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Hopes and Reality US/UK Investment Forum Niger - London Stéphane Brabant, Senior Partner, Herbert Smith LLP 14 June 2012.

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Presentation on theme: "Hopes and Reality US/UK Investment Forum Niger - London Stéphane Brabant, Senior Partner, Herbert Smith LLP 14 June 2012."— Presentation transcript:

1 Hopes and Reality US/UK Investment Forum Niger - London Stéphane Brabant, Senior Partner, Herbert Smith LLP 14 June 2012

2 Table of contents 1.Niger at a glance 2.Niger profile 3.Niger’s aspirations 4.Overview of African legal systems 5.A civil-law based country 6.Sub-regional organisations within francophone West African countries 7.African sub-regional legal systems 8.Mining regulations 9.Conditions to be fulfilled for the granting of mining titles 10.Overview of existing mining titles 11.Overview of tax regime 12.Main tax exemptions 13.Large-scale mining projects: concept 14.Large-scale mining projects: overview of benefits available 15.Is a mining convention negotiable? 16.State’s right to participate in exploitation projects 17.Stability of the tax regime 18.Niger’s local content requirements 19.Settlement of disputes 20.International treaties 2

3 1. Niger at a glance French speaking country in West (and Central) Africa Legal system is civil-law based 3

4 2. Niger profile Growth: 4% in 2011 and expected to be 14% in 2012 Population: 16 million in 2011 and 55 million in 2050; by then it will be the second largest country in West Africa after Nigeria Capital: Niamey Area: 1.27 million square km (489,000 square miles) Life expectancy: 55 years (men), 56 years (women) (UN) Major languages: French (official), Arabic, Hausa, Songhai Major religions: Islam, indigenous beliefs Challenges: Climate Landlocked country Population unequally spread and excessive population growth Main exports: Uranium currently constitutes up to approximately 70% of export revenues but oil & gas might take lead from Also coal and hydroelectric power. 4

5 3. Niger’s aspirations Democratically elected government The Niger presidential election: an example for Africa His Excellency Mr Mamadou Issoufou’s election marked a return to democracy after a year of military rule. Stabilised currency The CFA franc (as member of the "Banque Centrale des Etats d’Afrique de l’Ouest"); The CFA is linked to the EURO with a rate of CFA per EURO. A (large) mining potential Third largest uranium producer in the world, slightly ahead of Kazakhstan and Russian Federation in terms of output; Uranium mining is the largest Niger industrial employment provider; Niger is also rich in other minerals: coal, gold, gypsum, iron ore, tin, salt, petroleum. 5

6 6 4. Overview of African legal systems French legal system (Napoleonic Code) Portuguese, Spanish and Italian legal systems (largely based on Roman law) Systems based on common law principles Mixed civil law / common law based systems Two main legal systems in Africa (sometimes complemented by Islamic law or customary law) NATIONAL LEGAL SYSTEMS Common law and civil law traditions * * * * * * ** * * * * * * * * (*) * OHADA signatory States

7 77 Common Law (usual law for financing, international contracts and of a number of energy/ natural resources companies) Contractual approach Law of precedents Negotiation (negotiable vs. non negotiable) Drafting Settlement of disputes   Civil Law (Law of projects in most non-English speaking countries) Main source of law: Written rules Administrative law and courts Mandatory provisions Differences in: Property Law Criminal Law Company Law Laws on taking security Insolvency Law 5. A civil-law based country

8 OHADAWAEMU CAEMC 6. Sub-Regional organisations within francophone West African countries * membership pending * ECOWAS Organisation for the Harmonisation of Business Law in Africa West African Economic and Monetary Union Central African Economic and Monetary Community Economic Community of West African States

9 9 16 signatory States (including 14 Sub-Saharan Franc zone States): Benin, Burkina Faso, Cameroon, Central African Republic, Comoros, Republic of Congo (Congo Brazzaville), Côte d'Ivoire, Gabon, Guinea (Conakry), Guinea-Bissau, Equatorial Guinea, Mali, Niger, Senegal, Chad, Togo. Democratic Republic of Congo (pending) Ambition of extending to non French-speaking States (adoption of new working languages, although the French version prevails) Aim Harmonising business law with a view to securing legal certainty and to encourage investments Implementing a legal and judicial environment favourable to economic activities Progressive unification of legislations 7. African sub-regional legal systems OHADA: Organisation for the harmonisation of business law in Africa

10 8. Mining regulations The mining industry is regulated through national legislation and regulations issued by the Niger Parliament and the Niger executive branch, mainly by the Mining Code. Constitution of the VII e République, adopted on 25 November Mining code enacted by Ordinance No of 2 March 1993 as further amended by Law No of 9 August 2006 (the “Mining Code”). The implementing measures of the Mining Code are provided by Decree No /PRN of 18 August Law No of 3 July 2008 granting derogatory advantages for investments in large-scale mining projects. A model mining agreement is attached to Decree No /PRN of 18 August

