Commercial disputes in the mining and natural resources sector



FW moderates a discussion which covers commercial disputes in the mining and natural resources sector between Fábio Peixinho Gomes Corrêa at Lilla, Huck, Otranto, Camargo, Allan J. Guty at Parlee McLaws LLP, and Edmond Grieger at Von Wobeser y Sierra, S.C. 

FW: Have you seen a notable increase in disputes involving companies in the mining and natural resources industry?

Grieger: In Mexico we have seen an important increase in disputes involving international as well as national companies which have engaged in activities concerning the mining and natural resources sectors. One of the main reasons for these disputes is the fact that in the past decade we have seen in Mexico a significant increase in legislation, regulations and standards applicable to the mining and natural resources activities which have more strictly regulated compliance in this area. The common lack of awareness of the obligations applicable to the companies who engage in these activities usually results in a breach of legal requirements, which ends up in a dispute between the parties involved.

Guty: Our focus is on Alberta and elsewhere in the Western Canadian Sedimentary Basin, including the oil sands in northeastern Alberta and northwestern Saskatchewan. We have seen a notable increase in disputes in this part of the natural resources industry over the last several years as Canadian and international oil companies invest billions of dollars in developing their oil sands projects and bringing those projects into production. Disputes arise between oil sands producers and suppliers for a wide variety of reasons. As for disputes relating to conventional oil and gas projects, we have not seen a notable increase in the frequency of disputes that require litigation.

Corrêa: Brazil has been experiencing unprecedented growth in projects involving mining and natural resources. This boom has been fostered, among other factors, by the governmental plan to accelerate economic growth. Many foreign investors were encouraged to follow this tendency and relied on the prospect of quick financial results. However, the flood of governmental and international funds demanded highly capacitated personnel in quantities not available in the Brazilian market. This limitation caused costs to overrun in many projects that were seeking to meet the time limit contractually agreed. In other cases, the companies involved did not have the financial or material resources to overcome the barriers created by these difficulties. Consequently, many disputes have arisen out of EPC and M&A agreements regarding, for example, hydro, oil, and coal power plants, mining fields, and ethanol and paper plants. Most of these disputes have been referred to arbitral tribunals constituted under national or foreign arbitration institutions. 

FW: Could you outline any notable cases, decisions and settlements that have taken place in the last 12 months or so?

Guty: The Alberta Court of Appeal recently issued a decision regarding shut in wells on freehold land, ending a long running a dispute between operators – Bearspaw Petroleum v. Encana Corporation. The operators had each claimed that the terms of an operating agreement granted them ownership of certain shut in wells that were the subject of the agreement. In interpreting the terms of the agreement, the Court held that even though they had not been in actual production for several years, the leases were ‘producible’ and could be returned to production relatively easily when it became economical to do so. In the end result, the Court held that the leases continued, and Bearspaw, as the lessee, retained rights to the wells.

Corrêa: These cases are normally confidential and not much information is available to the general public. Nonetheless, a case involving the Brazilian National Bank of Economic and Social Development (BNDES) and Equator was broadly discussed in the media after the issuance of the final arbitral award. According to BNDES, Equator filed a request for arbitration before the International Court of Arbitration of the International Chamber of Commerce (ICC) claiming that BNDES irregularly loaned US$243m to the construction of Hydro Power Plant San Francisco. However, the Arbitral Tribunal rejected the claim and ordered Equator to continue paying the loan instalments. The construction of Belo Monte Hydro Power Plant has also raised several disputes during the bidding phase due to environmental and labour questions. While environmental protection has been the focus of the licensing institution and the Judiciary Branch, the contractors have dealt poorly with labour disputes, giving rise to physical confrontation and the destruction of private property at the site.

Grieger: One important recent case in the mining sector is related to a mine of the company Binsa which exploded and killed 14 miners and left one underage worker without an arm. The company carried out mining activities in northern Mexico, ignoring the applicable legal provisions and now will have to indemnify the families of the deceased miners and the underage boy who was illegally hired by the company. Criminal, labour and civil actions have been filed against the company and its directors, in addition to the corresponding administrative sanctions and fines, and its mining concession is being permanently revoked. There is also an important case in the tourism sector, where a public environmental claim has been filed by several non-governmental organisations against an important Spanish corporation, alleging that the €700m touristic development that the company intends to build in Baja California will irreversibly affect a corral reef and the natural resources of the area. The company already has an environmental impact authorisation; however, the supposed non-compliance issues are being re-evaluated by the federal environmental authority.

