Doing Business With Sovereign Nations © 2005 Michael C. Dennis All Rights Reserved Presented by Michael C. Dennis, M.B.A, C.B.F. For CMA Business Credit Services

Disclaimer The opinions presented in this program are those of the instructor. His opinions and recommendations do not necessarily reflect the views of CMA Business Credit Services or its officers and directors.

The opinions presented in this program are those of the instructor. His opinions and recommendations do not necessarily reflect the views of CMA Business Credit Services or its officers and directors.

A Personal Comment: I have the utmost respect for Native Americans. Nothing in this presentation is in any way intended to ridicule, criticize or denigrate any Native American, or any business venture funded by a tribe, or any business practice or legal practice of any Native American group. This presentation is intended to help you do more business more effectively with Native American businesses in the United States.

I have the utmost respect for Native Americans. Nothing

in this presentation is in any way intended to ridicule,

criticize or denigrate any Native American, or any

business venture funded by a tribe, or any business

practice or legal practice of any Native American group.

This presentation is intended to help you do more

business more effectively with Native American

businesses in the United States.

Introduction The last decade has seen explosive growth in the number and types of commercial ventures owned and operated by Native Americans on Tribal lands. A lack of knowledge about doing business with these Sovereign Nations has caused some creditors to refuse to do business with these entities on open account terms. I believe it is essential that credit professionals have a basic understanding of the legal principles, and issues surrounding doing business with sovereign Indian Nations.

The last decade has seen explosive growth in the number and types of commercial ventures owned and operated by Native Americans on Tribal lands.

A lack of knowledge about doing business with these Sovereign Nations has caused some creditors to refuse to do business with these entities on open account terms.

I believe it is essential that credit professionals have a basic understanding of the legal principles, and issues surrounding doing business with sovereign Indian Nations.

Some Important Information The inherent powers of Indian Nations to regulate commerce has been consistently recognized by the Federal Courts. Indian tribes enjoy sovereign immunity from suit similar to that of the United States government. Federal Courts have held that tribal sovereign immunity extends to business transactions with tribal business entities . As a general statement, tribal businesses cannot be sued in State or federal court. Sales to Indian tribes are becoming increasingly important to many creditors. Given the issue of sovereign immunity, discussed later in more detail, knowledge becomes the key to doing business correctly and safely.

The inherent powers of Indian Nations to regulate commerce has been consistently recognized by the Federal Courts.

Indian tribes enjoy sovereign immunity from suit similar to that of the United States government. Federal Courts have held that tribal sovereign immunity extends to business transactions with tribal business entities .

As a general statement, tribal businesses cannot be sued in State or federal court.

Sales to Indian tribes are becoming increasingly important to many creditors.

Given the issue of sovereign immunity, discussed later in more detail, knowledge becomes the key to doing business correctly and safely.

Important Information Refusing to do business with Indian Nations is neither a necessary nor is it appropriate response to the challenges of managing credit risk. Companies that refuse to do business with Indian tribes often either have incomplete or inaccurate information about how to do business successfully. The most basic rule that credit professionals must know is that Indian Nations have the right to enact laws regulating the conduct of business activities on tribal lands. These laws are based on a tribal Constitution or Charter.

Refusing to do business with Indian Nations is neither a necessary nor is it appropriate response to the challenges of managing credit risk.

Companies that refuse to do business with Indian tribes often either have incomplete or inaccurate information about how to do business successfully.

The most basic rule that credit professionals must know is that Indian Nations have the right to enact laws regulating the conduct of business activities on tribal lands.

These laws are based on a tribal Constitution or Charter.

A Good Place to Start A basic step in doing business with any sovereign nation involves examining the laws, rules, and regulations associated with doing business in that nation. Finding this information requires effort and research. An important source of information about doing business with a particular Indian Nation is the Tribal Constitution [or similar document]. Creditors must know what protection the Tribal laws offers companies selling to Tribal business entities.

A basic step in doing business with any sovereign nation involves examining the laws, rules, and regulations associated with doing business in that nation.

Finding this information requires effort and research. An important source of information about doing business with a particular Indian Nation is the Tribal Constitution [or similar document].

Creditors must know what protection the Tribal laws offers companies selling to Tribal business entities.

Immunity Sovereign nations have sovereign immunity… meaning they cannot be sued unless they consent to be sued. If you want to know your rights as a credit, you must read the relevant documents. There may be restrictions imposed on vendors’ right to sue. These restrictions will be described in the Tribal Charter, tribal law, or the Constitution. It is up to creditors to obtain and read these document. Many tribes are unwilling to waive immunity. Waiver made are generally partial waivers.

