A multinational mining company with operations in one or more Latin American countries – countries with diverse cultures and widely different stages of social and economic development – is invariably faced with significant challenges that dictate the need for periodic legal checkups or diagnoses of its projects on a case by case basis.

Challenges Faced by Multinational Mining Companies

Some of the challenges multinational mining companies face in Latin America include the following:

  • Communication problems with the company’s Latin American offices, often as a result of language barriers and/or the failure of in-country personnel to recognize critical timing requirements, may make it difficult to obtain complete and accurate information on the status of in-country operations.
  • The locations of the company’s Latin American offices – often far removed from the company’s home office – frequently result in host country personnel making decisions on their own, without seeking appropriate senior management input or approval.
  • Home office executives and their North American counsel may be unaware of potential problems faced in a given Latin American country and the consequences imposed by the host country’s legal system. All Latin American countries operate in civil law jurisdictions (there are a variety of types of civil codes), which may be unfamiliar to North American common law
  • Legal documents in Latin America may be extremely formalistic and rigid, in large measure because they are based on civil law. These documents tend to be sparsely worded, often accompanied by unacceptable explanations that omitted items are “understood” or “unnecessary.”
  • The laws in a given Latin American country may provide severe remedies (g., prejudgment attachment of bank accounts, pretrial detention or even criminal proceedings) that can significantly disrupt or paralyze a Company’s in-country operations.

Goals of an Effective Mining Legal Diagnosis

Some of the goals sought to be achieved in connection with an effective mining legal diagnosis of a mining company’s Latin American operations include:

  1. Reviewing and, when necessary, refining legal standards and policies for the company’s operations in the host Latin American country, taking into account:
    • North American laws;
    • laws of the host Latin American country; and
    • other applicable laws or regulations, such as those of a regional common market, or trade agreements.
  2. Verifying that the host Latin American country’s operations are in compliance with applicable international, North American and in-country legal standards.
  3. Verifying compliance with the company’s policies.
  4. Identifying areas in which the company is exposed to unnecessary legal risks, especially in light of corporate disclosure requirements imposed by North American and other stock exchanges.
  5. Developing corrective measures to reduce or eliminate any unnecessary risks.
  6. Ensuring that the company is receiving all of the benefits to which it is entitled (e.g., investment incentives, tax exemptions, etc.).
  7. Evaluating the quality and timeliness of the legal and other consulting services being provided to the company and its Latin American operations.
  8. Reviewing specific transactions and/or events that have placed the company at risk and suggesting corrective action to prevent similar problems or risks in the future.

Critical Areas of Inquiry

The following are critical areas of inquiry for the legal diagnosis team. This list is by no means exhaustive and will need to be adapted to the circumstances of the particular mining company:

  • anti-bribery and corruption
  • corporate matters
  • securities and ownership
  • mining rights
  • surface rights
  • technical and operational matters
  • water rights
  • environmental and related matters
  • taxes
  • accounting
  • personnel matters
  • litigation, proceedings, claims and disputes
  • insurance
  • other agreements

Advance Planning for an Effective Mining Legal Diagnosis

A successful mining legal diagnosis requires focused advanced preparation in order to produce optimal results at a minimal cost. Some suggestions to achieve such success include the following:

  1. Obtaining approvals from the company’s senior management or Board or Directors to initiate the diagnosis process.
  2. Developing background information on the entity(ies) or operation(s) that is/are the focus of the diagnosis.
  3. Prioritizing the locations, activities and transactions to be encompassed by the diagnosis.
  4. Defining the scope of the diagnosis.

Selection of the Optimal Mining Legal Diagnosis Team

Given the significant challenges faced by a mining company operating in Latin America, it is imperative that an effective mining legal diagnosis be carried out by qualified professionals in order to reduce or eliminate legal risks.

A successful Latin American mining legal diagnosis team requires an independent outside North American lawyer or law firm to oversee the diagnosis.

A company’s in-house counsel may not have the time, resources or sufficient independence to conduct a diagnosis; and in many instances, in-house counsel may act in a variety of capacities within a particular company and be denied true “attorney” status and may, therefore, be unable to establish or claim a critical attorney-client protected relationship with the company.

Mining companies operating in Latin America typically use trusted local outside counsel to serve as shareholders or to be part of the board of directors of the company’s local entity(ies). But, far too often, regular local outside counsel are part of, or may have contributed to, actual or potential problems faced by the company.

Even if regular local outside counsel is not conflicted out legally, in many (if not most) instances it is prudent to have an independent mining legal diagnosis team conduct the diagnosis.

For example, regular local outside counsel may have designed and established a series of entities, procedures and protocols that the mining company and individuals within the company use to conduct the Company’s business. If there is an allegation that there are problems with these entities, procedures and protocols, it is prudent to have another, independent lawyer or law firm conduct any investigations, reviews or diagnoses of the Company’s operations.

Similar to accounting audits or other types of reviews, an independent mining legal diagnosis team will not replace the company’s regular local outside counsel and will provide a “fresh set of eyes” to ensure that the company’s Latin American affairs are in order.

The Benefits of Attorney-Client Privilege

One of the most important benefits of having an independent outside North American law firm to oversee the company’s mining legal diagnosis – instead of in-house counsel or the company’s regular local outside counsel – is the ability to effectively make use of the attorney-client privilege.

If the privilege is used effectively, problems discovered by an independent mining legal diagnosis team during the diagnosis can be timely corrected/ameliorated by the company without the fear of having government officials, non-governmental organizations (NGOs), competitors, or others finding out that the problems existed in the first place.

An independent law firm conducting the diagnosis cannot be ethically compelled to, and may in fact be legally prohibited from, disclosing any matters discovered during the diagnosis.

All members of any successful Latin American mining legal diagnosis team, including the North American law firm overseeing the diagnosis, must possess, at a minimum, the following qualifications:

  1. Current knowledge and expertise concerning all matters – legal, social, political and otherwise – that may impact the Latin American operations of the Company.
  2. Familiarity with the legal system and cultural nuances of the host Latin American country.
  3. Significant experience in international, corporate, mining, environmental, business and related legal matters, including industry-specific technical expertise, in order to be able to assess every step of the mining process from exploration to the sale and/or final processing of product.
  4. Fluency in the foreign language(s) of the host Latin American country.
  5. Familiarity with the mining company’s objectives, structure and operations.
  6. Significant mining legal diagnosis experience.
  7. Independence and autonomy.
  8. Ability to write – in the host country’s language and in English – a clear and succinct final report of the mining legal diagnosis findings and recommendations.


After its inquiry, the legal diagnosis team should prepare a final mining legal diagnosis report for the mining company’s executives and Board of Directors. At the company’s direction, the diagnosis team can oversee the implementation of any recommended actions to be taken, based on the report.