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1 Setting the Legal and Policy Framework

Stage 1:
Setting the Legal & Policy Framework

Setting the Legal and Policy Framework refers to the need for a country to formulate clear policies and strategies that both attract FDI and benefit the country.

Government Policies and Strategies Legislative and Regulatory Frameworks Sector-Wide Analyses
2 Pre-Negotiation

Stage 2:
Pre-Negotiation Stage

The Pre-Negotiation Stage refers to the period during which a government identifies a particular project or investment and conducts feasibility studies and impact assessments.

Feasibility Studies Impact Assessments Tender Process and Financial Structure
3 Contract Negotiation

Stage 3:
Contract Negotiation Stage

The Contract Negotiation Stage refers to the actual negotiation of investment contracts between a government and an investor.

Prepare for the Negotiation Assemble a Negotiation Team Develop a Negotiation Position Contract Negotiation
4 Contract Implementation and Monitoring

Stage 4:
Implementation & Monitoring Stage

The Implementation and Monitoring of the Investment Stage refers to the period during which an investment project is developed and operated pursuant to the terms of the investment contract.

Monitoring Implementation Grievance Mechanisms

Roadmap

Prepare for the Negotiation

Content of this page:

Before the start of a contract negotiation, the host government should determine its national negotiating position, taking into account the feasibility studies and impact assessments that have been conducted as well as the positions of different government ministries and agencies.

Given that negotiations inevitably require some compromise to reach a final agreement, determinations also need to be made as to which provisions of the contract/ objectives are non-negotiable (the “deal breakers”), which are desirable and which points could be conceded in a negotiation in order of areas of higher and lesser priority.

If any additional research, information, or expertise is required for the negotiation to bolster the host government’s position, it should also be carried out at this stage. For example, governments may wish to engage legal counsel well in advance of the direct contract negotiations to assist with the negotiation process.

Key Tools At This Stage

Useful Resources

Negotiations

A Good Deal Better? Uganda's Secret Oil Contracts (Plus Economic Model) Explained Go to resource

  • Date:  2014
  • Sector:  Extractive Industries, Oil & Gas
  • Source:  Global Witness

Global Witness has analysed and made public two “production sharing agreements” signed by the Ugandan Government and international oil companies in February 2012. They determine what share of oil revenues the Government of Uganda will get and almost every aspect of its relationship with the oil companies. This is the first time this information has been made public.

Their analysis shows that the Ugandan Government has succeeded in negotiating a better financial deal in these contracts compared with older contracts – for which it should be congratulated. But there are some significant weaknesses that still need to be addressed. The contracts lack some important human rights and environmental safeguards. This is of particular concern given the unique habitats of the oil region in Uganda which sits on the border with the Democratic Republic of Congo and the Nile River.

To see how Uganda’s oil money will be shared and evaluate the new contracts against the old contracts see the Revenue Infographic. You can also download Global Witness' open source Economic Model, the first of its kind, which can be updated when new information becomes available or adapted for other countries’ contracts. A guide is also available here.

50 Pieces of Advice to an Official who is Engaged in the Negotiation of Mining Contracts Go to resource

The governments of resource rich countries have a responsibility to be well prepared and knowledgeable in contract negotiations for natural resource extraction and long-term 
land leases – not just for the sake of securing a balanced financial deal, but to promote high standards in labour and human rights, environmental protection, health, safety, transparency and fiscal management.

This handbook provides fifty pieces of advice to ensure good governance, capacity building and sustainable development for resource rich countries.

Guidelines for Good Governance in Emerging Oil and Gas Producers, 2016 Go to resource

  • Date:  2016
  • Sector:  Extractive Industries, Oil & Gas
  • Source:  Chatham House

The Guidelines for Good Governance in Emerging Oil and Gas Producers 2016, compiled under the auspices of the New Petroleum Producers Discussion Group, review common challenges facing emerging producer countries in the phases of exploration, recent discoveries and early production. The following are the Guidelines’ broad recommendations for addressing these challenges.

