By Galanda, Gabriel S. | Dispute Resolution Journal, November-January 2010 | Go to article overview


Galanda, Gabriel S., Dispute Resolution Journal

To advance the interests of tribal governments and their business partners, while managing the risk of attacks on tribal sovereignty, the author suggests arbitration as a means to address commercial disputes arising in Indian Country.

Economic development has proven markedly positive for many tribes. As Indian economies have grown, so too has tribes' capacity to assert sovereignty and exercise self-determination. For example, tribal governments are now administrating federal services, improving or creating tribal justice systems, lobbying other governments to further their socio-economic agendas, and refining policies governing tribal employment of an increasing number of non- Indian citizens. Attracted by the byproducts of these tribal governmental efforts, non-tribal business partners and investors have flocked to the reservation in search of economic opportunity like never before, with many forming symbiotic business relationships with tribal governments and enterprises.

But tribal economic development has been shadowed closely by a steady erosion of tribal sovereignty- the centerpiece of any tribal/non-tribal joint venture-which has in turn slowed private investment in Indian Country. This is particularly true in the business litigation context. Although there have been some tribal gains, courts have found waivers of tribal sovereign immunity where there were none,1 inappropriately imposed federal regulations on tribal businesses,2 and subjected tribal businesses to state taxes.3

This dichotomy forces us to ask: If tribes advancing business interests are simultaneously exposing their sovereignty to attack, how should tribes manage such exposure? And how must non-Indian business partners protect their own interests while at the same time respecting and leveraging tribal sovereignty? Slowing economic development is not an option; neither is knowingly risking long-term harm to the governmental integrity tribal leaders have sworn to protect, or to the economic integrity corporate fiduciaries must uphold. Arbitration is not the only tool, but it is a much-overlooked answer. Through careful contracting and governance, tribes and their business partners can employ arbitration to protect against litigation, while still encouraging private investment and economic growth in Indian Country.

Doing the Deal

For tribes, the importance of laying a strong foundation for business structures cannot be overemphasized. Tribal businesses must protect tribal assets and reduce risks to tribal enterprises, while simultaneously facilitating economic relationships- which, of course, require business risk. Business disputes that may be pedestrian in other contexts are direct threats to tribal sovereignty when a tribe's political integrity is attacked as part of the dispute process. For instance, nontribal businesses might denounce a business practice, or disgruntled employees might file suit under non-tribal labor or employment laws. When these issues are presented to state and federal courts, tribal parties are rolling the dice. Today's simple jurisdictional dispute may be come tomorrow's harmful judge-made authority for an attack on tribal sovereignty.4 In dealings, or anticipation of dealings, with non-tribal entities, business structuring often entails striking a compromise with regard to some aspects of sovereignty in order to avoid litigating in an uncertain legal and political climate. Typically up for negotiation, for instance, are the size, scope, and application of any waiver of tribal sovereign immunity; the forum permitted to adjudicate a dispute; and the substantive law governing the agreement.

Many, if not most, sophisticated non-Indian businesses already prefer arbitration to formal litigation proceedings, as arbitration is sometimes cheaper and less risky than litigation. Tribes should welcome these arbitration agreements for the same reasons-and some in addition. When forming a tribal business, tribes should keep in mind that arbitration provides an alternate, viable means for all parties to reconcile their differences. …

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