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A Brief Overview of Mining in Senegal by Alban Dorin and Lara Welsh

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A Brief Overview of Mining in Senegal by Alban Dorin and Lara Welsh Article A brief overview of mining in Senegal By Alban Dorin and Lara Welsh Overview of Senegalese legal OHADA provides for a uniform system of system business law directly applicable in its Member States through “Uniform Acts” which have Senegal is a civil law jurisdiction, meaning that been largely inspired by French law. These the core principles of law are codified and serve Uniform Acts cover matters such as corporate as the primary source of law. The Constitution law, security, insolvency, arbitration and of Senegal, adopted by constitutional refer- recognition of foreign courts’ decisions. Alban Dorin enda on 7 January 2001, is the fourth Counsel, Paris Senegal is part of WAEMU (or UEMOA in constitution of the country (after those of 1959, E: [email protected] French) - The West African Economic and 1960 and 1963). As with most Franco-African T: +33 1 53 53 18 51 countries, the Constitution of Senegal is heavily Monetary Union – which is an organisation of based on the 1958 French Constitution, 8 West African states established to promote considered as being the ‘Mother Constitution’. economic integration among countries that share the CFA franc as a common currency. Whereas in a common law legal system (such as The CFA Franc (FCFA) is linked to the Euro at a England and Wales) judicial cases are regarded fixed rate of 655,957 FCFA to 1 Euro. as the most important source of law (giving judges an active role in developing rules), in It is also part of ECOWAS - The Economic civil-law systems codes and statutes are Community of West African States - which is a Lara Welsh designed to cover all eventualities and judges regional group of 15 West African nations Senior Associate, London have a more limited role - to apply the law to the created to promote economic integration E: [email protected] case in hand. To ensure consistency, courts in across the region. T: +44 20 3130 3449 common law jurisdictions abide by precedents set by higher courts examining the same issue, Overview of laws applicable to whereas in a civil law system past judgments are mining activity really no more than a (loose) guide. US$5 billion was invested in Senegal’s mining The judicial branch consists of the Conseil sector from 2000 to 2013 and the Constitutionnel, the Conseil d’Etat, the Cour Government wants Senegal to become one of de Cassation, the Cour des Comptes and the Africa’s top seven gold producers, with an Courts and Tribunals. annual production of 17 tonnes of gold by The OHADA legal system applies in Senegal 2020. With this in mind, President Macky Sall – OHADA is a uniform system of business laws made mining industry reform one of his adopted by 17 west and central African nations. priority areas following his election in early OHADA stands for Organisation pour 2012. Recognising the great significance that l’Harmonisation en Afrique du Droit des the mining industry holds for Senegal, his goal Affaires (Organisation for Harmonisation of is to increase foreign investment in the mining Business Law in Africa) and was created on 17 sector thereby increasing its contribution to October 1993. Senegalese GDP. A brief overview of mining in Senegal The Parliament of Senegal passed a new ‘mining permits’ must commence mining Mining Code (No. 27/2016) on 30 October operations ‘as soon as possible’. No specific 2016 (the “New Mining Code”). The New timeframe is included but the New Mining Mining Code applies to new applications, with Code states that, if operations have not the provisions of the 2003 Mining Code (the commenced within one year of the date “Previous Code”) continuing to apply to of entry into force of the mining permit, existing permits. The passing of the New the permit holder will be liable to penalties Mining Code follows a three year consultation of US$ 100,000 per month for the first 3 and legislative drafting process and intro- months and increasing thereafter. If the duces many initiatives that have been used permit holder has not commenced work within the region. The bill was presented to the within 24 months the State may revoke the President for promulgation on 8 November mining permit. 