When businesses look to form partnerships with First Nations,
building an informal relationship often comes first, before legal
terms are considered. Even at that early stage — well before
you make any promises — it is valuable to consider your legal
needs and options.
Purpose of Arrangement
The first and most fundamental consideration is the underlying
purpose of the arrangement. Is this a straight contract for labour
or materials at commercially competitive rates? That type of
arrangement is less common in industry-aboriginal relations, and
while the considerations below remain relevant, supply and demand
in the particular sector will have more influence on the legal
terms. More common, and the focus here, are two basic types of
arrangements that have a distinctive aboriginal aspect.
First, there are agreements with First Nation governments,
commonly known as impact benefit agreements. Under these types of
arrangements, the First Nation agrees to support the issuance of
government permits necessary for the project, whether it is a mine,
liquefied natural gas facility, pipeline or other development. This
support provides increased legal certainty that the project will
not get held up in court or in the regulatory processes that the
project must undergo. In return, the business promises to provide
benefits to the First Nation, typically in the form of revenue
(which may be calculated as a lump sum, periodic payments,
royalties, etc.), contracts for the First Nation's businesses,
jobs for the First Nation's members and other economic
opportunities. While these sorts of arrangements were uncommon 10
years ago, they are now almost standard and increasingly expected
by regulators and financiers.
Second, there are a growing number of joint ventures (JVs) or
partnerships between businesses and First Nations, typically
seeking to work on other projects — private or public —
in the First Nation's territory. In these arrangements, the
business partner provides experience, expertise and financial
backing so the JV can bid on contracts with commercial credibility.
The aboriginal partner provides local content legitimacy. Together,
the JV can provide an attractive supplier for a project in the
First Nation's territory that needs the particular capability
provided by the business partner but also wants to gain the support
of the local community.
Having determined what type of relationship is being developed,
consider closely whether your proposed business partner can uphold
its end of the bargain. Just as a prudent lender performs due
diligence on a prospective borrower, a business needs to conduct
some due diligence on its prospective First Nation counterparty.
Here are some questions you should ask.
What is its governance structure? Are you dealing with an
elected government or hereditary system, and which one has true
authority to make the commitments you seek to secure from the First
Nation? If the government is elected, when is the next election?
Can you get an agreement executed before then? Remember, these
negotiations are rarely swift.
What is the First Nation's territorial claim? Does that
overlap with other First Nations' territories (likely), and if
so, how much and where?
There is a huge difference between a project in the core of a
First Nation's uncontested territory and one on the periphery
with overlapping territorial claims from other First Nations.
Consider your own capabilities, too. If you are promising to
allocate a certain number of jobs to the First Nation's members
— a common component of both JV structures and impact benefit
agreements — are you certain you will have the requisite
number of positions available? Are a sufficient number of First
Nation members likely available and interested? Are you prepared to
train them? How long will that take?
Nothing ruins a relationship more swiftly than broken promises.
With unemployment levels high in many aboriginal communities,
members and their representatives will be very critical if promised
jobs don't appear.
Last but certainly not least, consider how the terms of each
agreement fit into your overall business and legal strategy. For a
large or linear project, multiple impact benefit agreements are
likely. The terms of one agreement may become known to other First
Nations, so distinctions in commercial and legal terms offered to
one First Nation versus another must be defensible. Likewise with
JVs, consider whether you are intending to form similar
partnerships with neighbouring First Nations, and if so the
potential for overlap disputes.
If you ask these questions early on and get answers before you
make commitments, you will be able to establish your partnership on
sound legal footing.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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