"International Best Practice" in Mining Who Decides and How - and How Does It Impact Law Development?

By Williams, John P. | Georgetown Journal of International Law, Summer 2008 | Go to article overview

"International Best Practice" in Mining Who Decides and How - and How Does It Impact Law Development?


Williams, John P., Georgetown Journal of International Law


I. INTRODUCTION

One way in which international law influences international business decisions and behavior in developing countries is through the development of what is called "international best practice" and the promotion of the adoption and implementation of that practice in national regulatory frameworks. How that process works is the focus of this paper.

The concept of international best practice represents a kind of prevailing global or regional consensus (or compromise) among representatives of government, industry and international development finance institutions as to what constitute appropriate ground rules and protections for the achievement of the private objectives of industry and the public goals of government. This concept rests, of course, upon the optimistic assumption that the primary private goals of industry and the primary public goals of governments are or can be compatible.

Ideally, international best practice can be thought of as creating a condition of equilibrium and convergence between public and private goals in a particular industry which, when attained in a jurisdiction, enables the maximization of both private and public benefits from the relevant industrial activity. Practically, international best practice is a set of policies, norms, procedures and protections that industry and lawmakers in developing countries, especially, can look to as a template that has produced relatively predictable results in other countries. Assuming those results are politically desirable, the extent to which they can be achieved by adopting and implementing international best practice in a new jurisdiction will depend on a number of factors, including the intrinsic attractiveness of the new jurisdiction to private industry, corporate and political will, appropriate adaptation of international best practice to the national environment, and the absence of significant changes in the international markets involved.

This paper considers how the evolving concept of international best practice affects international business decisions and transactions in the hard rock mining industry, based primarily on the author's practical experience in Latin America, Asia and Africa. In particular, the paper focuses on the complexities of implementing international best practice in a national context and on the necessary conditions for successful implementation of a regulatory framework for mining based on international best practice.

II. THE INTERNATIONAL MINING INDUSTRY

The international mining industry has a number of rather unique characteristics that pose significant challenges for both companies and regulators. Although the markets for metallic and precious mineral commodities are global, and companies (whether multinational or national) compete internationally for resources and sales, mining is fundamentally a local industry. It is regulated by national, provincial and municipal laws and regulations. Mining companies must go where the minerals are found. They invest in mines that are not movable and are subject to the laws of the jurisdictions in which they are located. Unlike many manufacturing companies, mining companies cannot move their operations to another jurisdiction in order to benefit from cheaper labor, better infrastructure for shipping, or lower taxes--unless they obtain access to an attractive mineral deposit there. They do, however, generally earn their revenues offshore in hard currency and thereby avoid foreign exchange risk, except to the extent of currency repatriation requirements imposed by host country regulations.

Because mining companies must go where the minerals are located, and must compete for resources, they are often among the first major investors in countries that are newly open to private investment and that lack well developed legal frameworks and protections for investment. Thus, mining companies often compete for resources in countries with high political risk. …

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