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What’s Keeping Chief Legal Counsels in Extractive Companies Awake These Days?

I can admit I like lawyers. Having spent two days with very talented legal minds in the mining sector at the World Initiative of Mining Lawyers conference was, surprisingly, invigorating.

As a development economist, my first exposure to the mining sector was commodity traders, when the commodity boom was in full stride in 2006. I heard all about short selling and going long, alphas and betas, chartists and trend followers, and came away none the wiser on what these folks had to do with mining.

Next came a set of geologists; never knew ore grades and ore body shapes could be so fascinating…for other people. Bring in a random rock, and these lads can gush over it, worse than a gaggle of teenage girls who have just spotted Justin Bieber. Ever get a straight answer to a straight forward question? "It depends" is the best I have ever gotten out of them.

So when invited to attend a conference with mining lawyers, I was prepared to take a good book along. How interesting could they be? The answer was very.

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For example, I did not know the Supreme Court of Canada, in September 2015, decided in favour of Ecuadorian plaintiffs to recognise and enforce a US$9.5 billion judgement debt against Chevron Canada, originally handed down in Ecuador, against Chevron (US). Why is this unique? It is the first instance of a subsidiary being sued for acts committed by its parent company, particularly where there are no fewer than seven corporate layers separating the Canadian unit from Chevron Corp.

While the judgement itself is being challenged on a number of grounds, the fact that lawyers have now found a way to "follow" extractive companies into any jurisdiction, must be giving chief legal counsels sleepless nights.

Other things keeping chief legal counsels awake at night included, at the top of their list, environmental, health and safety regulations. While I have little sympathy for Samarco when it comes to their Brazilian prosecution for the tailings dam failure, the fact that mining companies reported environmental risk and social license to operate as being higher priorities than contractual and financing risks was remarkable.

It's not always about being in cases and courts, the legal profession in Kazakhstan has to go through a 400-page long draft mining code (expected to be ratified in the coming year).  One would expect that covers everything there is to cover, unlike the French version. Based on the 1804 Napoleonic code, the 2011 revision still seems to have some important pieces missing, such as providing legal certainty for carrying out mining.

The French are not the only ones harking back to the days of yore when it comes to mining codes. The Canadian engagement with its aboriginal communities is based on the Royal Proclamation 1763, which governs the consultation (not consent) between the indigenous people and the Crown. Interestingly, they still refer to it as the Crown; not the government of the day. Apparently governments come and go, but the Crown stays forever.

The most interesting session however, and not because I was on the panel, was on the development of a Model Mining Code. Based on 10 principles, the attempt at this template brought together the most contentious issues facing the governance of the mining sector across the globe. From defining the right to mine for a company, to inclusion of local community as part of legislation (and not regulation), the model mining code focused attention on issues that Napoleon or George III may not have been thinking about.

The work is still evolving, and as the Model Mining Development Agreement (2011) focused attention and better drafting for extractive contracts, the MMC certainly has the potential to do the same for mining codes.

All in all, spending two days with legal professionals involved with "real world" mining issues, none of which focused on tax avoidance or transfer pricing, made me take a look at my own profession and the abstractions I often deal with. Perhaps Walter Heller was right when he said "You know it's said that an economist is a man who, when he finds something works in practice, wonders if it works in theory".

The people I met were definitely doing it the right way around.

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