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Constitutional Versus Contractual Commitments by Governments

Gerald Padmore, International Resources Law II: A Blueprint for Mineral Development (1995)

When governments wish to attract new mineral investments, one way they do so is by agreeing to provide fixed, long term assurances of the rights, duties and benefits that the mineral company will obtain from future mineral projects. The purpose of such assurances is to induce the mineral company to invest by reducing the risk that once the investment has been made, a commercial find has been identified and operations have commenced, the government would either cancel the rights granted or so change the fiscal terms applicable to the project as to make it uneconomic.

The more highly industrialized countries tend to provide fewer such assurances to mineral companies. They often have a well-developed mineral industry that is substantially owned and operated by nationals of the country. For that reason, mineral companies in such countries have more ability to participate in and influence the political process in order to protect their interests. By contrast, in many less industrialized or developing countries, foreign owned companies comprise the sole or greatest source of investment in minerals. They have little political clout and, being foreign enclaves, are particularly vulnerable targets for governmental action.

At present, many developing countries are actively seeking new foreign mineral investments. During the past decade, many have changed applicable laws