General Description

The Mining Treaty between Chile and Argentina
MESSAGE Nº5-341

Honourable House of Deputies:

I have the honour to submit to the consideration of this Honourable Corporation the Treaty with the Republic of Argentina on Mining Integration and Complementation, its Complementary Protocol and the Agreement that amends the latter International instrument, subscribed on December 29th of 1997, on August 20th and 31st of 1999, respectively.

I. THE TREATY AND ITS PROTOCOL WITHIN THE INTEGRATION FRAMEWORK

The challenges that the economic development poses in the globalized world in the threshold of the third millennium have led the Republics of Chile and Argentina to consider the possibility of integrating and complementing the border mining activity of both countries, on the basis of mutual convenience and in the context of a reciprocal collaboration progressively higher in growing spheres of the national life.

We are aware, on another hand, of the world reality that mining faces and the consequential significance that the concept of regional competitiveness implies, as background for the assessment and materialization of mining projects of investment between Chile and Argentina. In this aspect, the Treaty and the Complementary Protocol that are submitted to your approval are aimed at strengthening the position of both countries in the sphere of investments, the development of the infrastructure and the environmentally sustainable use of the natural resources, thus enabling the development of border mining projects that imply for the Parties new business opportunities and a reduction in the production costs with the support of border facilitation mechanisms.

In the present decade, Chile and Argentina have made significant efforts in the sphere of the road and energy integration, which will bring about significant benefits for the production and commercialization of our products. In this context, the Treaty and the Complementary Protocol that are submitted to your consideration, constitute a new step, an important and necessary one, in the integration process between both countries.

 

II. BACKGROUND

The initiative to subscribe a treaty on mining matters has its origin in the Treaty of Peace and Friendship subscribed on November 29th of 1984. Such international juridical instrument had the virtue, not only of solving the Austral controversy with the neighbouring country, but in addition, it set the conventional basis so that both countries advanced in the economic co-operation and physical integration. In this respect, Article 12 of the referred Treaty is substantially pertinent, which created the Binational Economic Co-operation and Physical Integration Commission with the precise and explicit aim of intensifying the achievement of a greater integration, mainly promoting the development of initiatives in areas such as the terrestrial links global system, mutual fitting of harbours and free trade areas, land transport, air-navigation, electric interconnections, telecommunications and exploration of natural resources.

In this merit, whose juridical projections have manifested in a series of instruments in force, on April 2nd of 1991, Chile and Argentina subscribed the Economic Complementation Agreement Nº16 (E.C.A. Nº16), in the framework of the Latin American Integration Association, which Protocol Nº3 was annexed to. In the latter it was agreed, explicitly, to use in conjunction, in case that the circumstances allow it, the natural resources that run along both sides of the border, so that their exploration and subsequent exploitation are carried out in a sensible and integrated way, applying regulations and technologies proper of an advance mining.

Concretely, in the framework of the Economic Complementation Agreement Council Nº16 –following the dynamics of a process that begins to manifest naturally, binational commissions of technical and juridical work were constituted, integrated mainly by professionals of the competent Ministries and Services and with the permanent collaboration of the entrepreneurial and union associations from both nations -the Mining National Society of Chile and the Argentinean Mining Chamber, with the aim of elaborating the preparatory corpus of an international agreement, direct background for the Treaty that is submitted to legislative approval today.

Eventually, after a series of study and negotiation stages, on December 29th of 1997, in similar ceremonies held successively in the cities of San Juan, Argentina and Antofagasta, Chile, the Ministers of Foreign Affairs from both countries subscribed the text of the Mining Integration and Complementation Treaty between the Republic of Chile and the Republic of Argentina in presence of the respective Presidents.

 

III. CONTENT OF THE TREATY.

1. Structure

The Treaty in reference is structured in 23 Articles and 2 Annexes, the latter relative to its scope of application.

Articles 1 to 4 establish the objective and scopes of such international juridical corpus. They define the terms used by it, they specify the scope of application and institute a clause on national treatment.

Articles 5 to 8 rule what is relative to the Specific Additional Protocols, they establish the scope of the border facilitations and make clear aspects of the taxation, customs and promotional systems.

Articles 9 to 15 refer to labour and social security aspects, expenses payment, juridical statute of environmental protection, people’s health protection system, shared water resources use system and border demarcation preservation.

Finally, articles 16 to 23 cover matters related to the suspension and cessation of the mining business, the general exceptions system, the authority liable for the administration and assessment of the Treaty, the controversy solution system, the incorporation of pre-existing Specific Protocols to this new international juridical corpus, as well as its entry into force and duration.

