Resource Nationalism: Finding common ground in the minefield
Buoyed by soaring commodity prices, purported green ambitions, and nationalist fervor, governments have begun wielding a considerable range of regulatory and social tools against mining companies in the name of resource nationalism. From Poland’s coking coal to Mexico’s lithium and Chile’s dramatic nationalization of its ‘white gold,’ lithium, this trend is not simply confined to developing countries.
With firsthand experience in managing the contentious disputes and sizeable liabilities that arise out of nationalistic states ‘thumbing their noses’ at treaties and contracts with foreign investors, I see this current wave of resource nationalism as an opportunistic iteration of the same myopia that first reared its head in Tanzania in 2016, but ultimately dates back to decolonization.
Triggered by the popularity of President John Magufuli’s so-called ‘economic war’ on certain foreign mining companies, states across Africa adopted aggressive nationalistic mining policies that have frequently toed the line between legitimate economic balance and outright rent-seeking.
Recent coups in Francophone Africa typify the contemporary resurgence of politically popular, but fiscally irresponsible measures adopted from Tanzania’s policy playbook. These measures have included sweeping changes to mining codes to increase royalties and free carried interest percentages, increased export duties and the renegotiation of existing mining conventions and mineral development agreements. The practical impact of such changes have been increased permitting delays and complete legal uncertainty about how to meet regulatory requirements.
Make no mistake, however, this tide extends well beyond Africa’s shores. Poland’s protectionist stance on coal – at the expense of foreign investment – and Mexico’s nationalization cycle with respect to lithium underscore the universality of resource nationalism’s allure.
However, this allure masks a minefield for investor/state partnerships. Declining investment, cancelled projects, and legal battles paint a grim picture.
More often than not, these politically popular resource nationalist measures represent Pyrrhic victories – the triumphant party or newly installed military junta may have won hearts and minds, but left their States saddled with long-term liabilities.
Investors will continue to defend their themselves and seek recompense for as long as states prioritize nationalism over national best interest.
The path forward demands adaptability and innovative strategies and States like Uganda and Zimbabwe are showing us that path with recent changes to their respective mining codes. Those revisions appear to have balanced national interests with investor needs. These revisions were the result of both genuine stakeholder engagement and desire to develop meaningfully and sustainably national resources. And while it’s important to give credit where it is due, such States remain in the minority while politicians in these states favor electoral over national interests.
Timothy Foden is a Partner at Boies Schiller Flexner LLP, a firm of internationally recognized trial lawyers, crisis managers, and strategic advisers known for creative, aggressive, and efficient pursuit of success for clients. Its attorneys have an established track record of winning complex, groundbreaking, and cross border matters in diverse circumstances and industries for many of the world’s most sophisticated companies.