OVERVIEW OF SELECTED MINING LAW ISSUES IN VENEZUELA
| Jurisdiction | Derecho Internacional |
(Nov 1997)
OVERVIEW OF SELECTED MINING LAW ISSUES IN VENEZUELA
Baker & McKenzie
Caracas, Venezuela
(E-mail: Roberto.Mendoza@Bakernet.Com)
Prepared for the Rocky Mountain Mineral Law Foundation Special Institute on Mineral Development in Latin America Santiago, Chile, November 3-4, 1997
I. INTRODUCTION
Mining, with the exception of hydrocarbons, has not been very common during most of this century in Venezuela. The discovery of huge oil reservoirs during the second decade of the century, while launching a prosperous oil industry, also led the nation to abandon mining and agriculture. Hence, a country that was the world's leading gold producer in the 1860s virtually ceased formal mining until very recently. Even now, with the minor exception of a few State-run gold, bauxite, and coal projects, large-scale, modern mining is still at a nascent stage. Iron ore exploitation is fully reserved to the State, through a fully-owned corporation that inherited the operations of the Orinoco Mining Company (a subsidiary of US Steel) in the Guayana region.
As a result, Venezuelan mining legislation has not evolved to the extent that it has in other countries, with the acquisition of mineral rights continuing to be a key legal issues. Only when several large mining projects have started producing will other issues, usually significant for mining companies, be dealt with legally in Venezuela (i.e., confrontations between concessionaires and surface rights owners; the calculation of the different exploitation taxes applicable to commonly associated minerals whose quantities are determinable only after refining; generally applicable production plans after prime targets are depleted and production begins declining).
In this paper, we shall discuss the most significant issues in Venezuela's mining industry present development stage.
Venezuela's mining legislation follows the civil royalty-based system of mineral wealth ownership in which all minerals belong to the State. This principle has been universally recognized and adopted by all local legislation on mining since 1829, when the national liberator, Simón Bolívar, decreed that the new republic owned all mines located within its territory. Accordingly, all Venezuelan mining laws until 1945 (when the current law was enacted) have confirmed that the State owns all minerals.
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The most important consequence of the recognition of the royalty-based system is that no one except the State itself has the right to conduct mining activities without first having complied with certain formal requirements, which entail applying for receiving a mining concession from the State. In other instances, a mining concession is not required but certain permits or authorizations are (e.g., architectural stones like marble, kaolin, clay, and the like which, except when their exploitation has been transferred to the relevant state, belong to the owner of the land where they are found).
II. CURRENT LEGISLATION AND REGULATORY AGENCIES
Mineral rights are currently governed by the Mining Law of 1945 (the "Mining Law") and its Regulations and a series of subsequent presidential decrees and ministerial resolutions. A proposal for a new mining law is now before the Venezuelan Congress.
The Mining Law provided for free exploration, free exploitation of alluvial minerals located in public lands (baldios), and the right to acquire claims by staking. Generally, the Ministry of Energy and Mines ("MEM") has jurisdiction to grant mineral rights, usually through concessions (with the exceptions of alluvial minerals on public lands, and non-precious metals and stones). All prospectors had the right, prior to 1977, to obtain concessions by denouncement (staking) with minor exceptions for discretionary concessions on reserved areas or on national reserves. The general rule was then, that anyone who complied with the legal requirements to claim a mining property had the right to become a mining concessionaire for that area. Consequently, with the exceptions cited above, MEM had to grant concessions if the applicants met all the legal conditions to obtain a mining concession.
According to Article 2 (second paragraph) and Article 11 of the Mining Law, the Venezuelan government's National Executive can not only directly exercise the right to exploit any mineral whenever it has the discretionary power to grant concessions related to the mineral in question, but it can also reserve the exploration and exploitation of any mineral in any part of the national territory. In the case of such a reserve, denouncement (staking) is not available for the reserved minerals and/or areas, and MEM's authority related to the granting of concessions is governed by the rules of the Mining Law on concessions on reserved areas (discretionary concessions).
On February 15, 1977, the National Executive, in Decree 2039, declared all minerals contained in the entire territory of the Republic of Venezuela reserved for direct exploitation
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by the National Executive. Consequently, after the decree took effect, the only legal way for private parties to engage in mining (apart from gold and diamond exploitation in the Guayana region) was to obtain a discretionary concession from MEM. The major exceptions to this process were the gold and diamond rights in the Guayana Region (which includes the Kilometer 88 deposits in Bolivar State), which were under the jurisdiction of a government holding company, the Corporation Venezolana de Guayana ("CVG") through the granting of work contracts. In either case, MEM and CVG held enormous discretionary powers in granting both concessions and work contracts.
III.- CVG WORK CONTRACTS
1.- Legal Basis of CVG's Rights
CVG's rights originally derived from a trusteeship granted by MEM for alluvial gold and diamonds in specific areas of the Guayana region. Later, CVG obtained an asignactión, or commission, from MEM. An asignación is a partial delegation of rights and jurisdiction to a state corporation with the power to exercise the rights directly or in conjunction with third parties, or to delegate the...
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