[Senate Report 106-150]
[From the U.S. Government Publishing Office]
Calendar No. 270
106th Congress Report
SENATE
1st Session 106-150
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ENCOURAGING INDIAN ECONOMIC DEVELOPMENT, TO PROVIDE FOR THE DISCLOSURE
OF INDIAN TRIBAL SOVEREIGN IMMUNITY IN CONTRACTS INVOLVING INDIAN
TRIBES, AND FOR OTHER PURPOSES
_______
September 8, 1999.--Ordered to be printed
_______
Mr. Campbell, from the Committee on Indian Affairs, submitted the
following
R E P O R T
[To accompany S. 613]
The Committee on Indian Affairs, to which was referred the
bill (S. 613) to encourage Indian economic development, to
provide for the disclosure of Indian tribal sovereign immunity
in contracts involving Indian tribes, and for other purposes,
having considered the same, reports favorably thereon with an
amendment in the nature of a substitute, and recommends the
bill as amended do pass.
Purpose
The purpose of S. 613, as amended, is to replace the
provisions of the Act of May 21, 1872, Section 2103 of the
Revised Statutes, found at 25 U.S.C. Sec. 81 (Section 81) to
clarify which agreements with Indian tribes require federal
approval, to specify the criteria for approval of those
agreements, and to provide that those agreements covered by the
Act include a provision either disclosing or addressing tribal
immunity from suit. S. 613 also amends the Indian
Reorganization Act of 1934 and Sec. 81 to eliminate any
statutory requirement for federal review of tribal contracts
with attorneys.
Background
The federal government is the legal trustee for Indian
lands. As a result, these lands may not be sold or leased
except in a manner consistent with federal law. In addition, an
1872 statute, Section 2103 of the Revised Statutes, found at 25
U.S.C. Sec. 81 requires federal approval of agreements
``relative to'' Indian lands owned by a tribe or ``Indians not
citizens of the United States.'' Section 81 includes a list of
technical requirements for such agreements and provides that
any agreement that does not conform with its requirements is
null and void and all amounts paid by a tribe or on the tribe's
behalf are to be disgorged. Finally, the statute authorizes
parties to bring suit to enforce the statute ``in the name of
the United States in any court of the United States, regardless
of the amount in controversy.''
Enacted in 1872, Section 81 reflects Congressional concerns
that Indians, either individually or collectively, were
incapable of protecting themselves from fraud in the conduct of
their economic affairs.\1\ As explained by the Supreme Court:
``The early legislation affecting the Indians has as its
immediate object the closest control by the government of their
lives and property. The first and principal need then was that
they should be shielded alike from their own improvidence and
the spoliation of others * * *'' \2\ The Indian Reorganization
Act of 1934 (IRA) represented a fundamental break with this
policy. As the Supreme Court explained: ``The intent and
purpose of the [IRA] was `to develop the initiative destroyed
by a century of oppression and paternalism.' '' \3\ The IRA's
sponsor in the Senate, Senator Burton K. Wheeler characterized
the purpose of the IRA: ``[It] seeks to get away from the
bureaucratic control of the Indian Department, and it seeks
further to give the Indians the control of their own affairs
and of their own property; to put it in the hands either of an
Indian council or in the hands of a corporation organized by
the Indians.'' \4\
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\1\ The legislative history reveals that Congress enacted this
statute because of concerns about individuals retained by tribes to
assert claims on their behalf. See In re United States ex rel. Hall,
825 F. Supp. 1422, 1431-2 (1993), aff'd 27 F.3d 572 (8th Cir. 1994).
\2\ Shaw v. Gibson-Zahniser Oil Corp., 276 U.S. 575, 579 (1928).
\3\ Mescalero Apache Tribe v. Jones, 411 U.S. 145, 152 (1973),
quoting H.R. Rep. No. 1804, 73rd Cong., 2nd Sess., 6 (1934).
\4\ Id. at 152, quoting 78 Cong. Rec. 11125.
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Indian tribes, their corporate partners, courts, and the
Bureau of Indian Affairs (BIA) have struggled for decades with
how to apply Section 81 in an era that emphasizes tribal self-
determination, autonomy, and reservation economic development.
Although the IRA did not explicitly amend Section 81, it
was soon apparent that the two laws were based on fundamentally
inconsistent principles. This left those concerned with tribal
transactions with the difficult task of reconciling an 1872
statute that sought to protect Indian tribes by imposing
extensive federal oversight with a 1934 Act intended ``to
disentangle the tribes from official bureaucracy.'' \5\
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\5\ Id. at 153.
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A 1952 Opinion by the Department of Interior's Office of
the Solicitor represents one attempt to reconcile these two
statutes.\6\ The opinion addresses two separate transactions by
two different tribal entities. Although both entities were
organized pursuant to the IRA, one entity traced its authority
to a tribal corporation chartered under Section 17 of the IRA
(25 U.S.C. Sec. 477), while the other was organized under an
IRA constitution pursuant to Section 16 of the IRA (25 U.S.C.
Sec. 476). With respect to the Section 17 corporation, the
Solicitor pointed out that the IRA allowed the Secretary to
grant charters that authorized Indian tribes to mortgage or
lease tribal lands for any period up to 10 years. Thus, the
Solicitor reasoned that the Secretary could ``grant to the
tribe freedom to make contracts without complying with the
requirements prescribed in [Section 81].''
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\6\ Contracts for the Employment of Managers of Indian Tribal
Enterprises, Opinion of the Solicitor, February 14, 1952 (M-36119).
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The Solicitor reached this conclusion even though Section
17 precluded the Secretary from granting to the tribe
incidental corporate powers which are ``inconsistent with the
law.'' The Solicitor interpreted this phrase very
restrictively, to include only those ``powers which cannot
lawfully be given to any corporation, non-Indian or Indian.''
