MINING - BRAZIL
Published: December 2016
LEGAL FRAMEWORK
As a result of the paramount role mining plays in Brazil, the essential structure of the legal regime governing mining is defined in the Federal Constitution.3 Brazil is a federal republic composed of 26 states and the Federal District, but the power to enact laws on mining4 is exclusively held by the Union.
Administrative competency with regard to mining (grants, monitoring and sanctions) is exercised by the Ministry of Mines and Energy and by the National Department of Mineral Production, a federal quasi-government agency. There is mineral administrative competency only for the purposes of inspection for individual states, but this is not exercised in practice.
The legal regime governing mining in Brazil is spread among different levels of regulation: the rules are established in the Federal Constitution, in the Mining Code (a law in the strict sense of the word), in the laws that govern some classes of mining rights, and in various regulations, principally those issued by the Ministry of Mines and Energy and the National Department of Mineral Production. There are other regulations that can also indirectly apply to mining, such as foreign trade, tax and sanitation rules related to mineral water, and the rules governing the purchase of land by foreign-owned companies.
The regime is a mixed system and covers the acquisition of mining rights through the priority regime, a separate bidding system for mining,5 and activities in strategic areas called national reserves.6 Within this system, the following form the core of the Brazilian mining legal regime:
a the Union has a sovereign right over mineral resources and deposits and controls all stages of their development;
b mining must be carried out in the national interest;
c there is legal separation between ownership of the land and the mineral wealth contained in it;
d mining is a public utility activity;
e only Brazilians or companies founded in accordance with Brazilian laws, with headquarters and management in Brazil, can mine;
f the Union has the power to grant mining titles, and to monitor and sanction;
g the grant of the mining concession is a natural consequence of a valid application in a unrestricted area with a positive final exploration report;
h mining companies are guaranteed ownership of the product of the mining;
i there will be a charge for occupation during the exploration phase;
j there must be a commitment to performance of the Economic Development Plan;
k environmental sustainability is one of the attributes of the mine; mineral resources must be extracted with technical, economic and environmental feasibility; and
l landowners will receive a share of the product of the mining.
III MINING RIGHTS AND REQUIRED LICENCES AND PERMITS
i Title
According to the Federal Constitution, the Union has control over mineral activity, which requires prior consent of the Ministry of Mines and Energy or of the National Department of Mineral Production.
Although the Federal Constitution uses the expression ‘belongs to the Union’, there is discussion in the legal doctrine regarding the nature of this legal relationship between the Union and these resources and mineral deposits. This means that it is not a classic relationship of ownership, as known under civil law, but rather, a relationship of sovereignty that gives the Union the power of regulation and control.
Mining companies will invest, take risks, and, if they are successful, identify deposits that will then be under the control of the Union; however, they are assured ownership of what is mined. Undiscovered mineral deposits have no value; therefore, since the Union cannot afford to invest, it needs private investors to do so. Another interesting point is that mining activities around the world have not led to the exhaustion or reduction of mineral reserves. In fact, exactly the opposite has occurred: discovery of deposits leads to more investment, which, in turn, leads to the discovery of new deposits. So, even in the face of intensive exploration, the stock of mineral reserves has been increasing considerably. ii Surface and mining rights
There is legal separation between ownership of the land and the ores contained in it, that is, underground or outcropped.
Under the Mining Law, there are four ways to acquire mining rights:
a original acquisition, when the mining company is the first to make an application in a unrestricted area;
b acquisition in specific bidding procedures for the mineral sector offered by the National Department of Mineral Production (availabilities);7
c acquisition of mineral rights in National Reserve areas; and
d acquisition of existing third-party mining rights.
Types of mining right
Brazilian legislation establishes the following mining rights:
a exploration authorisations and mining concessions (a double title within the same administrative proceeding);
b claimstake mines;
c mineral licensing; and
d the small-scale mining consent regime.
Juridical nature of the mining rights in Brazil
It is correct to say that, where Brazilian Mining Law is concerned, there is no relationship between the juridical nature of exploration consent (authorisation) as it is used in the Federal Constitution and in the Mining Code, and the general administrative act known as autorização, as it is used in broad terms in administrative law.
