PublicationsLegal Prospects for Off-Reserve Casinos in Canada Commercial gaming managed and operated by the First Nations is in its infancy. Currently, the various First Nations operate a number of types of gaming activities on-reserve, both for charitable benefit and for commercial ends. The most prominent "off-reserve" gaming operators among the First Nations are the Mohawks of Kahnawake in the Province of Quebec, who service gaming operators and players world-wide by offering Internet gaming facilities from servers located on its reserve, through the auspices of their self-proclaimed Gaming Commission. Jurisdiction After 1969, the federal government began to reduce its direct involvement in gaming regulation, while the provincial governments lobbied for greater access to gaming revenues. In 1985, the Code was amended to make the provincial governments the sole providers and regulators of legal gaming in Canada. Once again, these amendments were brought about by the influence of the Olympics - in exchange, the provinces agreed to contribute $100 million towards the 1988 Winter Olympics in Calgary and to make annual contributions to the federal treasury. The 1985 amendments to the Code represent a missed opportunity for the First Nations. Had national organizations actively lobbied for the principle of gaming as an inherent aboriginal right at that time, the federal government might have been open to including provisions specifically exempting on-reserve gaming from the Code, perhaps in tandem with the creation of a national gaming regulatory body specific to the First Nations. As it stands, First Nations require provincial approval before they can conduct gaming, on- or off-reserve. This is contrary to the commonly-accepted view of First Nations as sovereign within their territory and not subject to provincial jurisdiction. By contrast, the large casino developments on some U.S. reservations are made possible by the U.S. concept of tribal sovereignty, which immunizes gaming operations from state legislation, although they are subject to a generally permissive act of Congress. In Canada, the courts have explicitly rejected First Nations' claims to an inherent right to conduct gaming activities at every turn. Section 35(1) of Canada's Constitution Act, 1982 recognizes and affirms aboriginal rights, but only certain activities fall within the ambit of being an "aboriginal right." In order to be an aboriginal right, an activity must be an element of a tradition, custom or practice integral to the distinctive culture of the First Nation claiming the right. In determining this, the courts will examine the issue of whether the activity was a "defining feature" of the culture of the First Nation in question prior to contact with Europeans. In the 1996 case of Pamajewon v. The Queen, the Supreme Court of Canada held that the evidence presented at trial did not demonstrate that gaming, or the regulation of same, was an integral part of the cultures of two Ontario First Nations (the Shawanaga and the Eagle Lake) at the time of European contact. The court accordingly upheld a decision of the Ontario Court of Appeal which declared gaming bylaws enacted by those First Nations invalid, and upheld criminal convictions obtained against members of the bands. The Court noted that while there was evidence that these First Nations played traditional wagering games, there was no evidence that such gaming was "of central significance" to those First Nations. Furthermore, even if gaming was of central significance to their people, the Court held that they would still have to prove that this gaming was the subject of regulation by the pre-contact First Nations. As well, the Court indicated it was not prepared to equate the traditional wagering games of a First Nation with modern commercial gaming, agreeing with the trial judge's observation that "commercial lotteries such as bingo are a twentieth century phenomena and nothing of the kind existed amongst aboriginal peoples and was never part of the means by which those societies were traditionally sustained or socialized." While a Pamajewon-type analysis would have to be undertaken on a First Nation by First Nation basis, to date no court has found there to be evidence to support the notion that the regulation of commercial gaming was an integral part of the culture of any First Nation prior to contact with Europeans. Absent such a finding, any gaming activity or regulation undertaken by a First Nation, without provincial approval, is illegal.
On-Reserve Business Problems A 1988 amendment to the Indian Act allows for the mortgaging of a leasehold interest in land which the community has designated for leasing purposes. Most reserves have a limited land base, however, and First Nations are quite naturally averse to putting that land at risk. Moreover, the process for obtaining a community designation of land for leasing or business purposes is slow and cumbersome, taking as much as two years to complete the required referendum process. These issues came to the fore in British Columbia in 1998, when the band council of the Mount Currie First Nation was working on a joint-venture casino deal. The community soundly rejected the deal in a referendum; not only did they not want a casino, more importantly they did not want to give their land to the casino developer under the terms of a 99-year lease.
