Who owns the minerals? A view on FN land & resource protection

This post was written in coordination with Michael Kennedy, a senior commercial lawyer in Halifax. It is an open letter intended as a response to the ongoing discourse concerning Aboriginal and Treaty rights in northwestern Ontario, and reacts specifically to issues covered in local Thunder Bay media and nationally. Natalie and Mr. Kennedy have travelled to that region, and continue to collaborate with respect to the unique opportunity faced by the First Nations of Ontario – and throughout the country – to continue to exercise the right to control and protect Canada’s natural resources. The issues facing communities in northwestern Ontario with respect to Treaty rights and resource protection are unique in some ways – yet have common ground and lessons to be shared with First Nations across the Canada.

We have read with interest the comments, articles and opinions associated with Kitchenuhmaykoosib Inninuwug (“KI”) and its attempts to protect its resources and people, from the time KI leaders were jailed for being found in contempt of court, up to their recent decisions with respect to the development of their traditional territories. It is our opinion that the ongoing rhetoric associated with KI and Canada’s First Nations generally is often fraught with, and/or received with prejudiced and/or uninformed views, rendering the discussions unproductive and immobilized by ulterior motives. This persistent hindrance to what could be otherwise productive, forward-thinking discourse is due to the large and ever-growing gulf of misunderstanding which exists between First Nations and the Canadian public on many of these issues today.

First of all, we would point out that our comments below are limited to Treaty 9, its history, and the legal background associated with its various provisions.

Use of the word “cede” in the Treaty, which seems to be a focal point to those who wish to enforce the provisions of the Treaty against the First Nations, raises numerous issues with respect to the Treaty itself.  This particular provision of the Treaty and indeed the Treaty in its entirety may be shown to be of no effect whatsoever.  In other words, many suggest that there are very strong arguments, legal and otherwise, which stand in the way of the enforcement of the provisions of Treaty 9 as it applies to the rights of the First Nations.

One issue which is the subject of considerable debate today is with respect to minerals. The Treaty is devoid of the word “minerals.”  Although some may view use of the word “mining” as synonymous, at law these are two substantially different terms.  “Mining” refers solely to the activity of extracting minerals, while “minerals” refers to the actual rights to those minerals and the profit derived from their sale.

At common law and also as indicated in the Crown grant legislation, it is clear that the Crown when granting lands does not include “minerals” unless specifically included in the grant. How can the Crown then argue that it received the grant (or ceding) of the “minerals” from the First Nations through Treaty 9 when in fact the Crown argues that this was a Treaty between two separate nations and accepts the position that the Crown does not grant minerals unless the term “minerals” is specifically stated?  Why then was this intentionally not included in the draft?  This omission raises substantial questions, particularly in light of the push to develop mining within Treaty 9, which of course includes the Ring of Fire.

One may then argue, due to the extension of the rights of First Nations in the most recent cases, that in fact the First Nations have a valid argument that they have title to the minerals and where they did not “cede” their rights through the Treaty with respect to these minerals included in the lands purportedly conveyed to the Crown.

Overall, viewed through a modern lens, the Treaty 9 provisions, the history of its signing, the lack of understanding of its terms by First Nations at the time of signing, the question of whether the terms of the Treaty were properly interpreted to the First Nations, the issue of whether their culture and language could possibly articulate and reconcile the wording and effect of the Treaty, the total failure to pay adequate compensation then or over time, the lack of any independent advice provided to the signatories in an effective manner and in terms which could be understood, the basic inequality in bargaining positions, and other circumstances may in fact lead one to the conclusion that the Treaty itself is not enforceable whatsoever.  Also, it should be noted that after the last adhesion of Treaty 9 was signed and for a considerable period afterward, the First Nations in Canada were effectively stopped from claiming any rights through the legal system associated with the Treaty or otherwise.

In short, the First Nations did not knowingly or willingly ‘cede’ or give anything to the Crown.  On the other hand, the Crown got everything they wanted through the use of the Treaty document which they prepared.

Even if we get by the arguments as outlined above, there are other substantial issues associated with the Treaty which may make portions of it unenforceable in the manner in which the Crown has operated for years.

So if the Treaty is in place (as it seems to be now), and if minerals were in fact included, the so-called “harvesting” clause allows for the First Nations to carry on their usual vocations on their traditional lands excepting only such tracks as may be taken up by the Crown from time to time for settlement, mining, lumbering, trading, or other purposes.  It may seem clear to the casual reader of the Treaty that in fact the Crown retains the right to take up such of the traditional lands of the First Nations for these specific uses.

