Protecting Your Interests While Contracting With Sovereign Nations

Date: August 23, 2011  /  Author: John P. Ahlers & Paige Spratt  /  Categories: Claims, Contracting  /  Comments (0)  /  Back to Blog

As Pacific Northwesterners, most of us are familiar with the Indian reservations scattered within the Washington, Oregon, Idaho, and Alaska boundaries. These reservations are controlled by federally recognized Indian Tribes (26 in Washington alone), many of which are becoming "heavy hitters" in the U.S. economy. While commonly associated with the operation of gaming casinos, many tribes also provide primary and secondary schools for their children, harvest lumber, and establish for-profit businesses such as water parks, retail stores, and restaurants. To facilitate this growth, tribes are contracting with non-Indians to construct buildings, utilities, and roads within the reservation or on other types of Indian land known as "Indian Country." Tribal reservations are considered sovereign nations (akin to a foreign county) by the law; therefore, contractors need to be aware of some of the risks when doing business with a sovereign nation, and how to protect their interests.

Sovereign Immunity

Sovereign immunity "protects tribes from suits involving both 'governmental and commercial activities,’ whether conducted ‘on or off a reservation.'" Wright v. Colville Tribal Enterprise Corporation. Immunity will also extend to tribal members acting on behalf of the tribe, tribal agencies, and most tribal "business enterprises" (i.e. casinos or retail stores). See id. Essentially, sovereign immunity prevents a lawsuit from being filed against any Indian tribe, an Indian tribal council member, or any tribal business in U.S. state or federal court, or in arbitration, which is governed by state and federal law.

Indian Tribunals and Waiver

  1. Tribal Courts and Tribunals

Each tribe usually has its own governing tribal code (laws governing tribal affairs inclusively dispute resolution). Some tribes even have their own tribunals to adjudicate civil and criminal matters, while the majority of tribes in Washington share a circuit court system to handle all tribal court matters. A case brought before a tribal court or tribunal will be governed by tribal code, which is often not readily available in a commercially published format. Nevertheless, there are inherent risks in adjudicating a claim before a tribunal—unfamiliarity with tribal law, jurisdictional issues, efficiency, etc.-that may preclude a contractor from ever prevailing on a meritorious claim.

  1. Waiver of Immunity

"Under federal law, tribal sovereign immunity comprehensively protects recognized American Indian tribes from suit absent explicit and ‘unequivocal’ waiver or abrogation." Wright v. Colville Tribal Enterprise Corporation. Hence a tribe can waive its sovereign immunity however, for a tribe to waive its immunity, the waiver must be unequivocal. As readers of this blog are aware the court’s analysis of "unequivocal waiver" in American Safety Cas. Ins. Co. v. City of Olympia (the "nail in the coffin" of the strict notice standard asserted in Mike M. Johnson), waiver must be an affirmative disregard of rights-the Indian tribe must engage in conduct or make statements that can mean nothing but a waiver of its immunity.

Understanding and Mitigating Your Risks

If an Indian Tribe does not waive its immunity, you will have no legal recourse against the tribe in state or federal court, or for that matter in arbitration. Taking a proactive approach to mitigating your risk when contracting with a sovereign nation is critical.

Most tribes are reluctant to waive their immunity but may provide provisions that allow recovery from the tribal court or tribunal; however, some contracts contain no provisions regarding your legal rights, and you must look to the tribal code to see if you can bring a claim against the tribe in the tribe's tribal court or tribunal. Bringing a case in tribal court where the judge and jury have a financial interest in preserving the asset of their tribe forebodes an uphill battle for any construction contractor seeking a claim recovery against a tribe.

When negotiating to perform work with the tribe, it is important to clarify your legal rights within the tribal court or tribunal or suggest another legal remedy, such as arbitration (which requires a waiver of sovereign immunity). Drafting an enforceable waiver of sovereign immunity provision is a tricky proposition for which experienced legal counsel should be consulted. The following is sample provision taken from an addendum to a construction contract with a tribe.

"Limited Waiver of Sovereign Immunity - Tribe. The Tribe expressly, unequivocally and irrevocably waives the sovereign immunity of the Tribe from binding arbitration herein and from suit against the Tribe in the courts of the State of Washington to compel arbitration and/or to enter or enforce judgment upon any arbitration award issued hereunder. This limited waiver of sovereign immunity includes, but is not limited to, any action for money damages, injunctive relief and/or declaratory relief. The Tribe agrees that it will not raise sovereign immunity as a defense in any judicial action brought by Contractor to enforce this provision."

The cited provision as provided as an example of one part of a more extensive legal addendum that ultimately accomplished the waiver of sovereign immunity. There are variety of different issues that should be addressed including proper arbitration clause consent of jurisdiction, choice of laws, service of process and obtaining tribal approval (insuring that the person or persons signing the addendum have the appropriate authority from the tribe to bind the tribe to this waiver of immunity). The following case from California demonstrates just how carefully the waiver of sovereign immunity must be crafted in a contract for it to become enforceable. The contractor allowed the tribe to exclude one of the pertinent rules of the American Arbitration Association which provided that the parties consented to state and federal courts having jurisdiction to enter a judgment from the contract. That omission was proved fatal to enforceability of the waiver of sovereign immunity.

"California Parking Service (CPS) had a valet parking contract with the Soboba Band of Luiseno Indians (Soboba Band), a federally recognized Indian tribe. The contract contained a broad arbitration clause the provided for arbitration conducted under the Commercial Arbitration Rules of the American Arbitration Association, excluding Rule 48(c). That rule provides that parties have consented to state and federal courts having jurisdiction to enter a judgment on the arbitration award. The Soboba Band terminated the contract and CPS filed a motion to compel arbitration in state court. The trial court denied the motion to compel arbitration. The Court of Appeal, Fourth District, Division 2, California affirmed the denial of the motion to compel. An Indian tribe is subject to suit only where Congress has authorized suit or the tribe clearly and unequivocally waives its sovereign immunity. By expressly rejecting Rule 48(c) the Soboba Band refused to accept state or federal court jurisdiction. The Soboba Band's refusal of state or federal jurisdiction to enforce the award is also a refusal of jurisdiction to compel arbitration because jurisdiction to compel arbitration is meaningless without jurisdiction to enforce the award."

California Parking Services Inc. v. Soboba Band of Luiseno Indians (July 20, 2011).

Protect your company’s interest before signing a contract with a sovereign nation and prevent being debilitated by inadequate legal remedies.


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