This aim of this chapter is to provide an overview of how the notion of social licence was born (as explained by James Cooney in his article, ‘Reflections on the 20th anniversary of the term “social licence”’),2 and how and why, in countries with certain constitutional traditions, it can be seen as contradictory to the rule of law, since the notion of social licence has eroded some capital constitutional principles. These reflections focus in particular on Argentina.

It is easier to understand the rationale of any law if the circumstances surrounding its creation and adoption are known. So, first, a brief reference to Argentine history, to provide some  factual background to a principle embodied in the Argentine Constitution of 1853.

What is today the Argentine territory had been part of the Spanish kingdom since the late sixteenth century. The confusion and disorder created in the Spanish kingdom by the invasion of the Iberian peninsula by Napoleon Bonaparte – who replaced the King of Spain with his brother Joseph Bonaparte in 1808 – expanded to the Spanish colonies in the west of South America, including what had been the viceroyship of the Río de la Plata (more or less the current Argentine territory) since 1776. In short, the American Spaniards implemented a system of government boards to conduct the governmental affairs of a particular region, as had occurred in Spain, where several government boards had been created (the most prominent of which was in Seville). In 1810, a sequence of events was set in motion so that six years later, in July 1816, the independence of a new country was declared. From May 1810 (when a government board was created in Buenos Aires), and for the next 43 years, the region now known as Argentina endured varying degrees of turmoil, from ineffective local, provincial and central governments to cruel and bloody civil war.

A Constitution was finally adopted in May 1853. It was drafted on the model of the Constitution of the United States, adopting a federal system consistent with the tradition inherited from the Spanish crown, a dual-chamber National Congress, a judiciary branch headed by a National Supreme Court and the administration of national affairs entrusted to a president.

Section 22 of Chapter 1 of the National Constitution of the Argentine Republic – in the original version and maintained after several amendments (the last in 1994) – sets forth the following:

The people neither deliberate nor govern except through their representatives and authorities established by this Constitution. Any armed force or meeting of persons assuming the rights of the people and petitioning in their name, commits the crime of sedition.3

The reason for discussing the historical context of this fundamental principle is to emphasise that the drafters of this rule were influenced by the decades of political violence prior to the adoption of fundamental rules to govern the political affairs of the country. The drafters of the Constitution rightly felt the need to set a very clear principle: that it was through the action of organised authorities (not only National Congress, but also provincial authorities) that the people of the country were to discuss, argue and adopt the laws that would govern their lives and businesses. They later adopted the notion of sedition, a crime – punished with imprisonment – for the ‘meeting of persons assuming the rights of the people and petitioning in their name’.

This rule does not suppress the right to petition (section 14 of the Constitution), or of free speech and free press (section 32), as scholars have noted,4 but rather it emphasises the way in which the will of the people must be channelled. It is the system of a representative republic, in which there is a delegation of the power to deliberate and adopt the law as a logical consequence of those deliberations. The extent to which the respect of this principle makes a paramount difference in the way a civil society conducts its affairs is easy to understand by reflecting that it is not only between 1810 and 1853 that Argentina has experienced violent times. In 1930, 1955, 1966 and 1976, the country suffered military coups d’état, each of which resulted in a military government that lasted for several years. In addition, as in many other countries in the region, the effects of the Cold War were demonstrated by the presence of armed groups applying terrorist tactics and actions, which prompted reactions from other armed groups that were sometimes supported in the shadows by such governments, in a spiral of violence that took many years to overcome. The principle adopted in section 22 of the Constitution is pivotal in establishing the difference between an organised civil society and chaos. In other words, it is a cornerstone of the rule of law.

Social licence

What it meant, what it means

Use of the term ‘social licence’ has become predominant in any discussion about the impact of the mining industry in any given community, or whenever the interaction of a mining company or project and the surrounding communities is analysed. It is fair to say that the current, global and expanded notion is that social licence is an essential condition, something that a project simply cannot afford not to have. To some degree, social licence is something that seems to be stronger, and far more important, than any legal requirement to build and operate a mining facility.

Although social licence is not a legal concept, it appears to have more weight than the law, even in legal circles. In fact, it has gained such a status that it sometimes casts a shadow over the existence of legal licences.