Sovereign nations have sovereign immunity… meaning they cannot be sued unless they consent to be sued.

If you want to know your rights as a credit, you must read the relevant documents.

There may be restrictions imposed on vendors’ right to sue.

These restrictions will be described in the Tribal Charter, tribal law, or the Constitution.

It is up to creditors to obtain and read these document.

Many tribes are unwilling to waive immunity.

Waiver made are generally partial waivers.

If You Need to Sue for Payment Creditors may be permitted to sue if immunity is waived… but may be required to do so in Tribal Court. These Courts operate under rules adopted by the Tribal government. This means the rules governing Tribal Courts may be very different from what creditors and their attorneys are used to. Some Tribes have adopted language that provides a limited waiver of their immunity from lawsuits for the specific purposes of enforcing the terms of a business agreement or contract with vendors.

Creditors may be permitted to sue if immunity is waived… but may be required to do so in Tribal Court.

These Courts operate under rules adopted by the Tribal government. This means the rules governing Tribal Courts may be very different from what creditors and their attorneys are used to.

Some Tribes have adopted language that provides a limited waiver of their immunity from lawsuits for the specific purposes of enforcing the terms of a business agreement or contract with vendors.

When Legal Action is Required Tribal court judges appear to have a conflict of interest but cannot recuse themselves. This is not intended to suggest that Tribal Courts are unfair or render improper decisions. It is a simple statement of fact. The same would apply to a trial by jury. Each member of the jury would also have to be a member of the tribe. You may or may not have the right to appeal a verdict to a higher Tribal court. The right to do so assumes an appeals process exists under applicable Tribal law.

Tribal court judges appear to have a conflict of interest but cannot recuse themselves.

This is not intended to suggest that Tribal Courts are unfair or render improper decisions. It is a simple statement of fact.

The same would apply to a trial by jury. Each member of the jury would also have to be a member of the tribe.

You may or may not have the right to appeal a verdict to a higher Tribal court.

The right to do so assumes an appeals process exists under applicable Tribal law.

Legal Action Also, without a specific written exemption, creditors cannot appeal decisions made by a Tribal Court to a State or federal court. Simply state, State and federal courts do not have jurisdiction to hear an appeal of this type, and Tribal land and property cannot be sold, taxed, liened or encumbered. State courts lack jurisdiction over lawsuits brought by non-Indians against Indians when such jurisdiction would infringe on “the right of reservation Indians to make their own laws and be governed by them.”

Also, without a specific written exemption, creditors cannot appeal decisions made by a Tribal Court to a State or federal court.

Simply state, State and federal courts do not have jurisdiction to hear an appeal of this type, and Tribal land and property cannot be sold, taxed, liened or encumbered.

State courts lack jurisdiction over lawsuits brought by non-Indians against Indians when such jurisdiction would infringe on “the right of reservation Indians to make their own laws and be governed by them.”

Avoiding Problems Avoiding problems involves a fundamental change in your mindset. Think about doing business with Indian Nations as doing business with a foreign government - - - such as the government of Iceland. Your risk of loss is higher simply because you may not have the right to sue - - - or because your rights are limited in some way - - - or because you must sue in Iceland. You need to do research before the sale. You need to know the risks. If applicable, you need to obtain approval from senior management before extending credit.

Avoiding problems involves a fundamental change in your mindset.

Think about doing business with Indian Nations as doing business with a foreign government - - - such as the government of Iceland.

Your risk of loss is higher simply because you may not have the right to sue - - - or because your rights are limited in some way - - - or because you must sue in Iceland.

You need to do research before the sale.

You need to know the risks.

If applicable, you need to obtain approval from senior management before extending credit.

Are Letters of Credit Effective? Can creditors use Letters of Credit to minimize the risk of selling to an Indian Nation? The answer is Yes. Creditors can use Letters of Credit to mitigate credit risk, just as they might when doing business with a customer in Iceland. Substituting the credit worthiness of a bank is one way to avoid potential problems. As with any other customer, getting the buyer to agree to provide a Letter of Credit is the key.

Can creditors use Letters of Credit to minimize the risk of selling to an Indian Nation?

The answer is Yes. Creditors can use Letters of Credit to mitigate credit risk, just as they might when doing business with a customer in Iceland.

