Some examples of these legislative changes include:
- Most recently, Cameroon adopted a new Mining Code on 19 December 2023. This new code significantly strengthens the position of the national mining company (Sonamines) created in 2020. Sonamines has not only been granted the possibility to implement production-sharing schemes but is now permitted to collect mining taxes on behalf of the State. Sonamines also has a right regarding the purchase and commercialisation of diamonds and gold.
In parallel, the new statute also confirms the local content obligations which had been introduced in the 2016 version of the Code, notably including principles of national preference for employment and general procurement, as well as an obligation for foreign companies to set up technology transfer programs.
- Mali: on 8 August 2023, the Malian government promulgated a new Mining Code including increasing local content requirements, such as a maximum 30% participation (including a 10% free equity stake) of the State in mining projects as well as a mandatory participation by local companies (5%). Mali also concurrently adopted a law on local content setting out a principle of national preference for employment and procurement of raw materials in the mining sector.
- Tanzania: in 2017, Tanzania implemented a new Mining Act requiring local companies to have a minimum 5% shareholding in mining companies, in addition to the State being granted a free equity stake in all existing mining projects. In connection with this reform to the mining sector, Tanzania also revoked several existing mining licenses, resulting in the introduction of several international arbitration cases against the State.
- Other States such as Burkina Faso, Guinea and Madagascar have also recently implemented or announced their intention to implement changes to their mining codes and laws on local content in the mining sector in order to strengthen local participation.
Potential relevance of rights and protections enshrined in international treaties
Provided that a potential investor is informed about these new legal requirements prior to making an investment, these new regulations and local content requirements may be taken into account by that potential investor in their investment decision, except in specific circumstances (such as where local content requirements are expressly prohibited by international treaties signed by the State in question), these legal requirements are therefore unlikely to be in breach of the State’s international obligations.
In contrast, such reforms have the potential to heavily impact the rights of existing investors if they are applied to ongoing projects, i.e. after substantial investments in capital and resources have been made, resulting inter alia in higher operating costs and the substantial reduction of the projected returns of the investment.
Against this background, several remedies can be available to investors to mitigate this political and legal risk, these range from commercial discussions and negotiations with the host State regarding the application of new legal requirements to political risk insurance or potential contractual claims under existing mining concessions (including relying on provisions such as stabilisation clauses or contract adaptation/hardship clauses).
Alongside these remedies, investors should also be aware of the potential protections offered by bilateral investment treaties (“BITs”) and international investment agreements (“IIAs”) that might be available to them:
- What are these treaties? BITs and IIAs are international treaties concluded between States which have the unique power to stipulate a series of substantive protections for private investors from one (home) State in the other (host) State, and often include the right for these investors to bring direct arbitration proceedings against the host State in case of breach of these protections.
- What protections are available? Typically, treaty provisions forbid unlawful expropriation (i.e. without a public purpose and without adequate compensation being paid), and impose obligations on the host State, such as according fair and equitable treatment (i.e. act transparently and in a non-arbitrary/discriminatory manner), full protection and security (physical protection), national treatment and most-favoured treatment to the investor. Some treaties also contain a clause requiring the State to comply with all the obligations entered into towards investors (such as the implemented mining concessions).
- How can these protections be enforced? Crucially, most BITs and IIAs contain dispute resolution provisions allowing private investors to start direct arbitration proceedings against the host State to obtain compensation for any breaches of these substantive protections. Investors can therefore seek redress before a neutral international forum. Many of these disputes are administered by the International Centre for the Settlement of Investment Disputes (“ICSID”), which ensures the increased enforceability of any awards – these being treated as final court decisions in most States.
It may therefore be crucial for mining companies operating in Africa to ensure they have access to these international protections in light of the current reforms being adopted.
Authored by Thomas Kendra and Lucas Aubry.