Background

The reform of the French Mining Code has been under consideration since September 2012. The existing code was implemented by a government ordinance of January 20 2011, and was therefore not debated in Parliament. It regulates not only mining, but also oil and gas activities, with most of the rules for these three activities being identical.

Although a committee consisting of elected officials, legal experts and representatives of non-governmental organisations and industry submitted a draft of the new Mining Code to the government in December 2013, the reform has since been postponed without explanation from the government.

A new version of the code – departing from the draft submitted to the government in 2013 – was published for public consultation on March 17 2015. The consulation closed on April 10 2015.

The purpose of the reform is to:

  • bring the Mining Code into compliance with certain environmental principles;
  • provide legal certainty for carrying out mining activities; and
  • provide transparency in the decision-making process relating to mining authorisations.

The enactment of the mining regulation reform is eagerly awaited by the industry, which is looking for increased visibility and a more secure legal framework. Indeed, the difference in treatment between mining activities and oil and gas activities is striking. On the one hand, the relaunch of mining activities has been observed in recent years, with several exploration permits for copper, zinc, lead, gold, silver, antimony, tin and tungsten having been granted. On the other hand, significant delays have been observed in the administration's processing of applications for new hydrocarbon exploration permits, and for the transfer or renewal of existing permits. These delays have created a highly insecure legal framework for developing hydrocarbon activities in France. In fact, only two new exploration permits have been awarded since 2011, while the government has remained silent on more than 120 permit applications which had been declared admissible.

Main features of reform

Two types of provision are set out in the draft law:

  • In 43 articles the draft law outlines the main principles applicable to mining activities – most of these principles are to be detailed in implementing regulations.
  • The draft law contains an article empowering the government to enact the Mining Code reform through a governmental ordinance and sets out the guiding principles of the reform.

The structure of the draft law is unusual in France and the government has not yet provided sufficient explanation regarding its choice of a two-step reform. Moreover, although the main principles applicable to mining activities set out in the draft law are meant to coexist with the existing Mining Code, they partially contradict each other.

Leaving aside the uncertainties and confusion engendered by this structure, the draft law sets out the main features of the reform, which are as follows.

Two types of mining authorisation The draft law does not amend one of the basic principles of French mining regulation – namely, that the mining title does not in itself grant the right to carry out exploration or exploitation works, and that such works are subject to an additional authorisation or declaration procedure.

High Council for Mines The High Council for Mines will be established and shall be consulted by any minister on questions related to the scope of the Mining Code, proposed amendments to the code or administrative decisions implementing the code. The scope of the new council's competence is unclear, especially as the General Council for the Economy, Industry, Energy and Technology already has the authority to provide opinions on mining title decisions. The draft law envisages the enactment of an implementing decree.

National Mining Plan The National Mining Plan, which will be updated every 10 years, will include:

  • national guidelines for the development of known or estimated resources;
  • data in relation to sub-soil resources and their location; and
  • a description of the exploration and exploitation techniques to be used, as well as the impact of such techniques.

However, at present it is unclear when the plan will be implemented and how it will be used by the authorities when making decisions relating to mining titles. Moreover, the fact that the plan will describe the techniques to be used for exploration and exploitation has given rise to fears that this will not always be up to date with the latest and best-performing techniques, thus adding an additional hurdle for investors.

Public information and participation The draft law includes several provisions aimed at increasing public awareness and participation in the decision-making process in relation to mining operations. The existing regulations have been criticised for a lack of transparency during the granting of various authorisations, and because on some occasions the public affected by a project is unable to comment on the project or is insufficiently informed about the decisions taken.

Therefore, the draft law provides that local authorities shall be informed about and consulted on the granting of mining titles. Moreover, the draft law provides that the issuance of a mining title might exceptionally be subject to the prior implementation of a reinforced procedure of public information and participation if it relates to areas with significant challenges for the environment. The reinforced procedure of public information and participation shall be led by an information and consultation group comprising representatives of local authorities, non-governmental organisations and local stakeholders, and chaired by the state's representative. The group will have the power to request expert assessments and the applicant will be granted the right to submit a second expert opinion. The group must submit a report within six months (extended to 12 months, subject to approval by ministerial order) and give a recommendation on the decision to be taken in relation to the application.

