Equinox think they are untouchable

Canadian Newsletter 'The Northern Miner' reports that at least one of Zambia's copper investors thinks they are untouchable.

While First Quantum Minerals declared themselves unwilling to comment on the president's announcement of a new tax regime because the ramifications are as yet unclear, Kevin van Niekerk, vice president of Equinox Minerals (who are developing the Lumwana project) told the Northern Miner he is confident that all Development Agreements will be honoured. "We will not see unilateral cancellation of existing Development Agreements," he says. "They are protected in law as binding international agreements." Van Niekerk seemed to believe that, as with Finance Minister Magande's announcement last year, the new system would apply only to new investments not those that already hold Development Agreements.

The report also claims, "Since the [Development] Agreements were created as part of a privatization process overseen by the World Bank and the IMF they hold international legal status, meaning the Zambian government cannot modify the agreements even through legislation. Development Agreements are also secret, not available for public viewing or scrutiny." Now we know that second bit's not true any longer; many of the Development Agreements are published on this website. But what about the first bit? Firstly, of course the Bank and Fund deny that they 'oversaw' the privatisation process - that is not how they chose to understand their own conditionality regime and they deny direct involvement in the negotiations - they were at most, they say, advising. So, what about his idea that the agreements have 'international legal status'? I would suggest this is simply wrong and that the sovereign parliament can introduce any taxes it likes. The constitutionality of the original agreements is much more likely to be challenged than Zambia's right to re-visit them. At worst, this could result in a tribunal at the Intenational Centre for the Settlement of Investment Disputes (ICSID), of which Zambia is a signatory. Bolivia recently chose to exercise its right to leave ICSID in order to facilitate a significantly more radical re-working of its natural resource sector than is being considered in Zambia. I can't see any companies being foolish enough not to realise that things have moved politically in Zambia and that they need simply to accept a new regime. Bolivian investors are seeing their plants nationalised - the Zambian proposals, even if we can't fully understand what they are yet, are most unlikely to be anywhere near as radical.

PS - Flatteringly, this news report cuts and pastes a significant section of the 'For Whom the Windfalls?' report!