Nowadays, it appears that, to many observers, stakeholders, non-governmental organisations (NGOs) and media, this is not only not surprising but has importance: how could it be considered unfavourable that a mining operation needs to have the acquiescence of those whose daily lives will be affected more than anyone else?

That any given mining project could not progress in spite of having been granted its various government licences owing to community opposition might be perceived as a triumph of social awareness about the environmental and other perils involved in mining. This is, indeed, a widespread view and a legitimate one. However, it is also true that with any mining operation frustrated by the failure to gain a social licence, there are jobs that are not created, revenues for workers that will not exist, taxes that will not be collected and value creation for shareholders that will not occur.

From a traditional legal standpoint, this approach creates the following problems:

  • Social licence is undefined. There is no official source of the concept, and there is no authority defining it; we know its meaning, more or less, but such a notion, even when shared, is by no means a definition.
  • Who grants it? Most people would say that social licence is granted by the community, but ‘the community’ is not a valid answer, as it is very rare that, in any given community, something or someone is empowered to act on behalf of the whole community except, precisely, for those authorities that are legally created and maintained – but then one is within the notion of ‘legal licences’, which is not covered by the concept of social licence.
  • For how long is it granted? It is possible to say that we know when it exists and when it does not exist, but there are a lot of grey areas that indicate that we simply do not know for how long an operation enjoys it.
  • What are the requirements to keep it in good standing? Similarly to the term of its existence, the conditions that are to be met to keep it in good standing are unknown. One may feel intuitively whether the social licence is still in place or if it has been lost, but there is no hard fact or measure to know for certain.

And yet, in spite of all the problems faced by mining companies’ executives and officers – and their financiers and advisers – the concept is solidly applied.

These problems have been a puzzle for some time. Something felt wrong: being so vague, its limits being so blurred, why is this notion so generally and widely applied? Should lawyers not do something to bring some clarity to the problem? Further, are the licences that are socially required for a mine to be built and operated not included in the law, whether national, provincial or even municipal? If the law does not provide for all the licences that are needed socially – if the law fails to catch certain licences – how can this other licence be dealt with legally?

In May 2017, the Journal of Energy & Natural Resources Law of the International Bar Association5 published a brief commentary entitled ‘Reflections on the 20th anniversary of the term “social licence”’. The particular value of this piece relies on the fact that the author, James Cooney, was the first to give ‘social licence’ its current meaning. It was the first time he made public his personal account of the events that led to his coining of the term, written and published 20 years later.

The most interesting aspect of this article was Mr Cooney's surprise at the evolution of the concept since he first used it. It was at a presentation he made in his capacity, at the time, as vice president of international government affairs with Placer Dome Inc during a World Bank event held in Washington, DC, in March 1997 – ‘Roundtable on Mining: The Next 25 Years’. Delegates included representatives of mining companies and NGOs, academia and other experts in various fields. Mr Cooney was a political risk expert, primarily responsible for managing his company’s political risk exposure in developing countries. He was invited to speak about the ‘main political risk challenges that the mining sector would face in the developing world during the coming quarter-century’.

After several years of experience of working with developing countries, Mr Cooney had come to the conclusion that managing political risk for mining projects consisted of two ‘tracks’. The first relates to the permits that every government requires for mining projects to operate – including health and safety, environmental issues and what is known as ‘government take’. Where applicable, these permits would also include stabilisation agreements, devised to guarantee to the investor (most likely an investor foreign to the country where the resource is located) that the tax and royalties regime under which the decision to build and operate the project was adopted would survive for the life of the project without amendments that would alter the basic economic parameters – or at least for a period long enough to guarantee repayment of the investment. The second track, in Mr Cooney’s view, is the effect of globalisation, which has allowed local communities to gain unprecedented levels of knowledge about the issues they might face with a particular project, as much as support in their negotiations with the relevant company or companies from the NGO community and other sectors sympathetic to their position. The two phenomena combined dramatically increased the bargaining power of local communities to levels that were unknown at the time.

