29 February, 2020

Three arbitration disputes over withdrawal of concessions in the mining sector of North Macedonia

There are currently three international arbitration disputes against the government of Northern Macedonia over the withdrawal of concessions in the mining sector, and the decisions initiated by SDSM have created legal uncertainty for foreign investors, despite their openness to them and a positive international profile promoted by the ruling party, SeeNews reports.

According to the United Nations Conference on Trade and Development (UNCTAD), a permanent intergovernmental body within the UN Secretariat dealing with trade, investment and development, of seven arbitration cases initiated since the passage of the International Commercial Arbitration Act in 2006, three refer to alleged arbitration offenses in the mining sector as of 2017, by the incumbent government.

In all cases, foreign investors were hit, with the Binani Indian group claiming a lead and zinc concession in Dobrevo and Toranica had been arbitrarily expropriated and reallocated, while the Ukrainian-British company Koper Investments claimed a copper, gold and silver concession in Kazandolu canceled without legal basis.

Meanwhile, Kuniko Risorsiz, owned by controversial Israeli billionaire Beni Stajmec, claims that the government has interfered with the sale of Kavadarci ferro-nickel mines, effectively resulting in the bankruptcy of the operating company.

All three concessions were approved by the previous VMRO-DPMNE government. No other Western Balkan country has a comparable number of arbitration cases affecting one sector, nor at that pace, according to the same database.

With the amendments to the Law on Mineral Resources, the Ministry of Economy tried to find a long-term solution to the health and safety problems of the residents of settlements in the vicinity of which were issued concessions for the exploitation of mineral resources, with unilateral termination of concessions. The amendments went through a shortened parliamentary procedure but were not adopted due to the dissolution of the Assembly on February 16, ahead of early parliamentary elections.

The business community responded that the Mineral Resources Act is a complex law, requiring extensive public debate rather than shortened adoption. This law is one of the most frequently amended laws, which requires changes based on a public hearing involving representatives of the business community, the Ministry of Economy, the non-governmental sector, the scientific community and other stakeholders.

According to the amendments proposed by the SDSM-led coalition, the concession may be terminated if the concessionaire uses less than 30% of the planned amount of mineral resources within a year or if the concessionaire fails to notify the Ministry of Economy of the change of ownership. The government would therefore have significant discretion to make arbitral awards, centralize decision-making and bypass mayors, leaving room for politically motivated abuses, critics say.

“The proposed changes are worrying. They have been published without consultation with industry or stakeholders and are not known to judge anyone’s health or safety. This paves the way for unilateral termination of contract and arbitrary decision-making, which not only goes against what the EU requires in terms of legal certainty and anti-corruption efforts, but will intimidate potential investors, “says Patrick Forvard, Chief Operating Officer at Canadian Euromax. He called for the creation of conditions for a predictable and competitive free market where foreign investors are truly welcome.

The main project of the Canadian copper and gold development company is the Ilovica-Stuka project on Ograzden Mountain, worth 343 million euros. However, in December 2019, the government decided to unilaterally terminate the concession agreement with Euromax, on the basis of delays in obtaining the appropriate permits. Euromax assessed the decision as politically motivated and threatened to seek international arbitration, although the situation has not yet reached that instance.

If the concessionaire Euromax decides to refer the case to arbitration, Macedonia is at risk of paying a heavy fine, depending on the outcome of the judgment. The Canadians have recently filed a lawsuit with the Administrative Court against the ruling of the second-instance state commission that there is no right to mine the ore at the site where the Ilovica mine is planned.

Namely, after years of protests by citizens of Strumica municipality and eco activists, the government ventured and decided that the planned mine would not be built. Ilovica was left without a concession, and Healthy Valley sent a congratulations on this decision.

Local environmental organizations, on the other hand, see the proposed changes to the mining law as a step in the right direction. In recent years, the population in the agricultural regions has become aware of the risks posed by the mines and has increasingly opposed the opening of mines that would endanger the environment and affect agricultural production.

Source: faktor.mk