Argentina; Overview Of The Legal Framework For Cross-Border Mining Projects

I. Introduction

Fortunately for us all, Mother Nature does not care or respect limitations of man and, therefore --among many other things-- mineral deposits hold aloof from political disruptions associated with borders between countries. However, this frequently appears as a major challenge for the development of mining projects.

It would be convenient for Latin-American countries to support the development of cross-border mining projects not only because of the potential productive linkages involved 1, but also because of the contribution that mining development provides to areas geographically outcast where physical infrastructure, services availability and communications improvements are an urgent need 2. Additionally, and most important of all, the correct development of cross-border mining projects is a also a demand of sustainable development, since is was acknowledged that the responsible exploitation of minerals is based on the use of appropriate methods that guarantee a reasonable mineral recovery rate 3 which, in the case of cross-border mineral deposits, is practically impossible if the interested parties to the border and project do not provide an adequate legal framework.

Below follows an outline of Argentina's achievements so far in this subject, especially considering the bi-national integration with Chile and Bolivia and the progresses reached through MERCOSUR.

II. The Deregulation Process of the 90's - A new horizon for Regional Mining Integration

Following the regional trend, early in the 90's Argentina moved into a phase of policy making aimed to promote and captivate direct foreign investment for large scale mining 4

The most relevant measures in this sense were (i) the enactment of the Mining Investment Law, No. 24,196 --as amended-- 5; (ii) the update of the Mining Code which meant the renewal of the exploration regime, the deregulation of nuclear mining and the inclusion of specific environmental protection measures --among other measures-- by Federal Laws No. 24,498 and 24,585 6.

In this sense, the particular requirements of cross-border mining were also attended during this process, in particular through the issuance of the Federal Decree No. 815/92 and Resolution of the Mining Secretariat No. 191/93 7 (the "Cross-border Regulations"). This set of regulations were dictated as consequence of the analysis performed by the National Deregulation Technical Committee 8 which concluded that there a number of unjustified and obsolete regulations that were preventing the development of mining production and commerce in the border areas where it is most likely to allocate relevant projects considering its particular geographical characteristics 9. In this sense, Cross-border Regulations provided that:

the concession of mining rights or property under the terms of the Mining Code shall be exempted from any discrimination associated to the nationality (Decree No 815/92, Section 1º); and

the exclusion of the mining exploitations and manifestations from the security zones regime applicable to Argentine international borders that provided that in order to develop mining activities in the international border area, special authorizations and requirements should be met (Decree No 815/92, Section 2º);

Therefore, mining concessions in Argentine international border areas are subject to the standard concession regime and, thus, are granted by the corresponding provincial mining authorities.

III. The Regional Integration Legal Framework

Argentina shares international borders with Bolivia, Brazil, Chile, Paraguay and Uruguay. All of these countries are members of the Mercado Común del Sur ("MERCOSUR"). Argentina, Brazil, Paraguay and Uruguay are parties to the common market, while Chile and Bolivia are non-party members. 10

However, due to geographical and geological reasons, the most relevant achievements of cross-border mining integration as from Argentina's stand point are reached bilaterally with the non-party members of MERCOSUR.

III.1 Argentina's Integration Process with Non-party members of MERCOSUR

III.1.i. The Bilateral Relationship with Chile

The success of the currently mature mining integration with Chile represents the most important accomplishment of Argentine mining regional integration. Since Chile and Argentina share the Cordillera de los Andes --one of the most important sources of minerals of the world-- as international border, the bilateral relationship between the two nations went through a large number of political conflicts in the past.

Nowadays, after the conflicts have been solved, the border entails an equally large number of opportunities for the development of mining projects and that is why in 2000 Argentina and Chile signed the Bilateral Mining Development Treaty (the "Mining Treaty"), which currently governs the harmonization of regulations for cross-border mining activities between these countries. 11

The background of the Mining Treaty was given by the "Peace and Friendship Treaty" signed on 1984, the activities of the bilateral committee created by such treaty and the integration efforts done through the Asociación Latinoamercina de Integración (ALADI). Under this organization Argentina and Chile signed the Partial Scope Agreement for Economic Complementation No. 16 and a number of special protocols associated with the development of the mining sector and cross-border projects (i.e.: Special Protocols No. 3; 4; 19 and 22 for the "Pachón" project; and 20 and 23 for the "Pascua-Lama" project). 12

The general idea of the Mining Treaty is to allow access, development and protection of all and any activity and service rendered in connection with the "mining business" 13 so as to allow investors to participate in integration process. The Mining Treaty declares that the mining activity should be considered among both states of public interest 14 and that is governed by the "most favoured nation" clause. 15 For matters not dealt in the treaty, each country shall apply its own regulations.

The Structure of the Mining Treaty

The scheme followed by the Mining Treaty is the following:

The treaty is applicable in a determined geographical area with a range of 15 to 190 kilometres width in Chile and 20 to 220 kilometres in Argentina all through the international border 5000 kilometres length (the "Cross-border area");16

The relationship between the parties to the Mining Treaty and the mining investors is coordinated by a special Administration Committee;17

The investor interested in the development of a project located in the Cross-border area should request the Administration Committee to conduct and evaluation of the project and then recommend the parties to the Mining Treaty the implementation of a special protocol for the development of the project;18

Such special protocols shall determine its operations area and the procedures applicable for each project. Special protocols will entry into force as from the date of its signature by the parties to the Mining Treaty (the "Special Mining Project...