In the same context, it is correct to say that there is no relationship between the juridical nature of exploitation consent (mine concession) as it is used in the Federal Constitution and in the Mining Code, and the general administrative contract known as concessão, as it is used in broad terms in administrative law.
The same can be said for mineral licensing and small-scale mining. Exploration consent (authorisation) and exploitation consent (mining concession)
Any substance may be developed under authorisations and concessions, which are granted in the same administrative proceeding. The exploration authorisation is always granted for a certain period, which varies from one to three years and may be extended.
Mining concessions are granted without a pre-established term, and are linked to the depletion of the deposit. The grant is made through an administrative act (mining lease) published in the Official Gazette of the Union. Claimstake mines (minas manifestadas)
The claimstake mine is a class of mining rights under which the holders retain ownership of the deposit. This mining right was created in 1934, as a result of the transition from the accession regime to the concession regime, when legal separation between ownership of the land and the mineral wealth contained therein began. Under the Federal Constitution and the Code of Mines of 1934, those who already held mining rights were grandfathered in under the same conditions. The only claimstake mines now in existence are those remaining from that time, because since 1934 the only way to acquire mining rights has been for the Union to grant them. Mineral licensing (registro de licença)
Mineral licensing has the following characteristics:
a it is used for the development of substances for immediate use in civil construction and other minerals;8
b it is exercised by the landowner or by those who have his or her consent;
c it applies to an area under 50 hectares; and
d it is granted subject to the term of the environmental licence or the period of consent of the landowner, and may be extended.
Generally speaking, the mineral-licensing regime does not require preliminary exploration. Small-scale mining consent (Permissão de Lavra Garimpeira)
Small-scale mining consent is the regime that allows immediate development of a mineral deposit that, due to its nature, size, location and economic use, can be developed without the need for preliminary exploration work.
Minerals subject to small-scale mining are gold, diamonds, cassiterite, columbite, tantalite and wolframite in alluvial, elluvial and colluvial forms; scheelite, other gemstones, rutile, quartz, beryl, muscovite, spodumene, lepidolite, feldspar, mica and others, in types of occurrence that may be indicated at the criteria of the National Department of Mineral Production.
The term is five years, which may be renewed. Acquisition of mining rights
The procedure to acquire mining rights is fairly simple. In addition to the normal documents that show the legal capacity of the applicant, in the exploration phase, the application must be accompanied by an exploration plan, and in the development phase, it must be accompanied by an economic development plan.
Administrative mining proceedings in Brazil are very slow, principally due to the double-title system for the authorisation–concession regime (which is responsible for 90 per cent of the mineral GDP), the lack of structure of the public administration and the obstacles that must be faced to obtain the environmental licence (mining concessions are only granted after the preliminary environmental licence and the environmental installation licence are obtained). After obtaining the mining concession, the environmental operating licence is granted. This is a very inefficient system that needs overhauling.
The Mining Code does allow assignment of mining rights, and this is a common procedure in Brazil; however, rights can only be assigned to those with the legal and economic capacity to acquire these rights. Only Brazilian individuals (or naturalised citizens) or legal entities founded under Brazilian law, with headquarters and management in Brazil, can hold mining rights.
Assignment of mining rights requires the prior consent of the Union through the National Department of Mineral Production. Activities regulated by special laws outside the Mining Code
The following are governed by special laws outside the Mining Code:
a deposits of mineral substances that constitute a government monopoly (petroleum, gas and substances for nuclear energy);
b mineral or fossil substances of archaeological interest;
c mineral or fossil specimens intended for museums, teaching establishments and other scientific purposes;
d mineral waters in the development phase; and
e underground water deposits.
Ownership of the land and mining rights
Considering the legal separation between ownership of the land and the ore contained therein, mining companies can hold mining rights without purchasing the land or receiving consent from the landowner (except under the mineral licensing regime, as explained above). There are therefore mechanisms that enable mining companies to occupy land belonging to third parties, in the event of an impasse.