The contrary argument to this is of course that, if the Treaty is enforceable, only upon expropriation by the Crown of these lands for these specific issues may the Crown then enjoy the uses as stated.  In other words, a reasonable explanation of this clause is that the First Nations were paid for the Crown’s right to expropriate these lands in the future, as no one at the time understood what portions of these traditional lands would be taken for any of these issues.  If all was taken at the time, then clearly the payments were inappropriate.  It could be argued that all that the Crown received was an ‘option’ to take these traditional lands for the uses specified and upon appropriate compensation to be paid at the time of the taking. As you are aware, in any expropriation process, compensation must be paid to those who have the rights over the lands.  This does not seem to have been the practice of the Crown in the past and, in the view of some of those within Treaty 9 and elsewhere, this is a debt due to the First Nations.  This amount is substantial and based upon a reasonable interpretation of the terms of the Treaty.

The foregoing are only some of the arguments and positions which have been held by the First Nations and many of these are yet to be advanced for a variety of reasons.  This does not mean that these arguments are not legitimate and won’t be used in the future.

As Canadians, we received the rights entrenched in the Constitution under the Charter of Rights and Freedoms.  There was a similar provision placed in the Constitution in favour of the First Nations that recognized all of their rights, which had historically accrued to and in favour of the First Nations.  That specific provision is now the most litigated portion of the Constitution or, for that matter, any other area of the law, and has been since the early 1990s.  Most recently, the Supreme Court of Canada has recognized a dramatic expansion of the rights of Aboriginal Peoples in Canada with respect to their traditional lands.  This decision, which was decided in June of this year, is only beginning to play out across the country and will have substantial impact on the ability of First Nations to protect and defend these expanded rights.

The implications associated with the advancement of those arguments outlined above are extremely far reaching for all parties. In recognition of this, in many cases the parties have agreed to a consultation and accommodation process supported by the provisions of the Constitution and the rulings of the Court. This should not be viewed in any manner as a diminishment of the rights of First Nations for these rights are clear and continue to be advanced. Based upon the strength of these rights, the bargaining position of the First Nations has increased dramatically.

Those who choose to criticize KI should perhaps bear in mind that KI is supported by substantive rights, and, as such the Crown and others in Canada are obligated to respect and acknowledge that these rights exist.  In today’s world, to accept the very limiting words which are used in the Treaties and in other arrangements with First Nations (which are suspect in and of themselves) simply promotes a misunderstanding and a lack of respect for the rights of others.  Today, all of the Court procedures and wranglings in the KI Platinex matter, would, in our view, have entirely different results from just a short time ago.

We would say to all of the detractors of the rights of First Nations, catch up to today’s reality and cease the shallow and harmful vitriol.  What we all have to realize is that the ground upon which our systems and ideas have been built is shifting dramatically and will continue to do so in a much more accelerated fashion in the near future.

Michael Kennedy and Natalie Clifford, Lawyers
Halifax, Nova Scotia

Contact Natalie at 902.240.4080 or by email at natalie@cslegal.ca.

Growing Aboriginal business – should you incorporate?

Starting or Growing your Business? Don’t forget to protect your assets and plan your tax future on or off-reserve.

This brief overview can help you consider whether on-reserve incorporation is right for your business.

If you are a Status Indian and act as Director of a corporation, plan to set up a company, or have a board/planned board with others who are Status Indian Directors, choosing the location of your Registered Office may be an important tax planning decision. Depending on the nature of the corporation’s work, you may be able to take advantage of the tax exemption rights allotted under the Indian Act.  Thorough consideration of a number of factors may reveal that locating your Registered Office on a reserve is advantageous for you and your corporation. This article is meant to inform you of some factors to consider, however is not a comprehensive examination of this topic. You should consult a lawyer before taking the next steps with your business

This area of law has room to expand as Aboriginal business in Canada continues to grow exponentially, and more on-reserve business people seek clarification of relevant tax laws.

Why incorporate a company?

A business-owner’s decision regarding incorporation is driven by a range of factors. Conducting business as an individual or partnership exposes business owners to personal liabilities. As business grows, and the company deals with more clients, contracts, operations, etc., and potential liabilities can increase. When you are not incorporated, your personal assets (home, car, money, etc.) are directly available to be seized by creditors to satisfy a debt. A debt can arise from simple daily transactions with suppliers, or can result from lawsuit settlements and regulatory fines.  When you incorporate a company to manage your business affairs, you separate your business from your personal assets and income reporting, effectively increasing protection for yourself against creditors – in other words, limiting your personal liability. Knowing when to incorporate can be very important to your overall bottom line – you should talk to a lawyer about your specific situation and other considerations to know whether incorporation is right for you.