Urban Reserves Urban reserves can make joint ventures with non-First Nations companies quite attractive. Properly-structured joint ventures can give non-First Nations companies access to the benefits enjoyed by the First Nations, such as tax exemption status, access to federal programs, proximity to markets and access to services. On a practical level, an urban reserve usually has access to infrastructure that may not be available on a rural reserve, and which may be necessary for a major casino project. Section 87 of the Indian Act gives reserves exemption from property and education taxes, subject to certain conditions. Joint ventures with First Nations could allow non-First Nations companies to benefit from this tax exemption, if they are structured so that the majority of the ownership interest is aboriginal. Private businesses located on reserves are still subject to corporate income taxes. Further, the federal "Set-Aside Program for Aboriginal Business" is available where the joint venture has fifty-one percent aboriginal control and ownership, and where the project meets certain conditions regarding the employment of Aboriginals. Using these lands to host commercial casino developments could conceivably permit First Nations to control the casinos in their entirety, without the need to partner with governments or non-First Nations joint venturers. Theoretically, an off-reserve casino operated by a First Nation would operate in the same regulatory environment as an on-reserve casino. As will be explained hereafter, even where First Nations are granted regulatory authority by a province, as may occur in Manitoba or Saskatchewan, the terms and conditions applied by a First Nations regulator will have to be the same as those licensed by the provincial authority.
Off-Reserve First Nations Gaming Saskatchewan anticipates transferring regulatory responsibility for First Nations casinos to a First Nations authority. At present, the Saskatchewan Liquor and Gaming Authority (SLGA) exerts conduct and management over slots at the four First Nations casinos currently operating in the province. Operational services at these casinos are provided by the Saskatchewan Indian Gaming Authority (SIGA). SIGA also conducts and manages table games through a licence granted by the SLGA. It is anticipated that once the capacity is established within the First Nations organizations, the province will transfer regulatory responsibility for the First Nations casinos. Conduct and management of slots, as well as general regulatory authority, would thereafter be placed in a body called Saskatchewan Indian Gaming Licensing. The four First Nations casinos in Saskatchewan are located in Prince Albert, North Battleford, Yorkton and Carlyle. The Northern Lights casino in Prince Albert and the Gold Eagle casino in North Battleford were both originally "off-reserve" casinos, when they opened in March 1996. However, the land on which these casinos were built has since been granted "urban reserve" status, with the Prince Albert casino becoming an urban reserve on June 19, 2001, and the North Battleford casino receiving such status on Jan. 31, 2002. The Painted Hand casino in Yorkton was also converted to on-reserve status after opening and operating off-reserve. The Bear Claw casino in Carlyle became the first on-reserve First Nation casino in Canada when it opened in November 1996. One more First Nations casino is planned in Swift Current, where the concept has already been approved in a referendum. It is expected that this will initially be an off-reserve casino, likely to be incorporated in to an urban reserve at a later date. Work continues towards a casino in the Saskatoon area, with the question of its exact location still undecided. A casino on the outskirts of Saskatoon would likely be incorporated into reserve land at some point, but if such a casino were to be sited for downtown Saskatoon, complications could ensue. Manitoba is also moving towards making the First Nations the responsible regulatory authority for on-reserve casinos. First Nations wishing to act as licensing authorities may negotiate a First Nations Gaming Commission (FNGC) Agreement with that province. These agreements establish the FNGC as a licensing authority on par with the Manitoba Gaming Control Commission (MGCC), while specifying that the terms and conditions of licenses issued will be the same as those licensed by the MGCC. Each FNGC so established may charge its licensees administrative fees to offset operational costs, and to allow the FNGC to become independently funded. MGCC consultants work with FNGCs to ensure the licensing manager and FNGC Board members are properly trained and have the necessary tools and information to oversee charitable gaming on their reserves. As of November 2002, there were 31 FNGCs representing 31 different First Nations in Manitoba. The one First Nations casino in Manitoba is located on Opaskwayak Cree Nation land near The Pas. Four other First Nation casinos were approved by the province in 2000, but financing and other logistical issues have delayed construction. The financing issues are related to the difficulty of obtaining financing for developments on reserve land. To that end, the province is considering replacing the four planned casinos with a single casino, possibly built off-reserve, with the profits to be shared among all of Manitoba's First Nations. Previously, three different urban reserve proposals, all tied to casino developments, were rejected in Thompson, Brandon and Headingly. Allowing casinos to develop on off-reserve land, which can be used as security to finance the development, and then turning around and transforming the land on which the operational casino stands into an urban reserve, is a useful legal tactic. It frees First Nations of the financial straight-jacket fashioned by the Indian Act, and then allows the reserve system, which has held First Nations back for so long, to give them a leg up.
