The IBA’s Model Mining Development Agreement: A new paradigm for natural resource projects

IISD

In October 2009, at its annual meeting in Madrid, the Mining Law Committee of the International Bar Association launched a project to develop a Model Mining Development Agreement (MMDA).  The MMDA was conceived to provide a different starting point for the negotiation of mining contracts between host governments and mining companies, one based expressly on promoting sustainable social, economic and environmental development through more equitable and transparent mining agreements.

As noted in the first public consultation on the MMDA, held in Toronto in April 2010, the Model recognizes that it is no longer sufficient to negotiate just the hard rock mining license and royalties. The social license to operate must also now be negotiated in tandem with the mining license. The MMDA sets out an agenda for such a negotiation that allows governments, companies and stakeholders to identify what may be needed in the specific circumstances of the project in question.

The MMDA project covers the mine development, production and reclamation phases of a mining project, understood as starting after exploration and feasibility studies show the economic and environmental viability of a mining site. It does not cover the exploration phase, though a further project may be conceived to do so.

The MMDA is a web-based tool that is able to address different circumstances rather than seeking to provide a one-size fits all model. It provides sample clauses taken from some 50 leading examples of existing mine development agreements for key clauses instead of one single formula. But the design goes beyond seeking this flexibility. Indeed, much of the value is anticipated to be found in the table of contents which contains links to the sample clauses, and which serves as a menu for parties to a negotiation and potentially impacted communities to consider during the negotiation of a mining development agreement. While not all model clauses will be relevant for all situations, collectively they and the sample clauses form a potential checklist for a negotiating agenda and a drafting tool from a sustainable development viewpoint.

The target audience for the MMDA is primarily developing countries and mining companies, but also includes all stakeholders in the mine development process. Hence, it is foreseen as being of value to government negotiators, industry, civil society organizations, Indigenous Peoples communities, parliamentarians and others who may engage in the process. The IBA Mining Law Committee recognizes that proper dissemination and capacity building will be needed, and anticipates developing further relationships towards this end.

Howard Mann, IISD’s Senior International Law Advisor is leading IISD’s participation in this project as a member of the MMDA’s international administrative committee. He describes the MMDA as a potential game changer, setting a new paradigm for mining and other natural resource projects that brings sustainable development into the forefront of the negotiations. “No longer will the social, economic and environmental aspects be add-ons if the Model takes hold. But rather they will be integral parts of the negotiating structure and process. From economic linkages to the local community to human rights protection, the Model covers a wide range of social, economic and environmental issues.”

Mann has been most impressed with the commitment of the private sector lawyers to the project: Peter Leon, the Chair of the Mining Law Committee, has stated:

“We envision producing, by the time of the IBA’s annual conference in Vancouver in October 2010, a non-prescriptive, web-based, widely available resource that can lead to informed, transparent, and equitable negotiations and contractual outcomes. Our vision is that host countries and investors share an interest in the stability of the investment relationship, and that this stability is best achieved when host countries and regions secure sustainable and meaningful social and economic development.”

The MMDA is now undergoing review by an international reference group and by representatives who attended civil society consultations conducted in conjunction with IISD during the project. The comments will be taken into account in revising the draft for presentation to the IBA Mining Committee in October at the Vancouver Annual meeting.  MMDA will be open for on-line public consultations after the Vancouver meeting, following which a further round of consultations will be held, leading to a final document in December 2010.

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