CI Natural Gas Conference

October 26, 2016

Drew Mildon

Building a Win-Win Aboriginal Business

Partnership – Leading Practices for BC’s

Natural Gas Industry

Why partnerships?

Royal Proclamation, 1763

And whereas it is just and reasonable, and essential to our Interest, and the Security of our Colonies, that the several Nations or Tribes of Indians with whom We are connected, and who live under our Protection, should not be molested or disturbed in the Possession of such Parts of Our Dominions and Territories as, not having been ceded to or purchased by Us, are reserved to them, or any of them…

Colonial Law

1. Terra Nullius

2. Conquest

3. Purchase (treaty)

Section 35 Rights

35. (1) The existing aboriginal and

treaty rights of the aboriginal

peoples of Canada are hereby

recognized and affirmed.

“… the duty arises when the Crown has knowledge, real or constructive, of the potential existence of the Aboriginal right or title and contemplates conduct that might adversely affect it …”

- Mikisew v. Canada (SCC)

Duty to Consult

Some basics

• Always assume that the culture is intact.

• Always expect more civility, politeness, and general social grace than you would find in a

meeting in settler culture. Don't be surprised if a meeting begins with a prayer. Stand and

take your hat off.

• Always assume that there is more to a story, complaint, or anecdote than meets the

eye. Grievances will be understated - take everything seriously. Similarly, do not ignore

comments about past matters that seem far-fetched or hard to believe.

• Be conscious of the fact that you are working with a society recovering from great loss, but

who will also have a great deal of resilience. Settler society and governments have taken

their lands and visited extreme mental and physical violence on them, but there is also

great strength in First Nation communities. It is important to be conscious of both the

losses and the strength.

• You are dealing with matters of great importance. Don't treat the main subject matter in a

joking or casual way. If you are meeting with a First Nation, it is serious, or you wouldn't be

there.

Basic Etiquette #1

• Always acknowledge Chiefs, Elders, and people of rank if you are aware of their presence. Where there are Hereditary Chiefs, it is often helpful to refer to an elected Chief as “Elected Chief.”

• Let them speak, and at their own pace. Too often settler people fill silence when in fact clients are taking their time to formulate what they want to say and are waiting for the other person to finish -- out of respect. Be cognizant of the cultural norm to let the other person finish.

• Be mindful of their relationship with neighbouring First Nations.

• Be culturally sensitive in general. Read up about the Nation or group before you go visit them. It is not too hard to pick up some details about the specific culture before you go. Read some current articles. It will help keep you from making a serious social faux pas.

• Be wary of umbrella organizations or others who claim to speak for a First Nation.

• Don’t send a racist to negotiate.

• It is hard to say yes, when you can’t say no.

Basic Etiquette #2

Who to negotiate with

•Customary law

•Representative Bodies

•More than One First Nation

•Band-Held Corporations

First Nations

Parties

Negotiating

First Nations Parties

Customary Law

Aboriginal right to

resources

BSA in same name as

Band

Representative Bodies

More than One First Nation

One entity acting on

behalf of an Ab. Group

Easier to negotiate as

long as common interest

MultipleBSA’s

Band-Held Corporation

Independent Research

Different Negotiations

Support if Conflict

Joint Ventures/ Service Argots

Agency Agrmts /Asset Holding

Lim. Liability Partnerships

Conflicting Roles

Government Parties• Tension between FNs, government and private companies re: who should be

required to reach a BSA with FNs.

• Includes disputing views over whether the gov’t or companies should share project revenue

or royalties with FNs

Private Companies Government

• Argue they are already paying royalties, stumpage, rent and/or taxes• Sharing of revenue derived is

gov’t responsibility, yet it is very limited • Gov’t is passing on its

consultation obligations to private actors sometimes even take credit and list private BSA’s on consultation record

• Gov’t sometimes states legal prohibition relating to fettering• Increasing number of BSA’s to

which gov’t are party to (i.e.: development permits)• Feds and provincial gov’t, or

both, may be party where required

Negotiation Streams

•Service contracts

•Measurable employment

•Job readiness

•Supply contracts

•Regulatory

Developmental

Negotiation Streams

•Enabling negotiation

•Signing bonus

•Community support

•Equity interest

•Environmental role

Benefit Sharing

Agreement

Regulatory Process

Partnerships

Structuring for the Exemptions

• Limited Partnership (“LP”)

– General partner has same liabilities, duties and rights as ordinary

partners; limited partner is an investor with limited liability.

– Limited partner must be passive or will lose limited liability; general

partner operates business.

– Allocation of income must be reasonable so as not to trigger anti-

avoidance rules in s. 103 of the ITA.

• Flow-through entity. No tax at partnership level.

• The tax status of the partner determines if income subject to tax. First Nation’s share of partnership income can be tax-exempt:

– s. 87 - Connecting factors test would apply.

– s. 149(1)(c) – for off-reserve activities

Sample LP StructuresNon-First Nation Company General Partner

First Nation Limited Partner

Limited Partnership

Company Affiliate (General

Partner)

Company Affiliate

(Investor)

First Nation (Investor)

Sample LP StructuresNon-First Nation General Partner

First Nation Limited Partnership as Limited Partner

Limited Partnership

First Nation Limited Partnership (Investor)

First Nation Corporation

(General Partner)

First Nation (Limited Partner)

Company Affiliate (Investor)

Company Affiliate (General Partner)

Sample LP StructuresFirst Nation Limited Partnership as Limited Partner, with Trust as Limited Partner for First Nation

Limited Partnership

Limited Partnership

First Nation Limited

Partnership (Investor)

First Nation Corporation

(General Partner)

Trust (Limited Partner)

First Nation as Beneficiary of the

Trust

Company Affiliate (Investor)

Company Affiliate (General Partner)

Revenue Issues

Revenue Management

• Management of “Indian Moneys”

• “Capital money” and “Revenue Money”

• Borrowing

• Own Source Revenue

• Fiduciary obligations of Council

• Financial Administration Bylaws and Laws

Own-Source Revenue

• Treaties and program claw-backs

• The federal government has a position of clawing back 50% of OSR from First Nations with a Treaty

• It is important to get legal and accounting advice to structure revenues to avoid or limit OSR claw-backs

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Thank you!