CRA Insights

Disputes Involving Mineral Assets: Statistics & Trends

June 20, 2023
Gold Grain

This article presents important insights on the past and future of mining arbitrations.

We conducted a thorough review of public databases and other relevant sources to analyze past mining arbitrations. Our analysis covered a total of 118 investor-State arbitrations, 80% of which were administered by ICSID.

We also carried out a survey specifically targeting professionals well-versed in mining arbitrations, including in-house and external counsel, arbitrators, and mining companies’ management. The survey aimed to gather insights from these individuals regarding emerging trends in mining arbitrations.

The combined findings from the arbitration proceedings and survey responses have unveiled noteworthy trends, providing key insights into the current landscape of mining arbitrations.

1. Growing number of mining arbitrations. Over the past decade, there has been a significant surge in investor-State mining arbitrations. 60% of the arbitrations analyzed were filed in the last decade. This increase is consistent with a rise in mining activity, driven by factors such as the clean energy transition. Further, more than 80% of survey participants anticipate a rise in government intervention and regulation in the mining sector in the next 12 months.

2. Africa and Latin America are the most frequent regions involved in disputes. Over half of the analyzed cases involved mineral properties located in Africa or Latin America. The survey participants identify the same regions as most at risk of mining disputes.

3. Most properties are developed, but practitioners expect disputes in properties at all stages. 68% of the mineral properties involved in arbitrations had reserves. Looking forward, the survey participants attach approximately the same risk of dispute to properties at all stages (exploration, mineral resource, development, and production).

4. Gold and copper make up half the cases; practitioners expect most disputes in base metals. Gold and copper are the most prevalent of the primary minerals, present in 50% of the past cases. Coal followed at 8% of the cases. According to the survey participants, base metals were identified as the assets most susceptible to disputes by material, with 65% of survey participants expressing that concern. Precious metals and rare earth metals followed as the next categories of assets most at risk.

5. Higher prices correlate with more arbitrations. Our analysis shows that higher gold or copper prices have corresponded to an increased occurrence of treaty arbitrations concerning properties with these minerals. Most of the survey participants also believe that higher metal/commodity prices lead to more government actions.

6. Causes of future arbitrations. Survey participants identified political causes (75%) and disagreement on financial compensation (57%) as the most frequent causes of negotiations breaking down between governments and investors and escalation to arbitration. Most survey participants also believe that government actions are more likely in economic recessions. Among offtake agreements, survey participants most frequently identified price review and royalty calculations as causes of disputes in the next 12 months.

7. Increased role of environmental and social issues as causes of disputes and as basis of counterclaims. ESG has gained significant prominence in the mining industry, with survey participants recognizing it as a major cause of disputes. A significant majority of survey participants (75%) anticipate an increase in government interventions related to ESG in the near future. Among the specific ESG issues highlighted by survey participants, local community and water usage emerged as the most critical factors impacting the relationship between investors and governments in the mining sector. Furthermore, a large majority of survey participants (86%) anticipate that governments will increasingly invoke environmental violations as a defense or counterclaim in the near future.

8. Mechanisms for investor protection. The survey participants deemed legal stabilization clauses, fiscal stabilization clauses, investment codes, and investment treaties equally effective in structuring investments and resolving disputes with governments. Among specific clauses, negotiation/equilibrium clauses were favored over freezing clauses for their perceived effectiveness in maintaining economic balance and offsetting adverse changes.

9. Claimed amounts exceed amounts awarded by a large margin. The analyzed arbitrations revealed a notable disparity between the amounts claimed and the amounts awarded. In 44% of cases where both the claimed and awarded amounts were available, the amount claimed exceeded the amount awarded by a factor of 10. The median claim is 4x the amount awarded.