BUS LAW NO.7 PDF - Business Law I - October 23, 2024

LEGL 2501-1 BUSINESS LAW I Class No. 7: October 23, 2024 Verschuren Centre CS 104 INSTRUCTOR: Patricia Fricker-Bates, LL.B., LL.M.  Welcome As we begin our class, it is our privilege to be gathering on the un-ceded...

LEGL 2501-1 BUSINESS LAW I Class No. 7: October 23, 2024 Verschuren Centre CS 104 INSTRUCTOR: Patricia Fricker-Bates, LL.B., LL.M.  Welcome As we begin our class, it is our privilege to be gathering on the un-ceded territory of the Mi’kmaq people. Image result for mi'kmaq flag Meaning of “unceded”: land that was never legally surrendered to or acquired by the Crown. (Textbook, p. 280).  Indigenous Business—Cultural, Historical and Politicial Context “It has never been more important to understand the interrelationship between Indigenous Peoples and the business sector. … The way government entities and private companies operate within Indigenous traditional territories is also rapidly evolving. … The Truth and Reconciliation Commission of Canada highlighted that everyone has a role in achieving reconciliation and specifically called on the corporate sector to adopt a reconciliation framework to guide corporate policy and activities”: p. 272 of textbook. Interactive First Nations Profiles Interactive Map at https://geo.aadnc-aandc.gc.ca/cippn-fnpim/index-eng.html  Addressing Indigenous Peoples??? Section 35 of the Constitution Act, 1982 Rights of the Aboriginal Peoples of Canada Recognition of existing aboriginal and treaty rights 35 (1) The existing aboriginal and treaty rights of the aboriginal peoples of Canada are hereby recognized and affirmed. Definition of aboriginal peoples of Canada (2) In this Act, aboriginal peoples of Canada includes the Indian, Inuit and Métis peoples of Canada. How to address Indigenous Peoples? ▪ “Indian” (pejorative term) ▪ “Aboriginal” (used in the legal context) ▪ “First Nations” (general term referring to a larger grouping of Indigenous Peoples) ▪ “Indigenous” (growing preference)  A Brief Cultural, Historical and Political Context Contact between the Indigenous Peoples of Canada and European colonizers took place in the context of both peace time and war time. The Seven Years' War of 1756–1763 was the first global war. In North America, Britain and France fought each other with the help of Indigenous allies. The Royal Proclamation of 1763 was issued by the British Parliament after the British defeated the French at Quebec City in 1759 and Montreal in 1760. After those defeats, New France (1608-1763) was taken over by the British. [See also, First Nations in Canada, https://www.rcaanc- cirnac.gc.ca/eng/1307460755710/1536862806124 ] “Indigenous Peoples have not enjoyed the same opportunities as their non-Indigenous counterparts in Canada. This is no accident; instead, it is the result of intentional actions to separate Indigenous Peoples from their lands, resources, and cultures”: p. 274. Separation from lands: ❑Wampum belts: Wampum are tubular purple and white beads made from shells. Wampum are used primarily by Indigenous peoples of the Eastern Woodlands for ornamental, ceremonial, diplomatic and commercial purposes. Belts made of wampum were used to mark agreements between peoples. https://www.thecanadianencyclopedia.ca/en/article/wampum https://qonaskamkuk.com/peskotomuhkati-nation/wampum/ ❑Royal Proclamation of 1763 – officially asserted Crown ownership over the British territories in British North America. In essence, Indigenous legal traditions relating to land rights were replaced by British legal traditions through the Proclamation.  A Brief Cultural, Historical and Political Context … cont’d Aboriginal Title: British legal tradition recognizes “Aboriginal title” but not as a right that negates the Crown’s title. The Crown retains sovereign ownership over land that is subject to Aboriginal title but is “burdened” by beneficial ownership of the land by the original inhabitants. ❑Calder v. Attorney-General of British Columbia, SCR 313 (SCC) – Aboriginal title first confirmed in theory. https://www.youtube.com/watch?v=hIEdwByP1Vo ❑Delgamuukw v. British Columbia, 3 SCR 1010 (SCC)—test for establishing Aboriginal title. https://www.youtube.com/watch?v=bKqOStqKK8g When an Indigenous group establishes title, they hold exclusive use and occupation rights, as well as the right to determine land usage directives and the right to economic benefits derived from the land. ❑However, Aboriginal title is a communal right that belongs to the specific Indigenous group that has established this right.  