Substituting the credit worthiness of a bank is one way to avoid potential problems.

As with any other customer, getting the buyer to agree to provide a Letter of Credit is the key.

FYI Generally, immunity applies to all contracts with Indian Nations and Tribal business entities irrespective of where the contract was formed or signed. Immunity from lawsuits extends to tribal officials acting in their official capacity and within the scope of their authority. This means that no personal liability attaches to Tribal officials conducting tribal business beyond that which is provided for in the Tribal laws. Some creditors require contracts with tribal entities contain waivers of tribal court jurisdiction or agreements to submit disputes to federal or state courts. These contracts may be completely unenforceable.

Generally, immunity applies to all contracts with Indian Nations and Tribal business entities irrespective of where the contract was formed or signed.

Immunity from lawsuits extends to tribal officials acting in their official capacity and within the scope of their authority.

This means that no personal liability attaches to Tribal officials conducting tribal business beyond that which is provided for in the Tribal laws.

Some creditors require contracts with tribal entities contain waivers of tribal court jurisdiction or agreements to submit disputes to federal or state courts. These contracts may be completely unenforceable.

Did You Know … That to be enforceable, a waiver of immunity must be in writing. It must be clear and unequivocal, and it must be signed by the proper Tribal authority or authorities. There is no universally applicable rule as to who has ‘proper’ authority to waive immunity. If a business entity is created under tribal law, the tribe may have enacted a corporation code or some similar tribal ordinance governing how corporations may be formed, and their powers and immunities. Generally, tribally-owned corporations have sovereign immunity like the tribe itself… meaning that creditors can assume that a tribal corporation is incorporated like other businesses in any by the state.

That to be enforceable, a waiver of immunity must be in writing. It must be clear and unequivocal, and it must be signed by the proper Tribal authority or authorities.

There is no universally applicable rule as to who has ‘proper’ authority to waive immunity.

If a business entity is created under tribal law, the tribe may have enacted a corporation code or some similar tribal ordinance governing how corporations may be formed, and their powers and immunities.

Generally, tribally-owned corporations have sovereign immunity like the tribe itself… meaning that creditors can assume that a tribal corporation is incorporated like other businesses in any by the state.

Ways to Protect Your Company Steps you can consider to reduce credit risk include: Requiring partial payment in advance. Requiring payment on delivery. Requiring progress payments. Shortening your open account dating terms. Holding orders any time your customer becomes past due. Visiting with the customer to develop a rapport with them.

Steps you can consider to reduce credit risk include:

Requiring partial payment in advance.

Requiring payment on delivery.

Requiring progress payments.

Shortening your open account dating terms.

Holding orders any time your customer becomes past due.

Visiting with the customer to develop a rapport with them.

Conclusion The uncertainty surrounding doing business with an Indian tribe is detrimental to both the buyer and seller. The buyer may not be able to obtain all the product they need. The seller may not be able to achieve their sales targets for the customer because of credit constraints. The key is to look for ways to do business safely and successfully.

The uncertainty surrounding doing business with an Indian tribe is detrimental to both the buyer and seller.

The buyer may not be able to obtain all the product they need.

The seller may not be able to achieve their sales targets for the customer because of credit constraints.

The key is to look for ways to do business safely and successfully.

Conclusion An informed and educated credit manager can help protect their employer by: Understanding the risks Explaining these risks to their management team Suggesting options to mitigate these risks

An informed and educated credit manager can help protect their employer by:

Understanding the risks

Explaining these risks to their management team

Suggesting options to mitigate these risks

Conclusion Ideally, before entering into a business transaction with a tribally created entity, creditors will perform the necessary review of organizational documents, including authorizing resolutions of all governmental and business entities involved. Your goal is to ensure that the entity with whom you are doing business is properly organized and that all necessary steps have been taken to approve and authorize the performance of the contract by the tribal business entity.

Ideally, before entering into a business transaction with a tribally created entity, creditors will perform the necessary review of organizational documents, including authorizing resolutions of all governmental and business entities involved.

Your goal is to ensure that the entity with whom you are doing business is properly organized and that all necessary steps have been taken to approve and authorize the performance of the contract by the tribal business entity.

One Final Thought The overwhelming majority of Tribal business entities want what most other customers want… a long and mutually beneficial business relationship with suppliers.

The overwhelming majority of Tribal

business entities want what most other customers

want… a long and mutually beneficial

business relationship with suppliers.