CHAPTER 4 ECONOMIC PRINCIPLES AND CONCEPTS OF CHILEAN MINING LEGISLATION: TOWARDS A DEEPENING OF THE MODEL

• Jurisdiction: Derecho Internacional

International Mining and Oil & Gas Law, Development and Investment
(Apr 2009)
CHAPTER 4
ECONOMIC PRINCIPLES AND CONCEPTS OF CHILEAN MINING LEGISLATION: TOWARDS A DEEPENING OF THE MODEL
Juan Paulo Bambach
Philippi, Yrarrázaval, Pulido & Brunner
jpbambach@philippi.cl
Santiago
Ricardo Irarrázabal S.
Universidad Católica de Chile

Juan Paulo Bambach, partner of Philippi, Yrarrázaval, Pulido & Brunner, with 20 years of experience in Natural Resources and Corporative Law. Post graduate diploma in Taxation Planning of Universidad Católica de Chile (2002). Post graduate diploma in Mining Law, Universidad de Atacama (1997). Master in Law, University of Wurzburg, Germany (1993). Profesor Mining Law, Universidad de Los Andes. He is member of Rocky Mountain Mineral Law Foundation and Bar Association of AIJA. Lecturer in international and local mining seminars.

I. Introduction

There is no doubt that the legislators of the Organic Law of Mining Concessions and of the Mining Code opted to leave on record in these bodies of norms the principles and concepts of the economic system of social market economy. In effect, the same Technical, Report of the Constitutional Organic Law on mining concessions, prepared in 1981 by the Minister of mines of the period, José Piñera, announced a "mining modernization" "through the establishment of rational and coherent rules of the game" thus defining a mining policy "that integrates the sector to the social market economy scheme¹ "

The above was not an easy task, since such paradigm had to cohabit with a series of definitions at constitutional level that contradicted the principles of social market economy and rather followed the statistic paradigm as economic model, such as absolute, exclusive, inalienable and imperative domain of the mines by the State and the existence of the Chilean state copper company CODELCO, which is obviously contradictory with the principle of subsidiarity. Now well, in a very intelligent way, those who drafted the bodies of norms mentioned finally achieved that the principles

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of social market economy should prevail and that these principles were manifested in a series of economic concepts contained in the different provisions both of the Organic Law of Mining Concessions and in the Mining Code.

Thus, economic principles that appear so clear in our modern mining legislation, such as the protection of property and the private initiative and protection to free economic entrepreneurship, was not the original inspiration of our legislators, who were influenced by the weakened but still perceptible winds of state interventionism and the old theories of nationalization of natural resources, announced by the same United Nations² and whose maximum exponent was the Russian Konstantin Katzarov³ All these weaknesses as regards the inspiration of our legislation were corrected by the accurate and determined language used by the Organic Law of Mining Concessions only in the year 1982. It must be pointed out that the development of our mining legislation makes it possible to examine interesting periods of the most recent history in the ideology of the west of the Twentieth Century. Marked strongly in its origin by a socialist influence going through later with years of warm glimpses of economic liberalism and strong temptations of statism to conclude with a free mining legislation and with sound economic fundaments of free market.

It is important to underline that these principles, definitions and concepts constructed what has today been called Latin American model mining law, promoted by the World Bank as a model to be adopted by all those countries that wished to adopt the

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principles of social market economy in the mining scope.⁴ Apart from Chile, that commenced this transformation at the beginning of the 80's, during the 90's a series of countries adopted reforms in such sense, such as Peru, Mexico, Ecuador, Argentina, Bolivia Brazil and Venezuela. However, several of thee countries have progressively abandoned these principles and have returned to the statist regime and centrally planned in mining matters, which obviously questions and puts in doubt the economic principles and concepts that continue to be effective in Chilean mining legislation. The Chilean model continues to be a very interesting case study, since in spite of its design and start up, it was conceived under the military regime, the model has remained unaltered under the different democratic governments that succeeded it, which speaks of a process of political legitimation and settlement of the Chilean mining reform, which has remained firm in spite of the political comings and goings. In this way, 25 years have passed with basically the same legislation, which is not a short time in a world context where new mining legislations are enacted with an unusual rapidity. In effect, since the year 1985, there are more than 120 countries that have changed their mining legislations.⁵ Likewise, the study of the Chilean model again has relevance in these times, where apparently the winds favorable to foreign investment have ceased to blow, being replaced by the winds of statism, in a constant historical fluctuations of this pendulum⁶ constituted by the mining industry.

