Hydro-Québec fined $5M for acting in institutional bad faith toward Innu community

The Quebec Superior Court has found that Hydro-Québec acted in institutional bad faith in its dealings with the Innu First Nation of Uashat and Mani-Utenam, failing to honour an agreement reached with the community during the development of the La Romaine hydroelectric complex a decade ago. 

In its Jan. 8 decision, the court ordered the Crown corporation to pay $5 million in compensation to the Innu Takuaikan Uashat Mak Mani-Utenam (ITUM) band council.

The judgment describes Hydro-Québec's role in never-ending negotiations with the First Nation to reach a final agreement, an "abusive" out-of-court settlement and the ignorance of key Hydro-Québec executives over the corporation's policies guiding its relations with Indigenous peoples.

"[Hydro-Québec's] stubborn refusal to compromise in the negotiation of the final agreement constitutes not only a breach of the requirements of good faith, but also the breach of the obligation to act in accordance with the honour of the Crown," wrote Justice Thomas M. Davis in his decision.

The utility was also pursuing other projects on the band's territory without conducting proper consultation or making meaningful efforts to resolve the issue at the heart of this dispute, according to the decision. 

Davis found that, as a Crown corporation, Hydro-Québec is bound by the same duty to consult Indigenous groups as the federal government which ratified the United Nations Declaration on the Rights of Indigenous Peoples Act (UNDRIP). 

"This decision is a great victory for us," said Chief Mike McKenzie in a news release published by the ITUM band. 

"Governments and their Crown corporations cannot act with impunity," he said.

Hydro-Québec backtracks on 2014 agreement

The decision comes more than a year after the La Romaine complex's inauguration and over a decade after the First Nation first brought Hydro-Québec to court over the project in 2009. Back then, at issue was Hydro-Québec's plan to install transmission lines over the Innu's traditional territory, referred to as Nitassinan. 

After much back and forth, an agreement in principle was drafted in 2014 between Hydro-Québec and the band, stipulating that the Crown corporation would have to pay more than $75 million between 2014 and 2073 to the Innu affected by the construction.

It was accepted by a majority of community members via a referendum, as requested by Hydro-Québec, save for a few families.

Despite being ratified by the community, the agreement was never presented to Hydro-Québec's administrative council because the dissidents had suddenly become "deal breakers" for the corporation, Davis says.

Hydro-Québec's president of production at the time, Richard Cacchione, believed the band was headed toward bankruptcy and could not assume the corporation's legal fees in the event that the dissident families sued. 

Justice Davis outlines that dissidence was to be expected given historical disagreements between some of the families and Hydro-Québec and the 2009 litigation. Moreover, he says concerns over the band's financial situation — which had not been studied by the corporation — were moot given the millions Hydro-Québec had committed to paying the band. 

During the trial, Cacchione also admitted to not having a proper understanding of the referendum results. 

"I thought [the agreement] had been rejected by the referendum," he told the court. 

In 2015, the band and Hydro-Québec signed an out-of-court settlement of over $6 million, where a misunderstanding essentially allowed the corporation to bypass paying the band the full value of the project. 

During the trial, it also came to light that though Hydro-Québec developed policies to govern its relations with Indigenous communities, "those who testified [in court] were only slightly familiar with them" while other executives didn't know them at all. 

"Consequently, those policies weren't applied," wrote Davis.

Overall, Davis found Hydro-Québec defaulted on its social responsibilities toward the community. Its failure to pay the band what it had initially promised for the project forced ITUM to cut certain programs which relied on the annual allowances. 

Not just business as usual for Hydro-Québec

In a statement, Hydro-Québec said it accepts the court's decision, pointing to its 2024 economic reconciliation strategy with First Nations and Inuit.

"This change seeks to ensure that Hydro-Québec projects are developed in close collaboration with Indigenous communities and therefore create real benefits for these communities," it said. 

Lawyer Isabelle Boisvert-Chastenay, who's represented ITUM since 2014, says the decision is historical — and an important one for other Indigenous communities.

"Hydro-Québec is not just a company like other third parties. As an agent of the Crown, Hydro-Québec has heightened obligations toward Indigenous peoples," said Boisvert-Chastenay.

This decision nullifies the 2014 agreement in principle as well as the 2015 settlement and allows the band and community members to resume litigation against Hydro-Québec.

"ITUM will continue to fight so that no development can take place on our territory without our consent and full participation," the band said in its statement.