The Ontario Superior Court of Justice has upheld an arbitration ruling against the Ontario Lottery and Gaming Corp. in favor of the province’s First Nations.
The ruling requires OLG to honor all terms of a 2008 agreement and pay 1.7 percent of all gross revenues from its casinos, even from non-gaming operations it no longer receives revenue from.
OLG owns all casinos in the Canadian province. The 2008 agreement with Ontario First Nations Limited Partnership (OFNLP) required OLG to pay 1.7 percent of the gross for gaming and non-gaming revenues, such as hotel, food, beverage and the retail value of complimentary services provided to guests.
In the face of declining revenues OLG changed its business model beginning in 2013. It divested itself of running its casinos, turning operations over to private companies. At that time, without consulting with OFNLP, it decided to stop paying the 1.7 percent of non-gaming revenues to the First Nations because it was not collected by OLG, but by the private companies operating the hotels and other operations. OLG attracted those companies by offering them 100 percent of non-gaming revenue.
The First Nations discovered this fact as a footnote in an audit statement in 2016. The discrepancy could account for more than $100 million, according to the OFNLP, which filed for arbitration against OLG for breach of contract.
OLG argued that it shouldn’t have to pay the 1.7 percent of non-gaming revenue that it wasn’t collecting because the First Nations were getting a higher revenue due to the more efficient private business model. It estimated a $1.3 billion increase in profits.
The arbitration panel ruled against OLG and now the Superior Court of Justice has upheld that ruling.