What does it mean to incorporate a company on-reserve?

The physical location of a company’s Registered Office is effectively the corporation’s location for the Registry of Joint Stock Companies. Often work will take place at other locations as well, however certain legal requirements apply to the Registered Office, and every corporation has one. A Registered Office is the place where company records are to be kept, made up to date, and be available for viewing by interested parties.

Incorporating on-reserve – some things you should consider:

Relevant laws:

First of all, incorporating a company on-reserve can be done through federal (CBCA) or provincial (NSCA) legislation. Deciding whether to incorporate federally or provincially requires an examination of your specific business needs. Secondly, on-reserve corporations are subject to some extra laws, including those under the Indian Act and its interpretations (including one which has decided that an on-reserve corporation does not have status as a legal person for the purposes of the Indian Act); and are also subject to any applicable bylaws created by the relevant band council. The band council of the relevant reserve has the ability to make some bylaws which affect business on-reserve, which can be a significant deterrent to incorporating on-reserve, as it leaves the regulatory landscape open to new rules which are not subject to the traditional legislative process – this could be detrimental or beneficial to an on-reserve corporation, depending on the band council’s attitude toward business on-reserve. If you ever choose to incorporate on a reserve, it is important to request copies of any/all relevant bylaws and keep abreast of new ones as they come into force. Other potential implications of on-reserve business should also be more deeply investigated should you decide to go this route. Don’t forget that band council decisions must be reasonable and you may be able apply to a court to get judicial review of a band council’s decision when it has affected you unfairly. Finally, the most attractive aspect of doing business on reserve is to benefit from the Indian Act tax exemption for Status Indians whose property is located on-reserve. For this, your corporation will deal with Canada Revenue Agency.

Is incorporation right for your business?

Does your corporation have a Status Indian Director(s)? Does its business take place on-reserve, and/or is it otherwise beneficial to First Nations/the relevant reserve? Does your business have a sufficient “nexus” in relation to First Nations? In order to answer these questions, you’ll need to have a close look at your business’ circumstances, along with legal definitions and Tax Court of Canada interpretations of on-reserve business scenarios. For this part of the decision, you should consult a lawyer.

The case law has decided that the on-reserve property tax exemptions granted by the Indian Act are essentially there to help preserve traditional living for on-reserve First Nations. The supporting principles have been interpreted so far as to allow First Nations businesses/individuals to arrange their affairs on-reserve so as to avoid tax – but the exemption is quickly limited by requiring a sufficient nexus between the work done by a business and the First Nation community. A nexus can be established if the corporation’s business benefits the community directly, and/or a significant amount of the organization’s work takes place on the reserve.

If you decide to incorporate on-reserve and claim the exemption, but engage in business without a sufficient nexus, you may end up in court trying to defend your relationship to the community and could be liable for fines or retroactive taxes.

There are options:

Incorporating on-reserve and claiming the property tax exemption might not be right for you right now – but can be other advantages to situating your business on reserve.

For example, you could incorporate on-reserve but not claim the exemption, or you could claim it just for “nexus” work if relevant. This option would require deeper investigation and careful accounting to support a structure in which corporate property subject to the exemption would be claimed separately from non-exempt corporate property (again it would only be the portion relevant to nexus work). This option could get very complicated, and should be carefully considered with the help of a lawyer and accountant.

Note that regardless of where you incorporate, you may be able to offer HST-exempt services to rightfully exempt on-reserve businesses paying you for your services. And keep in mind, a Registered Office can be changed periodically – to adapt to your business needs.

Personal property income tax exemption for income from the on-reserve corporation:

Whether a Status Indian Director or employee of an on-reserve corporation lives on or off-reserve will play a role in the availability of the property tax exemption to his/her personal income from the tax-exempt corporation. In a Tax Court case regarding an on-reserve corporation without a sufficient nexus, great efforts were made by the Status Indian Director to appear to be living and working on-reserve (she had a house with an office and claimed to be living there much of the time) – and she was found to be outside of the right to claim the exemption. Individuals should seek accounting and/or legal advice, specifically in relation to the relevant tax exemptions for personal income of Status Indians.

Find the solution that is right for your business

Your business has endless potential. It is up to you to strategically plan the future in order to maximize success. Two important aspects of this strategy include tax planning and protection against liabilities – among many others. While you dream big and do great things, take some time to cover these important bases for your business.

Contact Natalie at 902.240.4080 or by email at natalie@cslegal.ca.