After many years of discussions between the relevant stakeholders in the mining sector in the Democratic Republic of Congo (DRC), the revision of the Mining Code (the Code) and its regulation was adopted in 2018. The Code forms part of the trend of recent reforms of mining legislation in Africa. These reforms seek, inter alia, to better the interests of the State in the mining sector. In particular, the reforms brought about the following revisions:
(i) increasing the non-contributive participation of the State in the capital of mining companies from 5% to 10% (with a further 5% being transferred to the State with each renewal of the permit;
(ii) establishment of a special tax on “super profits” and a registration fee of 1% of the transfer price of the mining right;
(iii) moderate but widespread increase in mining royalty rates with the introduction of the “reserved substances” category (i.e. cobalt, germanium, and coltan), subject to a 10% royalty – the tax on the profits of mining companies remains unchanged at 30%;
(iv) repatriation of 60% of export earnings (compared to 40% previously);
(v) participation of mining licence holders in the industrialisation of the country by obliging them to treat or have their minerals traced locally, except for annual exemptions granted by inter-ministerial decree;
(vi) obedience of mining companies to sui generis regimes with regard to industrial responsibility (i.e. environmental regimes) and societal responsibility (philanthropic regimes); and
(vii) with regard to the operator of a non-contracting state of the International Centre for Settlement of Investment Disputes Convention, the prohibition of appointing an arbitral tribunal in such non-contracting state and the law to be governed by such non-contracting state. Generally, the above-mentioned developments are fair and reasonable and appear to be welcomed by the majority of stakeholders – however, in some quarters this view is not necessarily shared.
However, there are certain parts of the reform that may be problematic, particularly with regard to the DRC’s international commitments. The reduction of the fiscal stability clause in mining titles from 10 to five years is problematic due to the substantial investments required for mining projects – when dealing with such long-term projects, it is critical that investors are provided with sufficient predictability during the project period.
Accordingly, it is counterproductive to reduce the fiscal stability period to five years. Given that this reduction is applied retrospectively to the exploitation mining rights already granted on the date of entry into force of the new Code, it disrupts the general economy of existing mining projects despite the protections afforded to investors by certain bilateral investment protection agreements and the Common Market for Eastern and Southern Africa Treaty.
Furthermore, the principle of equality of treatment and non-discrimination based on nationality, enshrined by these (common market and free trade area) treaties, is undermined by the obligation to allocate 10% of the capital of mining companies to national natural persons (such as by reserving subcontracting activities to companies promoted by Congolese nationals even if, in this respect, the one-off derogations provided by the Law no. 17/001, of 8 February 2017, may somehow mitigate the impact of such requirements). Accordingly, the application of these provisions of the Code may therefore create commercial uncertainty, fuel disagreements or give rise to litigation.
Dentons takes this opportunity to thank Olivier Bustin, PhD, registered attorney at the Bar Associations of Paris, Kinshasa/Matete and Lisbon, Vieira de Almeida & Associados, visiting Professor at Bel Campus University in Kinshasa for his contribution to this month's newsletter.
- Law no. 18/001, of 9 March 2018, modifying and completing the Law no. 007/2002 of 11 July 2002 concerning the Mining Code.↩
- Decree no. 18/024 of 8 June 2018, modifying and completing the Decree no. 038/2003 of 26 March 2003, on the mining regulations.↩
- As per Decree no. 18/042, of 24 November 2018.↩