Area of Law: Aboriginal Law
Answer # 0659
Economic development on First Nation landsRegion: Ontario Answer # 0659
The following information has been provided with the assistance of Lakehead University Faculty of Law, Aboriginal Law Studies.
Economic development of Indian Land and the Government of Canada
Historically, European settlement controlled the commercial field of trade through the use and exploitation of Indigenous groups. These relationships still exist, however, there are some economic independence resurgences from First Nations. These include the duty to consult and to accommodate. For example, although laws, such as the Indian Oil and Gas Act give the Government of Canada power over the economic resources of oil and gas on “Indian land”, there is also a duty to consult and where necessary, the Indigenous people affected may be entitled to a financial accommodation.
Supporting land management and economic development leads to greater participation in the economy and improved economic prosperity for Aboriginal Canadians.
1. Government cooperation under the Indian Act
Under the Indian Act, there are several ways that the Government can help economic growth and self-sufficiency on “Indian land”.
(i) Loans to Indians
The Minister of Finance may make loans to bands, groups of Indians or individual Indians for the purchase of:
- farm implements, machinery, livestock, motor vehicles, fishing equipment, seed grain, fencing materials;
- materials to be used in native handicrafts;
- any other equipment, and gasoline and other petroleum products, or
- for the making of repairs or the payment of wages; or
- for the clearing and breaking of land within reserves.
In addition, the Minister has the authority to make loans for cooperative projects on behalf of Indians, and any other matters determined by the Governor in Council. However, the total outstanding loan amount at any one time cannot exceed a maximum amount.
Repayment of loans
When loans are repaid to the Minister by the borrower (band, group of Indians or individual Indian), the Minister is responsible to repay the funds to the Receiver General of Canada.
(ii) Operating farms on reserves
The Minister may operate farms on reserves and may hire people to teach Indians farming. In addition, the Minister may purchase and distribute (without charge) pure seed to Indian farmers. Profits made from such Government supported farming activities will be used to:
- expand farming operations on the reserves, or
- provide loans to Indians for farming or other agricultural operations, or used
- in any way that is considered to be desirable to promote the progress and development of the Indians.
(iii) Treaty money
Money that is payable (under a treaty) by the Government of Canada, to Indians or Indian bands, is only for the band or person for whose use and benefit in common the moneys are received or held. How the payments will be used is limited to the terms of the applicable treaty or surrender. In addition, the Governor in Council may decide if any purpose for which the payments are used, or are going to be used, is for the use and benefit of the band.
Indian moneys are held in the Consolidated Revenue Fund (CRF). The Consolidated Revenue Fund is where all of public moneys are deposited, as defined under the Financial Administration Act, which states the definition of a CRF as “the aggregate of all public moneys that are on deposit at the credit of the Receiver General”.
The interest on Indian moneys held in the Consolidated Revenue Fund shall be allowed at a rate to be fixed from time to time by the Governor in Council, therefore the amount received will vary (usually in the millions).
2. Government cooperation under the First Nations Land Management Act
The First Nations Land Management Act provided a huge shift in the way that First Nations control their land. This Act has allowed signatory First Nations the authority to make laws in relation to reserve lands, resources and the environment.
What are Signatory First Nations?
After a First Nation is recommended for entry into First Nations Land Management, the First Nation and the Minister sign an adhesion document. Once the adhesion document is signed, a First Nation becomes a signatory to the Framework Agreement on First Nation Land Management and is then formally added to Schedule 1 of the First Nations Land Management Act. According to the Government of Canada, as of 2019, 153 First Nations have entered First Nations Land Management and are either developing or already operating under their own land codes.
Under the First Nations Land Management Act, those First Nations who have ratified land codes can implement their own land management outside of the Indian Act – meaning the Indian Act provisions relating to land management will no longer apply. Ratified land codes are land codes that have been approved by the First Nation community by a ratification vote.
First Nation Powers
Provided that a First Nation is acting within the terms of its land code and Framework Agreement, it has the following powers:
(i) Power to manage
First Nations under the First Nations Land Management Act have the authority to manage First Nation land. For example, a First Nation may:
- exercise the powers, rights and privileges of an owner in relation to that land;
- grant interests or rights in that land, and licences in relation to that land;
- manage the natural resources of that land; and
- receive and use all money acquired by or on behalf of the First Nation under its land code.
The council of a First Nation is responsible for managing First Nation land in accordance with the First Nation’s land code. However, the council has the authority to delegate its power to an individual or group provided that the power is used for the benefit of the First Nation.
(ii) Legal capacity (authority)
In relation to First Nation land, a First Nation has the legal capacity (legal authority) necessary to exercise its powers and perform its duties and functions. For example, a First Nation may:
- acquire and hold property;
- enter into contracts;
- borrow money;
- spend and invest money; and
- be a party to legal proceedings.
