Transcript No Slide Title

Mitigation of Risk to Foreign
Direct Investment Mineral
Resources in Africa
Presented by
Eur. Ing. Colin Roberts B.Eng, C.Eng, P.Eng, LL.M
FSAIMM, FIMMM, MCIArb, MAusIMM, MCIM, MIEAust, MEI,
MIEZ, MSME, MSPE.
President The Mining Institute of Scotland, a branch of the IMMM
Introduction
• “Perhaps the major reason for reluctance of many Western
mining companies to commit to Africa is the belief that
virtually all of the continent is too corrupt and politically
unstable to sustain long-term exploration and mining
investment. Explorationists who are experienced in Africa
know that this fear is exaggerated, and that a majority of
African countries, some with excellent exploration
potential, are evolving with largely peaceful social and
economic development.” After Morgan & Wheeler (1999)
Foreign Direct Investment
(FDI)
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How much do we invest?
Into which commodity do we invest?
Is there a market for the product?
What is our competition?
What alternatives do we have?
Where do we invest?
– What are the risks?
RISK (1)
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•
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War and Terrorism
Disease
Poverty and Famine
Infrastructure
Risk (2)
• Logistics
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Climate
Customs Clearance
Airports and Seaports
Roads, Rail and Air Transport
Risk (3)
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Utilities
Education and Health
Banking and Trade
Crime
Tribalism and Religion
Corruption
Governance

 “that poor governance is readily recognisable. Some of its main symptoms are:
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Failure to make a clear separation between what is public and what is private, hence, a tendency to
divert public resources for private gain
–
Failure to establish a predictable framework of law and government behaviour conducive to
development, or arbitrariness in the application of rules and laws
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Excessive rules, regulations, licensing requirements, and so forth, which impede the functioning of
markets and encourage rent-seeking
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Priorities inconsistent with development, resulting in a misallocation of resources
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Excessively narrowly based or non-transparent decision making.”
World Bank
Dispute Resolution (1)
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•
Charter of Economic Rights and Duties of States, GA/Res/3281 (XXIX), UN GAOR, 29th
Sess., Supp. No 31 (1974) 50.
“Each State has the right:
•
To nationalize, expropriate or transfer ownership of foreign property, in which case
appropriate compensation should be paid by the State adopting such measures, taking into
account its relevant laws and regulations and all circumstances that the State considers
pertinent. In any case where the question of compensation gives rise to a controversy, it
shall be settled under the domestic law of the nationalizing State and by its tribunals,
unless it is freely and mutually agreed by all States concerned that other peaceful means
be sought on the basis of the sovereign equality of States and in accordance with the
principle of free choice of means.”
•
“All States are juridically equal and, as equal members of the international community,
have the right to participate fully and effectively in the international decision-making
process in the solution of world economic, financial and monetary problems, inter alia,
through the appropriate international organizations in accordance with their existing and
evolving rules, and to share in the benefits resulting therefrom.”
Dispute Resolution (2)
• Litigation
• Alternative Dispute Resolution (ADR)
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Expert Determination
Negotiation
Mediation
International Arbitration
Dispute Resolution (3)
• ICSID was established under the 1965
Convention on the Settlement of Investment
Disputes between States and Nationals of Other
States (the Washington Convention)
• The United Nations’ Convention on the
Recognition and Enforcement of Foreign
Arbitral Awards of 1958 (New York
Convention)
Dispute Resolution (4)
•
•
•
A sample ICSID Arbitration Clause follows:[1]
“Under the Convention, consent may be given in advance, with respect to a defined
class of future disputes. Clauses relating to future disputes are a common feature of
investment agreements between Contracting States and investors who are nationals of
other Contracting States.
The [Government]/[name of constituent subdivision or agency] of name of Contracting
State (hereinafter the "Host State") and name of investor (hereinafter the "Investor")
hereby consent to submit to the International Centre for Settlement of Investment
Disputes (hereinafter the "Centre") any6 dispute arising out of or relating to this
agreement for settlement by [conciliation]/[arbitration]/[conciliation followed, if the
dispute remains unresolved within time limit of the communication of the report of the
Conciliation Commission to the parties, by arbitration] pursuant to the Convention on
the Settlement of Investment Disputes between States and Nationals of Other States
(hereinafter the "Convention").”
[1] http://www.worldbank.org/icsid/model-clauses-en/7.htm#a
FDI Mining Survey
Ranking
Exploration Stage
1
N/a
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
Mining Stage
Decision Criteria
N/a
3
1
2
9
7
11
6
4
5
8
10
12
16
17
N/a
13
15
18
21
20
14
19
Geological Potential for target mineral
Measure of profitability
Security of tenure
Ability to repatriate profits
Consistency and constancy of mineral policies
Company has management control
Mineral ownership
Realistic forex regulations
Stability of exploration and mining terms
Ability to pre-determine tax liability
Ability to pre-determine environmental obligations
Stability of fiscal regime
Ability to raise external financing
Long-term national stability
Establish mineral titles system
Ability to apply geol assessment techniques
Method and level of tax levies
Import-export policies
Majority equity ownership held by company
Right to transfer ownership
Internal (armed) conflicts
Permitted external accounts
Modern mineral legislation
CONCLUSION
Start The Project
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AND
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