11 9. Conditions to be fulfilled for the granting of mining titles Requirements for performing mining operations ExplorationExploitation Obligation for a legal entity to be incorporated in Niger  Obligation for applicants to have adequate financial and technical resources  Mining titles granted through an application process  Obligation to execute a mining convention with the State  11

12 Rights conferredDurationRenewal conditionsIs a mining convention executed? Prospecting authorisation Right to prospect for one or several mineral substances in areas not considered to be closed areas, nor subject to any mining title. One yearRenewable indefinitely for periods of one year. Holder’s right to renewal if it has met all its obligations under the mining law. No Exploration permit Exclusive right to explore for the type of mineral substances for which the permit is granted, within the limit of the permit perimeter and without depth limitations. Three yearsRenewable twice for periods of three years. Holder’s right to renewal if he has met all its obligations under the mining law and the mining convention. Yes Exploitation permit Exclusive right to search, explore, exploit and freely dispose of mineral substances for which the permit has been granted, within the limits of the perimeter specified and without depth limitations. For small-scale exploitation The permit is granted for five years. For large-scale exploitation The permit is granted for ten years. For small-scale exploitation The permit is renewable for periods of 5 years until the depletion of the mining deposits for which it has been granted. For large-scale exploitation The permit is renewable for periods of 5 years until the depletion of the mining deposit for which it has been granted. Yes Artisanal exploitation authorisation Right to prospect for and exploit the substances for which it has been issued within the boundaries of the defined perimeter and up to a depth of 30 metres for exploitation works using terracing and 10 metres for excavation works. Two yearsRenewable one or more times. Holder’s right to renewal is subject to its maintaining a sufficient activity during the previous period of validity of the authorisation. No Overview of the existing mining titles

13 11. Overview of the tax regime Mining royalty Individuals/legal entities carrying out mining operations are liable for the payment of a mining royalty, the tax base of which is the market value of the extracted product. Mining royalties are calculated according to a specific formula presented below: o A = Mining products o B = Operating income o C = B/A (%) − If C is lower than or equal to 20%, the mining royalty rate is 5.5%; − If C is higher than 20% and lower than 50%, the mining royalty rate is 9%; − If C is equal to 50% or above, the mining royalty rate is 12%. 13

14 12. Main tax exemptions EXEMPTIONSEXPLORATION PHASEEXPLOITATION PHASE Value Added TaxThroughout exploration phaseFor a period ending on the date of first production Income TaxThroughout exploration phaseFor a period of three years, starting on the date of first production Minimum Flat TaxThroughout exploration phaseThroughout the exploitation phase Apprenticeship Tax Throughout exploration phaseFor a period of three years, starting on the date of first production Occupational TaxThroughout exploration phaseFor a period of three years, starting on the date of first production Land TaxThroughout exploration phaseThroughout the exploitation phase OthersRegistration fees on contributions made at the time of incorporation or capital increase All taxes and duties on any interests and other proceeds accruing from amounts borrowed by the company for its equipment and operations needs Benefit from accelerated depreciation rehime 14

15 13. Large-scale mining projects: concept Law No of 3 July 2008 granting derogatory advantages for investments in large-scale mining projects defines “large-scale” mining projects as follows: a)Any new mining project with a positive social and economic impact on the country and fulfilling the following two cumulative conditions:  Investments of at least CFA300 billion (taxes excluded); and  Creation of at least 800 new permanent jobs for Nigeriens. b)Any existing mining exploitation about to be expanded, diversified or modernised and which therefore has a positive economic and social impact for the country and meets both the aforesaid cumulative conditions. 15