A Brief Cultural, Historical and Political Context … cont’d Aboriginal Rights: ▪ Aboriginal rights can include Aboriginal title but are broader. They can also include hunting and fishing rights, self-government rights, economic rights, and cultural and social rights. ▪ Legal test: Is the activity an “element of a practice, custom or tradition integral to the distinctive culture of the aboriginal group claiming the rights” then it qualifies as an Aboriginal right. Treaty Rights: ▪ Treaty rights are the rights actually set out in treaties and the oral promises made concurrently with them. The honour of the Crown is always at stake. ▪ Historic treaties negotiated between 1701 and 1923 ▪ Modern treaties (and comprehensive land claim agreements) negotiated since 1975. These treaties often address broader issues such as land ownership, consultation requirements, financial settlements, participation inland use and environmental management, and self- government.  A Brief Cultural, Historical and Political Context … cont’d Separation from Resources: ▪ Following the Royal Proclamation, legislation, particularly the Indian Act (initially enacted in 1876 and still in existence today), continued to erode Indigenous Peoples’ means of economic participation. ▪ The reservation system confined Indigenous Peoples to small tracts of land with limited resources and economic opportunities. ▪ First Nations cannot own reserve lands. Instead, Canada holds legal title to reserve lands. Separation from Culture: ▪ The Indian Act’s provisions also sought to eliminate Indigenous cultures by making it illegal for Indigenous Peoples to hold religious ceremonies and cultural gatherings and by abolishing traditional governance structures. ▪ Legislation authorizing the creation of the residential school system. Between 1831 and 1996, the federal government and churches established residential schools whose purpose was to assimilate Indigenous children into mainstream Canadian culture. ▪ The Indian Residential Schools Settlement Agreement in 2007. As part of that agreement, the Truth and Reconciliation Commission was established to hear the stories of survivors, create a comprehensive historical record, and make recommendations for reconciliation. ▪ The summary of the TRC’s Final Report can be found at https://ehprnh2mwo3.exactdn.com/wp- content/uploads/2021/01/Executive_Summary_English_Web.pdf  Reconciliation The work of the Truth and Reconciliation Commission (TRC) generated 94 Calls to Action: The TRC’s Calls to Action actively promote healing by pushing changes to the Canadian legal landscape to address trauma and achieve social and economic parity for Indigenous communities. In 2021, Canada adopted legislation to implement the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP), requiring it to “take all measures necessary to ensure that the laws of Canada are consistent with the Declaration,” and to develop an action plan to achieve the Declaration’s objectives. See the United Nations Declaration on the Rights of Indigenous Peoples Act, S.C. 2021, c. 14 wherein the Government of Canada affirmed the UNDRIP as a universal international human rights instrument with application in Canadian law; and as a framework for the Government of Canada’s implementation of the Declaration. ▪ The United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP) at: https://www.un.org/development/desa/indigenouspeoples/wp- content/uploads/sites/19/2018/11/UNDRIP_E_web.pdf  What is Business Reconciliation TRC Call to Action 92: Business and Reconciliation We call upon the corporate sector in Canada to adopt the United Nations Declaration on the Rights of Indigenous Peoples as a reconciliation framework and to apply its principles, norms, and standards to corporate policy and core operational activities involving Indigenous peoples and their lands and resources. This would include, but not be limited to, the following: i. Commit to meaningful consultation, building respectful relationships, and obtaining the free, prior, and informed consent of Indigenous peoples before proceeding with economic development projects. ii. Ensure that Aboriginal peoples have equitable access to jobs, training, and education opportunities in the corporate sector, and that Aboriginal communities gain long-term sustainable benefits from economic development projects. iii. Provide education for management and staff on the history of Aboriginal peoples, including the history and legacy of residential schools, the United Nations Declaration on the Rights of Indigenous Peoples, Treaties and Aboriginal rights, Indigenous law, and Aboriginal–Crown relations. This will require skills-based training in intercultural competency, conflict resolution, human rights, and anti-racism.  