THE CHALLENGES AND LEGAL IMPLICATIONS OF SECURING THE OCCUPATION OF LAND REQUIRED FOR PROJECTS IN WEST AFRICA 28 OCTOBER 2014 Nicolas Heurzeau, Of Counsel, +33 1 53 57 78 55, nicolas.heurzeau@hsf.com
OUTLINE What will be discussed? Securing Project Lands and implementing involuntary resettlement activities Why are these activities high-risk? Hard sanctions and increasing risks How can companies mitigate risks and address legal implications? 8 principles to remember 2
BY THE END OF THE WORKSHOP You will be aware of the main risks, complexities, and legal implications associated with securing Project Lands and implementing the involuntary resettlement activities required for the development of mining and infrastructure projects in West Africa You will be able to build on practical recommendations to develop an appropriate strategy to mitigate the identified risks 3
WHAT WILL BE DISCUSSED? SECURING PROJECT LANDS AND IMPLEMENTING INVOLUNTARY RESETTLEMENT ACTIVITIES
NO LAND, NO PROJECT (1/2) Securing Project Lands is a challenging obligation and an operational priority 3 main green lights are required to start works: Environment authorisations Land access and occupation Permits and approvals Scope of projects concerned: Greenfield and brownfield mining and associated infrastructure projects in development Onshore and offshore infrastructure Permanent and temporary land occupation A question of scale depending on the impact Up to a project within the Project for megaprojects State commitments purporting to secure land occupation are generally insufficient to guarantee effective land occupation 5
NO LAND, NO PROJECT (2/2) Unavoidable negative social and environmental impact must be mitigated Project Affected Persons ( PAPs ): Individuals, households, family estates, lineages, communities (villages, etc.) Physically or economically displaced Type of impacts: loss of land, residential and non-residential structures, crops, trees, livelihood, access, customary usage rights, community infrastructure, etc. Impacted areas: perimeter of the infrastructure and major environmental impact areas PAPs must be identified and resettled and/or compensated: Surveys to determine the rights existing over Project Lands and PAPs eligible for resettlement and compensation ( R&C ) R&C activities Livelihood restoration Cultural heritage (graveyards, sacred sites, etc.) can also be affected 6
IT S ALL ABOUT LAND AND PEOPLE Sponsor s main goals concerning Project Lands: occupy Project Lands in a timely and cost-effective manner Land ownership is not always necessary comply with applicable laws and international standards build sustainable relationships with neighbouring communities and Government Social and community concerns: Food security - Disturbing life in the impacted communities: livelihood, tradition, history, etc. Land is part of the social organisation Regional differences Build strong community relations before implementing R&C activities Land concerns: do not forget to secure Land Rights excluding and taking priority over third parties Land and R&C Bear in mind: Short-term vision vs. long-term social performance Sensitive and highly political issue for West African States 7
ACTIVITIES AFFECTING HUMAN RIGHTS UN Guiding Principles on Business and Human Rights: A change of mindset requiring companies to respect Human Rights A methodology: assess and understand the impacts on internationally recognised Human Rights, avoid negative impacts, mitigate the negative impacts that cannot be avoided and ensure prompt remedy Examples of Human Rights which can be affected by involuntary resettlement activities: Right to own property Right to an adequate standard of living, including rights to food, sufficient housing and potable water Right to education and health Right to non-discrimination and rights of minorities Right to take part in cultural life Other and associated issues such as: Right to freely choose own residence, right to privacy, etc. Security and Human Rights: rights to life, liberty, security, freedom of peaceful assembly Local content and right to enjoy just and favourable conditions of work Project induced in-migration and management of its consequences 8
WHY ARE THESE ACTIVITIES HIGH-RISK? HARD SANCTIONS AND INCREASING RISKS
HARD SANCTIONS: A MAJOR RISK FOR THE PROJECT (1/2) Risks are high even for small-scale projects Safety issues (acts of violence) and risks of allegation of violations of Human Rights Death or injury of Project employees during protests by local communities Human lives are at stake Low levels of literacy in rural areas increase the risks of rumours and manipulations Loss of Social License to Operate 3 rd business risk facing Mining and Metal industries in 2014-2015 (4 th in 2013-2014 and 6 th in 2012-2013) Costs of conflicts with communities Operational risks: disruption, strikes, vandalism Legal and financial consequences: delays, mobilisation fees, etc. Conflicts can cost a lot during operations - Worst case scenario Loss of access to finance (IFC, EP Financial Institutions, State-backed ECAs, etc.): condition to the bankability of projects Loss of business opportunities through Human Rights disqualification 10