This interpretation was consistent with the purpose of
incorporation, which was characterized by the Solicitor as
``the means for the conduct of business activities in a
business-like way. * * *'' Having concluded that nothing in
Section 17 prohibited the Secretary from freeing a tribal
corporate entity from the dictates of Section 81, the Solicitor
then concluded that a provision authorizing the tribe to enter
into land leases of up to ten yearsand contracts of up to
$5,000 per year, without BIA review, should be interpreted as such an
exemption.\7\
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\7\ It is worth noting that the actual Section 17 corporate charter
under consideration in the 1952 opinion was granted to the Minnesota
Chippewa Tribe. However, the agreement which was under consideration
(and found not to require Section 81 approval) was an agreement between
a non-Indian and the Grand Portage Band, ``one of the constituent bands
of the Minnesota Chippewa Tribe.'' Thus, it would seem to follow that
any tribe with Section 17 corporation could confer similar authority on
any of its subordinate economic entities, at least up to the extent of
any conditions contained in its corporate charter.
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Nevertheless, the Solicitor opined that Section 81 was
applicable to a farm manager's contract with an Indian tribe
organized pursuant to Section 16. The Solicitor explained that
in addition to the powers which were explicitly to be vested in
the tribe under Section 16, the tribe retained ``all powers
vested * * * by existing law.'' The Solicitor then stated: ``We
do not find here any grant of power to make contracts without
regard to the requirements [Section 81].'' This conclusion
deviates from the Solicitor's long-standing practice, which
continues to this day, of interpreting the IRA as a
codification rather than the source of tribal authority.\8\
Hence, it is surprising that the Solicitor would look to the
Section 16 for a ``grant'' of authority.
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\8\ Finding that Section 81 was inapplicable to the Section 17
contract was consistent with the longstanding principle that federal
laws, including the IRA, are not the source of tribal authority.
Each Indian tribe begins its relationship with the
Federal Government as a sovereign power, recognized as such
in treaty and legislation. The powers of sovereignty have
been limited from time to time by special treaties and laws
designed to take from the Indian tribes control of matters
which, in the judgment of Congress, these tribes could no
longer be safely permitted to handle. The statutes of
Congress, then, must be examined to determine the
limitations of tribal sovereignty rather than to determine
its sources or its positive content. What is not expressly
limited remains within the domain of tribal sovereignty,
and therefore properly falls within the statutory category,
``powers vested in any Indian tribe or tribal council by
existing law.''--Powers of Indian Tribes, 55 Interior
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Decision 14 (October 25, 1934) (emphasis supplied).
However, applying Section 81 to the farm manager's contract apparently
disregards an equally important principle articulated in the same 1934
opinion: ``The acts of Congress which appear to limit the powers of an
Indian tribe are not to be unduly extended by doubtful inference.''
Another example where this important principle may have been
disregarded is Yavapai-Prescott Indian Tribe v. Watt, 707 F.2d 1072
(1983) (Secretarial approval needed to both approve and terminate
lease).
In fact, the Solicitor recognized that the IRA ``was
intended to make a new point of departure in the relations
between the tribes and the Government,'' but reasoned that a
repeal by implication was disfavored. Certainly Section 16 did
not explicitly exempt the contract at issue from Section 81,
but neither did Section 17 of the IRA. In addition, the
Solicitor pointed out that it would be ``unsafe'' to assume
that Section 81 was inapplicable because the failure to comply
with its requirements would subject the contracting party to a
fine and the loss of any benefit conferred upon the party by
the tribe. Again, the same risk applies to contracts with
section 17 corporations and counsels in favor of assuming that
Section 81 applies to those contracts.
The Solicitor's decision represents an attempt to reconcile
two statutes that derive from two fundamentally different eras
with little guidance from Congress on how these statutes were
to be harmonized. The opinion also freed at least some Indian
tribes from the onerous requirement of obtaining federal
approval for a potentially vast array of contracts.\9\
Nevertheless, a number of problems remain unresolved. For
example, until 1991, Section 17 charters were only granted by
the Secretary after a vote of a tribe's membership. Second, the
Solicitor's 1952 opinion did not provide any guidance
concerning the appropriate reach of Section 81's application to
agreements ``relative to Indian lands.'' Even where there is no
question that Section 81 applies to an agreement, it provides
no standards for the BIA to apply when deciding whether to
approve a proposed agreement.\10\ In addition, as the tribal
transactions became increasingly more complex, the BIA often
lacked the resources or expertise necessary to adequately
review proposed contracts.
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\9\ Another Solicitor's Opinion recognized that an Indian tribe
could organize its political institutions under Section 16 of the IRA
and still obtain a Section 17 charter for purposes of conducting
business. Separability of Tribal Organizations Organized Under Sections
16 and 17 of the I.R.A. 65 Interior Dec. 483 (November 20, 1958).
\10\ In one case where a private party sought judicial review of a
decision under Section 81, the United States argued that judicial
review should be unavailable because the Act did not contain sufficient
standards to allow the court to determine how the Act should be applied
to the case.
As an alternate basis on which to affirm the district
court['s decision to dismiss], the government asserts that
``review [of Interior Department decisions under 25 U.S.C.
Sec. 81] is not to be had [because] the statute is drawn so
that a court would have no meaningful standard against
which to judge the agency's exercise of discretion.'' Stock
West Corporation v. Lujan, 982 F.2d 1389, 1399-1400 (1993)
(Emphasis supplied, internal quotation to Heckler v.
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Chaney, 470 U.S. 821, 830 (1985)).
Obviously, if the government takes the position that Section 81
provides courts with no discernible standards for applying the statute,
tribes and their (potential) partners are similarly at a loss to
determine how and whether the Act will be applied. Such uncertainty is
anathema to reservation development.
As federal policy increasingly emphasized tribal-self-
determination by reducing or eliminating federal review of
tribal decisions, Congress has both directly and indirectly
addressed concerns about Section 81. For example, in 1958,
Congress removed a provision from Section 81 which required the
execution of these agreements in the presence of a judge.\11\
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\11\ Public Law 85-770.