FW: What are the most common causes for environmental claims against companies in the mining and natural resources sector, and which entities normally initiate such claims?

Corrêa: Every large mining and natural resources project considers previous environmental studies as a part of the licensing process.

Since different branches of the government are involved in such projects, it is not unusual that one specific branch attempts to fast track the licensing process, while Brazil’s environmental protection agency (IBAMA) concentrates its efforts on ensuring the project’s sustainability. Its intervention, though, is not always welcomed by the executive branch and private investors. Along with IBAMA, the Attorney General and their deputy counsels are actively controlling such projects from their inception until operation. Whenever the licensing process seems insufficient to ensure the lowest environmental impact, the Attorney General files class actions to claim the suspension of all activities in the site until further studies are produced. Brazil’s economic development is routinely criticised for undermining environmental issues, leaving the responsibility of balancing both interests to the judge.

Grieger: The most common causes of environmental claims in Mexico arise from non-compliance with the terms and conditions included in environmental authorisations mandatory to carry out specific activities and construction works in Mexico, or by companies carrying out projects to assess the possible negative impact on the environment of their projects, without obtaining the necessary environmental authorisation. Other common cases are due to environmental liabilities or risks originating from contaminated soil, subsoil or water, as well as non-compliance issues in the management of hazardous wastes. The entities which normally initiate such claims in Mexico are non-governmental organisations, public entities or private companies which generally are direct competitors of those companies carrying out the irregular projects. The most common mechanisms to initiate a claim are the public environmental claims or a damage claim which is filed before federal civil courts.

Guty: Most environmental claims against companies in the mining and natural resources sector arise in connection with the reclamation process, when landowners, whether individual or corporate, dispute the quality and/or completeness of the reclamation work. A number of claims also occur between companies regarding liability for reclamation on projects where multiple operators have been involved.

FW: To what extent does the government normally involves itself in each phase of a dispute resolution process or claim in the mining and natural resources sector?

Grieger: Initially we should establish which specific dispute resolution process we are analysing. In Mexico we usually see judicial litigations before administrative or civil domestic courts, environmental public claims or mediation and arbitration procedures. In public environmental claims filed before the Mexican Federal Environmental Protection Agency (PROFEPA), the PROFEPA acts as intermediary by receiving complaints against any private or public entity, notifies the claim to the possible infractor, and begins an investigation. If it is determined that a breach exists, damages were caused to the environment or human health, or a risk of causing them exists, the PROFEPA orders the necessary measures and administrative sanctions as well as a statement establishing the damages and losses caused to the environment or to a third party. This statement can be used as evidence to claim the indemnification of damages and losses before the civil domestic courts. In judicial litigations before administrative courts the government usually plays the defendant role, since in most cases, entities, associations or persons within the private sector file administrative claims against irregular acts or omissions in the mining or natural resource sector carried out by governmental entities.

Corrêa: Whenever the dispute is related to environmental protection, the Brazilian government – through IBAMA and the Attorney General – is present in all phases of its resolution process. In fact, these institutions participate early in the planning phase of the project, despite their limited resources, in order to prevent future deviations from the regulatory mark. If the project fails to acknowledge in this phase that environmental protection is a priority, most likely the Judiciary Branch will have to intervene to settle the dispute. With regards to disputes concerning contractual performance, there has been a clear tendency to avoid state courts by choosing alternative disputes resolution methods. Since the enactment of the Brazilian Arbitration Act, almost all contracts related to the mining and natural resources sector provide for an arbitration clause. Such provision has been consistently applied by the Brazilian courts, with a view that the government should not become an obstacle in the adjudication of claims in these fields.

Guty: Very rarely does litigation between oil and gas companies require the involvement of government at any phase. The government of Alberta takes a ‘hands off’ approach to litigation within the oil and gas sector other than to make a very general statement to generally encourage settlement of disputes. However, the government is very involved in encouraging and even mandating dispute resolution processes over those areas under which it has direct regulatory control. For example, the majority of the natural resources regulatory bodies created by the government now have their own dispute resolution processes, which participants are strongly encouraged to use. Some of the bodies, like the Surface Rights Board and the Environmental Appeals Board, have actual board members act as mediators, while other bodies, including the Energy Resources Conservation Board, use third party mediators. On rare occasions, the government, while not getting directly involved in the dispute, may take action that directly impact disputes. For example, the Alberta government’s recent legislation proclaiming that ownership of coalbed methane lies with the owner of the natural gas rights and not the owner of the coal rights. This has impacted, if not resolved, a longstanding dispute between coal rights owners and natural gas rights owners regarding ownership of coalbed methane.