HARD SANCTIONS: A MAJOR RISK FOR THE PROJECT (2/2) Reputational damage Increasing external scrutiny Non-judicial complaint mechanisms (OECD, IFC) Collateral damages for investors and shareholders: impact on the company s share price and on the future sale of projects, divestment Administrative sanctions (up to the suspension and/or withdrawal of mining rights) and revisitation risk Mining licenses revoked in Zambia in 2013 and in Chad in 2014 for compliance issues Herakles Farm agribusiness project suspended in Cameroon for compliance issues Requirements of consultations with affected communities before an exploitation permit is granted in DRC Increasing domestic and international criminal and civil law suits African Court of Human and People Rights (2013): suspension of Kenya s plans ordered as provisional measure Claims by local communities against companies for non-compensated negative effects Risk of directors liabilities (non-compliance with applicable standards) Misleading advertising, etc. 11
RISKS ARE INCREASING (1/2) Increasing external scrutiny and skyrocketing criticisms/claims on land grabbing Internet and social networks Communities are connected: mobile phones, etc. Capacity building of States, NGOs and communities (ECOWAS Directive) Examples of recent reports from NGOs on involuntary resettlement activities in Africa Trend of NGOs to monitor compliance with commitments: Practise what you preach You wouldn t want your Project to have its own NGO report 12
RISKS ARE INCREASING (2/2) Increasing incorporation of Human Rights into applicable laws No stabilisation Implementation of the Africa Mining Vision New mining codes transposing the ECOWAS Directive (Guinea, Côte d Ivoire, etc.) New laws on the protection of indigenous people, sustainable development, resettlement, etc. Regional mining codes in preparation (ECOWAS and WAEMU) Increasing reporting requirements on CSR in Western and African jurisdictions Debates on a binding treaty on Business and Human Rights (beyond UNGP) Increasing incorporation of Human Rights into agreements entered into with host States Model Mine Development Agreement Risks of domestic and international criminal civil law suits are increasing Recent claim in relation to land grabbing before the International Criminal Court Human Rights defence in international investment arbitration Human Rights and International treaties have equal value for States 13
INTERNAL RISK FACTORS AND ASSOCIATED RISKS Internal risks: Economic and political pressure to accelerate projects (Government, engineers, contractors, etc.) Limited resources due to budget restrictions ACCELERATED TIMETABLE AND LIMITED RESOURCES = DANGER In practice, compromises are inevitable so mitigation of risks is required Lack of awareness of the complexity and risks of these activities Poor project management: good coordination and accountibility are necessary Associated risks: Land liabilities: Adequate due diligence required prior to M&A operations and construction Non-compliance can result in significant time and costs Risks not only carried by project sponsors, their shareholders and investors: Possible risks for lenders, buyers, users, etc. Other risks: security and Human Rights, local content and supply chain, speculation, project induced in-migration, impact on environment and water, etc. 14
HOW CAN COMPANIES MITIGATE RISKS AND ADDRESS LEGAL IMPLICATIONS? NORMS AND PRINCIPLES, CHALLENGES, LEGAL IMPLICATIONS AND PRACTICAL RECOMMENDATIONS
LEGAL NORMS No legal vacuum Continent level African Union: International treaties ratified by African States: African Charter of Human and People s rights (1981), ILO Convention 107 on Indigenous and Tribal Populations, etc. Africa Mining Vision (2009) and associated implementation Action Plan (2011), developments reinforcing the protection of rights of indigenous people, resolution on a Human Rights based approach to Natural Resources Governance (2012) Regional level: ECOWAS directive on the harmonization of Guiding Principles and Policies in the Mining Sector (2009) National level: Constitutions and mining laws, including new Mining codes transposing the ECOWAS Directive Other laws: Civil, Land, Planning, Forest, Pastoral and Water codes and associated regulations Specific rules for the protection of indigenous people in the Republic of Congo (2011), similar draft law in DRC, Liberia community rights law in respect of Forest Lands (2009) Recent developments: sustainable development (Gabon and Côte d Ivoire), Decree in Mozambique (2013) Administrative precedents (agriculture): not easily accessible Due diligence Customary law: source of law but some contradictions with written laws Nevertheless, rules are incomplete and not sufficient to perform involuntary resettlement activities 16
