The First Perspective-Aboriginal, First Nations and Native News in Canada

The First Nations Governance Act in summary

On Friday, June 14, 2002 INAC Minister Robert Nault tabled legislation entitled the "First Nations Governance Act" for first reading in the Parliament of Canada.
The new act sets out to "provide an interim step towards-self government" and to give first nations communities tools that "would allow them to build self-sustaining communities," according to Nault.

During the months and perhaps year ahead-while the legislation is reviewed by a parliamentary standing committee for amendments or alterations-and until, or if, the bill goes through second and third reading, is passed by the House of Senate and finally receives royal assent and proclamation, analysis of the legislation by Indian organizations and other groups will be exhaustive.

The First Perspective will provide coverage and its own analysis of the legislation during this period. We start off this month by providing summaries of the major sections of the proposed legislation in this issue. These summaries appear as presented by Indian and Northern Affairs. To view the summaries and the Act itself, you can access at our web-site at www.firstperspective.ca and click on our first nations governance link, which will also provide further links to analysis of the legislation as provided by first nations political organizations and other interested parties.

This month we will be focussing on the following sections of the legislation:
Leadership Selection, Financial Management and Accountability, Administration of Government, Legal Capacity, Private Law Making, Ratification and Amendment of Band Designed Governance Codes.

ADMINISTRATION OF GOVERNMENT CODE

Background

Under the Indian Act, there are no rules for the development, making and registration of band laws, nor are there rules on conflict of interest or any of the other operational codes upon which all modern governments and their citizens rely. As well, there are no clear distinctions between band governance and administration.

Content

Under the FNGA, First Nations would have the option of developing their own administration of government codes. These codes would set out essential governance elements, such as:

• how the community works to enact and amend band laws;
• procedures for conducting council business, holding meetings of the band membership and keeping records;
• other ways to involve First Nation members in decision-making;
• roles and authorities of bands' administration and its relationship to the band council;
• conflict of interest rules;
• access to information provisions, protection of personal information under band control, and access by individuals to information about themselves; and
• a procedure for amending the code. Codes would have to meet minimum requirements and be ratified by the membership. If a First Nation decided not to develop its own code, it would then follow the default provisions set out in FNGA regulations.

In support of transparent governments, the band council would be required to make available to band members and residents of the reserve all administrative rules, policies and directives relating to operation of the band, including programs and services offered to members and residents.

Under the FNGA, a band council would also be able to withhold moneys payable to members of the band, to satisfy debts owed to the band by that member.

The FNGA would limit liability for chiefs, councillors and band employees. This is consistent with other legislation that protects executive and administrative officials acting in good faith while carrying out their duties.

Practical Application

Clear roles and procedures, rights of notification and access, and separation of legislative and administrative functions are basic tools that all governments and citizens rely on for the effective functioning of government. First Nations and their members and residents need them no less than anyone else to ensure stability, certainty and transparency in the operations of government.

FINANCIAL MANAGEMENT and ACCOUNTABILITY CODE

Definition

Financial management means: the sound management of financial resources; the regulation of the receipt and expenditure of funds and protection of First Nation assets; and the establishment of the administrative organization of the First Nation for these purposes.

Under the First Nations Governance Act (FNGA), the concept of financial accountability includes accountability of First Nations governments to their members and to governments from whom they receive funding.

There are three principles of financial accountability: transparency, disclosure and redress.

First Nation Financial Codes

FNGA requirements are intended to ensure that First Nation governments maintain financial records according to generally accepted accounting principles and in a manner comparable to other governments in Canada.
The FNGA would enable First Nations to ratify either a First Nation designed code which includes minimum elements specified in the FNGA, or utilise the default regime laid out in the regulations.
Minimum elements of the financial code relate to:

• preparation of an annual budget, adoption by council and presentation to members;
• expenditure control provision;
• internal financial controls;
• provision and collection of loans;
• remuneration of public officials and employees of the band;
• incurring of debt and debt management;
• management of and limitation of the band's deficit; and
• procedure for amending the code.

A band's financial statement would have to be publicly available within 120 days after the end of the fiscal year. Copies would have to be provided to requesters upon payment of a reasonable fee.

There are also provisions requiring financial reporting, addressing financial breaches, and the development of recovery plans by council. As a last resort, the Minister would retain discretion to intervene and require remedial measures in the following circumstances:

• a deterioration of the band's financial health that compromises the delivery of essential programs and services;
• the failure to make financial statements available; and
• the denial of an opinion, or an adverse opinion, by the band's auditor on the band's financial statements.

