Ecuador establishes rules on force majeure in mining

Ecuador's energy and mines ministry has established regulations for mining concessionaires to request and trigger the force majeure clause in their contracts.

Minister Fernando Santos issued instructions establishing that mining companies that submit a request to declare force majeure or a fortuitous event must comply with one of the following requirements:

• The event cannot have been foreseen.
• In the event that it could be foreseen, what actions were taken to avoid it.
• That, as a consequence of the alleged fact or occurrence, it has been impossible to carry out normal mining activities.
• That the act or fact that is alleged is impossible to resist.
• That the alleged act or occurrence is not a consequence of actions attributable to the mining concessionaire.

Once the application is submitted, the ministry has 15 days to accept it or, if not considered complete, give the petitioner a period of 10 days to clarify or complete it.

After that period, the application will be accepted or rejected within a period of 15 days.

Those who obtain a declaration of force majeure must continue to comply with legal, administrative, economic and environmental obligations, particularly the payment of annual license fees, reporting and commitments related to the community relations plan, among others.

As long as the force majeure lasts, exploration or production works will be halted, depending on the phase of the project, and minimum and agreed investments will also be suspended. These must be evaluated once the suspension has been lifted.

Industry representatives consider that the regulation of force majeure declarations will give more clarity to companies, especially those that have projects that have been affected by problems such as the COVID-19 pandemic, social conflicts, court orders to suspend projects or illegal mining.

“The order is a very good measure so that, for example, when concessions are attacked, the concessionaires can suspend the works but maintain their projects and the State is not harmed because the companies must continue paying the fees and comply with environmental obligations, while the State gives them guarantees to resume activities,” Andrés Ycaza, a lawyer for the Ecuadoran mining chamber, told BNamericas.

The instructions on the declaration of force majeure join another order issued on December 27, which regulates the terms for the exploration and exploitation of mining concessions, which is seen by the industry as a step towards improving the legal security of the industry.