There is a specific judicial procedure within the exploration phase by which to assess the amount due to the landowner or possessor, being income for occupation and reimbursement for possible damages.
In this situation, during the mining phase (until beneficiation) the most appropriate instrument to be used, established in the Mining Code, is the mineral easement. For other situations, such as manufacturing of the mineral product or pipelines, the most common instrument utilised is the general administrative easement.
Mining is considered to be a public utility activity – a very important attribute in overcoming resistance by landowners. Although it is legally possible, it is not common for the government to use expropriation in favour of mineral enterprises.
Legal restrictions exist on the acquisition of rural land by foreigners or foreign-owned Brazilian companies. The basic rules are as follows:
a acquisition of the rural land must be linked to the implementation of agricultural, ranching, industrial or settlement projects related to the company’s social purpose;
b the sum of the rural areas belonging to foreigners, including foreign-owned Brazilian companies, of any nationality, may not exceed 25 per cent of the surface area of the municipality; and
c individuals or legal entities, or foreign-owned Brazilian companies, of the same nationality, may not own more than 40 per cent of the total amount of 25 per cent of the area of the municipality in which acquisition by foreigners is allowed.
There are no restrictions on the acquisition of urban real estate for foreign-owned companies. Restrictions on surface or mining rights
Mining on indigenous lands is allowed under the Federal Constitution of 1988, but has not yet been regulated by the National Congress. As a result, there is no organised and regular mining on indigenous lands in Brazil, only clandestine activities. It is also allowed in the old quilombo areas, in spite of the additional difficulty surrounding environmental licensing of the activity in these locations.
Mining is also allowed in border zones.9 Companies need prior consent from the National Defence Council for this purpose, with the exception of companies that work with minerals for immediate use in civil construction.
To act in the border zone, mining companies must meet the following requirements, in addition to the general requirements for mining in Brazil:
a at least 51 per cent of the capital must belong to Brazilians;
b at least two-thirds of the workforce must be Brazilian; and
c the administration or management must be carried out by a majority of Brazilians, to whom the predominant powers are assured.
Legal nature of administrative mining acts
According to traditional doctrine, classic authorisations in administrative law are those discretionary and temporary administrative acts. The theory created by Brazilian legal scholars, however, is that the administrative mining act called (improperly) ‘authorisation’ is, in reality, an ‘authorisation for mineral exploration’ with specific attributes, with the characteristics of a binding administrative act.
In Brazil, the mining concession does not have the same attributes as the classic concession in administrative law. It is not formalised by an administrative contract (but by publication of the administrative act in the Official Gazette). It is not for a certain time, nor is it preceded by a bidding procedure.
This same interpretation can be made for the other regimes (licensing and permission). iii Additional licences and permits necessary for mineral activities
Mining companies basically need three types of permit to mine:
a a mining right granted by the National Department of Mineral Production or Ministry of Mines and Energy;
b environmental licences and other environmental permits (deforestation licences, licences to intervene in the Atlantic Forest, licences to intervene in natural caves etc.); and
c consent of the municipality, which will evaluate the compliance of the mineral activity with the municipal legislation.
iv Closure and remediation of mining projects
The measures to properly close mines and to mitigate or remediate the damage caused by mining are established in both mineral and environmental legislation.
From the start of the undertaking, mining companies must state how they intend to close the mine. This information, contained in the economic development plan and the mine closing plan, is continually updated. An interesting aspect is that, today, less attention is paid to the closing of the mine, and more to the future use of the mined area.
In Brazil, environmental insurance is still not mandatory, nor must provisions be made to pay for the costs associated with the mine closing or remediation of the environmental damages. However, there is a tendency towards this, and there are several bills being discussed that would make this insurance mandatory. IV ENVIRONMENTAL AND SOCIAL CONSIDERATIONS
i Environmental, health and safety regulations
In regard to environmental matters, the Federal Constitution establishes that the power to legislate is shared among the Union, the states and the Federal District. Municipalities may pass legislation on matters related to local interest, including for environmental matters. Administrative environmental competency is shared among the Union, the states, federal district and the municipalities.
