Like the rest of the global economy, the
extractive sector has been a hard hit
by the global pandemic. Prices have
plummeted for oil and for a number of
minerals, supply chains are disrupted,
logistics hampered. Companies are finding
it's increasingly difficult to operate
and it's therefore not surprising that
they're seeking to excuse or delay
performance via a number of means.
One route is by invoking force majeure
clauses under their contracts with governments.
These are provisions that
excuse a party from performance when
unforeseen events beyond the party's
control
prevent or hinder performance depending
on how the contract is written.
But another route is via lobbying governments for various forms of relief
tax relief or relief from social and environmental obligations.
So how should resource-dependent countries respond to these requests from companies
at a time when the functioning of the extractive sector is so critical
to their ability to weather this global pandemic
but also to continue on their development path going forward?
Well, one route is to review contracts in detail,
especially force majeure clauses,
for things like the basis of force
majeure any mitigation or notice
requirements. Notably, the inclusion of
epidemics in a force majeure clause
should not end the enquiry.
Causation will be a key factor – what is causing the non-performance? A second thing is to do
a careful assessment of the immediate
benefits of any legal deviations that
are granted, any forms of relief, and weigh
those against potential long-term negative
impacts on the sector.
And a third very
key thing is transparency. Being open and
transparent about relief being granted,
providing published details of any
renegotiated contracts will reassure
the public that decisions are
being taken in their best interest and
will prevents the risk of corruption.
So I get into more details on all of these
things in a blog
that I've written that you can find at the link.
