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Part B: Mineral Rights - Part B-3: Large Scale Exploitation - 26. Large Scale Exploitation Licensing | 26.12 Revocation of Licence

A provision in which a licence is withdrawn and/or taken away by the Regulating Authority is referred to as revocation of the licence. Whereas suspension or monetary penalties may be imposed for various failures to comply with health, safety, environmental protection and other qualitative obligations – thereby providing an incentive to comply while protecting workers and communities from the consequences of such breaches - revocation of the licence is the ultimate penalty, the grounds for which should be limited and clearly stated.

The revocation provisions of the law should also state whether the ground for revocation is one that can be cured and, if so, within what timeframe after notice. One approach shown below is to differentiate between licence maintenance obligations, on the one hand, and operating obligations, on the other hand. Licence maintenance obligations are limited to a small number of very objective obligations that must be performed by specific deadlines – such as the commencement of work within a specified period after issuance of the licence and annual payment of licenced area fees. These obligations may be strictly enforced. That is, a failure of timely compliance cannot be remedied (although it may be excused on grounds of force majeure). All other obligations are operating obligations under this approach. Failures to meet those obligations are generally sanctioned by orders to suspend operations until the failures are remedied. Depending on the type of obligation involved, the sanction may be a fine in lieu of or in addition to an order to suspend operations. This approach provides security of tenure to investors in mining projects by not endangering the validity of their licence, while motivating them to remedy compliance failures by preventing them from operating the licenced mine until the failure is cured, and/or imposing financial penalties. A variation on this approach is to provide that if operations are suspended for more than a certain time limit – such as 6 months or one year – without remedy of a compliance failure, then that situation becomes grounds for termination of the licence.

Another approach to revocation is to describe or list the types of major compliance failures that may lead to revocation of the licence. These may include, among other things, failure to commence production within a certain number of years after the issuance of the licence or a voluntary suspension of operations for more than a specified period of time. Such safeguards are often included in mining laws in order to prevent companies from “sitting” on a deposit without developing it or marketing the resources for reasons of corporate strategy that are inconsistent with the State’s development goals. Under this second approach, the revocation procedure should, and virtually always does, provide for notice to the licence holder in writing of the compliance failure, a reasonable statutory period of time within which the holder has the opportunity to present evidence that compliance was in fact made or to remedy the deficiency, and a second notification that either the condition has been remedied or that it has not and the licence will be revoked. This approach presents the licence holder with greater risk of loss of licence, but seeks to balance that with a greater opportunity to cure any and all compliance failures.

A third approach is to provide that the licence may be revoked for a much broader variety of compliance failures. This approach vests greater discretion in the Regulating Authority to determine whether to revoke the licence for a particular failure, accumulation of failures, or pattern of repeated failures. Notice in writing to the licence holder and an opportunity to present evidence of compliance or to remedy the failure within a reasonable period of time is always an essential element of this approach. Its advantage is flexibility. The regulatory authority need not revoke the licence for failures considered minor, but may revoke the licence for consistent repeat failures that cumulatively amount to unsatisfactory compliance by a deficient operator. This approach is generally considered by investors to provide insufficient security of licence unless the regulatory authority has an established track record of reasonable enforcement in which they have confidence.

26.12. Example 1:

Article [_] Reasons for the Withdrawal of an Operating Licence

(1) The failure to comply with Article 286 (on the non-payment of annual surface area fees and failure to commence work within the legal time period) shall constitute grounds for the operating licence to be withdrawn.

(2) Without prejudice to the provisions of Articles [_] to [_] of the present [Code][Act][Law] (on offences and penalties), any failure to comply with obligations relating to the operations listed in chapter [_] of title [_] of the present [Code][Act][Law] shall be penalised firstly with fines and/or possibly with an order to suspend operations or, in the event of an offence, by prosecution.

(3) However, the following acts shall result in the operating licence being withdrawn:

(a) fines imposed for failing to comply with obligations relating to the operations are not paid within a period of [three months] from when the operating licence holder is notified of the fine, or

(b) an order to suspend operations being carried out under an operating licence is not lifted within a period of [twelve months] from when the Operating Licence holder is notified of the order of suspension, due to the fact that they still have not rectified the failure to comply referred to in the order of suspension in question,

Article [_]: The Procedure for the Withdrawal of an Operating Licence

(1) The Mining Cadastre shall immediately notify the holder of the decision to withdraw the licence or permit and shall post an announcement in a room indicated in the Mining Regulations.

(2) Notification of the decision to withdraw the licence or permit creates a right to appeal as provided for in Articles [_] of the present [Code][Act][Law] (on arbitration appeal).

(3) Such appeals must be brought within thirty days of the decision being posted in the Ministry of Mines with jurisdiction.

(4) Should an appeal not be brought within the time period given above, the decision to withdraw the licence or permit shall be registered in the appropriate register and published in the [Official Gazette].

(5) Where an appeal is brought against a decision to withdraw a licence or permit, the mining right shall remain valid for the duration of the proceedings. However, there shall be notice of the decision and the appeal proceedings which have been brought, in the register of granted licences and permits.