2. Main Objectives.

The main objectives of the Treaty are the following:

a. Give a legal framework, based on the national treatment, in whose virtue the prohibitions and restrictions to Chileans and Argentineans, established by the respective home legislation regarding their quality of foreigner or national of the border country, are eliminated, within the scope of application of the Treaty, for the acquisition of mining rights or ownership or other real rights over properties located in the border areas.
This principle of the national treatment shall inspire the policies that are applied with respect to the activities relative to mining and that are necessary for its more efficient development.
b. Likewise, it considers the possibility of establishing border facilitation mechanisms, supporting the cross-border activity or creating cross-border easements in favour of the investors from both Parties, thus enabling, within the scope of application of the Treaty, the development of the mining business, especially of those mining projects that require them.

3. The operations area-

In order to carry out the cross-border mining activity, the possibility of establishing an operations area that would cover territory from both countries is considered. Within this area a special juridical system for the circulation of people, means of transport, machinery and inputs necessary for the development of the mining business would be applied. It also considers the possibility of creating easements in the territory of one Party in favour of a project that is developed in the territory of the other, previous agreement adopted in a Specific Additional Protocol.

 

4. Territorial scope of application of the Treaty

It is perfectly defined through geodetic co-ordinates and has been represented in an annex map, part of the Treaty.

Such scope has been determined as to include border territorial areas from both countries, where the potential deposits are located, which would be of mutual interest to exploit. The areas that, for higher interests, the countries considered that they should be exempted from the application of the Treaty, have been explicitly excluded.

 

5. Administration and assessment of the Treaty.

In order to implement the necessary mechanisms to guarantee the execution of the Treaty, a mix organism named Administrating Commission is created. Its tasks, among others, shall be to care for the fulfilment of the Treaty, to be acquainted with the mining projects that are submitted to its consideration and to facilitate the corresponding controversy solution processes.

 

6. Advantages of the Treaty.

a. It is necessary to consider –when assessing the Treaty- that the exploration and exploitation of the mining resources over which the Treaty submitted to your consideration can be applied, will attract a significant demand of inputs and services, especially in our country, in virtue of geographical and labour-culture reasons. This will generate additional benefits to such exploitation or enterprise, with the consequent expansion of our markets in such areas. In addition, it will have a positive impact on the associated manpower because of these activities. The Treaty foresees the access to the inputs that might be required by the mining business, as well as the recruiting of workers and professionals in the terms of article 10. This will have as a consequence a more efficient management of the mining projects that are developed in this new framework.

 

b. The Treaty will raise many Argentinean mining assets located in mountain range areas, with geological characteristics similar to the Chilean mining deposits, which have been suspended for many years because in that country there were not legal nor economic conditions, infrastructure and experience, essential for going into the advanced exploration and development stages, up to the technical-economic sustainability and financing.

 

c. Thus, an historic opportunity is given to our country to be part of the mining development of the neighbour country, contributing from Chile the services and know-how, the known and proved mining technology, manpower, transportation, energy in its various forms, smelting and refining capacity, that will promote in our scope the improvement of the road and harbour infrastructure, and the expansion of our state or private smelters and refiners.

 

d. The added value and the chains that the mining sector poses in our country with other activities of the national mining are proven. The demand that any mining project generates for inputs, machinery, equipment, technology and engineering and construction services is great.

 

e. Only considering the mining projects existing up to this day, which the Treaty will affect positively, and that project an initial capital investment of at least 2 billion dollars (US$2,000,000,000), are estimated to generate a demand for goods and services in Chile, during the construction of those mining complexes, of at least one thousand two hundred and fifty million dollars (US$1,250,000,000) and during the operation and use life of the mines –25 years- of an amount no lower than six thousand eight hundred million dollars (US$6,800,000,000).

 

f. In the spirit of co-operation that inspire the Treaty referred to and the Protocol Nº3 on Mining Co-operation and Integration of the ECA 16, the active and consensual participation of both countries for the promotion of the uses of copper world wide, in international forums and organisms specialised in mining, as well as in the multilateral instances linked to environmental and health matters, will enable to give a better response to the challenges and demand that arise in the changing international scenarios.

 

g. The application of the Treaty will lead to make binational joined efforts in which we must consider co-ordinated actions for the defence and commercial promotion of our copper production with the aim of expanding the markets in the international scope, facing the occasional crisis that might affect them, and define development strategies. This will contribute, in addition, to the sustainable growth of the activity. Likewise, carrying out and publishing co-ordinated research and studies, will enable to identify and promote new uses and markets for the mining production.

 

IV. COMPLEMENTARY PROTOCOL.

In addition to the text of the Treaty itself and its two Annexes, the mentioned Complementary Protocol, subscribed in our capital city on August 20th of 1999, is submitted to your consideration.

1. It is of interpretative character.

This corpus of complementary regulations is of an interpretative character. That is, it does not create new rights nor establish obligations different from the ones that the Treaty consults. However, it is aimed at explaining the sense and scope of some aspects that seemed basic and at strengthening the concept of full compliance of the provisions of the Treaty in the national, provincial and regional scopes.