If a management body (such as a management corporation) is created to manage First Nation land, it is considered to be a legal entity having the capacity, rights, powers and privileges of a natural person.
(iii) Power to make laws
The council of a First Nation has, in accordance with its land code, the power to make laws concerning:
- interests or rights in First Nation land;
- licences in relation to First Nation land;
- the development, conservation, protection, management, use and possession of First Nation land;
- matrimonial rights, rules and procedures that apply to First Nation land when a marriage or common-law relationship breaks down, or on the death of a spouse or common-law partner. In particular, the First Nation can make rules about:
- the use, occupation and possession of family homes on First Nation land,
- the division of the value of any interests or rights held by spouses or common-law partners in or to First Nation land or structures on First Nation land, and
- the period of cohabitation in a conjugal relationship required for an individual to be a common-law partner;
- the regulation, control or prohibition of land use and development including zoning and subdivision control;environmental assessment and environmental protection;
- the provision of local services in relation to First Nation land and the creation of fair user charges for those services; and
- the provision of services to resolve disputes in relation to First Nation land.
The council can also place limits on the liability, or provide defences and immunity of any individual (or organization or group) that did something, or failed to do something when performing a duty or function under a First Nation law or the land code.
(iv) Transfer of money
Under the First Nations Land Management Act, capital and revenue moneys are not considered Indian Moneys and are therefore directly transferred to the First Nation. This is an attempt to help First Nation self-sufficiency and economic growth within the community.
Capital moneys are Indian moneys that come from the sale of the First Nation’s surrendered lands (from an interest in land), or from the sale of the First Nation’s non-renewable resources. Capital moneys include:
- oil and gas royalties
- sale of a First Nation’s reserve lands
- other proceeds from the sale of timber, oil and gas, or gravel
Revenue moneys include all band moneys other than capital moneys. Revenue moneys may include, but are not limited to, proceeds from:
- the sale of renewable resources
- reserve land activities such as leases, permits and rights-of-way
- fines and interest earned on capital
(v) Environmental protection regime
After a First Nation land code comes into force, the First Nation will develop and implement an environmental protection regime. The regime must be developed in accordance with the terms and conditions of the Framework Agreement. In addition, the First Nation environmental protection regime standards, as well as the punishments for failure to meet those standards, must be at a minimum equivalent (in their effect) to standards and punishments imposed by the laws of the province in which the First Nation land is situated.
(vi) Environmental assessment regime
Environmental assessment laws made by a First Nation must include the creation of an environmental assessment regime. The assessment regime must apply to all projects carried out on First Nation land that are approved, regulated, funded or undertaken by the First Nation.
Economic development of Indian Land and private business
Although First Nations businesses are interested in the development of transactions with people both on and off reserve, there continues to be a great deal of misunderstanding about accessibility of reserves by non-First Nation groups. Consequently, non-First Nation businesses may be reluctant to enter into relationships where the laws are not clear to them. In many cases, the rules set out in the Indian Act (Act) apply. However, other rules may also apply, such as in communities which have self-government agreements in place. It is prudent that before entering into agreements, legal advice should be obtained.
Third party access rights
1. The law of trespass
There are two general exceptions to the law of trespass on reserves, one is for police purposes and the second is in cases of expropriation of land by the government. These exceptions do not normally apply to non-First Nation groups wishing to enter a reserve to do business. In such cases, the Act provides laws that deal with trespassing on reserve lands by non-First Nations. Although what trespassing is has not been clearly defined, it definitely includes entering upon someone’s land without lawful authority. For example:
- a First Nations council would be permitted to refuse entry to unallocated lands (where no one member holds a certificate to that land) on a reserve, and
- an individual band member, who is in lawful possession or holds custom allotments (granted by First Nations council) can refuse entry to that land.
By contrast, an individual band member, who holds a certificate of possession, does not have the legal right to refuse access to that land. Essentially, anyone who trespasses on a reserve is guilty of a summary offence. The Act does not allow First Nations council to define what trespass is, or for example, to grant a system of permits for entry (which would essentially be defining trespass). However, the Act does allow First Nations councils to create by-laws, which set out the punishment and removal of people who were found to have trespassed on reserve land, or be frequenting the reserve for prohibited purposes. The Act ensures that the common law remedies for trespass are maintained, and a First Nations band, an individual band member, and/or the Crown (federal government) can bring an action in trespass.
2. Business and trespass: seizure limitations
The Act has provisions which protect First Nations personal property and lands (real property) from seizure:
- Section 89 (1) of the Act states that the real and personal property of a First Nation or a band which is on reserve is not subject to charge, pledge, mortgage, attachment, levy, seizure, distress or execution in favour or at the instance of any person other than a First Nation or a band.