The FNGA would require band councils to make all the administrative rules, policies, and directives of the band publicly accessible to band members and reserve residents.These rules and procedures would form the basis for redress activities.

The FNGA financial code model is a practical governance vehicle for combining an enabling legislative approach with minimum standards.
For more information on the codes, see the fact sheets on Ratification and Amendment of Band-designed Codes, and Registry and Evidence of Band-designed Governance Codes.

Practical Application

Given its colonial nature, developed when bands were not managing multi-million dollar budgets, the current Indian Act is silent on financial management and accountability. As a result, basic financial management procedures are based on policies and funding agreements of the various federal departments providing resources to band governments. Consistent with the First Nations Governance objective to provide First Nations with tools they need now for effective and financially accountable governance and economic development, the FNGA would address the current lack of a legislative base to ensure sound financial management and accountability to band members.

It would provide members the opportunity to be more involved in the governance of their communities by providing greater access to financial information, including audited financial statements, annual expenditure plans and salaries for members of the council.

The FNGA would also help ensure members are informed of any financial difficulties their First Nation may be experiencing by requiring notification to members when deficits are incurred.

While the overall approach would enable and empower communities, as a last resort, the Minister would retain the discretion to intervene in more serious circumstances, including when the delivery of essential programs and services may be impacted, thereby avoiding a potential threat to the health and safety to communities.

LEADERSHIP SELECTION CODE

Background

Since the Indian Act was passed in 1876, the selection of First Nations leaders has taken place in one of two ways.

The Indian Act contains election provisions that set out the election rules and procedures for the 261 First Nations that were brought and remain under these provisions. These First Nations have been known as "Indian Act bands" or "section 74 bands".

Aside from 21 First Nations that are currently under four self-government agreements, the 330 remaining First Nations currently choose their leadership outside the Indian Act in a manner according to the custom of the community. This applies to 196 First Nations that were never moved into the Indian Act system, as well as to 134 First Nations that had been under the Indian Act but reverted by request to a "custom" model.

In its 1999 Corbiere decision, the Supreme Court of Canada ruled that subsection 77(1) of the Indian Act, which restricted voting rights in Indian Act elections to on-reserve members, violated equality rights protected by the Canadian Charter of Rights and Freedoms. The court ruled that members of "section 74 bands", regardless of whether they live on or off reserve, should be able to vote in elections and have meaningful input into decisions that affect their interests.

The Corbiere decision did not address other similarly restrictive provisions of the Indian Act dealing with who is eligible to run for councillor or who can nominate an electoral candidate. It did note that given the different interests of on and off-reserve members, there were a number of potential ways that those interests could be balanced, for example, through different voting regimes and/or structure of council.
Recognizing the need for greater change, the government responded to Corbiere with a staged approach.

In the first stage, the government simply allowed the discriminating words "and is ordinarily resident on the reserve" to become inoperative as a result of the court decision taking affect. It also amended the regulations to allow off-reserve band members to vote in band elections and referenda.

In stage two, the government decided it would, with further guidance from the Supreme Court of Canada (Lovelace), the Joint Initiative (the Department of Indian Affairs and the Assembly of First Nations initiative examining policy changes to the Indian Act), and consultations with First Nations and organizations representing off-reserve band members, develop longer-term legislative options to deal with leadership selection.

Leadership selection then became one of the three main themes of the First Nations Governance Initiative, focussing on the need for a comprehensive elections regime to replace the current regime for those bands operating under the Indian Act. This was necessary in order to respond to Corbiere, while respecting the fact that custom First Nations are not subject to the electoral provisions of the Indian Act.

Content of the First Nations Governance Act
The First Nations Governance Act (FNGA) includes a comprehensive elections regime that offers First Nations currently electing their leaders under the Indian Act, the empowerment and flexibility they are seeking, while ensuring that First Nations band members can enjoy transparent and accountable governments.

Indian Act Bands

Under the enabling provisions of the proposed legislation, First Nations presently conducting elections under the Indian Act have the option of designing their own community electoral code. While band-designed codes could reflect traditional values and community practices, they must also include the following minimum elements:

• the size and composition of council;
• the method of choosing members of council, the majority of whom must be elected;
• the term of office, not exceeding five years;
• voting procedures for council or members which are elected, and voting by secret ballot;
• eligibility requirements to vote, run for office and nominate candidates;
• filling vacancies on council;
• an appeal mechanism;
• policy for removal from office of elected and non-elected members;
• definition of corrupt electoral practices; and
• an amending formula.