2. Application of the principle of national treatment.

Among these aspects, in Article one of the Complementary Protocol the sense of Articles 1, 4 and 5 of the Treaty are clarified, as well as the matters subject to the creation of Specific Additional Protocols, respectively.

In accordance with these provisions, as mentioned, the Parties apply the principle of national treatment to the persons or legal entities from the other Party that intend to develop a mining business, which as a consequence release the prohibitions and restrictions to acquire real and mining rights, established in virtue of the quality of border foreigners.

From the mentioned principle, the Treaty and its Complementary Protocol consider that:

a) The acquisition or exercise of mining rights under the protection of the Treaty, and carrying out other activities considered in the respective mining legislation is allowed by the sole effect of the same Treaty. In consequence, a special pronouncement from the Administrating Commission is not required for this purpose.

 

b) Regarding the acquisition of the ownership or other real rights by nationals from one Party over property located exclusively in the border areas from the other Party, but within the scope of application of the Treaty and that their nature are not necessarily inherent to the development of a mining business, but that are required to carry out activities proper of it, the Protocol clarifies the sense of the Treaty as for the need of a pronouncement from the Administrating Commission, which shall verify, in a simple and fast manner, the existence of such activities or of a mining project.

 

c) When the development of the mining business requires border facilitations or cross-border activities, the creation of cross-border easements or the exercise of rights provided in Article 1, paragraph three, letter a) of the Treaty, it shall be necessary to inform the Administrating Commission of it. The latter shall be able to recommend, previous assessment, the adoption of Specific Additional Protocols where the area of operations and the corresponding proceedings for each case shall be determined, as established in Article 5 of the Treaty, which is restated in Article one of the Complementary Protocol.
The Parties shall determine the negotiation of these Specific Additional Protocols, case by case. These instruments shall not derogate the Treaty and its Complementary Protocol, nor affect the home legislation of each of the Parties regarding the competence of their home organisms, including their Courts of Justice.

According to Article 5, paragraph one of the Treaty, the border facilitations, particularly the creation of easements, shall be requested by the investors to the Administrating Commission for their assessment. This constitute and must be understood as a mere faculty of such Organism, so that the interested one shall be able to create them afterwards formally, according to the national legislation of the country where the serving land is located.

Having in mind that, as indicated in the above paragraphs, the activities of small and medium companies will be substantially facilitated, It will be important to promote their complete participation in the system of the Treaty, and to consider the roles of the Administrating Commission as useful measures to respond to the expectations of such important sectors of the national mining. The Administrating Commission shall be able to recommend Protocols on facilitation, in a simple, fast and economical [pc1]manner, having in mind specifically this fact.

3. In relation to water resources.

Another matter that the Complementary Protocol covers, is given by the explicit recognition of the possibility of counting with water resources existing in the neighbour country, to be used in mining projects on the other side of the border, when they have not the quality of shared water resources.

4. In relation to the facilities proper of a mining project.

It has also been explicitly established the possibility of placing facilities proper of a mining project in the neighbour country, when its territory presents the most suitable spatial scope for certain tasks, among them beneficiation plants, camping sites, tailings, sterile deposits, etc. The above, notwithstanding, in any case, the full compliance of the environmental regulations of the respective countries.

5. Solving controversies.

Along with the specific mechanisms that the Treaty provides for matters that concern the investors and the relationship between the Parties, the Complementary Protocol establishes the possibility of resorting to the Administrating Commission to examine, through fast negotiation proceedings, matters of operational nature that affect the development of the activities of a mining project in the other country.

 

V. AGREEMENT THAT AMENDS THE ADDITIONAL PROTOCOL

Finally, it is necessary to make clear that by later Agreement between the Parties, adopted by Exchange of Notes, subscribed in Buenos Aries on August 31st of 1999, the second section of Article one of the Complementary Protocol was amended, in the sense of eliminating the expression that between the words Party and wish, since it was included involuntarily.

Consequently, I have the honour to submit to your consideration, to be treated in the in the present Extraordinary Legislature of Sessions of the Honourable National Congress, the following:

BILL/PROJECT OF AGREEMENT

SOLE ARTICLE.- Be it approved the Mining Integration and Complementation Treaty between the Republic of Chile and the Republic of Argentina, its Annexes I and II, subscribed in San Juan, Republic of Argentina, and in Antofagasta, Republic of Chile, on December 29th of 1997; its Complementary Protocol, subscribed in Santiago, Chile, on August 20th of 1999; and the Agreement that amends the latter international instrument, adopted in Buenos Aires, Argentina, through Exchange of Notes, on August 31st of 1999..

God saves Your Excellencies

EDUARDO FREI RUIZ-TAGLE
President of the Republic

JUAN GABRIEL VALDES SOUBLETTE
Minister of Foreign Affairs

SERGIO JIMENEZ MORAGA
Minister of Mining