Facets of sovereignty. Institutions that Spur and Institutions that Retard Tribal Development.

Abstract

That so many of their assets continue to be held in governmental trusts under outdated policy rationales creates great difficulty for indigenous peoples. But restoring control of those assets to their rightful owners will impose daunting responsibilities on judiciaries. Exchanging assets for a residual share of returns from a joint venture exposes one to shirking by co-investors. Judiciaries known reliably to penalize those who renege on commitments help investors persuade others to sink complementary assets in promising projects. But a court is an arm of the sovereign. Across history and geography justifiable rulings adverse to sovereigns have so often been honored in the breach that private parties are especially leery of sovereigns as co-investors. To attract assets into its realm a sovereign may thus invest in a reputation for abiding by waivers of sovereign immunity, or rely on a still stronger sovereign to bond its waivers. Reputations arise from observed court successes by aggrieved co-investors when their suits against the sovereign are meritorious. But many tribal reservations are small and poor, have offered few investment opportunities, and hence possess thin legal histories. At the same time, investors are skeptical that courts of more powerful sovereigns such as Canada and the United States dependably bond tribal waivers. Thus tribes often must pay investors high risk-premiums, resort to costly tribal ownership, or even forego promising opportunities altogether. The Sovereign’s Paradox refers to the difficulty that an entity with power to compel involuntary outcomes has in negotiating voluntary ones. This chapter explores ways to ameliorate that Paradox and thus improve returns from reservation assets.