The legislation provides that band-designed codes must be in writing, must respect the interests of all band members and may balance their different interests, including the different interests of on and off-reserve members. It also requires ratification of these codes by on and off-reserve members.
First Nations would have two years from the time these provisions come into force in which to develop and ratify their own codes. After this two-year transition period, if the band has not adopted its own code, it would automatically fall under the default code. Bands would still be able to design and ratify their own codes in the future.

Custom Bands

The First Nations Governance Act would establish the following options, including minimum requirements, for First Nations which are currently operating under their own custom leadership regimes:

• use their existing custom rules, along with a new appeal process and amending formula (if the current rules do not address appeals and amendments); or
• create new leadership selection codes, to include the same minimum elements required for band-designed codes under the new Act.

A custom code would also have to be in writing and would also require ratification by members within the two-year transitional period. The failure to approve the existing custom rules or create a new band-designed code within that time will result in the application of the default regime.

Custom bands would have only two years beginning from the date when regulations applying to custom elections come into force, to create written versions of their codes and have them ratified by their members.

Default Regime

First Nations that did not ratify their own codes within the two-year transition period would be subject to a default regime to be contained in the First Nations Governance Act regulations. This regime would replace the present Indian Act election provisions with a comprehensive electoral process that includes on and off-reserve members. Consultations on the specific content of the regulations will be held following passage of the new Act.

The regulations would include provisions addressing the same matters that band-designed codes must include, such as composition of council, eligibility to vote and run for office, term of office, appeals, or removals from office.

Practical Application

Consistent with the First Nations Governance objective to provide First Nations the tools they need now for effective and financially accountable governance, the new Act would ensure that the members have direct and meaningful input into the choice of their leadership selection process.

The legislation would provide greater certainty and stability for First Nation members. Band-designed processes would be in writing and would allow for the adaption of traditional approaches, while communities operating under their own codes or under the default regulatory regime would both benefit from the greater consistency this legislation provides. Bands would have the option of specifying terms of office (up to five years) instead of the current two years.

These and other code provisions would provide more stability and transparency in band governance, enabling communities to concentrate their efforts on more pressing socio-economic priorities.

Custom First Nations would have an opportunity to review their processes and maintain or replace them if they wish to do so. Current custom systems that are serving their communities well would likely be affirmed without change, while those that have not been working well could be improved.

The result of this would be that the Minister would have no role in a First Nations leadership selection process of bands which design their own codes under FNGA, and would have a greatly reduced role in the election of bands under the default regime only retaining the discretion to deal with appeals.

LEGAL CAPACITY

Definition

Typically, any government in Canada has the clear legal capacity necessary to carry on day-to-day operations, such as the ability to sue, to contract, or to borrow.

Background

Bands under the Indian Act do not have clear legal status. While the courts have recognized that bands have the capacity to contract, to sue and be sued, significant uncertainty still exists. Currently there is a large volume of litigation in front of the courts involving bands, band members and third parties. Varying court decisions find that bands have legal capacity for some purposes but not for others.

This legal uncertainty has a negative impact on band government operations and economic development, especially when some bands use lack of legal capacity as a defence in contractual disputes. While some bands have managed to overcome some of these hurdles, it can be costly in both time and money. Uncertainty on the part of third parties can cause delays that lead to lost economic opportunities and/or lead to the need to establish corporations and undertake special legal proceedings.

Content of the First Nations Governance Act (FNGA)

The FNGA would clarify that a band would have the legal capacity, rights, powers and privileges of a natural person, including the capacity to:

• enter into contracts and agreements;
• acquire, hold, and dispose of rights and interests in property;
• raise, spend, invest and borrow money;
• sue or be sued; and
• do anything relating to the exercising of its rights, powers and privileges.

The proposed FNGA specifies that this clarification would not affect the nature of the interest in reserve lands and Indian moneys belonging to band members in common under the Indian Act, or the application of that Act in respect of those lands or moneys. It would further clarify that a band acts through its council in exercising its legal capacity

Practical Application

Consistent with the First Nations Governance Initiative objective to provide First Nations the tools they need now for effective and financially accountable governance and economic development, clarifying the legal capacity of bands would allow First Nations to more efficiently carry out day-to-day operations. These activities include dealing with third parties, businesses and other governments in matters such as contracts for goods and services, including contracts for municipal services and housing.

This clarification would also simplify dealings with provinces and resource companies with respect to important matters such as resource-sharing agreements, since they would be dealing with a clearly defined legal entity.

