The aspects of legal problems in mining projects and procurement are more often than not overlooked. But since increasingly as the mining projects have started to involve the contractors during and after the mining projects for execution and maintenance of operation, more and more legal problems are arising. However there may be many facets of legal problems involving mining projects but in the discussion here job contracting related legal problems and the likely dispute resolution mechanisms will be discussed. Increasingly the legal problems will be complex and more and more they will have bearing in the awarding contracts, project completion, and cost overruns and thus, more and more they will be important in mine planning. Often the technical people shrink at the thought of legal problems but it is however important that they learn some fundamentals of dispute resolution for their own sake.

But we will start with a brief glossary of terms here.

Brief Glossary

• Arbitrate:   to officially settle an argument or disagreement between two people or groups. Generally an empowered body (a court, a third party consultant or a confidante of both the disputing parties) appoints a committee to arbitrate in a dispute. It is generally a step before, if not settled by arbitration, litigation.
• Arbitration:  the official process of settling an argument as in arbitrate.
• Tender:  is the official process of inviting offer to supply goods or carry out work at a stated price. A tender provides equal opportunity to the interested parties like contractors, suppliers and manufacturers to carry out a work with the interests of all parties like client and server protected as per tender agreement.
• Tender agreement:  A tender agreement is supposed to be a legally binding document specifying the terms and conditions of the proposed work regarding risk, liability and responsibility.
• Litigant:   a person or a group who is making or defending a claim in the court of law
• Litigation:  the process of making or defending a claim in the court of law.
• Tribunal:  a type of court with the authority to deal with a particular problem or disagreement.
• Legal Forum :  In the absence of a proper court, a mutually agreed forum of legal experts is a place where parties can exchange opinions and ideas on a particular issue.
• Multiparty Arbitration Agreement:  is a separate document to which all the parties to the various project documents are party. It provides a uniform mechanism for the resolution of disputes under each of the project documents. Each project document will provide for the same dispute resolution clause.

Job contracting types:

Job contracting to the outsider (s) on the basis of tender is today a potent method of improving efficiency and reduction of cost. There are many types of job contracting some of them may be as follows:

1. Installation of large equipment.
2. Infrastructure development.
3. Project Management.
4. Mining work
5. Supply Chain work from raw material sourcing to order and payment realization.
6. Some or all of the above, together.

All the above work can be in a bipartite or multiparty framework. In a bipartite framework there may be only two groups, e.g., the owner of the mine and the contractor. In the multiparty framework there may be a number of contractors (or subcontractors as they are also called) mutually in agreement as per the engagement of work

Dispute Types

The dispute types are often of various degrees of complexities and some of them

are like the following and arising out of situations like:

1. Delayed payment.
2. Incomplete specifications of work.
3. Inconsistent sharing of money and property.
4. Jurisdictional trespassing in job or property sharing.
5. Unjustified (justified for the others) claims.
6. Misunderstanding.
7. All or some of the above together.

Complexities of Dispute

The contracting business, more particularly the contract mining business has traditionally been a very lucrative one for both contractors and principals. Contract mining agreements generally govern a relationship between the contract miner and the owner over a period of years, and the fees payable under these agreements can run into hundreds of million dollars. The cost of contractors in mobilizing to often very remote sites are also significant, as are the capital costs of acquiring and maintaining an appropriate mining fleet for the life of the project. A failure to ensure at the tender stage, that the drafting of the project’s contractual documentation is protective of proper interests may cost the owner/or the contractor millions of dollars over the life of the project. In many situations however the practicalities of the situation and the length of the projects will influence parties to negotiate a mutually acceptable resolution. This is often due to the fact that the owner needs the contract miner to continue production, that there are few owners and contractors in the industry, and the projects can be very lucrative for the owner, thus allowing them the opportunity to be generous.

In the event of a dispute parties need to be particularly aware of ensuring the reliability of the dispute resolution mechanisms as well finding a sure course for determination at the end of the proceedings. Circumstantial and procedural complexities of dispute can arise from many areas and they may be of the following types:

• the contract mining agreement either vests jurisdiction in local courts, i.e., either in local, state or country courts. This may or may not provide the parties with a degree of comfort in relation to the administration of the litigation process. Furthermore they may be where the decision of the local is sought to be enforced internationally.
• the dispute resolution clauses under the contract mining agreement fails to articulate the laws which will apply in a procedural sense (the contract may have a law specified but in the case of application jurisdictional problems arise) leaving the issue of the law to govern any dispute resolution process as unclear when the process suffers from clarity in actual situation.
• the issue of provisional measures (injunctions and other matters) subject to pending decisions or anything else is not addressed in the dispute resolution clause.
• the dispute resolution clause is drafted in a manner such that the decision of the arbitrators or court is unable to be enforced outside the jurisdiction in which it is made.