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More recently, Congress explicitly cited problems with
Section 81 review ofmanagement agreements as a justification
for enacting the Indian Mineral Development Act of 1982, P.L. 97-382:
[T]he approval procedure for non-lease ventures under
Section 81 requires a rather cumbersome case-by-case
analysis to determine whether the document submitted
for approval is a service agreement within the purview
of the 1938 act, or an interest in land within the
purview of the Indian Non-Intercourse Act (R.S. 2116;
25 U.S.C. 177). [In addition], with the proliferation
and hybridization of non-lease ventures, it is
increasingly difficult to make the determination
described. Without clarification of the Secretary's
authority for approval of existing ventures, because of
the confusion concerning the Secretary's authority to
approve non-lease ventures, the Department is reluctant
to approve a number of proposed agreements which are
pending.\12\
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\12\ H.R. Rep. No. 746, 97th Cong., 2nd. Sess. 1982.
More general relief was provided by Congress in 1990 when
it made several changes to Section 17 of the IRA. Public Law
101-301 amended the IRA by eliminating the requirement for a
reservation-wide plebiscite before the Secretary of Interior
could confer a corporate charter pursuant to Section 17. In
addition, it authorized section 17 tribal corporations to lease
Indian lands without Secretarial approval for up to 25
years.\13\ As enacted the IRA limited such leases to 10 years.
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\13\ As passed by the Committee, S. 613 would eliminate the basis
in federal law for Secretarial review or approval of a number of
contracts and agreements. As a question of tribal law, however, Section
17 charters, tribal constitutions, or tribal by-laws may include terms
that require Secretarial approval of agreements. In addition, some of
these documents may require Secretarial approval of any amendments to
those organic documents. There is no reason to assume that the
Secretary does not possess the authority to approve duly authorized
amendments to such documents. Certainly S. 613, P.L. 101-301, and the
IRA demonstrate a clear Congressional policy in favor of reducing
federal review of tribal decisions and agreements.
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In addition, the Tribal Self-Governance Act, established as
a component of the Indian Self-Determination and Education
Assistance Act,\14\ makes Section 81 inapplicable to
participating Indian tribes during the terms of their
participation in Self-Governance.\15\ These Indian tribes are
also exempt from any requirements under either 25 U.S.C.
Sec. 81 or Sec. 476 to submit attorney contracts for federal
approval.
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\14\ P.L. 93-638, 25 U.S.C. 450 et seq.
\15\ 25 U.S.C. Sec. 458cc(h)(2) and Sec. 4501(b)(15).
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While these laws have allowed some Indian tribes to engage
in business transactions without needing to conform with
requirements that were intended to shield them from ``their own
improvidence and the spoliation of others,'' it left Section
81's core provisions intact. As a result, neither tribes, their
partners, nor the BIA could predict with any certainty whether
a court might ultimately conclude that a transaction was void
because it was not approved pursuant to Section 81. The risk
that a court might make such a conclusion was exacerbated by
severity of the penalty for noncompliance borne by the party
contracting with the tribe.
For example, in 1985, in Wisconsin Winnebago Business
Committee v. Koberstein, 726 F.2d 613 (7th Cir. 1985) the
United States Court of Appeals for the 7th Circuit ruled on the
applicability of Section 81 to a five-year agreement with a
corporation ``to assist the [tribal business committee] in
obtaining financing, construct, improve, [develop], manage,
operate and maintain [specified tribal lands] as a facility for
the conduct of bingo games. * * *'' The proposed agreement was
submitted to the BIA Area Office and the Department of Interior
Field Solicitor. The Solicitor determined that Section 81 did
not apply to the agreement. Nevertheless, the Court of Appeals
ruled that it did.\16\
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\16\ Since the contracting party in this case was unaware of the
BIA's determination that Section 81 was inapplicable, the court of
appeals did not address whether principles of estoppel and/or
detrimental reliance precluded its application after BIA found that an
agreement was not covered by Section 81.
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The Koberstein case concerned an Indian tribe's attempt to
prevent the operation of a bingo facility run by an individual
who failed ``to disclose the potential conflict of interest
between his duties as tribal attorney and his position as
president of the [bingo management company].'' Thus, it is not
surprising that the court ruled that the agreement was void. In
its defense, the company sought to argue that Section 81 should
be interpreted in light of subsequent Congressional enactments
that limit federal review of tribal decisions and encourage
tribal economic development. For example, the Supreme Court
wrote in 1976: ``[W]e previously have construed the effect of
legislation affecting reservation Indians in light of
``intervening'' legislative enactments.\17\ The Koberstein
court brushed these arguments aside, relying instead on the
Supreme Court's analysis in cases addressing the preemption of
state law in matters affecting Indian tribes and their members.
In these cases, the Court has refused to be swayed by ``modern
conditions'' that arguably counsel in favor of state regulation
or taxation of the activities of Indian tribes or their
members.\18\ In cases involving preemption, the Court has
indicated that statutes are ``given a sweep as broad as their
language.'' Applying this principle to the relationship between
tribes and the federal government, the court determined that
section 81 should be interpreted broadly: ``[S]ection 81
governs transactions relative to Indian lands for which
Congress has not passed a specific statute.'' This approach is
inconsistent with the principle that ``The acts of Congress
which appear to limit the powers of Indian tribes are not to be
unduly extended by doubtful inference.'' \19\ In fact, the
court conceded: ``No federal cases have been presented to us *
* * that comprehensively analyze the scope of coverage of
section 81.''
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\17\ Bryant v. Itasca County, 426 U.S. 373, 386, quoting Moe v.
Salish & Kootenai Tribes, 425 U.S., at 472-5 (1976).
\18\ Central Machinery Co. v. Arizona, 448 U.S. 160, 166 (1980).
\19\ 55 Interior Dec. 14 (October 25, 1934). See footnote 8.
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Soon after Koberstein was decided, the 9th Circuit Court of
Appeals adopted its reasoning and conclusion in a suit where a
gaming management company sued to enforce an agreement that was
not approved by the BIA pursuant to section 81. In this case a
company sought to argue that section 81 was not applicable to
the agreement, even though its agreement with the tribe
recognized that section 81 approval was a prerequisite to the
contract. A.K. Management Company v. The San Manuel Band of
Mission Indians, 789 F.2d 785 (9th Cir. 1986).