INTERNATIONAL SOFT LAW STANDARDS No longer soft law when incorporated in hard law (laws and agreements) UN Guiding principles on Business and Human Rights OECD Guidelines for Multinational Entreprises IFC Performance Standard 5 and other relevant IFC Performance standards (in particular 1, 7 and 8) and associated guidance notes Other relevant standards include without limitation: Equator Principles FAO guidelines on the responsible governance of tenure of land and forests, Free Prior and Informed Consent ( FPIC ), etc. Companies standards and policies Voluntary Principles on Security and Human Rights ICCM Sustainable Development Framework and resolutions Etc. 17
RELATIVELY CLEAR PRINCIPLES Corporate responsibility to respect Human Rights Free Prior and Informed Consent: transparency, consultations and negotiations Resettlement Action Plan ( RAP ) (incl. entitlement matrix) produced in consultation with stakeholders No worse off standard: at least the same situation after displacement and, if possible, better livelihood restoration Fair and equitable compensation before land occupation impact on the schedule Sustainable compensation: compensation in kind preferred for land-based livelihood with security of tenure for replacement land ( like for like approach) Payments made to the correct persons Fairness and non-discrimination Specific care for vulnerable groups to ensure the adequate protection of their rights Non-disturbance Avoid PAPs from becoming dependent on the Project Monitoring and evaluation (internal and external audits) Grievance mechanism 18
SPECIFIC CHALLENGES FOR IMPLEMENTATION IN WEST AFRICA (1/3) No one size fits all template model Land conflicts and pre-existing tensions that can be aggravated by projects Absence of land registration in rural areas: difficulty to identify eligible PAPs Violent conflicts on the boundaries of villages Poor survey methodology can generate speculation and vendetta Complexity of land rights: superimposition of legal and customary rights (and combination of collective and individual customary rights) on a same parcel of land Incomplete domestic laws, not always easily accessible and not always enforced Compliance with applicable laws is necessary but not sufficient Contradictions between applicable laws and international standards Numerous categories of land governed by specific rules Non-existence of legal institutions: consider time for creation Due diligence: important to obtain - as far as possible - applicable laws and regulations and relevant precedents Customary law sometimes contradicts with written laws Differences depending on locations 19
SPECIFIC CHALLENGES FOR IMPLEMENTATION IN WEST AFRICA (2/3) Western standards vs. African realities Government evacuation practices with no (or late) compensations ( déguerpissements ) Sensitive issue, capacity building and advocacy Governance issues Individual approach vs. community realities Difficult to secure replacement land in areas where there is a high pressure on land Difficult to determine replacement market value in the absence of a market (for land) Difficult to manage PAPs expectations: Imposed compensation in kind vs. request for cash and negotiations - The paradox of security of tenure Imposed instalments vs. request for immediate payments and negotiations Cultural challenges: Gender requirements (land title for women) vs. non-disturbance Different perspectives on time Possible adverse effects of any decision (purchase of replacement land, security of tenure vs. rotation/flexibility) Low level of literacy and of bank access in rural areas: bring the bank system into rural areas, training on bank account and savings 20
SPECIFIC CHALLENGES FOR IMPLEMENTATION IN WEST AFRICA (3/3) Limited capacities of local Administrations and practical difficulties enforcing legal texts Risks of serious violations of Human Rights by public and private security forces Possible conflicts between objectives CONCLUSION: Do not underestimate the complexity of these activities and the time required for their implementation Important preparation and learning curve Language issues (translations), time required for administrative procedures, etc. Care is required before any commitment to time schedule Legal uncertainty should be mitigated 21
OPERATIONAL ACTIVITIES WITH LEGAL IMPLICATIONS Numerous legal implications are not adequately covered by social and environmental consultants An emerging area of law in Africa contrary to more mature natural resources jurisdictions Selected examples of the legal implications of these activities include: Compliance with increasing legal requirements (laws, standards and commitments) Planning procedures to secure priority over Project Lands and to mitigate speculation risks Drafting and negotiating agreements with the State, contractors, PAPs, affected communities (and associated legal issues) Formalities to secure land rights and cancel pre-existing usage rights Permits and approvals required for implementation of these activities Contribution to capacity building and training of local administrations on legal aspects Legal aspects of SEIAs and RAPs (incl. entitlement matrix) Legal implications of voluntary commitments Agreements for the reimbursement of civil servants expenses (per diems) Risk mitigation, documentation and reporting Grievance mechanism and dispute resolution/litigation (incl. with financing parties) The level of legal implications increases with the scale of the Project Legal support is therefore required alongside other CSR professionals 22