FW: In your opinion, what are some of the most effective measures used to avoid disputes in the mining and natural resources sector?

Corrêa: First of all, the parties must realise that the agreements should be thoroughly negotiated to reflect the real situation of the project. Moreover, good faith in exchanging information during the negotiations is a key factor to avoiding future disputes. Furthermore, good faith should be applied during and after the contractual performance to guarantee that all the parties are not surprised by any undisclosed factor. In the construction phase, the project owners have relied heavily on hiring specialised companies to act as the owner’s engineer. Although the owner’s engineer is conceived as a means of controlling the quality of the construction, sometimes these professionals have moved away from their initial functions and acted together with the engineer in charge. If this division of work is not clearly established by the parties, for instance, the construction agreements may stipulate that the issue is referred to a dispute resolution board, which is an internal board to solve conflicts raised due to this sort of misunderstanding of each party’s role.

Guty: The most effective way to avoid disputes begins with the corporate culture of the client which is implemented long before litigation lawyers are involved in a dispute. Even when one is dealing with immensely complex contract negotiations or project planning, which is often the case in large oil and gas endeavours, it is ultimately the good relationship between the people on the opposite sides of an issue that is essential to avoiding disputes. Excellent documentation and contract administration are important and will also assist the client immensely if the dispute goes to litigation; however, in order to avoid disputes, people skills are indispensable. Litigation is expensive and time consuming for employees and officers of companies so employing sound people skills early in the process will save considerable money and time.

Grieger: The first measure should consist of preliminary due diligence to analyse whether the party with whom a contractual relation is intended fully complies with the legal provisions applicable to its activities in the mining and natural resources sector. This is to avoid future possible non-compliance risks which could prematurely end the business relationship and affect the standing and image of the complying company in the event of damages or risk to the environment or third parties. A subsequent measure should be to include the proper clauses in the agreements to outline the liabilities and indemnities of the parties involved. In this regard we always suggest a mediation and arbitration clause be included in the agreements in order to avoid a dispute, and in the event one arises it is resolved with the benefits of an arbitral procedure. The insertion of mediation or arbitration clauses in mining and environmental matters is not that common in Mexico; nevertheless, we strongly promote its implementation.

FW: Have there been any important legal and regulatory developments affecting dispute resolution and claim mechanisms in the mining and natural resources sector?

Guty: In Alberta, the government has created a new Rules of Court which includes the requirement that all litigants participate in a dispute resolution process prior to the court scheduling a trial date. The court, however, has the ability to waive this requirement subject to certain conditions. There have also been proposals to create a regulatory ‘superboard’ for the oil and gas and mining industries, however, it is unlikely that this will be implemented prior to the next election.

Grieger: In March 2010, an amendment to the Federal Constitution was approved by Congress in order to incorporate the figure of collective actions, which is an instrument similar to class actions in the US. For the first time it will be possible for persons, associations and any private or public entity to file an action to defend the interests of a collectivity, without the need to evidence a direct damage to the person or goods of the person filing such judicial action. Collective actions are to be used mainly in the environmental, consumer protection and security sectors. Specific laws to regulate this judicial figure are being discussed in Congress and should soon pass. Currently there are no specific legal provisions in Mexico to clearly recognise damages caused to the environment, nor a specialised judicial procedure or federal courts to attend claims for environmental damages, since this procedure is normally ventilated in ordinary federal civil courts. A bill is also being discussed to issue a Federal Environmental Liability Act. The main purpose is to specifically regulate the judicial procedure and courts to attend claims for damages caused to the environment, as well as to provide clear rules to determine the concept and extent of environmental liability in the country.

Corrêa: The most relevant development in the last 15 years has been the enactment of the Brazilian Arbitration Law. Since then, investors and even state-owned companies have adopted arbitration as a dispute resolution mechanism. At the same time, Brazilian arbitration institutions have developed know-how in conducting cases in fields like mining and natural resources. Their list of arbitrators is formed by high profile lawyers and experienced experts, offering the parties a different choice from the Judiciary Branch. On the other hand, the regulatory changes affecting the Judiciary Branch have not been significant to the point of making the state adjudication adequate to the needs of these sectors. If a dispute cannot be solved through arbitration due to regulatory limitations – for example, environmental protection – there have been attempts to change the regulatory provisions regarding the environmental licensing process. If the government succeeds in changing this regulatory mark, it will most likely reduce the Judiciary Branch intervention in matters involving public policies.  