From that observation, he drew the following conclusions:

The objective of conventional political risk management at the national level was to obtain and sustain a ‘government permit’ to operate. What was the objective of political risk management focused on local communities and their global allies? It could not be called a ‘community permit’, as that would have implied a non-existent local legal authority, and would have overlooked the role of the international allies of communities. So I decided to describe the objective of local political risk management as a ‘social licence’, a term that had a nice verbal parallelism with ‘government permit’ but was necessarily more nebulous.

As with political risk management at the national level, a mining company needed to maintain an ongoing positive relationship with local communities and their allies by demonstrating that they were acting in a manner consistent with local expectations and demands. Failure to maintain government support could lead to the suspension of the mining permit. Similarly, failure to maintain community support could lead to the suspension of the ‘social licence’. That was what I intended the term to emphasise. It was simply an analogy or metaphor that highlighted the equivalence of the political risk management challenges at the community level with those at the governmental level.

In retrospect, I correctly foresaw that political risk management by mining companies during the years after 1997 would follow two separate tracks; one focused on national governments and the other on communities. What I failed to anticipate was that the term ‘social licence’, which I had used simply to illustrate the reality of this two-track process, would become a major reference point in the discussion about the relationship between mines and communities.

Later, he adds:

[I] remain surprised by how much attention the concept has attracted. For me, the term was descriptive of a reality that mining companies faced on the ground. Since then, the term has evolved into a prescriptive norm that mining companies should endeavour to achieve. . . . ​‘Social licence’ has been viewed positively by some as a useful guide and negatively by others as a harmful impediment to effective decision-making about major industrial projects. Apparently, that is the peril inherent in a metaphor.

This article is commands attention for two reasons. First, it was of an intellectual honesty that is not frequently seen; and second, it somehow came to prove that there was something wrong, if not with the notion, at least with the intensity and widespread use the term had gained. The term took on a life of its own, beyond the intent of its creator. A metaphor had become a crucial requirement that meant, for a mining company regarding a particular project, the difference between success and failure.

Is social licence consistent with the rule of law?

The elements that have been presented so far can be summarised as follows:

  1. a long history of struggling to make the rule of law the norm rather than the exception (in reference to Argentine history; although Rudolph von Ihering6 suggests in The Struggle for Law, published in 1872, that the concern is older and universal);
  2. a constitutional norm whereby attempting to express the will of the people and not being a representative elected in accordance with the applicable law is – as harsh as it may seem and sound – a crime; and
  3. a coexisting principle under which, to create and operate a mining project, a company needs the social licence of the community, understanding that, in that context, social licence does not mean the legal permits, licences and other approvals that community might have formally given to the project through various government bodies (local executive branch or legislature) because, by definition, social licence is different from a legal licence.

The aim of this chapter is to demonstrate that these three elements do not work well together. In other words, if understood and applied as if it were a strict principle, social licence (point (3) above) may very well work against points (1) and (2).

Argentina provides some examples of that.

Mining activity has been legislated by the national code adopted by the National Congress following a mandate in what is now section 75(12) of the Constitution: it is within the authority of the National Congress to adopt a code on mining. As per this norm, the mining code was adopted in the late nineteenth century and it has set forth the principle that mining activity is of public importance. This notion has some legal and practical consequences as it is the ground for the code mandating that easements for mining purposes are to be imposed on surface owners if the project’s needs so indicate.

In summary, the duly elected representatives of the people, gathered in the National Congress in their role as legislators, have decided that Argentina shall favour the mining industry on the understanding that it is vital to the country's economic development. This is the law.

In spite of what the law mandates (ie, mining is a fundamental activity and nobody other than the duly elected officers may represent the people), several communities around the country have decided that they do not support mining. In 2002, the local community in a town called Esquel, in the Andean lake region of Patagonia, started a series of actions that eventually led to Meridian Gold – a public mining company whose shares plummeted as a result – suspending all activities in the project.

Those community actions triggered similar activity in other locations. No a la Mina, an NGO, claims on its website7 that 100 communities around the country are opposed to mining projects.

Under the social licence standard, the Esquel project could not proceed; and, to date, it still has not. The reason was that it clearly lacked social licence; the company’s decision to build and operate was inconceivable. Under the rule of law standard, the company had all permits in place – it was entitled to go ahead – but the social licence principle prevailed.