Key objectives for the petroleum sector

Objective 1: Elaborate a strategic vision for the sector

Objective 2: Attract the most qualified investor for the long run

Objective 3: Maximize economic returns to the state through licensing

Objective 4: Earn and retain public trust and manage public expectations

Objective 5: Increase local content and benefits to the broader economy

Objective 6: Build capable national organizations to participate in and oversee the development of the resources

Objective 7: Increase accountability

Objective 8: Safeguard the environment

For each objective, the Guidelines discuss specific challenges related to the national contexts that face many emerging producers. Producers involved in the project offer their ‘lessons learned’ throughout this document.

IISD Handbook on Mining Contract Negotiations for Developing Countries Go to resource

  • Date:  2015
  • Sector:  Extractive Industries, Mining, Oil & Gas
  • Source:  IISD

Many governments lack the experience or human resources to prepare effectively for a negotiation, and are unable to make the investments needed to overcome these difficulties. Yet without preparing properly, there is little hope of achieving the desired national and community objectives. This guide provides a comprehensive approach that allows governments to set priorities and address critical issues in the preparation process.  It will assist governments in developing internal capacity and understanding where outside experts can best help. The guide addresses the process before negotiations begin, where the hard work gets done to lay the groundwork for a successful negotiation.

Mining Contracts: How to Read and Understand Them Go to resource

A book created to highlight strong contract clauses and explore how others could be improved. It goes beyond legal considerations to explore the policy questions and company interests underlying contract provisions—issues that are crucial for understanding and negotiating contracts, and for monitoring their enforcement.

Available in English and French

Miongozo ya Utawala Bora katika Wazalishaji wa Kujitokeza wa Mafuta na Gesi 2016 [Guidelines for Good Governance in Emerging Oil and Gas Producers, 2016 - Swahili version] Go to resource

  • Date:  2016
  • Sector:  Extractive Industries, Oil & Gas
  • Source:  Chatham House

2016 Mwongozo, uliotayarishwa chini ya Uangalizi wa Kikundi cha Majadiliano cha Wazalishaji Wapya wa Mafuta, urekebishaji wa changamoto za kawaida zinazokabili Mataifa zalishaji yanayoibuka yaliyo katika awamu ya utafutaji, uvumbuzi wa hivi majuzi na uzalishaji wa mapema. Yafuatayo ni mapendekezo pana ya ule Mwongozo ya kubabiliana na changamoto hizi.

Zingatia malengo Mwongozo huu umeundwa kutokana na malengo yaliyoorodheshwa hapa chini. Serikali lazima ziwe na mtazamo wazi wa umuhimu wa kila lengo. Lengo la 1 ambalo linahusu ono la taifa linafaa kuimarisha yale malengo mengine. Malengo muhimu ya sekta ya petroli:

Lengo la 1: Fafanua maono ya kimkakati ya sekta

Lengo la 2: Vutia wawekezaji waliohitimu zaidi kwa muda mrefu

Lengo la 3: Fikia upeo wa juu zaidi wa faida za kiuchumi kwa taifa kupitia kutoa leseni

Lengo la 4: Kupata na kudumisha imani ya umma na kusimamia matarajio ya umma

Lengo la 5: Zidisha maudhui ya kienyeji na faida kwa uchumi mpana zaidi

Lengo la 6: Jenga mashirika ya kitaifa yaliyo na uwezo ya kushiriki na kusimamia ukuzaji wa rasilimali

Lengo la 7: Zidisha uwajibikaji

Lengo la 8: Linda mazingira Kwa kila lengo, Mwongozo huu unajadili changamoto maalum zinazohusiana na mazingira ya kitaifa ambayo wazalishaji wengi wanaoibuka wanakumbana nazo. Kote katika waraka huu wazalishaji wanaoshiriki katika mradi huu wanatoa ‘mafunzo waliyojifunza’.