In response to federal court cases finding Section 81
applicable to gaming management contracts and as part of the
federal policy that encourages Indian tribes to engage in
gaming activities comparable to those offered within a state,
the Department published guidelines for the approval of these
agreements.\20\ Federal courts cited these guidelines as
evidence of a reversal of the Department's previous position
that Section 81 did not apply to these agreements, even though
the BIA was seeking legislative clarification of the statute in
response to these decisions. As a result, the application of
Section 81 to gaming management agreements was well established
as a question of law, even though some federal courts
characterized ``the draconian remedy of the statute [as]
distasteful.'' One federal court argued that the statute might
cause more harm than good: ``[Section 81] imposes a penalty out
of proportion to the purely technical violations if proscribes.
It seems likely that tribes may be hurt rather than protected
by the disruption of their successful business relationships.''
\21\
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\20\ ``[T]he Department of the Interior, which has the primary
responsibility for carrying out the Federal Government's trust
obligations to Indian tribes, has sought to implement these policies by
promoting tribal bingo enterprises. Under the Indian Financing Act of
1974, 25 U.S.C. Sec. 1451 et seq. (1982 ed. and Supp. III), the
Secretary of the Interior has made grants and has guaranteed loans for
the purpose of constructing bingo facilities * * * [T]he Secretary of
the Interior has approved tribal ordinances establishing and regulating
the gaming activities involved. The Secretary has also exercised his
authority to review tribal bingo management contracts under 25 U.S.C.
Sec. 81, and has issued detailed guidelines governing that review.''
California v. Cabazon Band of Mission Indians, 480 U.S. 202, 217-8
(1987) (emphasis supplied and citations omitted).
\21\ U.S. v. D & J Enterprises, 1993 WL 76789 (W.D. Wis. 1993)
(finding that Section 81 voided the agreement even though the tribe was
represented by competent legal counsel and there was no evidence of
fraud or duress).
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At its May 19, 1999 hearing, the Commission heard testimony
that tribes and their partners are unable to eliminate the
uncertainty created by Section 81. In this respect, Section 81
differs from the doctrine of tribal sovereign immunity. Any
uncertainty about whether tribal immunity will prevent the
enforcement of an agreement with an Indian tribe can be
addressed and eliminated through the terms of an agreement with
the tribe or by some other means. Courts have ruled, however,
that parties may not waive the application of Section 81 in the
same manner. In fact, it appears that Section 81 prevents a
tribe from binding itself to an agreement that it will not
raise its provisions as a defense if litigation ensues.\22\ In
addition, some courts have interpreted the last paragraph of
Section 81 as allowing qui tam suits against the party
contracting with the tribe. In some cases, such suits can be
brought by parties other than the tribe or the United
States.\23\ Thus, even if the parties decide that Section 81 is
inapplicable and agree that they will not subsequently employ
it as a defense to the contract's enforcement, third parties
can bring suit and at least disrupt the contract's performance
through costly and lengthy litigation. In addition, even where
the BIA determines that a contract does not fall within the
purview of Section 81, courts are not bound by this conclusion.
Thus, Section 81 produces uncertainty and leaves Indian tribes,
their business partners, and the BIA powerless to eliminate
this uncertainty.
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\22\ For example, courts have ruled that an agreement that is void
pursuant to Section 81 ``[the agreement] cannot be relied upon to give
rise to any obligation by [the tribe], including an obligation of good
faith and fair dealing.'' A.K. Management Co. v. The San Manuel Band of
Mission Indians, 789 F.2d 785, 789 (1986).
\23\ Based on this interpretation, non-parties to the contract can
sue a party contracting with the tribe if the agreement was not
approved under Section 81. This result was soundly criticized by one
court as ``bestowing a windfall'' for litigants, even where there is no
evidence of fraud or duress. U.S. v. D & J Enterprises, 1993 WL 767689
(W.D. Wis. 1993). Subsequently, the 7th Circuit Court of Appeals ruled
muted the effect such suits by ruling that the tribe is an
indispensable party under F.R.C.P. Rule 19 United States ex rel. Hall
v. Tribal Development Corp., 100 F.3d 476 (7th Cir. 1996).
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Another concern relates to the increasing complexity of
tribal transactions. Quoting from Congressional proceedings,
one U.S. District Court noted: ``Section 81 was enacted to
protect the Indian tribes at a time when Congressmen believed
that `[t]here are no Indians, as a tribe or as individuals,
that are competent to protect themselves against the enterprise
and the fraud of the white man.' '' \24\ There is no
justification for such an assumption to provide the basis for
federal policy in this era of tribal self-determination.\25\
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\24\ U.S. v. D & J Enterprises, 1993 WL 76789 (W.D. Wis. 1993),
quoting Senator Davis, Cong. Globe 1484.
\25\ In fact, there is some evidence that the Seventh Circuit
recognizes the difficulty of applying its Koberstein rule in a manner
that makes Section 81 applicable to ``nearly all transactions relating
to Indian lands.'' Altheimer & Gray v. Sioux Manufacturing Corp,. 983
F.2d 803 (1993) (reversing district court ruling that applied Section
81 to an agreement with an entity that was more than a consultant, but
which lacked exclusive control over a non-gaming facility owned by a
tribe.)
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Similarly, there is no basis to require, as a matter of
federal law, that tribes must submit their attorney contracts
to the federal government for approval. For example, during the
100th Congress, the Interior Department's Assistant Secretary
for Indian Affairs Ross O. Swimmer suggested that a bill
amending the IRA should include a provision eliminating this
requirement.
[W]e recommend that [the bill] as passed by the House
by amended to eliminate the current statutory
requirements that the Secretary approve the tribal
selection of tribal attorneys and attorney fees (25
U.S.C. section 81 and 476). It would be consistent with
the goals of Indian self-determination to allow the
tribes to choose their own attorneys and set the rate
of compensation without the Secretary's oversight.\26\
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\26\ Sen. Rep. 100-577, 100th Cong. 2nd Sess. (1988), letter from
Assistant Secretary Ross O. Swimmer to then-Chairman of the Committee
on Indian Affairs, Senator Daniel K. Inouye, dated September 7, 1988.
