Disputes against governments under investment treaties: a growing trend in the mining industry in 2020

Mining companies, from micro-cap to the world’s largest mining companies, have increasingly resorted to international arbitration claims against states under investment treaties in the course of 2020.

Of the approximately 50 cases brought before the International Centre for the Settlement of Investment Disputes in 2020, more than 20% concern mining concessions. This is a significant increase on previous years (2019: 10%; 2018: 10%; 2017: 0%).

The combination of a global rise in resource nationalism and an increasing electoral demand for governments to take strong and decisive action on environmental grounds means that the number of international arbitrations brought by mining companies against states will likely continue to increase in 2021. Such disputes could arise as a result of any number of measures taken by a state against mining investments, such as (but not limited to) the revocation or cancellation of a mining licence; a change in local laws; or an export ban.

In such circumstances, investor-state arbitration can be a powerful tool for investors. First, the availability and use of a claim under an investment treaty can be utilised as an effective negotiating tool with foreign governments. Second, if no settlement with the government can be reached, in case of success international tribunals can order states to pay damages to the investor. Third, if the state does not comply with an award ordering the state to pay damages, such an award can be enforced against the state in most jurisdictions.

The rise in claims brought by mining companies may also be explained by the growing role played by third-party funders in international disputes. Third-party funding allows an investor to bring a claim without the fees and costs associated with that claim affecting the investor’s balance sheet or having an impact on its cash flow.

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