Consultation Considerations for Non-Indigenous Businesses When a non-Indigenous business’s planned activity will negatively impact Aboriginal rights or treaty rights, the business must consider three things: (1) the impact of required Crown – Indigenous Peoples consultation and accommodation; (2) the value of entering into an impact benefit agreement with the affected Indigenous group; and (3) throughout the process, who within the Indigenous group should be consulted and who has the authority to make commitments on behalf of the group. Consultation Considerations for Non-Indigenous Businesses … cont’d ❑Case law since 2004: whenever the Crown is considering a decision (approval of a mine, fishing licence, forestry permit, etc.) that might negatively impact an asserted Aboriginal right or treaty right, it must consult with the Indigenous community about the decision and try to accommodate the impacts. ❑In cases of proven rights, the Crown must meet a justification test based on the “Honour of the Crown” that imposes a fiduciary duty on the Crown regarding Indigenous Peoples. ❑The Crown also has the option to obtain the consent of those First Nations whose rights or title are likely to be impacted, and this option is mandatory in cases where the impacts on rights are very serious or the right has been proven in court. This has created powerful incentives for proponents of major development projects to negotiate agreements with Indigenous communities before seeking project approvals. ❑Social Licence: A term that has been in usage for over 20 years. At its simplest, it refers to the acceptance granted to a company or organisation by the community.  Consultation Considerations for Non-Indigenous Businesses… cont’d Impact Benefit Agreements The Crown has a constitutional duty to consult with Indigenous communities when it makes decisions affecting Aboriginal and treaty rights, Private proponents of development projects have no constitutional duty to consult. However, if their projects require access to land or natural resources, they cannot rely on Crown consultation and accommodation to address all the concerns of affected Indigenous communities. ❑ One way to accomplish this is through Impact Benefit Agreements (IBAs)—these consent or cooperation agreements address the impacts of projects on Indigenous and treaty rights. For business, IBAs provide for access to contracting and procurement-related benefits and the creation of commercial partnerships. While non-Indigenous players gain significant benefits form IBAs, the jury is out as to whether Indigenous communities are similarly benefited. ❑Major issue for business, especially in the natural resources sector—Who to consult with? And who has authority to sign IBAs? Consultation Considerations for Non-Indigenous Businesses… cont’d Impact Benefit Agreements and Consultation Major issue for business, especially in the natural resources sector— Who to consult with? And who has authority to sign IBAs? ❑The Nation? ❑The Band? ❑Umbrella organizations? In Nova Scotia, there are many Mi’kmaq organizations: see https://novascotia.ca/abor/docs/demographics/Overview-of-Aboriginal- Organizations-(revised).pdf What is the appropriate level of consent? This is the major question once the appropriate parties to an IBA is determined. For instance, does consent require community consensus or is Band Council approval enough? ❑As a matter of risk management, any large-scale development that is likely to have significant impacts on Aboriginal, Métis, Inuit, or treaty rights or Aboriginal title should require a ratification vote of the entire band or community as a condition of an IBA.  Considerations for Indigenous Business The troubling effects of IBAs (Impact Benefit Agreements) ❑Indigenous communities may feel pressured into signing IBAs in situations where they believe projects will be approved with or without their support. IBAs may even be a tool for weakening Indigenous resistance to unwanted projects. ❑Crown governments may abandon their responsibilities to provide or create educational or economic opportunities, relying instead on private enterprises to do it for them. Procurement ❑Procurement is the act of sourcing and purchasing goods, services, or raw materials for a business from vendors or suppliers. It includes every action involved in and required for sourcing these goods or services, and an official procurement process helps purchasing teams request, approve, and track every purchase and control business spend. ❑Crown governments are engaging in procurement policy development aimed at improving the economic conditions of First Nations and their communities so that they enjoy the same benefits and opportunities as non-Indigenous communities.  