Client Alert: Mining

December 20, 2010

EU to Publish New Strategy on Raw Materials by End of January 2011

In November 2008, the European Commission launched the EU Raw Materials Initiative. In a communication to the European Parliament and the Council, the Commission adopted a new integrated strategy setting out targeted measures to secure and improve the EU’s access to non-energy minerals. The proposed strategy is based on three pillars:

  1. Ensure a level playing field in access to resources in third countries.
  2. Better framework conditions for extracting raw materials within the EU.
  3. Reduce consumption of primary raw materials by increasing resource efficiency and promoting recycling.

In June 2010, as part of this initiative, an “Ad-hoc Working Group on defining critical raw materials” chaired by the Commission defined 14 raw materials as critical for the EU, including cobalt and tantalum, the production of which is concentrated in the Democratic Republic of Congo. The Commission was to report to the Council in two years on the implementation of the Raw Materials Initiative. The Commission is now expected to publish its new strategy on raw materials by the end of January 2011. According to media reports, this strategy is to include the following proposals:

  • Mimicking China’s approach, have the EU fund infrastructure-building or have European firms build infrastructure in metal-rich African countries in exchange for access to key raw materials there.
  • Like Japan and the United States, maintain stockpiles of crucial raw materials.
  • WTO action against Chinese (and possibly in future Russian) export restrictions.
  • Suspend countries applying unjustified export and investment restrictions from the EU’s Generalized System of Preferences.

NGOs have criticized the EU Raw Materials Initiative’s trade policies as harmful for developing countries. In particular, limiting developing countries’ ability to levy taxes on raw materials exports and national treatment for EU companies would diminish government revenue and prevent the development of local manufacturing companies.

As a next step, the Commission is expected to publish in 2011 a legislative proposal defining inspection standards for waste across the EU, in order to facilitate the reuse of minerals contained in waste or “urban mining.”

EITI Board Characterizes DRC as “Close to Compliance”

The EITI (Extractive Industries Transparency Initiative) announced following its Board meeting of 13-14 December 2010 that the DRC, together with five other countries (Kazakhstan, Mali, Mauritania, Niger and Peru), is a Candidate country “close to compliance”.

The Board analyzed the DRC’s first EITI report (covering 2007) launched in March 2010, and took the view that it did not conclusively demonstrate that all validation indicators had been met. The Board set out the actions required to achieve EITI Compliance and granted the DRC, and the five other countries, six months (i.e. until 12 June 2011) to request a review by the EITI International Secretariat to verify whether it had reached Compliance. The Board retained the right to require a new “Validation” (i.e. the EITI’s quality assurance process) if the remedial actions are not completed within the six months.

The DRC was accepted in February 2008 as an EITI Candidate Country.

DRC’s Adhesion to OHADA One Step Closer

On 11 February 2010, the DRC president promulgated Law No. 10/002 authorizing the DRC’s adhesion to OHADA, the Organization for the Harmonization of Business Laws in Africa. The DRC’s original intent was that its adhesion to OHADA be effective as of January 2011. This would have required it to deposit the ratification instrument by 1 November 2010. However, the DRC president is reported to have required that the DRC magistrates be sufficiently prepared to apply OHADA uniform law before depositing the ratification instrument. The DRC president is said to have recently announced that judges selected from each of the country’s courts and tribunals will be trained for three weeks concerning OHADA law starting 18 January 2011. The actual date the ratification instrument will be deposited remains unknown.

The DRC’s adhesion to OHADA will render eight “Uniform Acts” regulating some aspects of business law “directly applicable and binding” in the DRC. As a last resort, disputes concerning the application or the interpretation of the Uniform Acts will be submitted to the Common Court of Justice and Arbitration in Abidjan (Ivory Coast) instead of the DRC Supreme Court. Concerning mines, article 3 of the Uniform Act relating to general commercial law includes the exploitation of mines as a commercial act, thus rendering commercial courts competent for disputes relating to mining.