- Section 29 of the Act states that, “Reserve lands are not subject to seizure under legal process.”
These sections of the Act mean that a non-First Nation lender does not have the right to enter a reserve for the purpose of seizing and selling property that is located on reserve, in the case where the borrower has defaulted in making payments on the loan. In addition, garnishment laws do not apply on reserve. For example, a non-First Nation cannot garnish the personal property of a First Nation individual or band that is on reserve. These laws make it more difficult for on reserve businesses and individuals to secure loans from banks and other traditional lenders.
Accessing reserve lands and/or enforcing security
Although the Act can be a barrier to business non-First Nation entities, there are a number of ways that non-First Nation businesses can access reserves to do business and to collect security in order to enforce business agreements.
Six exceptions to Section 89 (1):
1. Designated leased lands
The Act allows First Nation bands to designate lands, which can be leased. Under section 89 (1.1) “a leasehold interest in designated lands is subject to charge, pledge, mortgage, attachment, levy, seizure, distress and execution.” This means that a lender could legally enter on to a reserve, take possession of the property with the mortgaged leasehold interest and operate the business, or sell their interest in the project.
The designation can specify what the land will be used for, or be general in nature. Unfortunately, business opportunities have been lost because designation can be a lengthy process.
General: Under section 28 (1) of the Act, permits can be issued which allow the use of reserve land for activities such as grazing or timber removal.
Small-scale use: Also, under section 28 (2) permits can be issued which authorize the possession of reserve lands by non-First Nation for small-scale use. Although these types of permits are inexpensive and common, they do have their limitations. For example, the permits are usually only for a maximum of one year and are not transferrable. These two issues can make it difficult to get financing based on the value of the permit.
Unused land: Where reserve land is not being used, under section 58 (1), after getting consent from the band council, the Minister can issue permits for the lease of the land. In such cases, the land must be used for agricultural or grazing purposes, or for any purpose that is for the benefit of the person in possession of the land, or if not under lawful possession of an individual member, then for the benefit of the band.
Lease without the land being designated: Under section 58 (3), on application of a First Nation member who is in lawful possession of land, the Minister may lease the land for the benefit of the member, without the land being designated. This means that the member’s right to possession can be leased to a non-First Nation for the purpose of financing and development. Although the Act does not require consent of the council for the member to lease the land, it is common practice that the member obtains council support, as the land is still part of the reserve.
3. Conditional sales contract
If an item is sold subject to a conditional sales contract, section 89 (2) allows the seller the right to recover the property if the buyer defaults in the payments. If a court order is obtained, the seller can have a sheriff enter on to a reserve and collect the property in question.
In addition, if the sales contract was with a First Nation, rather than an individual band member, there would likely also be a resolution by the council approving the transaction. This resolution would be further documentation that a lending institution could rely on in making its decision to provide the loan.
The courts have determined that corporations are not considered to be “Indian” or “band” under the law. As a result, corporations, notwithstanding that the shareholders are First Nations, are not entitled to the protection from seizure and sale found in the Act.
5. Waiver of section 89 rights
If First Nation members waive their rights under section 89, then section 89 will not apply to that agreement (or transaction). This means that First Nation members can contract outside of section 89, and non-First Nation businesses can rely on standard loan enforcement procedures.
6. Joint lenders
Section 89 of the Act applies only to non-First Nation. This means that one First Nation member could use standard enforcement measures of seizure and sale of secured property against another First Nation member to enforce a business agreement. As a result, by arranging a joint loan, where the lenders are a First Nation member and a non-First Nation, the lenders will not be subject to the limitations of section 89 of the Act. Often, large financial institutions, such as banks, have a First Nation member who is an employee of the bank to act as a joint lender with the bank.
Indigenous and Northern Affairs Canada – Business Development Programs
Indigenous and Northern Affairs Canada has several programs in place to further the economic development of Aboriginal communities.
- Aboriginal Business and Entrepreneurship Development: provides funding (through its Aboriginal Financial Institutions) to Aboriginal entrepreneurs, organizations and communities to increase the number of businesses owned and controlled by Aboriginals.
- Community Opportunity Readiness Program: funding provided to communities in pursuit of economic opportunities which provide economic development for the benefit of First Nations or Inuit communities. Eligible activities include endeavors that support community-owned businesses, community economic infrastructure development, and activities to increase economic opportunities and promote private sector funding. Eligible expenditures related to those activities, include things such as wages, rent, utilities, equipment, and costs of professional services.
- Land and Economic Development Services
- Strategic Partnerships Initiative: funding is provided by the Government of Canada to support natural resource sector projects, such as mining, fisheries, forestry, agriculture and energy.
For more information and assistance in applying for these programs, visit the Crown-Indigenous Relations and Northern Affairs Canada (CIRNAC) website. For further resources, check our Aboriginal Law links.
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