Considerations for Indigenous Business … cont’d Financing: ❑One of the major barriers preventing the advancement of reconciliation and economic self-determination is the difficulty and cost in obtaining financing. Access to collateral to support financing is a significant barrier, particularly given that reserve land is not available to use as collateral. ❑Key to addressing this issue is the finance sector’s willingness to work with Indigenous communities and businesses to address the barrier of obtaining financing and to consider updating their own policies that are antiquated and rife with barriers. See “Building Relationships And Opportunities” at p. 287 of textbook.  Considerations for Indigenous Business … cont’d Tax Exemptions Available to Indigenous Business ❑Historical context: Royal Proclamation of 1763 and an early version of s. 87 of the Indian Act. By virtue of these two documents, personal property of “Indians” and “bands” are exempt from taxes. ❑Bastien Estate v Canada, 2011 SCC 38 and Dubé v Canada, 2011 SCC 39 Whether interest earned by First Nations is taxable depends on whether the interest is located on a reserve. First Nations seeking a tax exemption on investment income should ensure that the place of contracting, the location of the financial institution, and the place of payment are located on a reserve. The reserve does not have to be the taxpayer’s reserve. Note: Section 87 exemption does not apply to corporations—as legal persons, corporations are not considered “Indians” under the Indian Act. Income Tax Exemptions ❑Because bands and modern treaty First Nations are governments, they qualify for the Income Tax Act exemption, which exempts a “public body performing a function of government” and any wholly owned corporations of those public bodies. ❑Exception: Yukon First Nations with modern treaties have limited the application of the Income Tax Act public body exemption.  Considerations for Indigenous Business … cont’d The Challenge of Own-Source Revenue (OSR) ❑OSR refers to revenue generated by First Nations that is outside of funding provided by Canada in the fulfillment of the Crown’s constitutional obligations. ❑Indigenous Services Canada policy: calculate its financial obligations to First Nations by reducing government funding as OSR increases. The current federal government has made assurances OSR policy will not be implemented. This is not binding on future governments. (See https://www.rcaanc- cirnac.gc.ca/eng/1354117773784/1539869378991) ❑OSR policy punishes Indigenous business success by limiting growth, it directly undermines the principle of reconciliation. Structuring Indigenous Business for Tax Exemptions, Liability Protection, and Success Indigenous Peoples’ use of business associations are driven (1) by their own legal traditions, (2) the historical circumstances of colonialism, and specifically (3) the legal status and legal personality of “Indians” and “bands” (as defined under the Indian Act), (4) the definition of “person” in various partnership and business corporation acts across Canada, (5) restrictions on ownership and title to reserve and non-reserve lands, (6) qualification for constitutional protection of Aboriginal rights and title, (7) the need to minimize liability, and (6) the desire to take advantage of all tax exemption opportunities available. Under s. 91(24) of the Constitution Act, 1867, the Parliament of Canada has responsibility for “Indians, and Lands reserved for the Indians.” However, under s. 88 of the Indian Act: “Subject to the terms of any treaty and any other Act of Parliament, all laws of general application from time to time in force in any province are applicable to and in respect of Indians in the province.” This means that provincial regulation of the creation and governance of business structures applies to Indigenous business structures. Structuring Indigenous Business for Tax Exemptions, Liability Protection, and Success The legal status of Indigenous groups significantly impacts how their business ventures are organized. Indian Bands – not “legal persons” Indigenous Communities, First Nations, and “bands” – not typically recognized as having legal capacity to own off-reserve land because they are not “persons” who can be registered owners under legislation that governs provincial land registries. Creation of complexity for Indigenous governments, individuals or businesses when planning business activity and the appropriate business structure.  