Skip to main content

Uniform Commercial Codes - an Inter-Tribal Necessity too?

WASHINGTON - As prospects for inter-tribal business relationships develop,
the question arises of whether Uniform Commercial Codes can be dispensed
with among tribes, to be replaced in some measure anyway by good will,
shared history and a common cultural identity.

Such relationships can almost certainly be established in a limited sense.
But before they can expand to the point where robust businesses will stake
their future on the good word and track record of suppliers, some form of
UCC will have to be found that tribes can agree on, among and between
themselves. Of course, tribes doing business among and between one another
may reach into their own traditions, far more ancient forms of compact that
fulfill the essential functions of the modern UCC. Given the federal
bureaucratic obstructionism that hinders many officially conducted
enterprises, they could choose to legitimize less formal entrepreneurial
relationships with policies that in effect formalize them, as the Peruvian
economist Hernando De Soto has advocated for economies trapped in red tape.

In any case, the key is that tribes develop, even among themselves, legally
enforceable financial relationships, not at first perhaps but in time, as
networks of inter-tribal business transactions evolve. Otherwise, De Soto
warned, where legal protections cannot be counted on, trustworthiness comes
to trump productive values. But trust, even among tribes, won't guarantee
any recourse, much less put prime rib on the tables in high-profit-per-day
casino complexes, if a supplier misses production deadlines.

John Thune, second-time Republican candidate for a Senate seat in South
Dakota, spoke true of tribal business prospects in that state, "One of the
things that really hurts the reservations is there's no sense of legal
certainty ... I think that's a function of making some changes in perhaps
the legal structure to make it more opening and more accommodating, and
more friendly to business development ... I do think it's going to take a
certain amount of initiative from the tribes as well, tribal governments,
to recognize that and say that if we want to get serious about attracting
economic development to the reservations, then this is an issue that we
have to address. But it is something that I would want to work with them to

Now, those tribes are most fortunate that can establish legally enforceable
financial relationships with other tribes based on traditions welcome to
both. But until more such relationships are available, it may be useful to
review the basics of the Uniform Commercial Code, the Western gold standard
in the legal structuring of business relationships. The United States' UCC
was adopted in 1951 by the federal government and subsequently by 49 states
(Louisiana adopting all but two of the nine clauses).

In technical terms, a UCC is a set of laws meant to standardize obligations
of debtors and creditors in a secured transaction - one where collateral
functions as an "earnest" or pledge of repayment - as well as proper
recourse in cases of default. The essential purpose of a UCC is to codify
formal rules that render a secured transaction legally binding on all
parties to it. In brief, a UCC provides the legal framework for civic debt
collection that courts, creditors and debtors can rely on.

A UCC, then, must be an eminently practical document, paralleling economic
activity and drafted in response to actual, on-the-ground business
situations Tribes that have only just begun to examine a UCC may be
thinking the right thoughts, but they may also be getting ahead of events
if economic development isn't coming right along. When representatives of
the Northern Cheyenne visited Navajoland to inspect the nation's business
sector and UCC, they realized a UCC would be premature for the Northern
Cheyenne. Business activity there hadn't picked up enough to justify it.

That all changed when the tribe entered into negotiations for a branch bank
on the reservation. A tribal UCC, consistently enforced by law officers and
the courts, provided the comfort zone, the legal certainty in Thune's
phrase, the bank needed. By 1999, the Northern Cheyenne had their UCC, and
shortly after that an on-reservation bank.

Work on the UCC included a review of codes already enacted within Indian
country, community-wide consideration and debate of the code at large and
its individual provisions, a series of close readings on the tribal
council, involvement of tribal law enforcement officials in facilitating
the property repossession process invoked by the code, training for the
judiciary and lay advocates within the tribal court system so as to ensure
consistent application once the code was in place, and development of an
accessible system for the filing and perfecting of liens.

Above all, every successive draft of the code went before the Northern
Cheyenne people, and every effort was made to familiarize them with the
purpose and substance of the UCC. Otherwise it would have been "white man's
law" to them, whereas in fact the Northern Cheyenne were not adapting state
codes to tribal use, as some have attempted - they were codifying tribal
law and altering federal law in certain respects.

These all proved essential steps in implementing a UCC. So did going over
it clause by clause with the reservation's business community, so as to
overcome the risk of scaring off non-Indian businesses.

The Northern Cheyenne UCC was not a project for the fainthearted. The code
was under intensive development, involving many stakeholders, for three
years. In the final year, it provided work for four attorneys. And the
exploratory phase went on for years before that.

But in the end they built a model that could prove useful, at least in part
or if only as a kick-start to thought upon the complex of issues a UCC is
useful for in the first place, on other reservations.