Disputes have been increasing in the mining and natural resources sector. One reason for the increase in disputes is the downturn in commodity prices, which has led to restructurings, downsizings, as well as the cancellation and postponement of projects and a reduction in capital expenditure. These actions can have a significant effect on the supply chain and on other stakeholders resulting in disputes.

We recently asked clients what keeps them awake at night and the top response was governmental risk including changes to licensing and fiscal regimes. With lower commodity prices, governments are looking for ways to raise revenues including by considering changes to their licensing and fiscal policies. Another concern of clients was regulatory compliance and investigations, particularly in light of the growing regulatory burden being imposed on mining and natural resources companies. The increase in governmental intervention and regulation is likely to continue to give rise to disputes.

We have also seen a rise in the number of class-action disputes over recent years, with increased activism by non-governmental organizations and communities: this trend is likely to continue.

Preventative measures
With increasing regulation and scrutiny of mine operators' conduct, it is important to proactively manage risk by putting in place robust policies particularly in the areas of anti-bribery and corruption, human rights, and environmental health and safety, each of which can give rise to substantial commercial risk and liability. In addition, it is important to implement appropriate training and monitoring to ensure compliance with these policies.

However, no matter how many preventative measures are put in place, disputes are inevitable. Early intervention and careful management of disputes are key to minimizing the risk of disruption to the business. In this article we discuss the top ten issues to consider when a dispute emerges.

1: Limitation periods
One of the first issues to consider are the time limits applicable to any claim. Whether you are a potential respondent to a claim from another party or are looking to bring a claim yourself, it is important to know when the claim expires. Time limits may be found in the relevant laws on limitation period but there may also be time limits contained in relevant contracts specifying when certain rights must be exercised. If you are close to a time limit you may need to act quickly to preserve any claim by filing proceedings or agreeing to a standstill agreement with the other party.

2: Preservation of documents
Many claims are won or lost on documents. Accordingly, it is essential to secure all relevant documents as soon as possible.  This includes electronic documents such as emails and texts as well as hard copy files.

3. Identify possible rights and remedies (contract, common law, and statute) including applicable law/s and dispute resolution provisions
It is important to identify all relevant legal rights and remedies that may be available to you. If it is a contractual dispute there may be express rights and remedies provided for in the contract. You may also have additional rights under the common law or statute which may give a more favourable result to you. Accordingly, you should determine the full extent of your rights and remedies before choosing which to pursue. This will require you to consider which laws apply, particularly where the transaction is cross-border or involves agreements governed by different laws. Many contracts contain dispute resolution provisions which set out the procedure for resolution of disputes. It is important that these procedures, including any notice requirements, are fully complied with.
 
4. Preservation of rights
Rights may be lost in a variety of ways. These include, for instance, the expiration of time limits; not objecting to conduct by a counterparty; or making statements or taking actions that are inconsistent with your rights. Accordingly, you should identify at an early stage the rights on which you may wish to rely and to ensure that you do not take any actions or make any statements that could be construed as being inconsistent with the exercise or reservation of those rights.

5. Consider legal privilege issues
Consider involving a lawyer at an early stage, as documents provided to a lawyer for the purposes of legal advice and the resulting legal advice are generally protected from disclosure in legal proceedings by privilege. Privilege can also extend to documents prepared for the dominant purpose of use in contemplated legal proceedings. Privilege can be lost through to disclosure to third parties in some cases, so it is important to obtain advice on these issues at an early stage and agree procedures to identify privileged documents to ensure that such privilege is maintained.

6. Consider reporting obligations internally and to external bodies such as insurers and regulators
The mining and natural resources sector is heavily regulated and so you should consider whether any potential dispute gives rise to reporting obligations under relevant legislation. Another issue to consider is whether any losses may be covered by insurance and to notify insurers in a timely manner.

7. Public/customer/investor relations
For any significant dispute, consideration should be given to developing a strategy for dealing with stakeholder communications.  In the case of listed companies, disclosure under relevant listing rules may be required. Even if a dispute is not required to be disclosed, consideration should be given to whether there are any strategic advantages to disclosure and the most appropriate channels to use.

8. Strategy for communicating with the counterparty
Having a strategy for communicating with the counterparty is key to protecting your rights and ensuring that you are able to achieve your commercial goals through a settlement or a litigation or arbitration process. Involving a lawyer in the process of preparing communications can assist in ensuring that the communications protect your legal position as drafts shared with the lawyer for the purposes of advice will be privileged. It is also important to clearly identify those communications that are made for the purposes of settlement because these are likely to be covered by without prejudice privilege, which means that they cannot be used in any subsequent proceedings.

9. Settlement options
Parties should consider settlement options at an early stage including whether some form of Alternative Dispute Resolution such as negotiation or mediation may be appropriate. One important issue to consider is which representatives from each party would need to be around the table to make such a process effective.  When assessing settlement options a cost-benefit analysis should be undertaken at an early stage taking into account considerations such as the relationship cost, financial impact, delay, and potential reputational risk of pursuing the matter to a final judgment or award.

10. Strategy for mitigating loss
From both a legal and commercial perspective it is important to consider what reasonable steps can be taken to mitigate any loss arising from the dispute. Consideration should also be given to whether there are any changes that could be made to existing company policies to reduce the risk of such disputes occurring in the future.

Conclusion
While disputes are an inevitable part of business in the mining and resources sector, focussing on early and effective management can make a big difference to their commercial impact.