North of 60 Blog

The Yukon First Nations Business Registry (YFNBR) was the subject of judicial review adjudicated in the Supreme Court of Yukon in March and April of 2023. In two written decisions (the judicial review and the remedy ordered), Justice Kent criticised the opaque criteria for registering a business as a First Nations business.^[1] Registration provides First Nations businesses with bid value reductions from 5% to 20%, with additional reductions for hiring Indigenous labour.^[2] See our companion piece on government procurement policy.

Qualifying as a First Nations business for the purpose of being listed on the YFNBR, and gaining the competitive price advantages of bid value reductions, is at the heart of this dispute. The initial case was heard on March 8, 2023, and a further remedy determined on April 11, 2023. The Yukon Government revised their procurement policies on May 1, 2023, although most of the same provisions apply.

Qualifying as a First Nations Business can be Unpredictable

To be eligible to register as a First Nations business for the YFNBR, the business must meet certain ownership requirements set out in the procurement policies of the Government of Yukon, and published on the website of the YFNBR.^[3] The dispute arose when 837386 Yukon Inc. (873) applied for registration on the YFNBR and was rejected. 75% of 873 is owned by a member of the First Nation of Na-Cho Nyak Dun. This percentage was sufficient to clear one hurdle of qualification: being a corporation with at least 51% of the voting shares owned by a Yukon First Nations person (or qualified organization).^[4]

The problem was interpreting the policy’s requirement to be both “beneficially and actively controlled” by a Yukon First Nations business or Persons, and the “bona fide purpose of the business is to provide substantial benefits, whether financial or otherwise” to a Yukon First Nations business or Persons.^[5] Interpretation was up to the Yukon First Nation Chamber of Commerce (YFNCC) who had the responsibility to administer the YFNBR, including deciding whether or not a business was indeed a Yukon First Nations business.

837 applied to be included on the YFNBR in December 2021. It was six months later that 837 learned they were denied registration. The YFNCC determined that 837’s First Nations shareholder was not going to receive the “substantial benefits, whether financial or otherwise,” as required to be included on the YFNBR. The YFNCC decided 837’s non-Indigenous partner would receive those substantial benefits. The question was, what criteria was used to make the decision, and was that criteria available to 837 when the application to the registry was made?

The YNFCC’s internal notes showed that they found 837 met none of the criteria for being actively controlled by, or having a bona fide purpose of providing substantial benefits to, a First Nations Person. The YNFCC provided a list of 22 factors it relied on to come to this decision (although these were not provided in the decision). But Justice Kent was unimpressed, since none of these factors or criteria were publicly available to the applicant. The way the policy requirements were interpreted during the application process was “unfair.”^[6] Key evaluation definitions and criteria for beneficial ownership, the nature of “actively controlled,” and the bona fides of the business were not available to 837, and they should have been.

Evaluating First Nations Businesses

The YFNCC interpreted “beneficially owned” to mean the Yukon First Nations business owner would enjoy benefits commensurate with their share holdings. In this case, 75% of the benefits need to go to the First Nations business partner. The YFNCC pointed to a unanimous shareholder agreement (USA) that appeared to provide the First Nations business partner without “anywhere near equivalent to 75% of the net profit.”^[7] There seemed to be little consideration for substantial benefits other than financial.

“Actively controlled” was interpreted by the YFNCC as meaning the Yukon First Nations business owner controls the formal decision-making of the corporation, and controls the day-to-day operations. This interpretation was not available to applicants, which contributed to a lack of transparency.

Justice Kent pointed out some potential tests to prove the “bona fide purpose” of the First Nations business was to provide substantial benefits to the Yukon First Nations business owner. Tests could include whether a business arrangement came into being before or after the YFNBR began to operate, the motivation to start the business was from the Yukon First Nations business owner, or if there was evidence that the application to YFNBR came from the First Nations business owner.^[8]

Justice Kent held the evaluation process was “flawed and opaque and was not fair.” There was too much conjecture in the decision, said Justice Kent. There was an assumption that 837 was simply a shell company benefitting a non-Indigenous person, but it could also mean this is “a young company with a First Nation person who is starting out and learning the business.”^[9] Unlike the YFNCC, Justice Kent found there was no evidence that 837 was a shell company rather than a bona fide business to provide benefits (financial or otherwise) to the First Nations owner. Justice Kent requested further submissions on the matter, in order to determine a remedy for 837.

Not a Pleasant Amble Through the Woods

On April 11, Justice Kent ordered a declaration adding 837 to the YFNBR, giving the company access to the benefits of the First Nations Procurement Policy.^[10] 837 had requested special costs, due to Yukon’s position being “inconsistent with the documents that formed the record” for the judicial review.^[11] Justice Kent disagreed. In reasoning through the above decision, Justice Kent felt he needed to underpin his analysis with the “importance of moving along the path to reconciliation.”^[12] Although 837 had been long delayed in inclusion on the YFNBR, Justice Kent wrote that getting policies and procedures right in order to advance reconciliation “will continue to be tough slogging as we get it right.”^[13] Mistakes will be made, and the journey will not be a “pleasant amble through the woods.”^[14]

Clearing the Path Toward More Effective Policy

Fair and transparent Indigenous procurement policies are essential to foster and grow Indigenous businesses across the North. Non-Indigenous partners also require sound policy. Partnerships between Indigenous and non-Indigenous business can provide plenty of benefits to both. But all players require more transparency. This is true for existing policies: those of the YFNBR as well as policies of Nunavut Tunngavik Inc. in Nunavut. More transparent and accessible requirements to qualify are required. The Government of the Northwest Territories (GNWT) has been working on an Indigenous procurement policy since 2021. GNWT has an opportunity to learn from mistakes made in other jurisdictions, and create a transparent, fair and predictable Indigenous procurement policy. This will limit the tough slogging required of applicants trying to claim legitimate benefits of the policy, and let them focus on the success of their businesses.

_{[1] 837386 Yukon Inc. v Yukon (Government of), 2023 YKSC 11; 837386 Yukon Inc. v Yukon (Government of), 2023 YKSC 19.}

_{[2] Government of Yukon, “General Administration Manual, Vol. 2: Highways and Public Works Policies – Procurement Policies” (1 May 2023) at s 11(7.1)(b)(i)(a)-(d), (ii), online (pdf): Government of Yukon <yukon.ca/sites/yukon.ca/files/hpw/hpw-gam-2.6-yukon-first-nations-procurement-policy-may-2023.pdf>.}

_{[3] Ibid, s 1(2)(qq); Yukon First Nations Business Registry, “What is a Yukon First Nations Business?” (2023), online: Yukon First Nations Business Registry <yukon-first-nations-business-registry.service.yukon.ca/what-is-first-nation-business>.}

_{[4] Ibid, s 1(2)(qq)(ii)(d).}

_{[5] Ibid, s 1(2)(qq)(a)-(b).}

_{[6] 837386 Yukon Inc. v Yukon (Government of), 2023 YKSC 11 at para 40.}

_{[7] Ibid at para 22.}

_{[8] Ibid at para 26.}

_{[9] Ibid at para 43.}

_{[10] Supra note 2 at s 11.}

_{[11] 837386 Yukon Inc. v Yukon (Government of), 2023 YKSC 19 at para 8.}

_{[12] Ibid at para 9.}

_{[13] Ibid.}

_{[14] Ibid.}