PRACTICAL RECOMMENDATIONS TO MITIGATE RISKS (1/3) Common sense recommendations but rarely implemented in practice Acknowledge sponsor s responsibility and avoid short-term vision without using appropriate leverage and adequate control Do not rely on Government and/or contractors only for more cost-effectiveness and prompt implementation In practice, Project sponsor will bear most of the consequences of legacies Acknowledge that these activities are an inherent and necessary cost of Project development and that, in a risk management strategy, prevention is better than cure Adoption of a Human Rights policy Anticipation: start early Appropriate project management, coordination and schedule planning Mobilisation of sufficient resources - adapted to the magnitude of the Project Adopt a step by step approach and implement it in the right order with the support of qualified contractors familiar with the local context (in particular for surveys) Build long-term relationships with local stakeholders Excellent Community relations: do not start with RAP and asset surveys Community Baseline Assessment and due diligence: Dig in the community before you dig the ground Transparency, FPIC and negotiations This can help identify appropriate solutions to specific issues and avoid serious crisis Reparing a broken relationship is much more complicated than doing well from the beginning Excellent Government Relations: support from Government and Administration is required. Capacity building, training and support 23
PRACTICAL RECOMMENDATIONS TO MITIGATE RISKS (2/3) Clarify responsibilities and adopt a workeable legal framework: Compliant with international standards and Adapted to local challenges Objective: mitigate the risk of having to re-do surveys, R&C activities, etc. Strict compliance with applicable laws, standards and commitments Compliance management (on-going process) Audits, corrective measures and prompt implementation Control of supply chain compliance (in particular concerning Human Rights) Efficient grievance mechanism avoiding escalation and enabling prompt remedy Learn from experience Best practices to protect the rights of PAPs Translation and certification of the accuracy of the translation Time for reflection Independent third party advising PAPs and/or observing and certifying the process Etc. Adequate communication strategy Under promise, over deliver : do not give promises lightly Give accurate messages and avoid misleading ones Avoid Practise what you preach reports compliance 24
PRACTICAL RECOMMENDATIONS TO MITIGATE RISKS (3/3) Do not forget to: secure land rights over Project Lands document the process followed and store all related documentation for evidence purposes perform appropriate due diligence prior to M&A operations and construction have a legal advisor (risk management specialist) alongside other CSR professionals to adequately address legal implications In practice, compromises are inevitable due to time constraints and budget restrictions: Mitigate risks Organise interdisciplinary Crisis Management Emergency Task Force (incl. legal support) for a prompt reaction capacity to avoid escalation of emerging community crisis 25
IN SUMMARY ANTICIPATION, METHODOLOGY AND LEGAL SUPPORT
8 PRINCIPLES TO REMEMBER 1. Prevention is better than cure: anticipation and awareness 2. Inherent and necessary cost of project development: mobilise sufficient resources Protecting population protects reputation 3. Costs of non-compliance can be higher than the costs of appropriate implementation 4. Avoid serious violations of Human Rights and remedy minor breaches promptly 5. Build an on-going partnership with neighbouring communities and the Government Contributes to the long-life of the mining asset and long-term operability of the Project Excellent forum for stakeholder engagement 6. Develop and implement a global, pragmatic and flexible methodology including, without limitation, efficient project management and ongoing legal support 7. It is (almost) never too late to correct mistakes 8. Success stories also exist 27
QUESTIONS AND ANSWERS COMMENTS AND/OR EXPERIENCE SHARING ARE WELCOME
CONTACT Nicolas Heurzeau Of Counsel +33 1 53 57 78 55 +33 6 32 61 62 89 nicolas.heurzeau@hsf.com The contents of this presentation are for reference purposes only. They do not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking any action based on this presentation. Herbert Smith Freehills LLP and its affiliated and subsidiary businesses and firms and Herbert Smith Freehills, an Australian Partnership, are separate member firms of the international legal practice known as Herbert Smith Freehills. Herbert Smith Freehills Paris LLP 2014 29