Introduction

Negotiation of large and complex mining and infrastructure projects in developing countries is a special and often a new deal both for the country and the mining company. In most cases, neither of them is well prepared initially and the respective economical and legal culture is often at odds.

Investing upfront millions and sometimes billions of dollars with a return on investment after decades is very different from any other type of transaction: for instance in Africa cumulative international and local experience based on a significant number of deals remains extremely limited.

Some take-awayfrom the aggregated experience gathered by the French Institute of International Legal Experts (IFEJI) from lawyers and other service providers advising both mining companies and States in negotiation of large mining and infrastructure projects in civil law Africa over the last 30 years:

  • A good deal is good for both parties today, tomorrow and the day after tomorrow;
  • A smart clause aggressively negotiated has chances to become a pathologic clause and altogether a ‘pyrrhic victory;’
  • In case of serious dispute on natural resources, States eventually win;
  • An innovative concept not familiar for many stakeholders but tested with success forworld-class composite projects emerges: the concept of ‘consensus negotiation,’ which bridges to a large extent the gap with the traditional asymmetry of information.

Process

Several steps to consider by a Mining Company before negotiating such a Mining Convention include: [1) Pre-negotiation homework; 2) Engage with a government on the perception of the main issues identified and how to address them realistically in a sustainable manner; 3) Listen to the government objectives; 4) Develop a consensus between the government and mining company on their respective objectives and on the main issues to address; 5) Exchange on the organization on a multidisciplinary negotiation team for both sides and agree an efficient process conductive to success; 6) Clarify the decision making process for each side – on the government side, a coordinated inter-ministerial approach is important; 7) If necessary break out into sectorial exchanges on some key issues based on clear mission and appropriate coordination; 8) For the most complex issues, prepare position Memorandum before drafting contractual clauses; 9) Start by drafting simple sets of conceptual clauses dealing with all the key issues with more or less the same level of details, in plain wording, duly interrelated in an holistic manner; and 10) Draft and negotiate the Mining convention in plain language so it is easy to understand . . . .]

In our experience, if the above process is implemented professionally and in good faith, a consensus on key issues will have taken place, based on a similar level of information. Drafting and final negotiation becomes a rather simple and straightforward exercise. Empirical evidence indicates that this process which takes time and resources often reduces the time and resources needed up to the execution of a Mining Convention compared with a traditional transactional approach and facilitates smooth development of the project.

. . .

Conclusion:

For large and complex projects, a structured and progressive approach for preparing, negotiating and implementing a holistic Mining Convention, including series of innovative provisions which have been tested in landmark projects in civil law Africa, should be seriously considered in order to effectively conclude a good deal.

One of the benefits of this approach is to reduce substantially the initial asymmetry of information and to develop a level of transparency which may satisfy at the same time the legitimate interests of the State and of the Mining Company which should have in fact a common interest for resilient venture (otherwise it cannot be a ‘good deal’).

This modern approach which departs substantially from the negotiation of traditional international transactions leads in fact to a new form of ‘collaborative agreement’ well captured in the concept of social license to operate’ that ICMM advocates for large and complex mining projects having a strong transformational potential toward the SDGs.

 

Marc Frilet is the Managing Partner at Frilet Société d’avocats (www.frilet.com). To read the full article, please visit the GcilA Knowledge Centre at www.gcila.org/knowledge-center.