Uniform Commercial Codes: An Important Tool for Tribal Economic Development

What is secured transaction law and why is it important? Market economies depend on ability of organizations and individuals to access credit and encourage investment To enable access to credit, rules are needed to govern “lender-borrower/creditor-debtor” transactions

What is secured transaction law and why is it important? Three basis systems in modern market economies have developed for collecting debts: Unsecured lending – no collateral required Secured lending – ‘personal’ property as collateral Mortgage lending – ‘real’ property as collateral

What is secured transaction law and why is it important? Almost all developed private enterprise economies have laws or codes governing secured loans or transactions Developing and transition economies around the world have made adoption of secured transaction laws a priority (i.e., Albania, Russia, Georgia, Kazakhstan, Kyrgyz Republic, Uzbekistan, China, Indonesia, Thailand)

Development of UCC in the US By late 1800s interstate commerce hindered by lack of common commercial and other laws among states National Conference of Commissioners on Uniform State Laws (NCCUSL) created in 1890s UCC developed in 1940s to establish consistent legal environment for commercial transactions (14 years to draft, 10 years for all states to adopt in some form) Near uniform adoption of UCC enabled large increase in cross-border business

Components of UCC Article 1 – Definitions of General Rules Article 2 – Sales Article 2A – Leases Article 2B – Licenses Article 3 – Negotiable Instruments Article 4 – Bank Collections Article 4A – Funds Transfers Article 5 – Letters of Credit Article 6 – Bulk Sales Article 7 – Documents of Title Article 8 – Investment Securities Article 9 – Secured Transactions

Components of Article 9 Creation and attachment of security interests in collateral List of types of property that can be used as collateral (personal, intangible, payment instruments, proceeds) Method for perfection of security interest Establish priority among creditors with interests in the same collateral Filing system Default and enforcement rules

Why are UCC’s important in Indian Country? Need and desire for successful and sustainable economic development to increase tribal self- sufficiency Can create an environment that encourages lenders and other off-reservation businesses to do business with tribes, tribal organizations, and individual entrepreneurs Can create governing infrastructure that supports and strengthens tribal sovereignty Can satisfy fears of uncertainty expressed by prospective lenders, business partners and investors

Why are UCC’s important in Indian Country? Benefits of a commercial code: Creates certainty and predictability about the rules Encourages more lenders to do business on the reservation, thus increasing competition and reducing cost of money to tribes, tribal members, tribal organizations Gives tribal member consumers and tribal member-owned businesses more bargaining power with lenders, investors Can strengthen tribal sovereignty Concerns: Sovereignty, self governance, don’t want to just adopt “state laws” “white man’s laws”

UCCs in Indian Country Today – Examples of Different Models Tribal Commercial Codes Navajo Nation (1986), Sac and Fox Tribes Montana Model Tribal Secured Transaction Code (1997) Hoopa Valley Tribe, Northern Cheyenne Adoption of state UCC – inc. by reference Little River Band of Ottawa Indians, Cheyenne River, Mashantucket Pequot Tribal Nation Adoption of model UCC – inc. by reference Eastern Band of Cherokee Indians Collection Codes – for sole purpose of enforcement of judgements Oglala Sioux Tribe

Other Needs Court system that is independent and impartial with ability to adjudicate complex commercial cases Coordination with other law – rules of civil procedure? rules of evidence? etc. Training of judges on complexity of commercial law Public availability of laws and decisions Filing systems – tribe? tribal consortium? state?