Investing in First Nation joint ventures

First question to ask yourself when partnering with First Nation investors: Who is authorized to make an agreement?

By
Western Investor
June 22, 2017





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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 that the JV can bid on contracts with commercial credibility. The aboriginal partner provides local 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 social licence. 
 
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 of the questions you will want to get answered: 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 that these negotiations are rarely swift.)
 
What is the First Nation’s territorial claim? Does it overlap with other First Nations’ territories (which is 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 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 do not 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 one First Nation versus another must be defensible. Likewise with JVs, consider whether you intend to form similar partnerships with neighbouring Nations and, if so, be aware of 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.
 
 

Roy Millen is a partner with Blake, Cassels & Graydon LLP of Vancouver.
Copyright © Western Investor

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