Dispute Resolution Clause

The above considerations are to be kept in mind when preparing the dispute resolution clause. While the focus during the tender process (work specifications, modifications, fine tuning and redrafting of document, if required and awarding) is often on the estimating the task and substantive terms of any agreement, considering the dispute resolution clause is at least as important –if not more so. This is because the terms of dispute resolution clause are the insurance that parties end up in dispute, that dispute be resolved in as efficient and expeditious manner as possible .A failure to do so can result in greatly increased cost and legal uncertainty, and can have serious commercial consequence to the parties.

To Arbitrate or to Litigate?

Generally said  , the litigation is more productive when the owner and contractor of mining are within a country than in another country for the simple reason that the country’s legality may be well understood and they both have faith in the system. At the outset ,it is important to note that procedural and substantive laws of the forum( the contract may have provisions of a legal forum to be constituted in the event of dispute) generally control litigation. Assuming that local laws do not restrict the party’s ability to do so, parties may, however with certain limitations to agree on the choice of a particular legal order to govern their contract and the selection of forum to hear any dispute. However for the following reason litigation may be less favourable in company disputes than arbitration for the following reasons:

a.       In many countries or jurisdictions there may not be any legal machinery to effectively deal with litigation. Also a verdict in one country may not be upheld in another country due specific situations.

b.      Mostly companies working in a relatively unknown country may suspect of a bias working against them and for similar reasons may not like a hometown jurisdiction of the contractor/or owner.

c.       Many secrets that all companies protect from outsiders , may be out in the public in case of a legal forum working.

d.      The local language of the proceedings may be not well understood or fought against.

e.       Practical difficulties of attending the sub judice case with clarity of understanding of the proceedings also go against litigation.

Global mining contracts often involve parties from different states and countries doing business together in the same or third country, or at a minimum both owner and contractor being from different jurisdictions. The contractor is likely to enter into a number of supply contracts and subcontracts with international companies and it is generally sufficient to ensure that there is a degree of symmetry in respect of the way in which the various dispute resolution clauses operate. Ideally, such proceedings between multiple parties can be consolidated into one set of proceedings.

Arbitration has grown in favour among international owners and contractors primarily because of its speed, confidentiality and efficiency. Unlike a court process, the dispute is largely out of public view and because of its private nature, the parties can agree that the process will move on at a an expedited pace. Particularly in international projects, it is also often the case that an arbitration clause can provide for easier enforcement of any arbitral award under the 1958 Convention on the Recognition and enforcement of Foreign Arbitral Awards (“ New York Convention”), to which 134 countries are signatories, than the international enforcement of the decision of domestic court which is antiquated, costly and time consuming treaty arrangements.

There are however other routes also. In the event arbitrations selected as an option, there are a wider variety of different sets of arbitral rules that can be adopted, the most prominent of which are the Rules of Arbitration of the International Chamber of Commerce (“ICC Rules”) and the United Nations Commission on International Trade Arbitration Rules (“ UNCITRAL Rules”). In respect of the former, these are generally managed by the International Court of Arbitration on Paris, and the latter are generally managed by a nominated center, of which there a re a number in different jurisdictions like in Singapore and Cairo, or the permanent court of arbitration at The Hague.

There are also a number of other sets of rules, including for example the American Arbitration Association International Arbitration Rules (“AAA Rules”) and the London Court of International Arbitration Rules (“ LCIA Rules”).

Adoption of these rules helps in the following ways:

1.      Each of these bodies produces “ Sample Clauses” that can be inserted into contracts to adopt that particular set of rules.

2.      Most commonly adopted are ICC Rules. This is partly because a number of standard forms of construction contract commonly used international projects specify ICC arbitration.

In litigation, mostly the operations come to a halt as per the observations of the concerned court. Compared to that in the arbitration there may be a clause entered to suggest that the operations will continue even if the parties are in the process of arbitration to avoid a costly halt to mining operations on site.

In arbitration, the parties involved have a choice to select the arbitrators or they are in a position to nominate them. This is not always available from the local judiciary. Often the process of arbitrations one where the parties appoint an arbitrator each and the appointed arbitrators chose a chairman of the committee to look after the arbitration proceeding. When doing business in an unknown jurisdiction, possibly in a country where the judiciary is not well developed or efficient, particularly in complicated projects it is important that the parties have confidence in arbiters in matters of experience in arbitration, mining and construction industries generally.