Transcript Bertrand Montembault - Herbert Smith LLP

How to protect your mining investment?
Some views on stabilisation clauses
Bertrand Montembault
Avocat au barreau de Paris, Herbert Smith LLP
PDAC MineAfrica 2010, Toronto, 9 March 2010
Protecting investment through the
stabilisation of the legal environment
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Risks faced by the mining industry: geological, financial,
environmental and political / legal
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It is necessary to mitigate these risks in order to attract investors
(mining companies, financiers, etc.)
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At the core of political/legal risks: sovereignty of State vs.
sanctity of contract
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A key element to mitigate political/legal risks: stabilisation of the
legal environment
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Protecting investment through the
stabilisation of the legal environment
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Mechanisms available to stabilise the legal environment:
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Treaties (BITs)
Statutes (mining laws, investment laws, etc.)
Legal doctrine (e.g. French administrative law: act of state
(fait du prince, State's liability arising from enactment of laws)
 Contract with the state: stabilisation clauses
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Stabilisation clauses: back to basics
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Clauses stabilising the non-legal environment: general contract
law
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Force majeure clause
Hardship clause
Renegotiation clause
Adjustment clause (revision clause)
Purpose of stabilisation clauses: neutralisation of the State's
legislative power
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Stabilisation clauses vs. "intangibility clause"
Stabilisation clauses vs. non-expropriation clause
Need to neutralise the State's jurisdictional power (arbitration
clause)
 Need to establish contractual relationship with the State
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Protecting investment through the
stabilisation of the legal environment
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Validity

International arbitration cases (Texaco, Calasiatic, Aminoil,
Agip, Saphire, etc.)
 Applicable law clauses: internationalisation of contract
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Typology
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Legal nature: freezing (stabilisation "stricto sensu" or stability) /
economic equilibrium / hybrid clauses
 Scope: general / limited
 Unilateral / bilateral
 Implementation: automatic / conditional
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Freezing clauses (stabilisation "stricto
sensu" / stability): a criticised tool
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Perception

Developed countries / emerging countries (36% in Sub-Saharan
Africa)
 Industry sectors (50% extractive industries)
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Would limit State's capacity to legislate in human rights matters (HSE):
appointment of John Ruggie as Special Representative to the UN
Secretary General
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Limited legal efficiency: no specific performance / award of damages
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Similar protection may be achieved by other means, less harmful to
the State's sovereignty:
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BITs
Economic equilibrium clauses
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Freezing clauses (stabilisation "stricto sensu" /
stability clauses): a useful tool in the context of
the resurgence of resource nationalism
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Efficiency of freezing clauses established through:
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Uncertainties arising from:
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Characterisation of State's breach of contract
Principle of higher indemnification seems to be admitted
("damnum emergens" + "lucrum cessans") but the solutions are
not yet clearly established : "legitimate expectations" (Aminoil
1982), "fair market value" (CMS Gas Transmission 2005/SD
Meyers)
Notion and implementation of economic equilibrium clause (no
arbitration case known)
Creeping expropriation
A useful reference to bear in mind: domestic (administrative) law
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Alliance offices
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