Developer Risk Factors
The developer's risk factors can be divided into the following types:
- Sovereign immunity
- Uncertainty in tribal law
- Choice of law
- Mediation or arbitration
Dispute resolution is usually one of the most contentious issues in any business relationship with tribes. Tribal sovereign immunity is often the focal point. It is important to recognize the distinction between sovereign immunity and sovereignty. Sovereignty is the power of the tribe. Sovereign immunity is an attribute of sovereignty that makes a sovereign immune from suit. To waive sovereign immunity is not the same as a waiver of sovereignty. Actually, a waiver of sovereign immunity is an exercise of sovereignty. The tribe is merely allowing a party to sue the Tribe in the event of default. The waiver can be limited in scope so that all that it put at risk is property or funds that are specifically identified in the waiver.
Uncertainty in Tribal Law
The single biggest risk perceived by developers is the uncertainties in what laws will apply in Indian country. Many of these uncertainties can be eliminated through the development of tribal laws that will either govern disputes that might arise during the project, or give the parties certainty in what remedies are available to deal with disputes. Some of the uncertainty can be eliminated by merely providing the business partners a copy of the tribe's law and order code, or taking them on a tour of tribal court so that can see that the tribe has a functional judicial system. With some education, potential business partners may come to realize that they would be better served by requiring that disputes be settled in tribal court rather than insisting they go to state or federal courts.
Choice of Law
The parties can lay out the choice of what law will apply in the event of default. Tribes are often reluctant to make any mention of state law when they deal with outside parties. However, in order to create certainty, it may prove beneficial to rely on particular bodies of state laws, such as contract laws, to govern interpretation and enforcement of documents. This does not mean that the state will be allowed to enforce its laws on the reservation; it only means that for purposes of settling disputes with business partners, state laws will be relied upon to interpret documents and settle disputes.
Mediation or Arbitration
The parties might agree to use alternative dispute resolution — such as nonbinding mediation services or arbitration — to resolve disagreements. The tribe may want to adopt an arbitration code that would allow the tribal court to enforce arbitration orders against the tribe. Alternately, the tribe may want to adopt orders to enforce arbitration agreements, requiring the tribe to enter into arbitration in the event that it failed to follow the arbitration agreement. These codes often give developers the level of certainty they need to go forward with a project. However, tribes must be careful in drafting arbitration language in contracts. The U.S. Supreme Court has held that contract language that called for the rules of arbitration to apply amounted to a waiver of sovereign immunity, because the arbitration award would be enforced in state court.
Significant savings on project costs can be realized if goods and services are delivered directly to the tribe on the reservation. Most states have developed procedures that recognize these well-settled tax rules. State rules, however, cannot always be relied upon to reflect these tax rules. Before the project begins, tribes should consult with their tax advisers or tribal attorneys to afford the project all appropriate tax advantages.
Because of tribal sovereignty, the permitting authority of states on Indian reservations is either very limited or nonexistent. But developers are not always aware of such limitations on the states, and may unwittingly submit to a state's regulatory jurisdiction for a project on Indian lands. Such mistakes can cause tribes unnecessary and costly conflicts. Tribes often have their own permitting processes, including protections for culturally sensitive sites. Tribes should thoroughly establish with developers what permits will be required for the project and who will be responsible for securing the permits. Resolution of applicable permitting can also result in cost savings for the project.