The Indian Act: Understanding The Legal Capacity Of First Nations In Canada

• Jurisdiction: Canada
• Law Firm: Borden Ladner Gervais LLP
• Subject Matter: Corporate/Commercial Law, Government, Public Sector, Corporate and Company Law, Contracts and Commercial Law, Shareholders, Indigenous Peoples
• Author: Mr Chris Roine and Kay Elizabeth Turner
• Published date: 21 February 2023

A recent decision from the British Columbia Court of Appeal (BCCA) expands our understanding of the legal capacity of a First Nation - recognized as a band under the Indian Act, R.S.C. 1985, c. I-5 (the Indian Act) - as well as the exemption from taxation available to a band under Section 87 of the Indian Act.

How is a band defined in Canada?

The legal capacity of bands has been the subject of evolving case law and practice for several decades.

The definition of a 'band' implies that a band is little more than a collection of its members. Sec .2(1) of the Indian Act defines a band as a body of Indians:

1. For whose use and benefit in common, lands, the legal title to which is vested in Her Majesty, have been set apart before, on or after September 4, 1951.
2. For whose use and benefit in common, moneys are held by Her Majesty.
3. Declared by the Governor in Council to be a band for the purposes of this act.

The concept of a band was created by the Indian Act to, in part, provide for a form of legal organization with which the Crown could interact with and govern Indigenous communities. This genesis, the historic marginalization of indigenous communities and the inability of the federal government to find consensus in the past half-century on modernizing the Indian Act, are the roots of the difficulties with which courts have struggled to categorize bands.

In the late twentieth century, some courts compared a band to an 'unincorporated association,'¹ in contrast to a 'natural person' who has full legal capacity to sue and be sued, or otherwise conduct business, in its own name.² As a result, the accepted practice by the early 2000s for litigating indigenous rights (which the Courts have defined as 'collective rights') was for the chief (and sometimes council) of a First Nation to sue in a representative capacity, on behalf of their members.³

In the corporate context, it was common practice by the 1990s to not have bands hold securities directly in their economic development corporations, but rather have the chief and council do so in trust for the band. In many jurisdictions, this practice continues. Similarly, most provincial land registries will not register an interest in land directly in the name of a band, with little discussion on why this restriction persists.

This doubt about the legal capacity of a band - and practices to address that doubt - leads to a variety of challenges. Having securities held by political leaders in trust for a band adds cost and risk to the creation and maintenance of economic development structures. Most bands that want to acquire 'fee simple' land outside of their reserves must do so through corporate entities, often supported by trusts or limited partnerships to preserve certain tax advantages held by bands. In the event of a contested election, or unexpected death, it can be challenging to secure valid shareholder resolutions. It also begs the question: if a band cannot be a shareholder, how could it be a beneficiary? The definition of beneficiary in the Trustee Act of British Columbia and definition of shareholder in the Business Corporations Act of British Columbia, both refer to 'persons', without supplementing the general definition of...