MMDA presentation

Public Finance Transparency

ProgramHosted by the Soros Foundation – Kazakhstan

Contract transparency in the extractive sector

as an important means of sustainable

development in Kazakhstan

An introduction to

the International Bar Association’s

Model Mining Development Agreement

Peter LeonChair, IBA Mining Law Committee

Astana, Kazakhstan

25 – 26 August 2010

Overview of Presentation• The International Bar Association (“IBA”)

• The IBA‟s mining law committee

• The Model Mining Development Agreement (“MMDA”) project

– origins

– objective

– format

– the development process to date

• Conclusion

• Questions

The IBA• The IBA, established in 1947, is the world‟s leading organisation of

international legal practitioners, bar associations and law societies

• The IBA has a membership of more than 40,000 individual lawyers and 197 bar associations and law societies spanning all continents. It has considerable expertise in providing assistance to the global legal community

• Grouped into two divisions – the Legal Practice Division and the Public and Professional Interest Division – the IBA covers all practice areas and professional interests. Through the various committees of the divisions, the IBA enables an interchange of information and views among its members as to laws, practices and professional responsibilities relating to the practice of business law around the globe

• Additionally, the IBA‟s high-quality publications and world-class conferences provide unrivalled professional development and network-building opportunities for international legal practitioners and professional associates

• The mining law committee, which is one of the IBA‟s 78 committees, is responsible for the MMDA project

The IBA’s mining law

committee• The mining law committee comprises 14 officers, all of whom

are legal practitioners from different parts of the world

• The mining law committee, together with five other IBA

committees, form the IBA‟s Section on Energy, Environment,

Natural Resources and Infrastructure Law (“SEERIL”)

• The objective of the mining law committee is to promote an

interchange of information, ideas, views and knowledge among

individual members of the committee as well as international

practitioners, as to the laws, practices and procedures affecting

minerals and mining in the global legal community

The origins of the MMDA project

• In April 2009, after initial discussions with the World Bank, the mining law committee resolved to initiate a major project to develop a model mining development agreement based on international best practice principles to serve as a negotiation template for investor-state agreements in the mining sector in developing countries

• The mining committee will present the first version of the Model Mining Development Agreement at the IBA‟s annual meeting, in Vancouver, Canada, on 3 - 8 October 2010

• The MMDA project is to remain a 'living process' beyond its initial presentation in October 2010, with new best practices included as they are developed


(II)• The MMDA project has been developed in recognition of:

– the fundamental role that foreign investment plays in the mining sector in the growth of many developing economies and, in turn, the improvement of living standards in mine or near mine communities

– the negative impact, for example, environment damage, which mines can have on surrounding communities is significant

– host governments have developed strong views on the role that mining companies should play in the sustainable development of mine communities

– there is a need to address the growing resistance of such communities to mining operations that prove to be of little benefit to them

– anti-corruption legislation has become more pervasive under both the law of many developing countries and under international law, which has led to a call by international organisations, non-governmental and civil society organisations for increased transparency in international resource extraction agreements


(III)• Mining companies are increasingly concerned about the need for a “social

license to operate”, which includes obtaining local community support

• At the same time, mining companies require certainty in terms of the legal regime governing their mining operations and stable investment conditions under which to operate in order to ensure the long term security of their investments

• It has become imperative that foreign investment in the mining sector fosters sustainable development while protecting the interests of the host governments, mine communities and investors in an equitable way

• Many developing countries, however, do not have developed mining codes which deal with these issues

• The need for the MMDA project arose from uncertainty as to what constitutes best practice in investor – state agreements in the mining sector

– the Democratic Republic of Congo's controversial contract review is a key example of a disagreement between a host state and investors regarding what constitutes best practice in an investor-state agreement

The objective of the MMDA project

• The MMDA project is primarily aimed at producing a draft model

mining development agreement based on international best practice

principles in the mining industry

• The MMDA is intended to be used as the basis of negotiations to

improve investment agreements entered into by mining companies

and host governments in jurisdictions where:

