In Mining, Mining Coffee Chats

Ecuadorean President Guillermo Lasso’s pledge to give more security to the mining sector in a bid to attract investment has been met with a series of decisions in past months by the country’s constitutional court that have created legal uncertainty amongst miners and investors.

In December 2021, the Constitutional Court revoked environmental licenses based on grounds of protecting the “Rights of Nature” in the Río Magdalena project in the Los Cedros forest in the country’s north. The project was being developed by state-owned mining company Empresa Nacional Minera and Canadian partner Cornerstone. The Court found that the Ministry of Environment had failed to properly assess the impact of the licensed activities on the people’s access to clean water and a healthy environment, and that affected communities had not been consulted as required by local and international law.

Shortly after, on January 2022, the Court upheld the right of the A’I Cofán community to be consulted prior to the approval of mining concessions in their lands. The Court explained that if it is not possible to obtain the consent of the communities and it is nonetheless decided to move ahead with a project, the government needs to give objective, reasonable and proportionate reasons why it was not possible to accommodate the project or modify it according to the concerns, demands and proposals expressed by the communities that would be affected.

These two decisions, which have direct implications for miners and mining investors operating in the country, were joined by two other decisions that could potentially affect the sector.

On one hand, the Court declared the water law, in force since 2014, unconstitutional because it fails to guarantee the resource as a public and communal good. Indigenous groups have long expressed concern that the law could allow for state intrusion into their rights to water and land use.

And on the other hand, the Court ruled that wild animals possess distinct legal rights, including to exist, to develop their innate instincts and to be free from disproportionate cruelty, fear and distress. The decision comes almost simultaneously to the discovery of two new species of glass frogs near active mining areas in the Andes, which has attracted significant interest from the international scientific community.

What do these decisions have to say about the country’s prospects for mining? What should miners and mining investors expect going forward?

These are some of the questions we explored during our April 5, 2022 Mining Coffee Chat, in which John Price, Managing Director of AMI, and Alejandro Álvarez, Co-Director of AMI’s Mining practice, were joined by two legal experts based in Ecuador:

  • José David Ortiz Custodio, Director, Pérez, Bustamente and Ponce (PBP)
  • María Isabel Aillón Vásconez, Director, Pérez, Bustamente and Ponce (PBP)

José David is a constitutional law expert, while María Isabel is a mining law expert.

The video below shows the discussion, which covered a number of crucial recent cases and should be useful for miners and investors who are looking to understand above-the-ground risks going forward in Ecuador.

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if you are interested in a deeper, more strategic understanding of mining risk in Ecuador. AMI has completed more than 200 consulting engagements that were focused on helping companies operating in LatAm’s mining sector obtain a clear picture of their above-the-ground risks with local community opposition, political risk, security risk and much more. Our assessments can be a crucial resource for conducting due diligence for investments or for handling challenges with ongoing projects.

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