Environmental protection is given a separate chapter in the federal Constitution and in all the state constitutions. In addition to the general rules governing legislative and administrative competency, and environmental protection guidelines, the federal Constitution states that ‘those who develop mineral resources must restore the degraded environment, in accordance with the technical solution required by the competent public agency, in accordance with the law’.
Environmental laws can be classified as general or specific to mining. Examples of general laws are the National Environmental Policy Law, the Forest Code, the National Water Resources Policy Law and the National Solid Waste Policy Law. In relation to mining, the specific rules cover mineral activity in special environmentally protected areas (conservation units, such as parks, and areas of permanent preservation, such as the banks of waterways).
There are also fairly strict laws governing occupational health and safety. There are also generic rules and other specific rules, such as the Mining Regulation Rules. ii Environmental compliance
Generally, environmental licensing is carried out by the environmental bodies of the states. The exceptions are licensing by the municipalities or by the federal agency.
In Brazil, the system in effect requires three separate environmental licences: the preliminary licence, which is the most important because it attests to the environmental feasibility of the project, the installation licence and the operating licence.
The general rule is that environmental licensing begins with the preliminary environmental licensing. For mining projects that begin operations in an irregular manner – without environmental licensing – there is a corrective environmental licensing procedure.
As three separate environmental licences are required, the entire environmental licensing process is quite time-consuming. Besides the difficulties inherent to the environmental licensing process, there are also difficulties resulting from gaps in the environmental legislation, the lack of structure of the environmental agencies, thoughtless interference by the Public Attorney’s Office and the proliferation of non-governmental organisations (NGOs), all of which tend to delay environmental licensing. iii Third-party rights
Mineral aspects
The Mining Code states that miners and mining companies are exclusively liable for damage that their activities cause to third parties.
This prevents the Union from being sued in the event that the activity causes harm to a third party, but an exception occurs when the government is negligent. In this case, an inefficient public entity can be sued together with the miner or mining company. Environmental aspects
In general, miners and mining companies are exclusively liable for damages that their activities cause to third parties, not only in a diffuse aspect, but also in relation to individual damages.
Here, there is also an exception, and the party harmed may sue the government, if there has been any omission that has contributed to causing the damage or harm. Indigenous rights
The law protects the rights of indigenous people. Mining on indigenous lands technically depends on a special law and authorisation of the National Congress. In light of the absence of actual law and lack of regulation governing how this authorisation could be given, there is, however, no regular mineral activity on indigenous lands.
The intent of lawmakers was to protect non-acculturated Indians and their lands. This has, however, led to a situation in which many unscrupulous people declared themselves to be Indian, in light of the complacency of the agency responsible for this control. This has led to many problems, not just for mining, but also for farmers and lumber companies.
The federal Constitution states that when mineral activity on indigenous lands is regulated, the indigenous peoples will be entitled to a share of the mining taking place on their lands.
Another Brazilian characteristic related to indigenous lands deserves mention. These are the demarcations made without any technical criteria, under pressure by demagogic interests or pressure from NGOs. To give an example, in the state of Roraima, demarcated indigenous lands occupy at least 46.37 per cent of its territory. Quilomba communities
Quilombolas are the remnants of the quilombolo communities. These are ethnic-racial groups with their own unique history, which have specific territorial relations and a presumption of African ancestry related to resistance to the historical oppression they suffered. Brazilian legislation has a curious feature in that recognition of a person as quilombola is through self-declaration, which has led to a great deal of abuse.
In projects in which there is a possibility of interference with quilombo lands or in which there are elements that could cause direct socio-environmental harm inside the quilombola community, this matter will be analysed in the environmental licensing procedure.
In the event that quilombola families are displaced, the mining company must submit indemnification proposals, in accordance with the rules stipulated by Convention 169 of the International Labor Organization, which was ratified by Brazil. https://thelawreviews.co.uk/edition/the-mining-law-review-edition-5/1140348/mining-brazili
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