– „mature‟ mining codes are not in place;

– a mining code requires supplementation by private contract; or

– it can serve as a template for agreements with state-owned mining entities

• The MMDA will endeavor to address the matters that a potential

investor, mining company, government or civil society representative

may expect in a basic mine development agreement, such as security

of tenure, regulatory certainty, and clarification of the rights and

obligations of government and investors

The objective of the MMDA

project (II)

• There are a number of important points to note:

– the MMDA is a mining development agreement, and not an

exploration agreement or a community development agreement

– the MMDA is a basis for the development of an investor-state

agreement, and thus does not deal with local level issues in detail

– it is not intended that every nation adopt the MMDA, rather it is

simply a negotiation tool that governments and investors may

consider

The format of the MMDA project

• The MMDA takes the form of a publicly accessible web-based product

– Access to the MMDA project website, www.mmdaproject.org, is currently controlled by means of a password, which is shared by, inter alia, members of the committee, invitees to the two international consultations, sponsors and collaborators

– The username is “mmda” and the password is “pr00f”

• The MMDA provides:

– multiple alternative clauses for key contractual points

– commentary explaining the uses of the alternative clauses

• This is to enable it to be adaptable and relevant to a broad range of scenarios that mining companies and host governments face with the negotiation of each new mining agreement

• This format also allows for easy amendment so that it may be included in a mining law, or be used as guidelines

The development process to date:

the drafting process

• In 2009, the mining law committee established a working group to manage the drafting process

• The working group compiled a confidential database of agreements from different jurisdictions on which to draw during the drafting process, and subsequently deconstructed these agreements to identify provisions that represent viable best practice alternatives for each specific subject

• The working group then undertook the revision of the draft provisions as legitimate concerns and ideas were raised through the consultation process

• Draft version 1.0 of the MMDA has been published on the MMDA website


the consultation process

• In order to develop the MMDA, broaden the base of participation as well as ensure the legitimacy, transparency and openness of the MMDA project, the working group, together with representatives of key stakeholders, inter alia, governments, industry, civil society groups, and universities, is currently undertaking a detailed consultation process

• Two international consultations have taken place in 2010:

– the World Mines Ministries Forum in Toronto on 6 March 2010, with government and civil society representatives

– a civil society forum, which was held in Toronto on 24 and 25 April 2010, which involved civil society representatives and other industry experts


the consultation process (II)

• Further consultations are to take place in the run-up to the IBA‟s annual meeting, in Vancouver, Canada, including:

– the Public Finance Transparency Program, hosted by the Soros Foundation, Kazakhstan, on contract transparency and model mining development agreements in the extractive sector of Kazakhstan in Astana, Kazakhstan

– a stakeholder review meeting of the United Nation's Economic Commission for Africa's ("UNECA") international study group framework report, organised by the African Union ("AU"), set to take place in Addis Ababa, Ethiopia, on 1 to 3 September 2010

• The mining law committee has also established links with other governmental and non-governmental organizations who are involved in similar initiatives in order to draw on their experience and resources

Conclusion

• It has become imperative that foreign investment in the mining sector fosters sustainable development while protecting the interests of the host governments, mine communities and investors in an equitable way

• The MMDA is based on international best practice principles and is intended to serve as a negotiation template for investor-state agreements in the mining sector in developing countries

• The working group has completed draft version 1.0 of the MMDA, which has been published on the MMDA website

• The consultation process is ongoing. There are a number of consultations scheduled to take place in the run up to the the IBA‟s annual meeting, in Vancouver, Canada, on 3 - 8 October 2010

• We view your feedback and comments on the draft version 1.0 MMDA as well as the process going forward, as important to the consultation process

• The MMDA project is to remain a 'living process' beyond its initial presentation at the IBA Annual Meeting in October 2010, with new best practices included as they are developed

Questions?

Thanks

Education

MMDA presentation