Mitigation of Risk to Foreign Direct Investment Mineral Resources in Africa Presented by Eur. Ing. Colin Roberts B.Eng, C.Eng, P.Eng, LL.M FSAIMM, FIMMM, MCIArb, MAusIMM, MCIM, MIEAust, MEI, MIEZ, MSME, MSPE. President The Mining Institute of Scotland, a branch of the IMMM

Introduction “Perhaps the major reason for reluctance of many Western mining companies to commit to Africa is the belief that virtually all of the continent is too corrupt and politically unstable to sustain long-term exploration and mining investment. Explorationists who are experienced in Africa know that this fear is exaggerated, and that a majority of African countries, some with excellent exploration potential, are evolving with largely peaceful social and economic development.” After Morgan & Wheeler (1999)

Foreign Direct Investment (FDI)  How much do we invest?  Into which commodity do we invest?  Is there a market for the product?  What is our competition?  What alternatives do we have?  Where do we invest? –What are the risks?

RISK (1) War and Terrorism Disease Poverty and Famine Infrastructure

Risk (2) Logistics –Climate –Customs Clearance –Airports and Seaports –Roads, Rail and Air Transport

Risk (3) Utilities Education and Health Banking and Trade Crime Tribalism and Religion Corruption

Governance  “that poor governance is readily recognisable. Some of its main symptoms are: –Failure to make a clear separation between what is public and what is private, hence, a tendency to divert public resources for private gain –Failure to establish a predictable framework of law and government behaviour conducive to development, or arbitrariness in the application of rules and laws –Excessive rules, regulations, licensing requirements, and so forth, which impede the functioning of markets and encourage rent-seeking –Priorities inconsistent with development, resulting in a misallocation of resources –Excessively narrowly based or non-transparent decision making.” World Bank

Dispute Resolution (1) Charter of Economic Rights and Duties of States, GA/Res/3281 (XXIX), UN GAOR, 29 th Sess., Supp. No 31 (1974) 50. “Each State has the right: To nationalize, expropriate or transfer ownership of foreign property, in which case appropriate compensation should be paid by the State adopting such measures, taking into account its relevant laws and regulations and all circumstances that the State considers pertinent. In any case where the question of compensation gives rise to a controversy, it shall be settled under the domestic law of the nationalizing State and by its tribunals, unless it is freely and mutually agreed by all States concerned that other peaceful means be sought on the basis of the sovereign equality of States and in accordance with the principle of free choice of means.” “All States are juridically equal and, as equal members of the international community, have the right to participate fully and effectively in the international decision-making process in the solution of world economic, financial and monetary problems, inter alia, through the appropriate international organizations in accordance with their existing and evolving rules, and to share in the benefits resulting therefrom.”

Dispute Resolution (2) Litigation Alternative Dispute Resolution (ADR) –Expert Determination –Negotiation –Mediation –International Arbitration

Dispute Resolution (3) ICSID was established under the 1965 Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the Washington Convention) The United Nations’ Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958 (New York Convention)

Dispute Resolution (4) A sample ICSID Arbitration Clause follows:[1][1] “Under the Convention, consent may be given in advance, with respect to a defined class of future disputes. Clauses relating to future disputes are a common feature of investment agreements between Contracting States and investors who are nationals of other Contracting States. The [Government]/[name of constituent subdivision or agency] of name of Contracting State (hereinafter the "Host State") and name of investor (hereinafter the "Investor") hereby consent to submit to the International Centre for Settlement of Investment Disputes (hereinafter the "Centre") any 6 dispute arising out of or relating to this agreement for settlement by [conciliation]/[arbitration]/[conciliation followed, if the dispute remains unresolved within time limit of the communication of the report of the Conciliation Commission to the parties, by arbitration] pursuant to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (hereinafter the "Convention").” [1] 6 [1]

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