This was a leading case. Whether or not the number of communities, as referenced by No a la Mina on its website, is actually 100, the fact remains that the level of opposition to mining projects has expanded.

Activism has replaced deliberation in the appropriate locations and legislative debate. It is true that activism has developed, at some points and under certain circumstances, into law. Where that has happened, the rule of law is saved, but in many instances, mere activism is what stops a project. And where those situations occur, in spite of the existence of valid government licences, permits and approvals, it is clear that the rule of law has suffered. The issue is that activism has been legitimised by the notion of social licence.

The following is relevant in supporting the view that the rule of law can be eroded by social licence when social licence is given undue importance:

But the Rule of Law is not just about government. It requires also that citizens should respect and comply with legal norms, even when they disagree with them. When their interests conflict with others’, they should accept legal determinations of what their rights and duties are. Also, the law should be the same for everyone, so that no one is above the law, and everyone has access to the law’s protection. The requirement of access is particularly important, in two senses. First, law should be epistemically accessible: it should be a body of norms promulgated as public knowledge so that people can study it, internalize it, figure out what it requires of them, and use it as a framework for their plans and expectations and for settling their disputes with others. Second, legal institutions and their procedures should be available to ordinary people to uphold their rights, settle their disputes, and protect them against abuses of public and private power. All of this in turn requires the independence of the judiciary, the accountability of government officials, the transparency of public business, and the integrity of legal procedures.8

Also, as follows, regarding the practical implications of this matter in the decision-making process:

Predictability is often cited as a Rule-of-Law virtue. In his well-known recent book on the subject, Tom Bingham indicated that one of the most important things people needed from the law that governed them was predictability in the conduct of their lives and businesses. He quoted Lord Mansfield to the effect that: [i]n all mercantile transactions the great object should be certainty: . . . ​it is of more consequence that a rule should be certain, than whether the rule is established one way rather than the other. (Lord Mansfield in Vallejo v Wheeler (1774) 1 Cowp. 143, p. 153 (cited by Bingham 2010: 38).)

[N]o one would choose to do business . . . ​involving large sums of money, in a country where parties’ rights and obligations were undecided. (Bingham 2010: 38.)

[A]nd knowing that one can count on the law’s protecting property and personal rights gives each citizen some certainty about what he can rely on in his dealings with other people. The Rule of Law is violated, on this account, . . . when the norms that are applied by officials do not correspond to the norms that have been made public to the citizens or when officials act on the basis of their own discretion rather than norms laid down in advance. If action of this sort becomes endemic, then not only are people’s expectations disappointed, but increasingly they will find themselves unable to form expectations on which to rely, and the horizons of their planning and their economic activity will shrink accordingly.9

Conclusion

Mining, like other extractive industries, has been under intense scrutiny for various reasons, at different levels, during the past 50 years. In some provincial jurisdictions within Argentina, the risks (real or perceived) associated with open-pit mining and the use of cyanide has led those jurisdictions to ban either one or both. Whether right or ill decisions from a political, economic or constitutional standpoint, the existence of laws restricting mining practices or the use of certain chemicals is part of the legal landscape and, as such, companies must deal with it and, to a point, accept it. Companies affected by such laws may take action to ensure that policy and lawmakers are well informed and that decisions are adopted as a result of a process conducted rationally. Where appropriate, companies may take legal action and seek a remedy from within the legal system as devised by constitutional rules. In practice, however, the will to ban mining, as much as the opposition to a particular project, is often channelled through other means. This is the case in countries in which the legal institutions are, for a variety of reasons, weak.

Reality shows that, where legislative bodies and the judiciary are regarded with disrespect, social demands are made, bypassing republican institutions. Even violent means are sometimes used.

Not only to prevent violence, but simply to contribute to social advancement in developing nations, the importance of the role of law in communities’ lives can never be exaggerated.

In James Cooney’s words, ‘the term (social licence) has evolved into a prescriptive norm that mining companies should endeavour to achieve’.

The concern, however, is that social licence might have helped to undermine the importance of the rule of law, which, as Professor Jeremy Waldron described, is ‘not just about government. It requires also that citizens should respect and comply with legal norms, even when they disagree with them. When their interests conflict with others’, they should accept legal determinations of what their rights and duties are’.