Supreme Court land title ruling may affect First Nations financing

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A landmark legal decision by the Supreme Court of Canada involving aboriginal title is raising speculation about whether it could affect financing for native groups.

A June decision by the Supreme Court of Canada affirmed aboriginal title to a specific tract of land for the Tsilhqot'in Nation, leading some to question whether the title could be used as leverage to obtain financing or negotiate with companies that want to build, say, a wind or hydro-power project on the land in question.

"Before [the ruling], we had two types of land in the province – fee simple … and Crown land," David Austin, a Vancouver lawyer who has worked extensively in the energy sector, said in a recent interview. "We now have a third concept – aboriginal title land."

The Supreme Court of Canada in June confirmed the Tsilhqot'in Nation holds aboriginal title to nearly 2,000 square kilometres of land in interior B.C.

Given that aboriginal title is held on a collective basis, it would not likely provide lenders the same type of security as fee-simple property, which can be foreclosed on in the event of loan payments not being made, Mr. Austin said.

But he expects new financing models could emerge.

"It does not appear that First Nations can pledge their aboriginal title lands for security for money required for economic development," Mr. Austin said. "But I am very confident that this problem can be worked out."

Joan Young, a partner with McMillan LLP law firm in Vancouver, is less convinced that the recent court decision will affect financing arrangements, noting that the Supreme Court of Canada found governments can infringe on aboriginal title if they meet certain conditions.

That could lessen the likelihood of such title being used as financial leverage.

"I don't see a bank relying on that [aboriginal title] in terms of advancing funds to a First Nation," Ms. Young said. "If you're thinking with your banker's hat on, you would ask, 'Do I give money to somebody on the basis of the interest they have in this land when another party can still go in there and use it for a purpose that the person I have lent money to may not agree with?'

"Probably not," she said.

She does, however, see other potential financial implications of the recent decision, including potential damage claims if, say, a First Nation were to establish aboriginal title over a given territory and then seek compensation for development that has taken place on those lands in the past.

"Will the Crown now have to go back and look at what are all the things we have authorized on that land without consent, will there be an infringement analysis – is the infringement something than can be justified … I will expect that will be an issue," she said.

Those questions could come up either at the treaty table, where dozens of B.C. First Nations are at various stages of negotiation with the federal and provincial governments, in future court cases or in negotiations with industry and government in relation to existing and proposed development, she said.

"I think for a lot of First Nations – they will carry on in the same way they have, with [Impact and Benefit Agreements], agreements with government – that will provide them with a lot of the same benefits they might get going through a multiyear, contentious lawsuit trying to establish title," Ms. Young said.

Lack of borrowing power by First Nations has long been seen as a barrier to economic and infrastructure development for First Nations communities. In response, aboriginal groups set up the First Nations Finance Authority, which last month issued its first bond, a $90-million debenture designed to raise capital for roads, water and other infrastructure projects. A second bond issue is expected next year.