How Investment Treaties Can Protect Your Mining Interests Abroad

Mining is a capital-intensive and long-term activity that often involves operating in challenging and uncertain environments. As a foreign investor in the mining sector, you may face various risks, such as expropriation, regulatory changes, breach of contract, political interference, environmental disputes, or social unrest. These risks can undermine the profitability and viability of your mining projects and expose you to significant losses.

Fortunately, there is a legal tool that can provide you with a degree of protection and recourse against such risks: investment treaties. Investment treaties are agreements between States that grant certain rights and guarantees to foreign investors, from one State, in the territory of another State. These rights and guarantees typically include:

• Fair and equitable treatment: the host State must treat your investment in a manner that is consistent, transparent, reasonable, and non-discriminatory, and that respects your legitimate expectations.
• Full protection and security: the host State must protect your investment from physical and legal harm or damage caused by State or non-State actors.
• National treatment and most-favoured-nation treatment: the host State must treat your investment no less favourably than it treats its own investors or investors from other States, respectively, in similar circumstances.
• Compensation for expropriation: the host State must pay you adequate, prompt, and effective compensation if it directly or indirectly takes or interferes with your investment, even when the measure is for a public purpose, non-discriminatory, and in accordance with due process of law.
• Free transfer of funds: the host State must allow you to freely transfer your capital, profits, dividends, royalties, fees, and other payments related to your investment, subject to reasonable and non-discriminatory regulations.
• Access to international arbitration: if a host State breaches the protections that it has undertaken towards you, as a foreign investor, in an applicable investment treaty, you can bypass the local courts and submit any dispute arising out of your investment to an international, impartial and independent tribunal of arbitrators, who can award you monetary damages or other remedies if they find that the host State has breached its obligations under the investment treaty.

Investment treaties can offer you a powerful and effective way to protect your mining interests abroad, as they can deter or prevent host States from taking adverse actions against your investment, or provide you with a means to seek redress if they do. However, not all investment treaties are the same, and not all investments are covered by them. Therefore, it is important to be aware of the following factors when structuring your investments, at the outset of any project, in order to take advantage of investment treaty protections:

• The existence and scope of investment treaties: You should check whether there is an investment treaty in force between your home State and the host State of your investment, and what rights and guarantees that treaty provides. You should also check whether there are any exceptions, reservations, or limitations that may affect the applicability or enforceability of the investment treaty. For example, some investment treaties may exclude certain sectors, such as mining, or certain measures, such as taxation, from their scope, or may require that your investment has a certain level of contribution, duration, or impact to qualify as an investment.

• The definition and nationality of the investor and the investment: You should ensure that you and your investment meet the definition and nationality requirements of the relevant investment treaty. This may depend on various factors, such as the place of incorporation, the place of management, the place of operation, the ownership structure, the control structure, and the substantive links of your investment vehicle. For example, while most investment treaties only require that a company is incorporated in your home State, some treaties may require that you have a substantial or genuine business presence in your home State, or that you do not have the nationality of the host State, to be considered as a foreign investor.
• The timing and form of the investment: You should consider making your investment before any dispute arises, or at least before any measure that may give rise to a dispute is taken by the host State, as investment treaties usually do not have retroactive effect. You should also consider the form and structure of your investment, such as whether it is made through direct or indirect ownership, joint ventures, contracts, licenses, or concessions, and how these may affect your rights and obligations under the investment treaty and the host State's laws.
• The choice of law and dispute resolution clauses: You should carefully draft and negotiate the choice of law and dispute resolution clauses in your contracts and agreements with the host State or its entities, as these may have implications for your access to investment treaty arbitration. For example, you may want to avoid clauses that waive or limit your right to resort to investment treaty arbitration, or that require you to exhaust local remedies before doing so. You may also want to include clauses that expressly incorporate the standards and guarantees of the investment treaty, or that refer to the investment treaty as a source of law. It is important to note, in addition, that some investment treaties contain "fork in the road" clauses. These require the investor to choose between pursuing a domestic remedy (such as litigation before the courts of a host State) or an international remedy (such as arbitration under the treaty) to resolve a dispute with the host State, and to stick to that choice. Once the investor has initiated a proceeding in one forum, it is precluded from initiating or continuing another proceeding in a different forum for the same dispute. Accordingly, it is important to fully analyse any applicable investment treaties before taking any action against a host State in the event of a dispute.

Investment treaties can be a valuable asset for foreign investors in the mining sector, as they can provide a layer of protection and security for their mining interests abroad. However, investment treaties are not a panacea, and they require careful planning and structuring of your investments in order to maximize their benefits and minimize their risks. Therefore, it is advisable to seek expert legal advice and guidance when entering into or managing your mining investments in foreign jurisdictions.