Mining Legislation and Regulations

4. Summary of key considerations for governments

Legacy issues and entrenched business practices

Minerals and mining legislation is rarely prepared from a “clean slate”. Instead, governments are challenged to ensure that the historic and current context of the minerals market is understood.

Legacy issues. At any given time, the preparation of legislation will be challenged to accommodate existing legislation, policy and even existing investments. The first step in addressing legacy issues is typically the issuance of government’s new and revised policy directions that will be followed by legislative drafting.

Informal operations. Especially in post-conflict environments as well as in unregulated markets, mining operations are underway and have not been subject to meaningful regulatory oversight. Addressing this context requires a focus on environmental and financial impacts, and this may be as beneficial to the operator as to government.

Regulation by contract. In the absence of legislation or a fully effective legislative regime, mineral investments may have been developed through contract or agreements in which government and the investor have agreed terms. As the legislative framework develops, government must provide confidence to existing investors (presuming all contract and agreement terms are fair) that their investments are protected while promoting a more developed and detailed legislative regime that will guide mineral investments.

Entrenched business practices. Governments struggle for decades to mitigate and amend poor or ineffective business practices that become entrenched over time. Modifying business approaches that are well-known and entrenched is difficult and will require the prioritisation of policy and legislative drafting.

Examples include:

     Tribal lands. Throughout much of the mining world, historic tribal land entitlement exists whether set out in writing or not. How can legislation progress these holdings to be registered and fall in line with financial, environmental and other legal expectations of mineral development?

     Deal-making. Both domestic and foreign mineral investments may be in place and were based on “closed door” deal-making. Government is challenged to discern exactly what those investments have included, how they have benefited or damaged the economy, and how best to bring those investments into the legislative realm.

     Nepotism. There is almost always a level of nepotism in mining operations, how much of a priority is this for government in revising its legislative regime?

     Environmental neglect. There is typically great disregard for environmental impacts of unregulated mining, what can government do now to immediately address these poor practices?

Determining the scope of legislation

Each government should determine the scope of legislation required to adequately facilitate a viable minerals market. For the most part, governments are already engaged in broad legislative development as new legislative considerations specific to minerals development is being considered. Determining the scope of new legislation varies according to the level of market development, literacy and capacity of the population, status of minerals development, and general investor interest.

Extent of legislative coverage. The scope of legislation can range from covering entire sector governance issues to specific mineral development issues; it may include upstream, mid/side-stream and downstream or be limited to one technical or commercial aspect. Even the definition of what “minerals” will include varies amongst jurisdictions – i.e., minerals, rocks, ores, coal. Governments are consistently challenged in determining the scope of legislation required at any given time to support sound minerals development.

Prioritisation of legislative issues. To prepare legislation, governments sometimes take a “cookie-cutter” approach, sometimes including “cut and pasted” legislative guidance from other jurisdictions. While this approach does provide immediate results, it typically results in useless legislation or legal guidance that is inadequate. It is important that government balance immediacy with utility of legislation. A simplified approach to preparing legislative priorities may be taken, whereby government focused on core topic areas rather than preparing comprehensive sector legislation whilst it is still building the capacity to do so. For example, initial legislation can be prepared that focuses on:

  • Overall sector governance and institutional arrangements

  • Fiscal regime and revenue management

  • Mine safety and worker health

  • Environmental and social impacts

A table detailing the prioritisation of legislative issues and related considerations can be found here.

Meeting expectations of donors or investors. Some mining jurisdictions prepare their legislation in line with regional or international donor and investment commitments. This approach can be ambitious and may not necessarily address the current needs of the specific mineral market.

Determining the Role of the Government

Government is the political administrator of the State and is responsible for the creation, definition, and enforcement of the laws of the State. Especially where minerals development has been operating in an unregulated or semi-regulated market, the role of government in legislative leadership can be challenging. In some jurisdictions, government seeks to assert or recapture its role as policy-maker and regulator. In others, government seeks to restructure market operations and will encounter resistance from vested interests.

Government as legislative lead. It is imperative that the government empower the government agency responsible for minerals development with the legislative authority and budgetary means to achieve leadership in the sector.

Especially in new and emerging mineral markets, the lack of clarity on leadership may confuse the legislative process and stall much-needed reform. Synergies amongst the Office of the President or Prime Minister, line ministry and related government agencies must be championed by all levels of government to strengthen the governance of minerals and ensure that they are developed in a way that improves the quality of life.

Government implementing the State role as mine operator. In various mining jurisdictions, government is tasked not only with the policy-making and regulation of the minerals sector but with implementation of the State’s mining operations in the form of State-owned enterprises or quasi-State corporations. There are also instances of government having to manage State shares in mining operations.

The optimal approach in the most viable jurisdictions is the incorporation of any government-owned and operated mining company or share holding whereby corporate governance principles applied to private companies are similarly applied. Where such governance is not in place, government runs the risk of mingling budget funds with mining revenues, resulting in less transparent mining operations that do not perform optimally.

Synergies amongst the Office of the President/Prime Minister, line ministry and related government agencies must be championed by all levels of government towards strengthened governance of how minerals, non-renewable resources, are going to be developed to improve quality of life

How legislation is prepared and modified

Each mining jurisdiction is beholden to its specific legal system which typically includes a process for legislative process. Government leaders are challenged to abide by the processes while attempting to introduce legislative change or improvement.

Legislative drafting capacity. The preparation of minerals legislation requires a combination of technical expertise that may include legal, technical and commercial specialists. Government staff drafting capacity to prepare minerals and mining legislation is not always available to government, particularly in new and emerging mineral markets. It is not uncommon in all jurisdictions that non-government, private sector assistance is sought to assist in legislative drafting for which adequate funding is required.

Established legislative processes. Just as government is challenged with preparing legislation, so too may it be challenged by enduring the legislative processes that are formally and may be informally in place. Review of draft legislation will likely come under the scrutiny of various government agencies, parliamentary and congressional members with little to no understanding of minerals development. Government leaders must be well-versed in legislative rationale and prepared to debate on specific topics.

Consultation processes. “Buy-in” and “ownership” are common terms used to conduct legislative consultation, seeking the full understanding and support of key stakeholders to adopt new or amended legislation. How consultation processes are designed, who leads and participates in them, and how their outcomes are monitored are as important to legislative development as drafting. Government is challenged to implement these processes while implementing its other array of mandates. Where not already in place, establishing clear guidelines for consultation on legislation to include outreach, notice and public hearing procedures, supports government throughout the course of any legislative action.

Revisions and amendments. Government administrations change and with those changes often come proposals for legislative amendments. Investors and civil society are keen to observe such proposals and governments should, as a matter of policy, limit amendments if to support predictable sector development and to ensure market stability. A list of legislative challenges and corresponding government actions can be accessed here.