The Mohawks of Kahawake These servers house "off-reserve" casinos, in the sense that no gamers ever set foot on the reserve - all gaming is conducted "off-reserve." The Kahnawake Gaming Commission regulates and licences all gaming sites operated from reserve land. The e-commerce services necessary to the operation of the gaming web sites is provided by Mohawk Internet Technologies, a non-incorporated entity wholly owned and controlled by the Mohawk Council of Kahnawake. The legal foundation for the operation and regulation of gaming in this manner has not been tested in court. In theory, it derives from both section 35(1) of the Constitution Act, 1982 regarding inherent aboriginal rights, and from the fact that the Criminal Code does not specifically address the issue of Internet gaming. In particular, the law is not clear on the issue of where commercial activity of this sort takes place when it is conducted on-line. This question is key to determining whether the Criminal Code even applies to the activities of the servers on the Kahnawake reserve. Until a court declares otherwise, the Mohawks of Kahnawake take the position that gaming conducted on the websites hosted on their reserve does not "take place" on that reserve. It has been suggested that now that First Nations are aware of the test to be met in the Pamajewon case to establish gaming and its regulation as a section 35(1) "aboriginal right", the Mohawks of Kahnawake are prepared to meet this test if the situation requires it. Evidence has been collected to establish a pre-European contact history of gaming and wagering among the Iroquois people, that such gaming and wagering was integral to the culture, rituals and mythology of the Iroquois, and that this gaming and wagering was regulated by an unwritten code of conduct. It is apparent that this last element (regarding the Iroquois' alleged "regulation" of gaming and wagering in the pre-contact era) will be the most difficult to establish, but if all three elements were established to the courts' satisfaction, the activities of the Kahnawake Gaming Commission and the bona fides of the licences issued by that body would be upheld. While the Attorneys General of both Canada and Quebec have in the past stated that the operations being conducted by the Kahnawake are illegal, neither level of government has formally challenged those operations in any way, despite the passage of five years since they became aware of their existence. In any event, it is likely that these issues will not end up being tried in a court. We anticipate that an agreement will most likely be struck between the Province of Quebec and the Mohawks of Kahnawake to lay these issues to rest. In that spirit, the Mohawk Council of Kahnawake and the Government of Quebec have been negotiating a framework for discussions on how relations between them might best evolve, and it is possible that these discussions could give rise to a modus vivendi on a number of issues, including gaming. Regardless of the uncertainty surrounding the legal status of the Kahnawake operations, it should be noted that the Kahnawake Gaming Commission has made great efforts to provide stable and effective regulation of the activities hosted on its servers. The regulatory regime is based on that used in Australia to govern on-line gaming, and may itself someday serve as a starting point for both other First Nations and for provincial gaming regulators in how on-line gaming will be regulated in Canada. Indeed, if the Mohawks of Kahnawake continue to act to their credit as de facto regulators of Internet gaming, they may well create a beneficial precedent for First Nations gaming regulation that may encourage the federal government to some day amend the Criminal Code to allow the First Nations to directly regulate gaming, rather than being themselves regulated by the provinces. |