Deadlines for the issuance of mining titles and related authorisations One of the major issues raised by operators in respect of the existing Mining Code was the length of time it could take to assess, process and grant mining titles. For example, under the existing framework, an application for a concession is deemed to be rejected if no explicit decision is taken by the minister within three years. A shortened period is provided for in the draft law: decisions must be taken by the administration within six months (for the granting of exploration titles) or nine months (for the granting of exploitation titles), with the possibility to extend this time period once for a maximum of the same duration. A decree shall provide whether a lack of response from the administration at the end of this period amounts to refusal or approval of the application.

Moreover, the draft law and the presentation note prepared by the administration suggest that for certain authorisations relating to mining titles, an implementation decree could set out shorter assessment periods as well as a mechanism whereby an application is deemed accepted if no explicit decision is taken by the administration. Such a mechanism would clearly be an improvement, given that in the existing framework, an application for the renewal or assignment of a mining title is implicitly rejected if no decision is taken by the administration within a long period (between 15 months and two years, depending on the type of application and mining title).

Environmental issues The existing Mining Code has been heavily criticised for failing to take properly into account environmental concerns. The proposed changes in this respect are as follows:

  • The environmental impact of the envisaged works will be taken into account at the stage of granting the mining title. Under the existing system, information about the planned works is provided only at the time of issuance of the works authorisation, and mining titles have therefore been granted without the administration having a clear understanding about the envisaged works and techniques. The new mechanism is designed to allow the administration to carry out a proper environmental assessment at a very early stage.
  • Mining works will be subject to the regulations that apply to classified installations for the protection of the environment, with some adjustments (which have not yet been disclosed).

Judicial clearance of authorisations under Mining Code The draft law provides for a mechanism whereby any interested party may request an administrative court to validate the administrative procedure which granted authorisations. By this procedure a court will be asked to confirm that the processing of an application complied with applicable rules. If the court takes the view that the procedure has been conducted irregularly, it will issue an injunction requiring that the breach be remediated. Conversely, if the court finds that the application was processed correctly, no future claim can be brought against the relevant authorisation on the same grounds. Under the existing rules, in principle claims challenging the validity of the various authorisations can be filed within a limited period of time (ie, two months from the grant of authorisation). However, the court proceedings can be extremely long (eg, up to two-and-a-half years before the first-instance court). While the filing of a claim does not legally oblige operators to suspend the works intended to be carried out under the relevant authorisation, in practice such a claim may dissuade them from pursuing their activities. The judicial clearance procedure has been introduced in order to give more legal certainty to mining operators. However, the maximum duration of the judicial clearance procedure – up to nine months – is likely to dissuade operators from deliberately applying for it, and they may continue to run the risk of claims and lengthy court proceedings.

Liability regime of mining title holders and operators The draft law reaffirms the principle that the entity in charge of exploration works or the holder of the mining title can be held liable for damages caused by its activity, and reinforces the possibility of gaining compensation for such damages. It provides that if the mining title holder (or the entity in charge of the mining works) is subject to insolvency proceedings, the court dealing with the proceedings may demand that the entity controlling the insolvent entity remedy any damages resulting from mining operations. If the liable entity no longer exists or fails to remedy the damages, the state shall compensate such damages. It is regrettable that the government has given preference to this type of liability regime over more straightforward mechanisms such as a bank or parent company guarantee or a provision for decommissioning accounts.

Comment

Some of the principles laid down by the draft law suggest that the government has noted the criticism of the existing regulations and is striving to improve the conditions for carrying out mining activities in France.

However, the feeling is that the mountain has laboured and brought forth a mouse – and that this long-awaited reform is incomplete and unintelligible. The choice made by the government in terms of structure is unique in France: the principles laid down by the draft law will coexist with those set out by the existing Mining Code, while subsequent ordinances adopted by the government – without debate before Parliament – will supplement or amend such principles. Rather than creating a more secure legal framework, the coexistence of these laws and regulations is likely to lead to confusion.

Moreover, at present the timeframe for completing the new regulatory framework for mining operations is far from clear, although it seems likely that the draft law will not be enacted before 2016. Finally, the draft law does not address one of the major issues at stake – the very low level of royalties paid for mining operations – despite the fact that the increase of such royalties would result in better acceptance of mining operations at a local level.

For further information on this topic please contact Mehdi Haroun or Ruxandra Lazar at King & Spalding LLP by telephone (+33 1 7300 3900) or email (mharoun@kslaw.com or rlazar@kslaw.com). The King & Spalding LLP website can be accessed at www.kslaw.com.

This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.