With 2022 approaching the rear-view mirror, the mining industry this year faced challenges ranging from resource nationalism halting production and much needed energy projects caught in permitting quagmires. Timothy Foden, partner in the international arbitration group at law firm Boies Schiller Flexner joins for a yearly retrospective, and to look forward at future challenges facing the mining industry.
Foden has experience in handling investor-treaty and complex commercial arbitrations in the mining and energy sectors, has been recognized by Global Arbitration Review and Who’s Who Legal as a “Rising Star in International Arbitration” for the past four years and in 2022 was named amongst Who’s Who Legal’s “most highly regarded” Future Leaders of Arbitration for the EMEA Region.
For 2023 he was named as a “global elite thought leader” in the Future Leaders of Arbitration. Foden shared some industry insights in this exclusive interview with MINING.com.
MDC: What would you consider important new years’ resolutions for miners?
Foden: New years’ resolution: Stop ignoring the fact that international treaties provide you protections against encroaching third parties on your mine site if you have a treaty in place between your home country and the host country. Take a company that, for instance experiences a mass incursion onto their mine site. If there is a bilateral investment treaty between the country of that miner and the host State — that BIT will include a ‘full protection and security’ provision that ensures the physical safety of the foreign company’s investments in the host State — not just from government forces, but also the acts of third parties, whether that’s protectionist, civil unrest, or terrorists. It’s a positive obligation for the state to ensure that, if necessary, a military or police presence is there to stop any sort of vandalism.
A lot of states say they can’t fulfill that, and where it gets tricky is where a company goes and hires private security, or off duty police officers who are there on a contract basis, but as actual police officers, and it’s very much a grey area – are they operating in an official police capacity, or are they operating as contractors? Sometimes those folks get trigger happy. But before you even get to that there is this obligation on the state to effectively ensure the rule of law in the area. And miners are very often blind to that.
Another resolution, I would say, for miners is ‘no more structuring of your foreign investments just for tax purposes.’ It saddens me when I run into mining companies that have run into significant foreign sovereign interference, and you look at their holding structure and they’ve gone and incorporated a vehicle that will enable them, at some indeterminate point in the future to pay as little tax as they can. And that’s great — if you’ve got a producing asset, but so often these are companies that are in the exploration phase, and that are 10-12-15 years away from seeing a single penny.
What they haven’t done, is ensure that somewhere in their holding structure there is a company that will have access to an international investment treaty that will give them protections and the right to bring a claim in the case of foreign interference, which is often more likely at the exploration stage than at the production stage, in my experience.
MDC: What resource nationalism issues have you seen this year?
Foden: In terms of resource nationalism, it usually starts with governments banging on about how foreign miners are taking things away from the country, and I see that usually as an electoral ploy or its done in order to benefit state-owned businesses. You see in Zambia, beating the drum about foreign miners was done to facilitate the transition from certain businesses to the state-owned miner ZCCM.
And in Tanzania, for instance, from 2015 until the death of president John Magufuli in 2021, they were in what they referred to as ‘economic warfare’ against foreign mining companies. They caused a lot of collateral damage, including against Canadian and Australian companies. I’ve learned, subsequent to bringing cases, is what filled the gap in the time that our clients had been kicked off sites they had spent in some instances 12-15 years exploring, was illegal mining operations.
MDC: How does resource nationalism interface with illegal or artisanal mining?
Foden: I have to draw a hard distinction between illegal and artisanal mining. Artisanal mining calls to mind that you have a few people mining on the periphery of your mining footprint panning gold — no harm no foul. But what you see in the likes of Tanzania and Ghana and other serious mining jurisdictions is not that. It is a large scale operation, usually backed by foreign capital — you can guess where that foreign capital comes from — that are staffed, or manned by people not within the district of the mine itself, but from farther afield, even sometimes from different countries and they are using heavy equipment in ways that are highly dangerous, with no qualifications or skills to do so.
They are digging pits that are sometimes 60-80 metres deep and the overburden is enough to kill anyone in the pit. They are highly organized, they have sophisticated accounting systems to ensure that these cooperative systems that they set up spread the wealth, but they don’t spread the wealth to the surrounding communities. They only go into the pockets of local politicians who sanction this work.
Local officials are often working in cahoots with these cooperative societies and they get a pass from central government authorities and then ultimately the benefits are to foreign offtakers. They are into high grade zones and are destroying deposits – I have seen it with my own eyes. What pains me the most is the local communities surrounding the mine doesn’t get the benefit of new roads, or a hospital or schools that would all be incumbent upon the junior or major miner, oftentimes foreign, that would be operating in that area. In a time and age when we talk a lot about social license, we don’t talk about the fact that illegal miners have absolutely no regard for social licence. When we draft a pleading in a case speaking about illegal mining issues, the first thing I tell associates, is ‘you will not call this artisanal mining.’
Also, now, when a community decides taking up arms is the best way to deal with a dispute with a foreign miner, you have states weaponizing social license as a concept in saying, rather than a shield to protect communities, it’s a sword they wield to get off the hook for their failure to intercede and protect foreign investment by pointing to social license.
MDC: What advice/insights on permitting process delays?
Foden: As an American, I’m disappointed that this is the case when you look at some of the projects going on, such as Arizona and New Mexico and Colorado — these are for minerals that we need if we want to fuel this green revolution and the permitting needs to get fixed. We have the ability, as an industry to do these projects in a way that isn’t as harmful as it used to be and sooner or later there needs to be a press effort to change the public consciousness away from the idea that miners are kind of mustachioed robber barons looking to plunder countries’ natural resources and poison the environment.
But it can be done — I’ve worked for a lot companies that do it and don’t leave the place worse than they found it. We need to get the public to realize something more akin to what mining looks like today.
I think the time is coming. Mining companies have a lot of patience and they are eternally optimistic, but sooner or later they need to go on the offensive about their role in society and the green transition. And when you’ve invested millions of dollars into an asset and then you’re told that you can’t for reasons that are largely political, sooner or later you’ll have to recoup part of that investment.