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Model code addresses economic development in Indian Country

A model commercial code for Indian tribes is designed to encourage the business and lending communities to invest in Indian Country and foster economic development.

July 1, 1998


Model code addresses economic development in Indian Country

Indian Country historically has not been a hotbed of economic development. Non-Indian entities frequently do not evaluate opportunities for establishing viable business ventures within Indian Country, except perhaps in the natural resource-extraction arena. As a result, the economic development projects that do exist in Indian Country generally reflect some type of revenue-generating enterprise or activity established and operated directly or indirectly by the tribal government. Reasons given by non-Indian developers or investors for this lack of economic development within Indian Country are routinely summed up with two words: "uncertainty" and the "unknown."

Indians, non-Indians address strategies

The Montana Regional Strategies Initiatives (MRSI) held several meetings beginning in 1995 to explore issues contributing to low levels of economic development in the state. Indian and non-Indian participants met to address strategies to improve the business opportunities in the economically depressed regions of Montana, including Indian Country areas. Meeting participants identified several key factors perceived as barriers to economic development in Indian Country. One concern expressed repeatedly at these meetings was the lack of tribal laws that would provide some legal certainty with regard to commercial transactions.

Consequently, MRSI created the Tribal Business Code Development Task Force to evaluate various alternatives for addressing this concern. The task force ultimately recommended developing a model commercial code for tribes. The group decided on this approach because it believed it would likely have the broadest effect on economic development prospects in Indian County in the shortest time.

In the spring of 1996, Professor Raymond Cross from the University of Montana-Missoula's School of Law offered MRSI the services of the Indian Law Clinic to develop a model secured transaction law. Gerald Sherman, community development officer with First Interstate BancSystem, Billings, Mont., sought funding from a variety of tribal and nontribal entities to help defray the costs of this project. Although several clinic students worked on the project, Morgan Damerow, now an attorney in the Seattle area, drafted the majority of the secured transaction law.

Drafting this model law was a multistep process similar to other tribal code development projects the clinic has undertaken. The clinic reviewed all existing tribal commercial laws and determined the areas of commercial law that tribes considered important. During the drafting process, the clinic incorporated as many of these provisions as deemed to be relevant into the model law. Several provisions were included as options for tribes to consider when drafting their own tribal commercial codes. In addition, based on discussions with various tribal entities or interests, the clinic considered current tribal needs and included provisions for handling problems frequently experienced in commercial dealing in Indian Country. The clinic used the secured transaction article of the Uniform Commercial Code as drafted by the National Conference of Commissioners on Uniform State Laws for provisions to incorporate into the model tribal law.

Model code provides uniformity, certainty

The final product is intended to be a culturally responsive document that recognizes the sovereign aspects of tribes and that can be used in the development of individual tribal commercial codes. The model law can be enacted independently or incorporated as part of a more comprehensive commercial code. In addition, the model law incorporates principles that are intended to reduce—if not eliminate—the perceived barriers to doing business in Indian Country. Because this model secured transaction law is designed to provide a degree of uniformity and certainty in commercial dealing, it should minimize the perceived risks associated with doing business in Indian Country. This may in turn encourage the business and lending communities to invest in Indian Country and foster economic development.

The clinic continues to receive requests for this model secured transaction law from tribal entities and organizations. Given the expressed interest in this area of Indian law, the clinic would consider creating additional model tribal laws focusing on other commercial areas, provided funding can be located.

Maylinn E. Smith is director of the Indian Law Clinic of the University of Montana's School of Law.

What is a Uniform Commercial Code?

The Uniform Commercial Code (UCC) is a set of standardized laws drafted by the National Conference of Commissioners on State Laws that govern most, if not all, aspects of commercial transactions. The various laws, or articles, that comprise the UCC cover substantive areas of commercial law which deal separately with sale of goods, leases, negotiable instruments, bank deposits and collections, funds transfers, letters of credit, warehouse receipts and bills of lading, investment securities and secured transactions. The UCC, which has been adopted by all states except Louisiana, provides the primary means by which risk will be allocated among parties in commercial dealings. Because the various jurisdictions that have adopted the UCC operate under substantially the same set of commercial laws, financial institutions and commercial entities are able to do business across jurisdictional boundaries with a large degree of certainty as to the rules that apply and the way risk will be allocated in the event something goes wrong.

In Indian Country, one hoped-for outcome of the model tribal law discussed in this article is that economic development will be promoted by providing a sound economic environment in which businesses and banks can operate. The model tribal law is modeled after Article Nine of the UCC, Secured Transactions; Sales of Accounts and Chattel Paper (the shortened title for which is "Uniform Commercial Code-Secured Transactions").