Mining Arbitration in Latin America: Social and Environmental Issues in Investment Arbitration Cases
Attracting foreign investment to explore for and exploit minerals and natural resources has long been a keystone for economic development, especially in economically developing nations. The number of mining projects has increased with every passing year. However, mining projects require significant up-front investments during scoping, pre-feasibility, feasibility and development phases to reach the production stage, and most often several years of continued production are needed before they yield a positive return. During this period, mining projects are subject to risks such as volatile markets, cost variability (e.g., increased OPEX or higher costs for EPCM contracts), geological risks (e.g., ore grade variability), legal and regulatory changes (e.g., to the royalty regime, mining concessions and leases), and social and environmental challenges.
With the increase in the number of mining projects (prompted by bullish commodities’ markets and low financing costs) and the resurgence of resource nationalism and geopolitical instability worldwide, the number of disputes involving mining projects has also been on the rise, particularly between foreign investors and host states. Since 1992 (when the first mining case under a treaty protecting foreign investment began), 95 cases involving investments in mining projects have been filed before institutions such as the International Centre for the Settlement of Investment Disputes (ICSID). Of these cases, 29 involve mining projects in Latin America.