Partnerships between Project Proponents and Indigenous Groups in Canada: Legal Considerationsht

Introduction

In recent years, there has been a growing trend of joint ventures between project proponents and Indigenous groups in Canada. These collaborative arrangements involve shared ownership and profits from specific projects or business ventures. They are seen as a way to address the longstanding economic disparities faced by Indigenous peoples, while also providing economic benefits and certainty for project proponents. As these arrangements continue to grow in popularity, it is important for project proponents to understand the legal considerations involved in this type of agreement.

1. Understanding Aboriginal and Treaty Rights, Consultation and Accommodation

One of the key considerations in joint ventures between project proponents and Indigenous groups (i.e., First Nations, Métis and Inuit peoples) is the issue of Aboriginal and Treaty Rights. Indigenous peoples and groups have rights under historical or modern treaties, as well as rights recognized and protected under the Constitution Act, 1982. 

The Crown has a legal obligation to consult Indigenous peoples before taking actions that may negatively impact their Aboriginal or treaty rights. This requires meaningful, collaborative engagement to assess and address potential effects of government decisions on those rights. In some cases, the Crown may delegate its duty to consult (and accommodate, where applicable) to third parties, such as corporations, but the Crown remains ultimately responsible for fulfilling the obligation. Project proponents must work with Indigenous groups to minimize or mitigate any such potential impacts at all stages, from planning and development to the implementation and operation of the project. 

Failure to fulfil this duty can result in legal challenges, delays, increased project costs, and reputational damage.

1. Contractual Considerations

a. Legal Status of First Nations Under the Indian Act and Self-Government Agreements 

The legal status of Indigenous communities under Canadian law is determined by a combination of federal legislation, such as the Indian Act, and the terms of any self-government agreements that may have been negotiated with the federal (and provincial) governments. 

Under the Indian Act, First Nation communities are recognized as “bands” and are governed by elected band councils. The Indian Act sets out the powers and responsibilities of these councils (1).

[1] Self-government agreements, on the other hand, provide a different framework for Indigenous groups to exercise their rights to self-determination including with respect to their people, land, resources, culture, policies and the environment. 

b. Creating Binding Contracts with Indigenous Groups or Band Councils

Section 2(3) of the Indian Act sets out the authority of a band council to exercise certain powers and functions on behalf of the band, including representing the band in negotiations and dealings. It provides that, “unless the context otherwise requires or this Act otherwise provides, a power conferred on the council of a band shall be deemed not to be exercised unless it is exercised pursuant to the consent of a majority of the councillors of the band present at a meeting of the council duly convened”. Compliance with Section 2(3) of the Indian Act is frequently demonstrated through a written Band Council Resolution ("BCR"), however, such a document is not considered conclusive proof of compliance.

In 2022, the Alberta Court of Appeal ("ABCA") in Kehewin Cree Nation v Kehew Construction Ltd, addressed the application of the Indian Act to private contracts between First Nations and third parties, and held that a BCR is not necessary for such contracts to be legally enforceable. Rather, there are several ways in which a band council may exercise its authority to bind a First Nation in contract, such as through delegation of contracting authority. The ABCA emphasized the evidence demonstrating that the delegation of contracting authority had been authorized by the band council in reaching its conclusion. 

From a commercial viewpoint, while a BCR is not necessary, project proponents should always obtain a BCR to evidence the First Nation's consent to contract. In instances where a proponent is dealing with a First Nation representative purporting to have contracting authority, it is prudent to request evidence of the band council meeting at which such authority was delegated.

3. Partnership Structures

Project proponents can use various types of business structures to form joint ventures with Indigenous groups. Common types of business structures include:

(i) Equity Agreements: An equity agreement is a type of agreement which is becoming more common, particularly in major energy projects such as pipelines and transmission lines. It is an agreement between a proponent and an Indigenous group whereby the parties each have equity (i.e., ownership) interests in the project, thereby sharing in its profits (and losses), such as:

a. Corporations: A corporation owned by an Indigenous group and a project proponent, and governed by a unanimous shareholders agreement, is a legal entity separate from its owners and can enter directly into contracts. The shareholders' assets are protected except to the extent of their investment.

b. Limited Partnerships: A limited partnership in which one partner (the general partner) manages the business and assumes unlimited liability, while the other partners (limited partners) invest capital and are only liable to the extent of their investment.

c. Joint Ventures: A joint venture is a business relationship in which two or more parties collaborate on a project or venture. The parties contribute resources, such as capital, expertise, or assets, and jointly decide how these pooled resources are allocated. They also share in the risks and benefits of the project.

(ii) Benefit Sharing Arrangements: Benefit sharing arrangements often outline the benefits and potential impacts of a project on an Indigenous group and typically provide for Indigenous employment and business opportunities, environmental protection, and compensation; and support of the applicable project by the Indigenous groups. 

The specific type of business structure chosen will depend on the particular goals and needs of the parties involved and may require a combination to achieve the desired relationship structure.

Another 2022 ABCA decision, Benga Mining Ltd v Alberta Energy Regulator,[2] highlighted the importance and potential benefits of properly utilizing joint ventures and having Indigenous partners involved in the approval process for proposed projects. In this case, a Joint Review Panel, in its capacity as the Alberta Energy Regulator, denied regulator approval for a proposed coal mine in Alberta. The case provides important guidance for project proponents, highlighting that Indigenous groups that support a given project should meaningfully participate in the applicable review process to ensure the regulator has complete information about the project’s benefits. Where a project proponent and affected Indigenous group have entered into a benefit sharing arrangement, such information may include an explanation of how the denial of regulatory approval would adversely affect the Indigenous group's economic interest.  

Ultimately, joint ventures between project proponents and Indigenous groups are a meaningful way of building mutually beneficial relationships between industry and Indigenous groups, but they must be carefully structured to ensure the desired outcome for all parties involved. 

For further information, please reach out to Carolyn Wright, Mardi McNaughton, Katerina Maragos, Alex Sinclair or any member of our Infrastructure & Project Development group, or your usual BD&P contact at any time.

[1] There is no Indian Act equivalent for Inuit or Métis groups, however, both are constitutionally recognized as Aboriginal peoples under Section 35 of the Constitution Act, 1982, and their governance structures derive from self-government agreements, land claim treaties, and national and regional representative bodies. Although this article focuses on First Nations, joint venture arrangements are common with Métis and Inuit communities which have unique requirements from those with First Nations.
[2] Appeal to the ABCA was denied on the basis that the proposed grounds of appeal sought to reargue findings of fact rather than raise questions of law.