Structuring Indigenous Business for Tax Exemptions, Liability Protection, and Success: Business Forms and Their Impacts Joint Ventures (not a legal person in the eyes of the law): ❑ A contract intended to provide clarity about profit and loss attribution by setting out the specific obligations of each party, as well as the investments they each bring to the venture and expect to receive from it. ❑ Can provide useful tax incentives ❑ Little liability protection Partnerships (two or more persons pursuing business in common with a view to making profit): ❑ Effective tool for Indigenous communities and businesses because a partnership generally is not a taxable entity. Limited Partnerships (Most common form of business structure used by First Nations in Canada today) ❑ Clearwater Seafoods Limited Partnership at https://seafoodfromcanada.ca/listing/clearwater-seafoods- limited-partnership/ ❑ Clearwater Seafoods ("Clearwater" or the "Company") (TSX: CLR) entered into a definitive arrangement agreement (the "Arrangement Agreement") with FNC Holdings Limited Partnership ("FNC Holdings"), representing a coalition of Mi'kmaq First Nations (the "Participating Communities") and Premium Brands Holdings Corporation ("Premium Brands") ❑ Drawbacks to limited partnership: (1) First Nations can receive income as limited partners on a tax-exempt basis and be shielded from liability so long as they do not breach those portions of provincial legislation that limit a limited partner’s role in management. (2) If a limited partner holds itself out as a partner or as capable of binding the partnership, the law will deem it to be a general partner, it will have unlimited liability, and in the case of a First Nation limited partner, it will lose the benefits of the applicable tax exemption.  Structuring Indigenous Business for Tax Exemptions, Liability Protection, and Success: Business Forms and Their Impacts … cont’d Limited Liability Partnerships (available for professional businesses; in BC and NWT, for non-professional businesses as well) ❑Becoming more popular for the following reasons: ❑(1) flows profits to the partners in a way that allows First Nations to benefit from income tax exemptions on or off reserve under the Income Tax Act; ❑(2) apportions civil liability such that risk is statutorily limited and manageable provided partners take steps to correct the questionable acts of their other partners; ❑(3) allows First Nations to take part in management or control of the business; and ❑(4) provides proportional tax exemption on transactions, due to apportioning certain kinds of operating expenses that are attributeable to First Nation ownership interests in the partnership. Corporations (independent legal entity or person) ❑The Indian Act tax exemption does not apply to corporations. ❑However, for corporations owned by First Nation governments, the Income Tax Act exempts income of corporations that conduct 90 percent of their business activities on reserve or treaty settlement lands.  Structuring Indigenous Business for Tax Exemptions, Liability Protection, and Success: Business Forms and Their Impacts … cont’d Trusts: ❑The law does not recognize trusts as legal persons ❑However, under the Income Tax Act, many kinds of trusts are deemed to be individuals for taxation purposes. ❑First Nations often use trusts as a form of effective tax planning. Co-operatives and Not-for-Profit Societies and Corporations ❑Co-operatives and not-for-profit societies are flexible corporate forms that confer legal personhood and liability protection. See Gull Bay Development Corp v The Queen, 2 FC 3, 1983 CanLII 5017: use of a commercial logging operation by Gull Bay Development not-for-profit corporation. The corporation was deemed a tax- exempt not-for-profit. Not-for- Cooperative Profit Next Class: Wednesday, October 30, 2024 Read the following: ❑Chapter 8 “Indigenous Business and Economic Development in Canada” … cont’d (pp. 286-296) ❑Chapter 6: “Facilitating Business, Protecting Consumers, and Safeguarding the Marketplace” (pp. 175-192) ❑TEAM PROJECT ASSIGNMENTS AND DISCUSSION OF GRADING RUBRIC