16 14. Large-scale mining projects: Overview of benefits available Mining Phase / Investment Amount From XAF300 Billion to XAF600 Billion From XAF600 Billion to FCFA1,000 Billion From FCFA1,000 Billion to FCFA1,500 Billion More than FCFA1,500 Billion Until the date of first production Exemption from all fees and taxes, including VAT, payable on: equipment, spare parts, excluding those for passenger cars and any private vehicle; and materials and equipment to be integrated permanently in the works. Exemption from all fees and taxes, including VAT, payable on: equipment, spare parts, excluding those for passenger cars and any private vehicle; and materials and equipment to be integrated permanently in the works. Exemption from all fees and taxes, including VAT, payable on: equipment, spare parts, excluding those for passenger cars and any private vehicle; and materials and equipment to be integrated permanently in the works. Exemption from all fees and taxes, including VAT, payable on: equipment, spare parts, excluding those for passenger cars and any vehicle for private use; and materials and equipment to be integrated permanently in the works. For a period of three years, as from the date of first Production Suspension of customs duties and taxes payable on the entry, including the VAT on goods. Suspension of customs duties and taxes payable on the entry, including VAT, on goods. Suspension of customs duties and taxes payable on the entry, including VAT on goods / equipment imported for mining operations and their registration in the temporary normal admission regime throughout the duration of use. As from the date of first Production and throughout the exploitation phase VAT exemption and 20% reduction on the rights and taxes payable on: equipment, spare parts, excluding those for passenger cars and any private vehicle; and materials and equipment to be integrated permanently into the works VAT exemption and deduction of 40% on the rights and taxes payable on: equipment, spare parts, excluding those for passenger cars and any private vehicle; and materials and equipment to be integrated permanently into the works. VAT exemption and deduction of 60% on the rights and taxes payable on: equipment, spare parts, excluding those for passenger cars and any private vehicle; and materials and equipment to be integrated permanently into the works. VAT exemption and reduction of 80% on the rights and taxes payable on: equipment, spare parts, excluding those for passenger cars and any private vehicle; and materials and equipment to be integrated permanently into the works. As from the fourth year of the First production VAT exemption and abatement of 20% of the customs duties and taxes payable on the entry of new acquisitions / capital goods imported for mining operations. VAT exemption and abatement of 40% of the customs duties and taxes payable on the entry of new acquisitions / capital goods imported for mining operations. VAT exemption and abatement of 60% on customs duties and taxes payable on the entry of new acquisitions / capital goods imported for mining operations. VAT exemption and abatement of 80% of the customs duties and taxes payable on entry into new acquisitions / capital goods imported for mining operations. 16

17 15. Is a mining convention negotiable? Its purpose is to define the rights and obligations of the parties with respect to the legal, technical, financial, fiscal, administrative, environmental and social terms and conditions applicable to mining titles (i.e. an exploration or exploitation permit). It covers the exploration period as well as the first validity period of the exploitation permit. Valid for a maximum period of twenty (20) years. Negotiable upon each renewal. 17

18 16. State’s right to participate in exploitation projects The granting by the State of an exploitation permit entitles it to benefit from a non-dilutable 10% participation in the share capital of the company throughout the exploitation phase. The State is also entitled to contribute, either financially or in-kind, directly or through a public entity, to the exploitation of mineral substances by partnering with the exploitation permit holder. The nature and terms of this participation shall be expressly defined by mutual agreement between the parties to the mining convention. State’s participation in the operating company shall not exceed 40%. 18

19 17. Stability of the Tax Regime Exploration or exploitation mining companies benefit from tax stabilisation and other advantages granted by the mining law, from the date of execution of the mining convention and during its period of validity. During the stabilisation period, rates, tax bases and tax recovery rules will remain the same as those which were in place on the date of entry into force of the mining convention: no new tax or requirement of any kind shall apply to the holder or beneficiary during this period. 19

20 18. Local content requirements (as provided by the Mining Code) Local preference to Nigerien companies for any construction, supply or service contracts. to Nigerien labour. Training and Promotion Obligations Transfer of skills in favour of Nigerien contractors and workers. 20

21 19. Settlement of disputes Under the Mining Code: Nigerien Administrative Courts (tribunaux administratifs) have jurisdiction over any dispute arising out of the application of an administrative act. Nigerien Courts have jurisdiction over other disputes. The arbitration clause contained in the model mining agreement provides for the following: Parties undertake to seek amicable settlement of any dispute which may arise out of the interpretation or performance of the mining convention. Any dispute arising out of the interpretation or performance of the mining convention shall be settled by the Court of Justice of UEMOA, in case of failure to reach an amicable settlement. Any dispute relating to technical aspects, which cannot be settled through an amicable procedure, shall be settled by an expert. Any other dispute shall be settled through ICSID arbitration: o arbitration shall take place in Paris, and in French; o the arbitration tribunal shall be made up of three (3) arbitrators; and o the law applicable shall be that of the Republic of Niger. In the event the Centre declares itself incompetent, the Common Court of Justice and Arbitration of the OHADA shall have jurisdiction. 21

22 20. International treaties Date of signatureDate of entry into force New York Convention of 10 June 1958 on the Recognition and Enforcement of Foreign Arbitral Awards 14 October December 1965 Washington Convention of 18 March 1965 on the Settlement of Investment Disputes between States and Nationals of Other States 23 August December 1966 Double Taxation Avoidance Agreement concluded with France 1 January June 1965 Bilateral Investment Treaty concluded with Algeria 16 March 1998N/A Bilateral Investment Treaty concluded with Egypt4 March March 1998 Bilateral Investment Treaty concluded with Germany 29 October January 1966 Bilateral Investment Treaty concluded with Switzerland 28 March November 1962 Bilateral Investment Treaty concluded with Tunisia 5 June 1992N/A 22

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