FW: What advice would you give to companies on dealing with a dispute as it arises? How important is it to act early and assess all the options, including litigation, arbitration and alternative dispute resolution methods?

Grieger: The best advice in this regard is for companies to pursue agreements with a mediation clause in order to resolve any potential dispute if possible. It is also important for companies to timely assess and agree on the most efficient method to resolve disputes that do arise. The method should be adapted to the particularities and amount of the specific contracts. Acting early in order to establish the method that will be used by the parties to resolve their disputes should significantly reduce costs and time periods for the parties to resolve any dispute that does arise.

Corrêa: The sooner the company invests in a speedy resolution of a dispute, the higher the chances that the parties will amicably settle such dispute. Indeed, if the parties have all the necessary information at the outset, they will most probably reach the same conclusions on their chances of winning or losing their case. The legal counsel is responsible for evaluating the case specifics to point out the best course of action. If the legal counsel fails to exercise his or her role early in the beginning or if the company decides to move forward without a legal counselling, this window of opportunity will be lost and, even worse, the other party may gain a strategic advantage. The choice between litigating and settling the dispute should be based on an informed decision among the available dispute resolution methods. The wrong choice will not only waste time and money, but will also allow the counter party to be better prepared to claim or defend from a claim with lower costs.

Guty: There is not a ‘one size fits all’ response. The position taken by a client with respect to a dispute, including proceeding to litigation, arbitration, negotiation or mediation is heavily dependent on the facts and the client’s legal position. Before a dispute reaches the litigation stage, clients must be made to understand the issues and facts as well as determine what dispute resolution processes have taken place up to that point in time. An important question is whether there has been a face to face meeting between the parties which would include those persons with the authority to agree to a resolution. Often times at this stage the respective parties will already conclude that no resolution is possible. However, after years of litigation, legal expenses, and damaged relations, most commercial litigation is settled before trial between representatives of the respective clients. One often wonders why that negotiation did not happen at the beginning of the dispute rather than towards the end, especially when the facts have not changed very much. It is, therefore, very important to assess all options with respect to litigation, arbitration, negotiation and mediation early in the dispute.


Fábio Peixinho Gomes Corrêa is a partner at Lilla, Huck, Otranto, Camargo. His legal practice is focused on civil and commercial litigation, with emphasis on arbitrations, domestic and international, Brazilian class-actions, disputes concerning corporate and contractual issues, and infrastructure projects. Mr Corrêa holds a Masters Degree and a Doctorate in Civil Procedure from the Universidade de São Paulo. He received a Master of Laws (LL.M.) in American Legal Studies from Regent University in 2008. He is a member of the Brazilian Bar Association (OAB) and of São Paulo Attorneys’ Association (AASP). Mr Corrêa can be contacted on +55 11 3038 1019 or by email:

Allan J. Guty is partner at Parlee McLaws LLP. He has represented oil and gas clients in a large number of cases where comprehensive understanding of the technical aspects of the client’s case has been imperative. He has represented clients involved in intellectual property disputes, including cases of alleged theft of intellectual property by present and former employees, and also appeared before the Court of Queen’s Bench in a large number of applications for injunctions and Anton Pillar Orders. Mr Guty is active in the Canadian Bar Association. He can be contacted on +1 403 294 7079 or by email: 

Edmond Grieger is a senior associate at Von Wobeser y Sierra, S.C., and specialises in environmental and energy law. He provides legal counsel on environmental and energy matters and disputes and has successfully represented national and international clients. He obtained his law degree from the Universidad Anáhuac and a Masters in Law (LL.M.) specialising in environmental and energy law at the Johannes Gutenberg Universität Mainz, Germany. He is a member of the Mexican Bar Association, the Environment and Energy Committee of the ICC, and the Environment and Energy Law Commissions of the IBA. He can be contacted on +52 (55) 5258 1016 or by email:

© Financier Worldwide



Fábio Peixinho Gomes Corrêa

Lilla, Huck, Otranto, Camargo 


Allan J. Guty

Parlee McLaws LLP 


Edmond Grieger

Von Wobeser y Sierra, S.C.

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