negotiation of contracts john p. williams, duncan & allen world mines ministries forum toronto,...

NEGOTIATION OF CONTRACTS

John P. Williams, Duncan & Allen

World Mines Ministries Forum

Toronto, March 1, 2008

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NEGOTIATION OF CONTRACTS

1) FUNDAMENTAL CONSIDERATIONS

2) KEY ELEMENTS

Negotiation of Contracts by John P. Williams

FUNDAMENTAL CONSIDERATIONS

• CONTEXT

• OBJECTIVES

• AUTHORITY

Negotiation of Contracts by John P. Williams3

FUNDAMENTALS - CONTEXT

• CONTRACT WITH GOVERNMENT– NEW CONTRACT NEGOTIATION– CONTRACT RENEGOTIATION

• CONTRACT WITH STATE-OWNED ENTERPRISE– NEW CONTRACT NEGOTIATION– CONTRACT RENEGOTIATION


FUNDAMENTALS - OBJECTIVES

• INCREASE REVENUES

• SHARE OR INCREASE CONTROL

• SUSTAINABLE DEVELOPMENT

• GOOD GOVERNANCE


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FUNDAMENTALS - AUTHORITY

• CONSTITUTION

• EXECUTIVE VS. LEGISLATIVE

• DELEGATED AUTHORITY

• AUTHORIZATION PROCEDURES


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KEY ELEMENTS

• TERM AND TERMINATION

• RIGHTS

• OBLIGATIONS

• COMMUNICATION

• REVIEW AND ADJUSTMENT

• DISPUTE RESOLUTION


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ELEMENTS - TERM AND TERMINATION

• TERM– Term of License

– Term of Project

– Term of Financing

• TERMINATION– Clear end date

– Government/SOE Rights

– Developer Rights

• TERMINATION OBLIGATIONS


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ELEMENTS – RIGHTS & OBLIGATIONS I

DEVELOPER RIGHTS• Mineral rights

– Nature of rights

– Scope

– Expansion

• Surface use/Access/

Transportation

HOST OBLIGATIONS• Recognition

– Enforceability: nationally and locally

– Compensation

– Conditions

• Local acceptance ; Infrastructure planning


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ELEMENTS – RIGHTS & OBLIGATIONS II

DEVELOPER RIGHTS• Marketing

– Market pricing

– Export freedom

• FOREX usage– Offshore accounts

– Payments abroad

– Accounting currency

• Stability

HOST OBLIGATIONS• Enforce

– Follow markets

– Facilitate exports

• Accept and Enforce– Monitor, facilitate

and count

– Adapt if compensated

• Guarantee


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ELEMENTS – RIGHTS & OBLIGATIONS III

DEVELOPER OBLIGATIONS

• Social /Environmental Protection– Consultation

– Assessment

– Management

– M&E

– Mine closure

– Surety

HOST RIGHTS• Sustainable

Development– Participation

– Review

– Accountability

– Adjustments

– Audits

– Self-help


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ELEMENTS – RIGHTS & OBLIGATIONS IV


• Health, Safety and Security

• Fiscal Payments– Annual Fees

– Property taxes

– Customs duties

– Payroll taxes

HOST RIGHTS• Standards,

Inspections and Service Integration

• Fiscal Benefits– Cover costs

– Local, regional and national revenues


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ELEMENTS – RIGHTS & OBLIGATIONS V


• Fiscal Payments– Royalties

– Income taxes• Revenues

• Deductions

• Depreciation (accel.)

• Losses

• Exemptions

• Profit Sharing

HOST RIGHTS• Fiscal Benefits

– Sliding scale• Distribution

– Set rules• Competitive

• Minimum tax

• Say no to tax holidays

• Preferred DividendsNegotiation of Contracts by John P. Williams

COMMUNICATION• INSTITUTIONALIZE ONOING LOCAL

CONSULTATION AND PLANNING– Coordinate development plans– Develop local revenue budgets– Review environmental management – Anticipate and address future issues

• PUBLISH RESULTS– Company benefits

– National benefits

– Local benefits


REVIEW & ADJUSTMENT

• PERIODIC CONTRACT REVIEW – Market developments– Technology changes– Infrastructure need changes– Environmental and sustainability results

• CONTRACT ADJUSTMENT– Temporary adjustments– Permanent adjustments


DISPUTE RESOLUTION

• INFORMAL MECHANISM FOR MINOR DISPUTES

• MEDIATION: OPTIONAL OR MANDATORY

• ARBITRATION– Rules

– Location

– Language

– Enforceability


CONCLUDING OBSERVATIONS

• STABILITY FOR THE INVESTOR DEPENDS ON POLITICAL STABILITY FOR THE HOST

• STABILITY FOR BOTH INVESTOR AND HOST REQUIRES EQUILIBRIUM IN:– THE SHARING OF PROJECT BENEFITS

– THE PARTICIPATION OF THE HOST POPULATION IN THOSE BENEFITS, AND

– BELIEF IN THE SUSTAINABILITY OF THE DEVELOPMENT


negotiation of contracts john p. williams, duncan & allen world mines ministries forum toronto,...

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