Canada: Key Legal Considerations In Developing Partnerships With First Nations

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.

Due Diligence

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.

Your Capabilities

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.

Your Strategy

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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