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African Legal Support FacilityNegotiations of natural resource contracts : Role of ALSF2013
African Legal
Support Facility
Stephen KarangiziDirector, ALSF
+Outline of Presentation
Who is the ALSF, what does the ALSF do?
How does the ALSF work?
Key Issues in ExtractiveIndustry Contracts
+Who is the ALSF?
The African Legal Support Facility (ALSF) is an international institution that is dedicated to providing legal advice and capacity building to African countries on vulture fund litigation, complex commercial negotiations and related sovereign transactions.
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IntroductionWhy was the ALSF established?
+What the ALSF doesWho we are and who we help
Providing Legal Assistance All regional member countries of the African Development Bank or
African countries who are members of the ALSF Assistance is primarily initiated by governments
Commercial Creditor (Vulture Fund) Litigation Focus is on international litigation initiated by commercial creditors
against African Governments Particular emphasis on post-HIPC completion point countries
Complex Commercial Transactions Debt Agreements Natural Resource Contracts Concession Agreements Infrastructure PPPs
Capacity Building (Specialized Sessions/All external support includes)
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+How does the ALSF do its work?The ALSF receives request from governments, identifies legal experts who can assist, and provides grants or financing to directly pay for the lawyers to help the Government.
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+What are the key issues in the extractive industries?Many African countries face challenges during the negotiations of their contracts. Poorly negotiated contracts lead to inefficient management of extractive industries resources and prevent countries from enjoying full benefits of its resources.
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+Extractive industries
Lack of technical expertise
Lack of relevant fiscal and legal tools
Pressure from external donors and companies to conclude negotiations
Weak governance and Institutions - Intergovernmental cooperation
Contracts – usually favour or perceived to favour investor
Contracts – believed to contain inequitable clauses
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Challenges faced by many African countries during negotiations
+Extractive industries
Prevent countries from enjoying full benefits of its resources
Entrenched poverty and conflicts
Loss of public revenue
Natural resource degradation and depletion
Loss of access to resources for local communities
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Impacts of poorly negotiated contracts
+Extractive industries
More efficient contract negotiations
More efficient fiscal measures
Governance issues –Transparency on the part of both Investor Company and Accountability of State to stakeholders
Sequencing: Issue Exploration Contracts; Auction extraction rights; Complete national policy and legislation
Clauses that will lead to sustainable development (local content; capacity enhancement; social and environment issues)
Engage external expertise – where skills do not exist (as long as you ensure there are no conflict of interests) – cost is worth it in the long run
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Key issues on negotiations of extractive resources contracts – Objective of support to the negotiations
+Phases for preparation and negotiation of contracts Setting the investment environment
Government strategies and policies; regulatory frameworks; sector wide analyses
Pre-negotiation phase Review project feasibility, environment and social impact assessment,
prepare tender documents, model contracts and the financial structure. Acquire knowledge about the resource and have a clear Policy; bring together all relevant experts; develop guidelines with different scenarios for negotiations
Negotiation phase Assemble a multi-disciplinary team, prepare the negotiation
strategy, draft and review contractual provisions
Contract implementation phase Monitoring to ensure contract compliance - follow up on
implementation of Agreements; requires strong institutions
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Preparation for Negotiations
Early preparation before negotiations begin are crucial
Obtain adequate data on the resource and projected value to be extracted (assess contribution to overall economy)
Involve other stakeholders – increased transparency enhances negotiations capacity and legitimacy
Long Term Implications (Clarity on fiscal implications - Tax incentives that may be difficult to remove)
Existing Bilateral Investment Treaties – are they sufficiently balanced (also take account of local investor interests)
+ 13Improving Contract NegotiationsEnvironment
Is National Policy in Place?
Is adequate legislation in place?
Are there adequate institutions?
Rent Recovery – how transparent can it be? See Ghana reports – quantity and price posted on public web site
Capacity Building – local skills
Infrastructure – how will it contribute to other development efforts?
Donor Coordination – Avoiding conflicting advice
+Other Issues
How to deal with Confidentiality Clauses
Protecting the Investment - “Stabilization” or “Equilibrium” or other Clauses (covering interests of both parties)
Dispute resolution (what forum?)
Role of the National Company
Institutional Arrangements
Renegotiate or not?
Upstream and Downstream contracts
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