By Alex Yomah
Independent research work done by two international research companies say, the Bao-Chico Concession Agreement recently passed by the House of Representatives was done with due diligence, thus terming it as a ‘bad concession’ Agreement.
The Columbia Center on Sustainable Investment (CCSI) and the International Institute for
Environment and Development (IIED) were requested to brief the Caucus before the ratification of the agreement by the Legislature; though same has been passed by the House of Representatives.
The memo provided high-level analysis, highlighting issues that might warrant the Caucus’s closer inspection from public policy and sustainable development perspectives.
The memo which does not constitute legal advice offered a response to a time-sensitive request from the Caucus as the contract may contain other issues deserving attention.
In addition, the Caucus said the memo did not include a review of the laws and regulations that would apply to the project and did not analyze the economic Equilibrium of the deal, as no fiscal model has been developed to support the analysis.
As policy research institutes, CCSI and IIED do not deliver legal advice and therefore, the Caucus might consider procuring legal advice to navigate issues such as those highlighted in the memo.
Meanwhile, the agreement supplants the law in several instances across the agreement, specifically in S. 4.1(c), 5.7(f), 6.3(c), 13.1, 14.1, 14.4, 20.1(b), 21.1(i), 23.10(d), and
25.5(c) while ideally the agreement should sit within the law to ensure uniformity and
Strengthen the rule of law.
Government’s decision-making power is subsumed by the company where it is allowed to assume that it has permission to proceed where the government does not meet a timeline requirement.
The agreement requires the company to get permit from EPA for exploration, and the company only has a priority right to move to mining development.
The agreement has weak provisions on mine closure. Baseline assurances on mine
closure and funding should be included in the agreement. S. 5.5(c) and 5.6(c) should
include a proposal to ensure the availability of funds to finance mine closure and not
just environmental restoration and remediation.
The company should be liable for obligations as set out in the final closure plan and
for any remediation and restoration that resulted from its mining or exploration activities.
The agreement only specifies the need to enter into pricing agreements for what the mining companies will produce (e.g, “the Products”), not for the goods and services used in the production, which constitute production costs.
While the revenue code is broader, given that the agreement trumps the law in this regard, it would be necessary to specify that even cost-related transactions should be covered by pricing agreements and transfer pricing rules.
If the government wants the mining sector to help finance the monitoring capacity of the
Government, fees should be established in the law, and payment should be contributed to a common trust between all companies and as a one-time fee.
The goal is to break the link between a company’s payment and the inspection service
Rendered in exchange while the company should not be allowed to offset the consultants fees against royalties (S. 6.4 (c).
The agreement provides for a fixed lump sum amount of $50,000 for the first 5 years then $ 30,000 from the 6th year to the end of the agreement. Surface rent should be proportionate to the production area and not a flat fee.
However, the burden of proof of whether local goods or local employment are competitive
should be shifted to the company. If the company is not required to show evidence as to why local employment and local procurement cannot be done without endangering the project, local content will never be achieved; this, the researchers advised that senate relook at it before concurrence.
Local employment targets should be grounded in analysis. While it is hard to assess whether those set in the contract are appropriate, in general it is better for all targets to proceed from a deep analysis of the company’s needs as compared to existing competences in Liberia and those that can be feasibly built up.
The agreement permits the company to utilize traditional water sources without community consultation.
The company’s right to access water supplies should be in accordance with environmental, water, and other applicable laws, including the need to have community consultation before using a community water source.
This means that the company can make disproportionate profits without sharing those with the community.