It also has the potential to encourage economic development activity between First Nations and third-party investors who prefer to do business on familiar legal ground. This clearly has the potential to improve the quality of life for First Nations people.
While clearly defined capacities would better enable band councils to more effectively run their communities, it would not affect the legal status of a band or turn it into a corporation, would not allow the alienation of reserve land, or undermine the fiduciary relationship between the Crown and First Nations.

It also would not adversely impact on Aboriginal and treaty rights, including self-government. In fact, the FNGA clarification of legal status would be similar to that being used in most self-government discussions.

Definition

Legal capacity is an important legal concept. According to general common law principles, only persons (either human beings or legal entities such as corporations) have sufficient legal personality to possess legal rights and duties.
Typically, any government in Canada has the clear legal capacity necessary to carry on day-to-day operations, such as the ability to sue, to contract, or to borrow.

Background

The FNGA would clarify that a band would have the legal capacity, rights, powers and privileges of a natural person, including the capacity to:

• enter into contracts and agreements;
• acquire, hold, and dispose of rights and interests in property;
• raise, spend, invest and borrow money;
• sue or be sued; and
• do anything relating to the exercising of its rights, powers and privileges.

Practical Application

This clarification would also simplify dealings with provinces and resource companieswith respect to important matters such as resource-sharing agreements, since they would be dealing with a clearly defined legal entity.

RATIFICATION and AMENDMENT OF
BAND-DESIGNED GOVERNANCE CODES

Overview

The First Nations Governance Act (FNGA) would give bands the authority to design, pass and amend their own governance codes with respect to the administration of government, leadership selection, and financial management and accountability.
The FNGA would require the codes to be approved by on and off-reserve band members. Accordingly, there would be a need to establish ratification standards for determining membership consent to proposed codes.

Content of First Nations
Governance Act

The First Nations Governance Act would require ratification of codes by secret ballot. A simple majority of eligible electors who vote would have to approve the proposed codes and more than 25 percent of the eligible voters must have voted to approve them.

An eligible voter is described as any member of a band, residing on or off the band's reserve, who is 18 years of age or older.

The Act would also require codes to include an amendment process. However, the details of the process would be developed by the band and contained in the codes themselves.

The Act would require codes to be registered both in a band's own registry and in anational registry to be established by the Minister. Codes would come into force at the beginning of the day following the day on which they are registered in a band's registry or at such later date as the code may specify.

If bands do not choose to pass their own governance codes within the two-year transition period following the passage of the regulations supporting the legislation, or repeal their existing codes without replacing them, or if their codes are declared invalid by the courts, they would be governed by the default regulatory regime under the FNGA. However, even after bands were operating under the default regime, they would continue to have the ability to develop and ratify band-designed codes and may, of course, enter into self-government negotiations at any time.

Practical Application

Consistent with the First Nations Governance Initiative objective to provide First Nations the tools they need for effective and financially accountable governance and economic development, the FNGA would provide for an effective and practical code ratification process.

The proposed approach is intended to be consistent with the principles of the Corbiere decision of the Supreme Court of Canada, as it requires that codes respect the interests of both on and off-reserve members. Since proposed codes are required to contain an amending formula, all members would, through exercising their right to vote, have an opportunity to ensure their interests in future amendments are appropriately protected.

The standard for determining membership consent would strike a balance between the need for a representative threshold of membership approval and the realities facing all electorates, which is that it is difficult to "get the vote out". Since First Nations face particular challenges because of the large off-reserve population, a higher consent threshold would effectively create a bias in favour of the default regime. A lower level, on the other hand, may not respect the significance of the subject matter being voted upon. The proposed approach therefore supports the adoption of enabling codes, consistent with the objective of First Nations empowerment.

The ratification process is intended to provide for membership engagement, be inclusive of off-reserve members and otherwise provide a meaningful opportunity for all members to provide their informed consent through the receipt of relevant information and other means.

In the event a code is not in place for any of the reasons noted above, the default regime would apply, thereby avoiding governance gaps in First Nations communities.

LAW-MAKING

Background

By-laws, largely section 81 of the Indian Act, are outdated and insufficient to run modern communities. The Minister is often forced to disallow otherwise good laws because of a lack of modern authorities in the Indian Act. Enforcement problems exist as courts do not always take judicial notice, and penalties are well below those of other governments for similar infractions. Bands also do not have access to the necessary authorities, such as ticketing schemes.