In this paper we shall revise the economic principles that are present in our mining legislation, as well as their manifestation through clear concepts of an economic type which are mentioned in the different provisions of our mining legislation, as far as the public scope is referred to (role of the State in mining) and in the private scope (role of the concessionaires).

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II. Economic Principles

It s unquestionable that with the Constitution of 1980, Chile adopted the principles of the social market economy as an economic system, whose characterizing elements implied the "making of decisions by millions of economic units, with a principally private ownership regime, with active and dynamic markets and prices, and with an indicative planning for the private sector and imperative for the public sector."⁷

From the point of view of Mining Law, in which as we have seen principles of different types cohabit, we believe that there are four economic principles that rule Chilean mining legislation.

1. Principle of Economic Freedom and Right of Ownership.

The principle of economic freedom and the right of ownership come from the basic principle of our Political Constitution, which is prevalence of man over the State and the conception that the community exists for the perfection of man.⁸ It is exactly because of this primacy that the constituent asserts freedom of people in general and their manifestation in the economic life of the country, through the principle of economic liberty, that the Constitution guarantees in article 19 No. 21 as the right to develop any economic activity which is not contrary to morals, public order, or national safety, respecting the legal norms that regulate it, in a real projection of freedom of the people. Likewise, this economic freedom is manifested and materialized in the right of ownership of the private parties and intermediate companies,⁹ which contradicts the socialist paradigm that priorizes property in the hands of the State. It must be underlined that our Constitution, in its article 19 No. 24, establishes that the domain of the concessionaire is protected by the constitutional guarantee of the right to ownership. It has been exactly these two tendencies that have marked mining

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legislation throughout its history, reach the centrally planned current reaching its peak moment with the nationalization of the large mining companies, and the free current to its maximum expression in mining matters, with the legislation enacted at the beginning of the years 80 in Chile and which we shall explain throughout this paper

2. Principle of Subsidariety and Equality of Opportunities.

As stated in article 1 of our Constitution: "The State recognizes and defends the intermediate groups through which society organizes and structures itself and guarantees them the necessary autonomy for attaining their own specific objectives." Establishing likewise in article 19 No. 2 the principle of equality before the law and also the arbitrary non discrimination in economic matters (19 22)

The principle of subsidiarity thus established in our Constitution, basic requirement of a free and equal community,¹⁰ of Aristotelic and Catholic inspiration,¹¹ then guarantees to intermediate groups their right to self government and give themselves their own regulations - principle of the social autonomies - that would permit them to reach their own specific objectives, without the intervention of the State or of other societies. Let us recall that as asserted by professor Fermandois, "private property is, in a strict interpretation, an immediate derivation from the principle of the social autonomies. In effect, if the primacy of the person permits him to confirm intermediate groups with the right to self government, and this franchise is extended also to the economic scope, then the product of this economic activity must belong in quality of principle and of guarantee to whoever has performed such activity.¹² "

The logical consequence of the application of the principle of subsidiarity to the mining scope is that the exploration and exploitation of mines has been performed by private parties, which was fully discussed by those who advocated that the State should assume

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such role, as such resources are created by nature and because of their non renewable nature. However, and as was underlined by José Piñera, the above are fallacious arguments, as the exhaustion of a mine both in public hands and in private hands is the same, and the non renewability of the resources is something quite creative, since the new exploration technologies have made it possible for...