2016 (law no 2016-32). Mining companies still need to enter into a Whilst the framework of the mining regime mining convention at the same time as the remains substantially the same, key changes permit is granted. The convention must be from the Previous Code include: published on the website for the Ministry of Mines following execution. It cannot • Type and length of mining permits derogate from the provisions of the New Under the Previous Code the distinction Mining Code, but may supplement them, between a ‘mine permit’ and a ‘mining and it must detail the rights and obligations concession’ caused confusion for of the parties, including the stability of the investors. The New Mining Code hopes to legal conditions under which the mining simplify these titles. Under the New Mining title was granted. Code a company can apply for a ‘small mine permit’ or a ‘mining permit’. • Fees, royalties, taxes and tax relief One of the key objectives of the New A ‘small mine permit’ will be limited to a Mining Code is to increase revenues to the daily treatment capacity of 500 tonnes government from the mining sector. See of minerals and a mining area of 500 ‘Taxation of mining projects’ below for hectares. It will be issued for an initial term further details. of 5 years (increased from 3 years under the Previous Code). It may be renewed • Introduction of production sharing for 3 years at a time, with no limit on agreements the number of renewals. A ‘small mine The New Mining Code permits the state of permit’ holder must commence mining Senegal and a mining company to enter operations within 3 months of the small into a production sharing agreement, mine permit being granted. giving the mining company the exclusive There are no limitations on the scale of right to research and mine a particular operations under a ‘mining permit’. A area and recover the cost of doing so from mining permit will be issued for an initial sale of the mined substance. The profits term of between 5 and 20 years, depending from the sale of the product are split on the mineral reserves identified and the between the State and the mining investment required - this is less than the company in the amount specified in each maximum 25 years for an initial permit under individual agreement. Where a produc- the Previous Code. Mining permits will tion sharing agreement exists, the mined be renewable as many times as necessary substance will not be subject to the until the resource is exhausted. Holders of quarterly mining tax outlined below. 2 mayer brown A brief overview of mining in Senegal • Enhanced social and environmental • Transparency obligations Under the New Mining Code mining The New Mining Code introduces an companies, as well as the State, are subject obligation for mining title holders to to more thorough audits. All mining contribute annually to a local develop- revenues due to the State will be published ment fund in the amount of 0.5% of sales, in publicly available statements. In minus ‘annual fees’ (unspecified). The addition to abiding to the principles of EITI purpose of the local development funds is the State is free to appoint independent to promote the economic and social firms to audit mining companies. development of local communities Other laws affecting the mining industry: residing around mining areas, and must include women’s empowerment projects. » The Civil Code The introduction of a local development » The revised Uniform Act relating to component has been a common theme in general commercial law dated 15 recent years in African jurisdictions, for December 2010; example Mali and Guinea have also » Law n°2001-01 enacting the introduced compulsory local develop- Environmental Code, dated 12 April ment contributions. 2001; ‘Small mine permit’ holders (who had no » Law n°98/03 dated 8 January 1998, obligations regarding rehabilitation costs enacting the Forest Code and its under the Previous Code) must provide a implementing decree dated 20 guarantee as security for rehabilitation February 1998; and costs under the New Mining Code. » Regulation n°09/2010/CM/UEMOA In addition to rehabilitation obligations, dated 1 October 2010. under the New Mining Code all mining title holders are required to: Restrictions on foreign ownership i) respect, protect and implement The mining permit must be held by a human rights in areas affected by mining company incorporated under Senegalese operations; law. Under the Previous Code, foreign investors were not permitted to own ii) respect the provisions of the Forestry 100% of the shares in a Senegalese Code where the mining title has been granted company. This restriction has been over a “classified forest zone”; and removed under the New Mining Code. iii) respect the principles and obligations under the Extractive Industries Local content Transparency Initiative (EITI), such as Mining title holders may freely choose declaring all payments made to the State to their suppliers, sub-contractors and the EITI authorities. service providers as well as their partners. • Penalties However, mining title holders and their suppliers and sub-contractors shall use, The New Mining Code lists various whenever possible (i) services and potential infractions which may be material originating from the Republic of penalised including non-payment of taxes, Senegal and (ii) products made or sold in health and safety violations and illegal the Republic of Senegal, provided these mining activity or storage, transport or services and products are available at sale of mineral substances.
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