Content

Under FNGA the wording of current band law-making powers under section 81 of the Indian Act would be modernized and made more general in a number of cases to provide greater flexibility to bands. As well, these powers would be split into two clear groups of authorities: those related to local on-reserve matters and those relating to the conduct of band affairs. A new law-making section relating to the operations of government would also be added. First Nations would be required to register their laws publicly , as outlined in the Registration, Commencement and Notice of Band-designed Governance Codes fact sheet.

Under the present Indian Act, the Minister can disallow First Nation by-laws, which is an inappropriate intrusion into local matters. Under the FNGA, the Minister would have no disallowance power. As a result, the FNGA would contain a main clause for each of the three law-making authorities that explains which federal acts and regulations prevail in the event of a conflict.

Band by-laws which were enacted and enforced under the Indian Act shall still apply under the FNGA.

Laws for Local Purposes

Law-making would be modernized and updated to give band councils the authority to make laws for local purposes, at least comparable to other local governments in Canada, that apply on the bands' reserves. The wording of authorities in this area is such as to provide a general purpose heading, rather than detailed listings obviating the need for frequent changes to legislation in this area.

In addition to the modernization of authorities in the current section 81 of the Indian Act, the FNGA provides First Nations new local purposes authority to enact laws related to landlord-tenant relationships. This is important, as equivalent provincial laws do not currently apply on reserve lands.
Laws for Band Purposes

The band council would have the authority to make laws for band purposes which include all similar matters in section 81 of the Indian Act in addition to new general purpose authority for management of community natural resources within the reserve such as wild rice, timber and herbs.

First Nations would also benefit from a new authority to pass laws for the preservation of their culture and language.

These law-making authorities have been distinguished (relative to their treatment in the Indian Act) from local purpose authorities to make it clear that bands are more than municipalities recognizing the communal nature of lands and resources, and that membership is not defined by geography.

Operation of Band Governance

The Indian Act contains no provision enabling bands to establish boards, bodies and other entities by delegating some or all of their powers. Under the FNGA, this would change to allow a band council to establish a housing committee, health board or other entity to act on behalf of a band. It can also be used to delegate functions in the FNGA (e.g. redress body) to an external agency if that would be more practical.

Currently the Indian Act does not provide for access to information and privacy rules for First Nations governance with respect to information held by the band, nor does it contain conflict of interest rules. The FNGA enables First Nations that wish to pass laws with respect to access to information and privacy to do so. These are normally part of open and transparent government operations across Canada. There is also a need for authority to develop detailed rules governing elections to council and elections to bodies established by council, pursuant to leadership selection codes.

The authority for the joint establishment of a body by two or more bands recognizes that some bands may need or want to join together to govern their communities more efficiently. This, as well as the delegation function, will be particularly useful in small communities where capacity limitations might otherwise impede the implementation of the FNGA and the realizable benefits to communities.

Enforcement of Laws

The FNGA would give band councils increased modern enforcement powers, comparable to other governments in Canada. It would also provide that the courts may take judicial notice of band laws.

The FNGA would provide for fines of up to $10,000, or a term of imprisonment up to three months, or both, for most infractions, and up to $300,000, or imprisonment of up to six months, or both, for matters causing adverse affects to the environment. The current fine of $1,000 under the Indian Act has not proven to be an effective deterrent, especially given the nature of modern-day activities on reserves across Canada where the minor fines and the unwillingness of courts to take judicial notice have often meant that band laws have gone unenforced.

The FNGA would also provide a ticketing scheme that councils may use to enforce laws. First Nations communities would be able to collect and retain proceeds.
Band councils would also have the authority to enforce laws regulating on-reserve residential tenancies by means of evicting non-performing tenants.

Councils could also appoint band enforcement officers who would have the power to investigate an alleged breach of a band law, search on-reserve premises, seize evidence and issue orders and notices. The FNGA does not diminish the authority of peace officers, who are still able to perform their current functions, if deemed necessary by a band council.

Practical Application

Consistent with the First Nations Governance Initiative objective to provide First Nations the tools they need now for effective and financially accountable governance and economic development, the proposed measures combine to strengthen First Nations councils and their citizens by providing increased power and authority over day-to-day local matters. The modernization and addition of new authorities would also enable bands to put in place more effective program and services for their communities.

Band councils would have improved law enforcement tools to deal more effectively with problems that arise in their communities and the authority to establish more enforceable meaningful penalties.

In keeping with the increased powers and authorities of band councils, the federal government would have significantly reduced involvement in matters that are more efficiently and appropriately addressed at the community level.

For More information go to:

Assembly of First Nations

Indian and Northern Affairs Canada