Article [_]: The Cancellation of Mining Rights

(1) Mining rights shall be cancelled by [the Regulatory Authority] when the holder has not brought an appeal against the decision to withdraw the licence or permit and when the time period for an appeal has lapsed or the appeal has been dismissed.

(2) The decision to cancel a licence or permit shall be made on the day the appeal is dismissed or the last day of the period within which the appeal should have been brought.

(3) The Ministry of Mines shall be notified of the decision of the to cancel the licence or permit and shall register it in the register of cancelled titles.

(4) The area which is the subject of a mining or quarrying right which has been cancelled shall return to the State.

Article [_]

(1) Holders of mining rights who have lost their rights and whose titles have been cancelled may not obtain new mining rights for a period of five years from the date on which the cancellation was registered in the register kept by the Ministry of Mines.

(2) In addition, the cancellation of mining rights does not have the effect of releasing the holder from their environmental and tax obligations.

Annotation

Drawn from the DRC’s mining law (2002), this example provides for revocation of the licence for failure to strictly comply with two specified licence maintenance obligations. This is a safeguard against speculation. If licence holders cannot commence operations within the required timeframe, or fail to pay the required annual licence maintenance fees on time, their licences are revoked.

Whereas failures by licensees to comply with the numerous other operating obligations are penalized in the first instance by suspensions of operations or monetary fines, if the fines are not paid or the cause of the suspension is not corrected within stipulated timeframes, then the exploitation licence will be revoked.

This bifurcation of obligations and the related sanctions into two categories (licence maintenance obligations and operating obligations, respectively), and the clarity and objectivity of the two obligations that are strictly enforced by revocation of the licence, provides security of licence to licensees by minimizing their risk of loss of the licence. It also ensures prompt and complete payment of the fees that fund the work of the Regulating Authority.

Enforcement of the various operating obligations by means of fines and suspension orders requires attentive monitoring by the authorities, but incentivizes licence holders to correct the deficiencies in their operations while maintaining their licences. Because some licensees will be unable to pay the fines or make the necessary corrections, the example provides that they will lose their licences if they have not paid their fines within three months or made the necessary corrections within one year of a suspension order.

The example includes due process procedures for the revocation of the licence, including a right of appeal during which the status quo is preserved.

26.12. Example 2:

Article [_]

(1) Subject to the provisions of this section, the [Regulating Authority] may suspend or cancel a mineral concession if the holder thereof—

(a) fails to make any of the payments required by or under this [Act][Code][Law] on the due date;

(b) contravenes any provision of this [Act][Code][Law] or the conditions of his mineral concession or the provisions of any other written law relating to mines and minerals;

(c) dies, becomes of unsound mind, becomes insolvent, commits any act of bankruptcy, enters into any agreement or scheme of composition with his creditors, takes advantage of any written law for the benefit of debtors, or, in the case of a company, goes into liquidation, except as part of a scheme for its reconstruction or amalgamation.

(d) makes any statement to the Government in connection with his mineral concession which he knows or ought to have known was false; or

(e) for any reason is or becomes ineligible to hold a mineral concession under the provisions of section 6 (on the types of individuals and companies that are not eligible to receive mineral rights).

(2) Before suspending or cancelling a mineral concession under paragraphs (a) and (b) of subsection (1), the [Regulating Authority] shall give the holder thereof notice in writing specifying the particular failure or contravention and calling upon the holder to remedy the same within such period, being not less than 30 days, as may be specified in such notice.

(3) If the holder of a mineral concession fails to remedy any failure or contravention specified in paragraphs (a) and (b) of subsection (1) within the period specified in a notice issued under subsection (2), the [Regulating Authority] may, by notice to the holder thereof, suspend or cancel the mineral concession forthwith.

Annotation

Drawn from Botswana’s mining law (1999), this provision provides the Regulating Authority with discretion to suspend or cancel a licence (or not) for any of the grounds stated in Article 76. This form of the third approach described in the introduction above is in contrast to the approach under the 2002 Mining Code of the DRC which makes a distinction between the grounds for cancelation and the grounds for suspension. The DRC Code requires cancellation for failure to comply with the two requirements stated in Article 286, and provides for possible fines and suspensions for everything else. By contrast, the regulatory authority in Botswana may, but is not required to, revoke a licence for any violation of the mining law or licence conditions or any other related law.

Whereas on paper this provision does not appear to provide security of licence to licence holders, in fact Botswana is consistently the most highly rated mining country in Africa in the Fraser Institute surveys, due to the confidence of investors in the fair and reasonable implementation of the mining law by the regulatory authority, together with a generally good business climate.

Thus, matching the type of revocation terms with the country’s administrative capability and reputation is important. In the DRC, where the general business climate is considered poor and there is a low level of trust in the administration generally, an approach that circumscribes administrative discretion has worked in attracting investment and developing the sector. In Botswana, where the general business climate is considered favourable and there is a high level of confidence in the administration, a more flexible discretionary approach to the grounds for revocation of licence (coupled with a procedure for notice and an opportunity to cure) has worked well.

Elsewhere, Article 47 of the South African MPRDA of 2009 is similar to the approach under Botswana’s law, but the powers of the Regulating Authority are more circumscribed in the South African law.