The current Administration has also indicated its support
for such a provision and S. 613 incorporates this proposal.
Summary of the Amendment in the Nature of a Substitute
Section 1. Short title
Section 1 cites the short title of the bill as the Indian
Tribal Economic Development and Contract Encouragement Act of
1999.
Section 2. Contracts and agreements with Indian tribes
Section 2 of the bill replaces the text of 25 U.S.C.
Sec. 81 with six subsections.
Subsection (a) provides definitions for the terms ``Indian
lands,'' ``Indian tribe,'' and ``Secretary.'' Perhaps a
definition for Indian lands is intended to circumscribe the
scope of this statute to those lands where title is held in
trust for a tribe or a restraint onalienation exists as a
result of the principle, dating from the Revolutionary War Era, that
the federal government must hold title to Indian lands in furtherance
of the federal-tribal trust relationship.
Subsection (b) provides that agreements or contracts with
Indian tribes that encumber Indian lands for a period of seven
or more years are not valid unless they bear the approval of
the Secretary of Interior or a designee of the Secretary. Under
present law, Section 81 is susceptible to the interpretation
that any contract that ``touches or concerns'' Indian lands
must be approved. In addition, because of the ``draconian''
nature of the penalty for non-compliance, parties frequently
``erred on the side of caution'' by submitting any contract
with a tribe to the BIA for approval. Deputy Commissioner for
Indian Affairs Michael J. Anderson testified: ``Contracts for
the sale of vehicles to tribes, maintenance of buildings,
construction of tribal government facilities, and even the
purchase of office supplies are now routinely presented to the
BIA for review and approval.'' As reported by the Committee,
subsection (b) will allow tribes and their contracting Partners
to determine whether Section 81 applies when they form an
agreement. First, by limiting the provision's applicability to
those agreements with a duration of seven of more years,
parties can look to an objective measure to determine whether
an agreement falls within the scope of the statute. Also, by
replacing the phrase ``relative to Indian lands,'' with
``encumbering Indian lands,'' the bill will ensure that Indian
tribes will be able to engage in a wide array of commercial
transactions without having to submit those agreements to the
BIA as a precaution. Two other provisions also advance this
objective. First, subsection (e) directs the Secretary to issue
regulations identifying the types of agreements not covered by
the Act. Second, by eliminating the qui tam provisions in the
statute, the bill eliminates the possibility that third parties
will bring suits without the consent of any of the parties to
the agreement.
At the Committee's May 19, 1999 hearing, the Administration
proposed simply eliminating Section 81 entirely. Although the
amendment in the nature of a substitute reported by the
Committee addresses many of the Department's concerns, it
leaves the provision in place to address a limited number of
transactions that could place tribal lands beyond the tribe's
ability to control the lands in its role as proprietor.
The amendment eliminates the overly-broad scope of the Act
by replacing the phrase ``relative to Indian lands'' with the
phrase ``encumbering Indian lands.'' By making this change,
Section 81 will no longer apply to a broad range of commercial
transactions. Instead, it will only apply to those transactions
where the contract between the tribe and a third party could
allow that party to exercise exclusive or nearly exclusive
proprietary control over the Indian lands. For example, a
lender may finance a transaction on an Indian reservation and
receive an interest in tribal lands as part of that
transaction, If, for example, one of the remedies for default
would allow this interest to ripen into authority to operate
the facility, this would constitute an adequate encumbrance to
bring the contract within Section 81. By contrast, if the
transaction concerned ``limited recourse financing'' and the
lender merely acquired the first right to all of the revenue
derived from specified lands for a period of years, this would
not constitute a sufficient encumbrance to bring the
transaction within Section 81. A more difficult case would
involve a situation where a designated third-party would
operate the facility in the case of default. In essence, with
the exception of those tribes exempted pursuant to the Self-
Governance program, Section 81 will apply to those transactions
that are not leases, per se, but which could result in the loss
of tribal proprietary control.
The bill also proscribes the Act's application to those
agreements that take more than 7 years to complete. Just as the
statute of frauds looks at transactions when they are entered
into, this provision is concerned with the reasonable
expectations of the parties when they enter an agreement.
Subsection (c). In addition to the provisions that allow
Indian tribes and their partners to determine with a much
greater level of certainty whether Section 81 applies,
subsection (c) provides that a BIA determination that an
agreement is not covered by Section 81 has the effect of making
the section inapplicable. It would contradict the bill's intent
if parties made a practice of submitting agreements where
Section 81 is patently inapplicable, simply to obtain an
official endorsement of this conclusion. To be sure, such
official determination may be necessary, especially when tribal
obligations are to be sold in the secondary market. This
subsection may help eliminate uncertainty and increase the
marketability of transactions involving tribal obligations. If
a practice develops where agreements are submitted even where
it is patently obvious that Section 81, as amended, does not
apply, the BIA may find it necessary to simply return these
agreements without making any determination, even the
determination authorized by subsection (c). Such action may not
be necessary, but might be needed to preclude the waste of
limited BIA staff resources.
Finally, this subsection is intended to work in conjunction
with subsection (e), which directs the Secretary to enact
regulations establishing which agreements are not covered by
Section 81.
Subsection (d). Under subsection (d), the Secretary is to
refuse to approve any agreement otherwisecovered by the Act, if
it is in violation of federal law or if it fails to address sovereign
immunity in one or more of the three ways specified.
Violation of Federal law
Consistent with the principles of tribal self-
determination, this bill does not direct the BIA to substitute
its business judgment over that of a tribal government. This is
not to say that the Department may not offer and tribes may not
seek advice or assistance in negotiating, preparing, or
submitting agreements covered by Section 81, as amended. Since
the enactment of the IRA, at least those tribes with corporate
charters conferred pursuant to Section 17 of that Act have been
authorized to enter agreements without Section 81 approval.\27\
In addition, those tribes participating in Self-Governance are
also free from the requirements of Section 81. The Committee
has not been informed that this has resulted in any widespread
problems. In fact, the Department's May 19, 1999 testimony in
favor of striking all of Section 81 clearly demonstrates that
it does not believe that federal review of such agreements is
necessary. For that reason, in place of more intrusive review,
the bill will limit the Secretary's determination to whether
the agreement would violate federal law. Since these agreements
will bear the imprimatur of federal approval, it is appropriate
for the Secretary to be satisfied that the agreement does not
contravene any specific statutory prohibitions.
