On 30 June 2011, as a result of strong lobbying by the nuclear power industry, environmental associations and local authorities, the French Parliament banned the use of hydraulic fracing technology. This decision has had a knock-on effect for operators using conventional technology.
Over the course of the last 18 months, the French Government has refused, almost systematically, to grant new exploration permits and oil concessions, and to extend or transfer existing ones, regardless of the type of technology used.
Mining operators that are active in France have therefore resorted to litigation and/or threatened arbitration against the French Government. Such actions may be brought before national administrative courts and, depending on the circumstances, before international arbitral tribunals pursuant to the Energy Charter Treaty (the Treaty).
The Anti-Fracing Campaigns
Since the enactment of the law prohibiting the use of fracing, mining operators active in France have been criticised strongly by environmental protection groups and local authorities, neither of which tend to distinguish fracing from other methods of exploration. Indeed, such groups and authorities frequently hold the view that any type of extraction will cause irreparable damage to the environment and public health, without presenting any evidence to support that view.
Environmental protection associations have brought a number of actions against orders authorising exploration works. To our knowledge, no court has ever ruled in favour of such a complainant, perhaps because of a lack of evidence to support their case, but this has not stopped the groups from trying.
Local authorities have adopted orders that actively hinder mining operators from implementing permits and concessions, such as preventing mining trucks and construction machinery from using public highways and denying mining operators the right to cross publically owned lands. The French Minister of Ecology has herself impeded the activities of mining operators by failing to examine their requests regarding exploration permits or oil concessions, or by systematically turning down these requests.
The result of these actions is that mining operators active in France have suffered massive financial loss.
Actions Before the French Administrative Courts
Several operators have decided consequently to resort to litigation against the French Government by initiating two kinds of action before the French administrative courts.
First, mining operators have brought claims before administrative judges asking for injunctions requiring the French Government to consider (or reconsider) mining operators’ requests relating to exploration permits and oil concessions.
In early 2013, a French administrative court ruled in favour of a mining operator by ordering the government to reconsider its refusal to transfer an exploration permit. The court considered that the operator in question had suffered financial harm owing to the extent of the investments it had made, even though these investments were only preparatory. The judge added that the government had violated the principle of legal certainty, which requires mining operators to be “rewarded” for the investments they had made in exploration work that was in the general interest.
Second, mining operators have sought damages against the French Government to compensate them for the financial losses caused by the government’s conduct, and the resulting inability of the operators to reap the rewards of their investments.
Earlier this year, at least one mining operator initiated a damages claim against the French Government, asking for compensation for the multimillion Euro investments it had made in France. This claim is currently pending before the administrative court.
The Energy Charter Treaty
Where a mining operator is, or is owned by, a company that is incorporated under the laws of a country party to the Treaty, or is owned by a natural person with citizenship or nationality of a party country, then the operator may have additional rights under the Treaty. The countries that are party to the Treaty are listed at www.encharter.org/ index.php?id=61.
In a manner similar to a bilateral investment treaty, the Treaty provides protection to investors from one party country in relation to investments made in another party country. In particular, it requires that such investments shall be accorded “fair and equitable treatment” and shall not be expropriated, except where expropriation is for a purpose that is in the public interest, not discriminatory, carried out under due process of law and accompanied by the payment of prompt, adequate and effective compensation.
It is likely that the French Government’s arbitrary and unjustified approach to mining operators, in which they fail to make any distinction between those using fracing and those using conventional methods, contravenes its obligations under the Treaty. In addition, because the Treaty makes no distinction between the actions of central and local government, the decisions made by French local authorities to prevent mining trucks and construction machinery from using public highways, and to deny mining operators the right to use publically owned lands, may well constitute a breach of the Treaty.
The Treaty provides for dispute settlement in three ways:
- Arbitration within the International Centre for Settlement of Investment Disputes system
- Ad hoc arbitration under the Rules of the United Nations Commission on International Trade Law
- Arbitration under the Rules of the Arbitration Institute of the Stockholm Chamber of Commerce
Each of these arbitration procedures has relative advantages and disadvantages relating to cost and delay of proceedings, and enforceability of awards. They are all, however, very effective ways of protecting the rights of investors.
Hopefully, the combination of actions before the French courts, the prospect of international arbitrations connected with breaches of the Treaty and the negative publicity that such arbitrations would bring France on the world stage will cause the French Government to take a more rational and fair approach to mining operators active in France. In addition, the French Government should also take the steps necessary to control the actions of local authorities. If not, it may well spend a lot of time, money and resources dealing with such actions and arbitrations in the years to come.