Lexpert magazine features articles and columns on developments in legal practice management, deals and lawsuits of interest in Canada, the law and business issues of interest to legal professionals and businesses that purchase legal services.
Issue link: https://digital.carswellmedia.com/i/1544329
14 www.lexpert.ca Feature JUST A few years ago, an Indigenous community's involvement in a resource development project that could impact its traditional territory, like a pipeline or mine, would typically unfold like this. e individual or entity driving the project – known as the project proponent – would identify nations or communi- ties that could be affected. e propo- nent would then approach those groups with a so-called benefits agreement that promised compensation in the form of revenue, jobs, subcontracting opportuni- ties, or community amenities – things like community centres, training opportuni- ties, or upgraded roads. In exchange for these contractual benefits, the Indigenous party would agree not to hinder, block, or delay the project in any way. Over the last five years, such arrange- ments have increasingly been eclipsed by a new type of offer to Indigenous parties: equity. Driven by reconciliation mandates, government loan programs that have made capital more accessible to Indigenous groups, and court decisions affirming Aboriginal title over signifi- cant tracts of land, the trend of offering Feature THE ERA OF INDIGENOUS EQUITY INDIGENOUS EQUITY HAS ECLIPSED BENEFITS AGREEMENTS AS THE MOST POPULAR WAY FOR RESOURCE PROJECT PROPONENTS TO PARTNER WITH INDIGENOUS GROUPS. NOW, ANOTHER NEW NORM IS EMERGING: EQUAL OR MAJORITY INDIGENOUS OWNERSHIP, WRITES JESSICA MACH Indigenous groups an ownership stake in projects has given those groups the chance to take a real seat at the table, rather than just a predetermined sliver of a proj- ect's rewards. And in stark contrast to the benefits agreements that proponents approached Indigenous communities with for decades, these new arrangements actually hand substantial control over to Indigenous parties. Now, lawyers who focus on resource transactions say that among these types of deals, another new norm is emerging: equal or majority Indigenous ownership. "e level of the ownership that nations are taking in projects has changed," says Sam Adkins, a partner at Blake, Cassels & Graydon LLP, whose practice focuses on Indigenous and project development matters. "Instead of seeing a 10 percent interest, you might see a 49 percent interest or 51 percent interest." "e margins are slimmer [for the proponents] the more the nations own the projects," says Malcolm Macpherson, a partner at Macpherson Law LLP whose practice focuses on increasing First Nations' participation in the economy. "But it's clear that … in order for permit- ting timelines to be met and for proper social license to be achieved, the nations have to be very substantive owners of proj- ects," Macpherson adds. "I would say that, especially on the larger [projects], it won't be long before the base minimum [for Indigenous equity] is 51 percent." at value – 51 percent – is oen cited in discussions about Indigenous equity, emblematic of what Macpherson calls the "tug of war" between the inter- ests of proponents on the one hand and Indigenous groups on the other. From the proponents' perspective, 51 percent is the minimum ownership stake required for a project to qualify as Indigenous-owned, opening the door to government contracts and other opportunities. It also still leaves the proponents with significant control over day-to-day project management, which can help reassure lenders who want proponents to retain their authority to make major project decisions. For many Indigenous communities, a majority stake is significant because it means "repatriating ownership over their territory and resources," Macpherson says.