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\27\ See the discussion of the February 14, 1952 Solicitor's
Opinion accompanying footnote 6.
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Tribal sovereign immunity
Over the last several years, the Committee has held
extensive hearings on tribal sovereign immunity.\28\ Over the
course of these hearings, Committee members have expressed
divergent views about the value, effect, and even the purpose
and justification for the doctrine. One view closely parallels
that of Supreme Court Justice Stevens, who has written: ``there
is no justification for permanently enshrining the judge-made
law of sovereign immunity.'' This view questions the
philosophical justification for the doctrine with respect to
the federal government, states, or Indian tribes. With respect
to Indian tribes, Justice Steven's dissent in Kiowa Tribe of
Oklahoma v. Manufacturing Technologies, 523 U.S. 761 (1998)
criticizes tribal immunity by arguing that ``Indian tribes[s]
enjoy broader immunity than the States, the Federal government,
and foreign nations[].'' In his Kiowa dissent, Justice Stevens
pointed out that his opinion for the Court in Nevada v. Hall,
440 U.S. 410 (1979) precludes states from asserting immunity in
the courts of another state because one state's ability to
plead immunity is a question of comity rather than a
constitutional command. By contrast, he pointed out that the
Court's ruling in Kiowa makes the result in Nevada v. Hall
inapplicable to Indian tribes appearing in state courts,
probably based on the principle urged by the United States that
tribal immunity is a matter of national, rather than state,
policy.\29\
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\28\ These hearings include S. Hrng. 104-694 (September 24, 1996)
and S. Hrng. 105-303, Parts I, II, and III (March 11, April 7, and May
6, 1998 respectively).
\29\ See Amicus Brief of the United States in Kiowa Tribe v.
Manufacturing Technologies (96-1037) at pp. 22-25. This brief also
notes that with respect to the immunity of foreign governments, ``the
courts did not take it upon themselves to abrogate the sovereign
immunity of foreign governments in certain circumstances. That step was
left to the political Branches, as the Constitution required.''
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Another perspective articulated by members of the Committee
begins with the premise that Indian tribes, are one of the
three domestic sovereign entities recognized by the United
States Constitution. Recent Supreme Court cases have strongly
affirmed that notions of sovereignty that existed when the
Constitution was formed have lost none of their relevance in
the subsequent two centuries.\30\ One of the fundamental
components of that sovereignty is the right to decide for
itself when or under what circumstances a sovereign will be
sued, especially in its own courts. Based on the long-standing
principles enunciated in Williams v. Lee, 358 U.S. 217 (1959)
tribal courts almost always possess exclusive jurisdiction over
agreements with Indian tribes.
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\30\ Seminole Tribe of Fla. v. Florida, 517 U.S. 44 (1996)
(Congress lacks power to abrogate state sovereign immunity from suits
commenced or prosecuted in the federal courts), Alden v. Maine, 67 USLW
3683 (U.S. 1999) (``[T]he States' immunity from suit is a fundamental
aspect of the sovereignty which the States enjoyed before the
ratification of the Constitution, and which they retain today. * * *''
Florida Prepaid Postsecondary Educ. Expense Bd. v. College Savings
Bank, 67 USLW 3682 (U.S. 1999).
---------------------------------------------------------------------------
Rather than trying to reconcile these divergent views
concerning tribal sovereign immunity, the approach taken in S.
613 builds upon an apparent agreement that Indian tribes and
their contracting partners are generally best served if
questions of immunity are addressed, resolved, or at least
disclosed when a contract is executed. As discussed above, this
view is also shared by Indian tribes that have entered into
increasingly complex commercial transactions by addressing
immunity directly. Such arrangements are especially relevant
where parties are seeking to utilize or create a secondary
market for tribal obligations. To be sure, all tribal
obligations may face disparagement in such secondary markets if
a perception exists that tribal immunity will preclude
enforcement of these agreements. Such perceptions may develop
even in instances where a party contracting with a tribe was
fully informed about the tribe's immunity. As Chairman Campbell
indicated upon introducing S. 613: ``I am concerned, however,
about those who may enter into agreements with Indian tribes
knowing that the tribe retains immunity but at a latter time
insist that they have been treated unfairly by the tribe
raisingthe immunity defense.'' \31\ Under terms of S. 613,
there will not be any question that a party entering into a contract
that requires federal approval pursuant to Section 81, as amended, was
at least informed of tribal immunity. In practice, there appears to be
a consensus that this requirement will not violate any core tribal
interests. As one member of the Committee explained:
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\31\ Cong. Rec. March 15, 1999, p. S.2666.
[E]arlier hearings discussed contracts in which
sovereign immunity is sometimes imposed. It's probably
the field, listening to all of the testimony, in which
there's been the most extensive abandonment of
sovereign immunity on a case by case basis by tribes
themselves because at least in connection with large
contracts, unless there is some kind of remedy, no
outside organization is anxious to make a significant
investment, but [I believe] it is still a problem with
small day-to-day contracts.\32\
---------------------------------------------------------------------------
\32\ Hrng. 105-303, pt. 3, Hearing Before the U.S. Senate Committee
on Indian Affairs, Sovereign Immunity, p. 35.
The Committee has reached a consensus that Section 81
should not (or perhaps was never intended to) apply to such
``routine'' contracts. With respect to those contracts and
agreements that fall within the scope of Section 81, as
amended, the overwhelming practice is to address immunity, and
often to provide some form of arbitration, a full or partial
waiver of immunity, or some other recourse. For example,
irrevocable letters of credit are sometimes employed. While
some form of waiver is often a practical necessity, S. 613 does
not make such waivers a legal necessity. At a minimum, however,
S. 613 directs the Secretary not to approve an agreement or
contract covered by Section 81 if immunity is not, at least,
disclosed.
