Negotiations on how to compensate First Nations children taken from their homes and communities through the on-reserve child welfare system have been "productive" and are headed toward an agreement, according to a Justice Canada letter filed with the Canadian Human Rights Tribunal.

Talks have been ongoing since December on the mechanism to distribute and set eligibility for compensation ordered by the tribunal even as the federal government continues to seek a judicial review with the Federal Court aimed at quashing the need for a payout.

The federal government is proceeding with the talks because it has to live by the tribunal order until the Federal Court issues a final ruling on Ottawa's application for a judicial review.

The federal government initially refused to engage in discussions on the distribution of compensation. That changed after it lost a bid to stay the tribunal's September ruling that Ottawa pay $40,000 to First Nations children who were taken from their families and communities through the on-reserve child welfare system since 2006 — and some of their parents and grandparents.

"The talks have been productive and we are hopeful of reaching an agreement to submit to the tribunal on a number of elements of a framework for providing compensation to those entitled to receive it," wrote Justice Canada lawyer Robert Frater, in a Jan. 24 letter to the tribunal.

Frater's letter also included a joint request from all parties to the talks — including the First Nations Child and Family Caring Society and the Assembly of First Nations (AFN) — to move a deadline for submissions on possible compensation mechanisms to Feb. 21 from Jan. 29.

"We believe this schedule to be a realistic one, and one that will allow us to achieve agreement in areas that will benefit the recipients of compensation," said Frater.

The tribunal responded to Frater's letter on Tuesday, agreeing to the extension.

"The [tribunal] is pleased that the parties are making progress in their discussions," said an email from the tribunal that is part of the record.

Indigenous Services Minister Marc Miller told the Assembly of First Nations last December that Ottawa was moving forward to settle compensation for First Nations children and families harmed by the on-reserve child welfare system. (CBC)

Indigenous Services Minister Marc Miller told reporters he couldn't comment specifically on the status of talks because of the ongoing process which is confidential.

"These are not easy discussions, they are discussions that need to be refined even more," said Miller.

"These discussions … are focused on children, on fair, equitable compensation of children."

Cindy Blackstock, who heads the First Nations Child and Family Caring Society, could not be reached for comment.

The AFN could not immediately provide a comment.

This is the second extension requested on submissions to the tribunal around the compensation mechanism. The federal government requested the initial extension from the original Dec. 10, 2019, deadline.

Miller appointed Frater and Valerie Gideon, the assistant deputy minister for the First Nations and Inuit Health Branch, on Dec. 10 to negotiate with the Caring Society and the AFN.

Tribunal's compensation order

The human rights tribunal ruled in January 2016 that Ottawa discriminated against First Nations children by knowingly underfunding on-reserve child welfare services.

In September, the tribunal ordered the federal government to compensate those children, and parents and grandparents who were primary caregivers of children who were not apprehended for reasons of abuse.

The tribunal instructed the parties to submit proposals on how to distribute the compensation.

The order also included compensation for children removed from their homes to receive health services or who were denied those same services between Dec. 12, 2007, and Nov. 2, 2017.

The federal government filed for a judicial review in October seeking to overturn the tribunal's compensation order, arguing that the human rights body overstepped its jurisdiction into class action law The government also argued that the January 2016 ruling was about systemic discrimination that required a systemic fix — not individual compensation.

Since then, the government, from Prime Minister Justin Trudeau on down, has said First Nations children affected by the on-reserve child welfare system would be compensated.

Justice Minister David Lametti and Miller said in late November the government was looking to settle the issue through a separate $6 billion class action lawsuit over child welfare filed last year. The ministers said the government would consent to the class action.

However, last Thursday, Justice Canada notified the lawyers involved in the class action that the government was not ready to certify the class action and needed more time.