Regulation Of Lithium In Chile And Opportunities For Investors

• Law Firm: Urzua Abogados
• Subject Matter: Government, Public Sector, Energy and Natural Resources, Energy Law, Mining, Constitutional & Administrative Law, Government Contracts, Procurement & PPP
• Author: Mr Daniel Weinstein
• Published date: 17 January 2023

Chile is the country with the largest lithium reserves in the world; however, we are far from realizing the potential that we could have as lithium producers, and the reason for that is only one: an inadequate legal framework. Indeed, lithium is subject to an exceptional regulation, different from the one applicable to the vast majority of minerals, which has made its exploitation difficult.

As a general rule, in Chile, all mineral substances can be exploited by any person or company that requests a mining concession over the area where the minerals are located. However, certain minerals are non-grantable, among them, lithium. This exception itself has exceptions though, which allow companies, either national or international, to exploit lithium in certain cases described below.

The exceptional legal framework for lithium exploitation is not only inadequate, but also unjustified. Lithium was first reserved for the State in 1979, due to its potential nuclear uses. We must remember that, in 1979, Chile was ruled by a military government, and the Cold War was a factor that affected many decisions. It made sense at the time to introduce special regulation for a substance believed to be potentially very important for military purposes. But that is not the situation anymore. Lithium is no longer relevant for nuclear use; instead, in the last decade, it has acquired a vital importance for electromobility, reaching an unprecedented high price. Is Chile taking advantage of that surge in price and demand? No, or at least, not as it should. And the mentioned regulation of 1979, the Decree Law 2,886, is still in force.

As we emerge from a failed constitutional process a few months ago and now enter another one, it is important to note that the lithium special regulation is not contained in the Chilean Constitution (enacted in 1980 and heavily amended in 2005), but on Law 18,097 of Mining Concessions, enacted in 1982. This law is not an ordinary law, but a "constitutional law", therefore requiring a higher quorum for any amendment. Additional regulation can be found in the mentioned Decree Law 2,886 and in the Mining Code of 1983.

As per the current regulation, lithium can be explored or exploited only by the State, directly or through its companies, or by civilians or non-governmental companies in two cases:

1. When an administrative concession or a special operation contract has been granted, subject to requirements and conditions to be defined, in each case, in a...