Subsection (e). This provision requires the Secretary of
Interior to promulgate regulations that identify those types of
agreements or contracts that are not covered by subsection (b),
for example because they do not sufficiently encumber Indian
lands.
Subsection (f). This section removes the statutory
requirement that attorney contracts must be approved by the
Secretary. It also makes clear that S. 613 is not intended to
make any changes to provision of the Indian Gaming Regulatory
Act of 1988, P.L. 100-497, which require federal approval.
Finally, consistent with the long-standing principle that the
federal trust obligation may not be unilaterally terminated, S.
613 does not alter those tribal constitutions that require
federal approvals.
Section 3
This section amends the Indian Reorganization Act to
eliminate the requirement that attorney contacts must be
submitted to the Secretary.
Legislative History
S. 613 was introduced on March 15, 1999 by the Chairman of
the Senate Indian Affairs Committee, Senator Ben Nighhorse
Campbell, and referred to the Committee on Indian Affairs. On
May 19, 1999 the Committee held a legislative hearing on the
bill. At an open business meeting on June 16, 1999, Senator
Campbell proposed an amendment to S. 613 in the nature of a
substitute. Senator Orrin G. Hatch was joined as a co-sponsor
of the proposed amendment.
Committee Recommendation and Tabulation of Vote
In an open business session on July 19, 1999, the Committee
on Indian Affairs, by a voice vote, adopted the amendment in
the nature of a substitute offered by Senator Campbell and
ordered the bill reported to the Senate, with the
recommendation that the Senate do pass S. 613 as reported.
Section-by-Section Analysis of S. 613 as Reported by the Committee
Section 1. Short title
Section 1 cites the short title of the bill as the Indian
Tribal Economic Development and Contract Encouragement Act of
1999.
Section 2. Contracts and agreements with Indian tribes
Section 2 replaces the provisions of Section 2103 of the
Revised Statutes, 25 U.S.C. Sec. 81.
Section 2(a) provides three definitions: ``Indian lands,''
``Indian tribe,'' and ``Secretary'';
(b) Establishes that agreements or contracts that encumber
Indian lands for a period of seven or more years are not valid
unless they are approved by the Secretary of Interior or his
designee;
(c) Makes subsection (b) inapplicable if an appropriate
official determines that a contract or agreement is not covered
by that subsection;
(d) Directs the Secretary to refuse to approve an agreement
if that agreement either violates federal law or it fails to
include a provision that either: provides remedies to address a
breach of the agreement; provides a reference to applicable law
(found in either tribal code, ordinance, or competent court
ruling) that discloses the tribe's right to assert immunity; or
waives immunity in some manner;
(e) Provides the Secretary for 180 days to issues
regulations for identifying the types of agreements or
contracts that are not covered under subsection (b);
(f) Establishes that this section is not to be construed to
require Secretarial approval of contracts for legal services;
or limit, amend, or repeal the authority of the National Indian
Gaming Commission, or any tribal organic documents that require
Secretarial approval.
Section 3. Choice of counsel
Section 3 amends the Indian Reorganization Act to strike
the requirement for Secretarial review and approval of attorney
contracts.
Cost and Budgetary Consideration
The cost estimate for S. 613, as amended, as calculated by
the Congressional Budget Office, is set forth below:
U.S. Congress,
Congressional Budget Office,
Washington, DC, July 9, 1999.
Hon. Ben Nighthorse Campbell,
Chairman, Committee on Indian Affairs,
U.S. Senate, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for S. 613, the Indian
Tribal Economic Development and Contract Encouragement Act of
1999.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contacts are Megan
Carroll (for federal costs), and Marjorie Miller (for the
impact on state, local, and tribal governments).
Sincerely,
Barry B. Anderson
(For Dan L. Crippen, Director).
Enclosure.
S. 613--Indian Tribal Economic Development and Contract Encouragement
Act of 1999
Summary: Based on information from the Department of the
Interior (DOI) and the Bureau of Indian Affairs (BIA), CBO
estimates that implementing S. 613 would reduce discretionary
costs for BIA by a total of about $2 million over the 2000-2004
period. The bill would not affect direct spending or receipts;
therefore, pay-as-you-go procedures would not apply. S. 613
contains an intergovernmental mandate as defined in the
Unfunded Mandates Reform Act (UMRA), but CBO estimates that
this mandate would impose minimal costs that would be far below
the threshold established by that act ($50 million in 1996,
adjusted annually for inflation). Further, the bill would
reduce the costs of an existing mandate, more than offsetting
any new mandate costs. S. 613 contains no new private-sector
mandates as defined in UMRA.
S. 613 would amend a provision of law (25 U.S.C. 81) to
remove certain restrictions on contracts between Indian tribes
and other parties. This provision, known as section 81,
requires DOI's approval of all contracts involving payments
between non-Indians and Indians for services relative to Indian
lands. Under current law, any contract that is subject to this
provision and is not approved by DOI can be declared null and
void. As amended by S. 613, section 81 would only require
approval of contracts that encumber Indian lands for a period
of at least seven years. S. 613 would prohibit DOI from
approving contracts that neither provide for remedies in the
case of a breach of contract nor explicitly disclose or waive
an Indian tribe's right to assert sovereign immunity as a
defense in an action brought against it. In addition, the bill
would amend the Indian Reorganization Act to remove a
requirement that a tribe's choice of legal counsel and the fees
to be paid to such counsel be subject to DOI approval.
Estimated cost to the Federal Government: Based on
information form DOI and BIA, CBO expects that S. 613 would
reduce the number of contracts the department has to review
each year. CBO estimates that implementing this legislation
would reduce costs for BIA by between $300,000 and $400,000 in
each of fiscal year 2000 through 2004. Any change in overall
BIA spending would be subject to appropriation action.
Pay-as-you-go considerations: None.
Estimated impact on state, local, and tribal governments:
Section 81 currently imposes a mandate on tribes to submit
certain contracts for approval by the Secretary of the
Interior. The bill would greatly reduce the number of contracts
requiring approval, thus reducing the cost to tribes of the
existing mandate. But under this bill, a tribe entering into a
covered contract would have to include a specific statement
regarding its sovereign immunity. This in an additional
enforceable duty imposed on tribes, and so would constitute an
intergovernmental mandate under UMRA. The cost of this mandate
would be minimal, however. It would not affect the rights of
either party under such contracts, but would only require that
these rights be explicitly stated.
Estimated impact on the private sector: This bill contains
no new private-sector mandates as defined in UMRA.
Estimate prepared by: Federal Costs: Megan Carroll. Impact
on State, Local, and Tribal Governments: Marjorie Miller.
Estimate approved by: Robert A. Sunshine, Deputy Assistant
Director for Budget Analysis.
Regulatory Impact Statement
Paragraph 11(b) of XXVI of the Standing Rules of the Senate
requires that each report accompanying a bill to evaluate the
regulatory paperwork impact that would be incurred in carrying
out the bill. The Committee believes that S. 613 will have a
minimal regulatory or paperwork impact.
Changes in Existing Law
In compliance with subsection 12 of rule XXXVI of the
Standing Rules of the Senate, the Committee notes the following
changes in existing law (existing law proposed to be omitted is
enclosed in black brackets, new matter printed in italic):
25 U.S.C. 81
[No agreement shall be made by any person with any tribe of
Indians, or individual Indians not citizens of the United
States, for the payment or delivery of any money or other thing
of value, in present or in prospective, or for the granting or
procuring any privilege to him, or any other person in
consideration of services for said Indians relative to their
lands, or any claims growing out of, or in reference to,
annuities, installments, or other moneys, claims, demands, or
thing, under laws or treaties with the United States, or
official acts of any officers thereof, or in any way connected
with or due from the United States, unless such contract or
agreement be executed and approved as follows:
[First. Such agreement shall be in writing, and a duplicate
of it delivered to each party.
[Second. It shall bear the approval of the Secretary of the
Interior and the Commissioner of Indian Affairs indorsed upon
it.
[Third. It shall contain the names of all parties in
interest, their residence and occupation; and if made with a
tribe, by their tribal authorities, the scope of authority and
the reason for exercising that authority, shall be given
specifically.
[Fourth. It shall state the time when and place where made,
the particular purpose for which made, the special thing or
things to be done under it, and, if for the collection of
money, the basis of the claim, the source from which it is to
be collected, the disposition to be made of it when collected,
the amount or rate per centum of the fee in all cases; and if
any contingent matter or condition constitutes a part of the
contract or agreement, it shall be specifically set forth.
[Fifth. It shall have a fixed limited time to run, which
shall be distinctly stated. All contracts or agreements made in
violation of this section shall be null and void, and all money
or other thing of value paid to any person by any Indian or
tribe, or any one else, for or on his or their behalf, on
account of such services, in excess of the amount approved by
the Commissioner and Secretary for such services, may be
recovered by suit in the name of the United States in any court
of the United States, regardless of the amount in controversy;
and one-half thereof shall be paid to the person suing for the
same, and the other half shall be paid into the Treasury for
the use of the Indian or tribe by or for whom it was so paid.]
Sec. 2103. (a) In this section:
(1) The term ``Indian lands'' means lands, the title
to which is held by the United States in trust for an
Indian tribe or lands the title to which is held by an
Indian tribe subject to a restriction by the United
States against alienation.
(2) The term ``Indian tribe'' has the meaning given
that term in section 4(e) of the Indian Self-
Determination and Education Assistance Act (25 U.S.C.
450b(e)).
(3) The term ``Secretary'' means the Secretary of the
Interior.
(b) No agreement or contract with an Indian tribe that
encumbers Indian lands for a period of 7 or more years shall be
valid unless that agreement or contract bears the approval of
the Secretary of the Interior or a designee of the Secretary.
(c) Subsection (b) shall not apply to any agreement or
contract that the Secretary (or a designee of the Secretary)
determines is not covered under that subsection.
(d) The Secretary (or a designee of the Secretary) shall
refuse to approve an agreement or contract that is covered
under subsection (b) if the Secretary (or a designee of the
Secretary) determines that the agreement or contract--
(1) violates Federal law; or
(2) does not include a provision that--
(A) provides for remedies in the case of a
breach of the agreement or contract;
(B) references a tribal code, ordinance, or
ruling of a court of competent jurisdiction
that discloses the right of the Indian tribe to
assert sovereign immunity as a defense in an
action brought against the Indian tribe; or
(C) includes an express waiver of the right
of the Indian tribe to assert sovereign
immunity as a defense in an action brought
against the Indian tribe (including a waiver
that limits the nature of relief that may be
provided or the jurisdiction of a court with
respect to such an action).
(e) Not later than 180 days after the date of enactment of
the Indian Tribal Economic Development and Contract
Encouragement Act of 1999, the Secretary shall issue
regulations for identifying types of agreements or contracts
that are not covered under subsection (b).
(f) Nothing in this section shall be construed to--
(1) require the Secretary to approve a contract for
legal services by an attorney;
(2) amend or repeal the authority of National Indian
Gaming Commission under the Indian Gaming Regulatory
Act (25 U.S.C. 2701 et seq.); or
(3) alter or amend any ordinance, resolution, or
charter of an Indian tribe that requires approval by
the Secretary of any action by that Indian tribe.
* * * * * * *
25 U.S.C. 476(e)
In addition to all powers vested in any Indian tribe or
tribal council by existing law, the constitution adopted by
said tribe shall also vest in such tribe or its tribal council
the following rights and powers: To employ legal counsel[, the
choice of counsel and fixing of fees to be subject to the
approval of the Secretary]; to prevent the sale, disposition,
lease, or encumbrance of tribal lands, interests in lands, or
other tribal assets without the consent of the tribe; and to
negotiate with the Federal, State, and local governments. The
Secretary shall advise such tribe or its tribal council of all
appropriation estimates or Federal projects for the benefit of
the tribe prior to the submission of such estimates to the
Office of Management and Budget and the Congress.