Natural Resource Contracts as a Tool for Managing the Mining Sector Go to resource

This study examines the different types of legal regimes governing mining projects in 18 countries around the world with a particular emphasis on the key provisions in mining contracts as well as in law where countries have adopted a licensing regime. In so doing, it discusses some of the reasons for which some countries have adopted a licensing regime to fully or partially regulate the rights and obligations of the parties in a mining project, whereas other countries have opted to use mining contracts to do so. Where a country relies on contracts to govern some or all aspects of a mining project, the study further examines the relationship between country's mining contracts and its legal framework, taking into account the trend - towards more legislated terms - that minerals regimes are taking. In addition, it analyzes the mining contract negotiation and implementation process and attempts to identify potential opportunities to support resource-rich, low-income countries in managing their mining investments from the planning and preparation for a contract negotiation or licensing round to the implementation and monitoring of the mining investment.

Oil Contracts: How to Read and Understand Them Go to resource

  • Date:  2012
  • Sector:  Extractive Industries, Oil & Gas
  • Source:  OpenOil

Walk-through guide on oil contracts: what they are, who participates in them, how the revenues should be handled and divided, what the different impacts of an oil project are, what its role is in fostering economic development, and how disputes between parties can be resolved.

Principles for Responsible Contracts: Integrating the Management of Human Rights Risks into State-Investor Contract Negotiations: Guidance for Negotiators Go to resource

  • Date:  2011
  • Sector:  Extractive Industries, Infrastructure, Land & Agriculture, Mining, Oil & Gas
  • Source:  UN Human Rights Council

A guide that sets out and explains 10 principles that can help guide the integration of human rights risk management into contract negotiations.

Fiscal Tools

A Good Deal Better? Uganda's Secret Oil Contracts (Plus Economic Model) Explained Go to resource

  • Date:  2014
  • Sector:  Extractive Industries, Oil & Gas
  • Source:  Global Witness

Global Witness has analysed and made public two “production sharing agreements” signed by the Ugandan Government and international oil companies in February 2012. They determine what share of oil revenues the Government of Uganda will get and almost every aspect of its relationship with the oil companies. This is the first time this information has been made public.

Their analysis shows that the Ugandan Government has succeeded in negotiating a better financial deal in these contracts compared with older contracts – for which it should be congratulated. But there are some significant weaknesses that still need to be addressed. The contracts lack some important human rights and environmental safeguards. This is of particular concern given the unique habitats of the oil region in Uganda which sits on the border with the Democratic Republic of Congo and the Nile River.

To see how Uganda’s oil money will be shared and evaluate the new contracts against the old contracts see the Revenue Infographic. You can also download Global Witness' open source Economic Model, the first of its kind, which can be updated when new information becomes available or adapted for other countries’ contracts. A guide is also available here.

NPV model to analyze PSAs/PSCs or Concessionary Arrangements Go to resource

The website offers an economic model that estimates expected cash flows for an upstream petroleum project (petroleum exploration, development and production). Host governments can use it to increase their understanding of the revenue they can expect from the project at each stage.

Contractual Terms

A Good Deal Better? Uganda's Secret Oil Contracts (Plus Economic Model) Explained Go to resource

  • Date:  2014
  • Sector:  Extractive Industries, Oil & Gas
  • Source:  Global Witness

Global Witness has analysed and made public two “production sharing agreements” signed by the Ugandan Government and international oil companies in February 2012. They determine what share of oil revenues the Government of Uganda will get and almost every aspect of its relationship with the oil companies. This is the first time this information has been made public.

Their analysis shows that the Ugandan Government has succeeded in negotiating a better financial deal in these contracts compared with older contracts – for which it should be congratulated. But there are some significant weaknesses that still need to be addressed. The contracts lack some important human rights and environmental safeguards. This is of particular concern given the unique habitats of the oil region in Uganda which sits on the border with the Democratic Republic of Congo and the Nile River.

To see how Uganda’s oil money will be shared and evaluate the new contracts against the old contracts see the Revenue Infographic. You can also download Global Witness' open source Economic Model, the first of its kind, which can be updated when new information becomes available or adapted for other countries’ contracts. A guide is also available here.

Energy Charter Model Agreements for Cross-Border Pipelines and Electricity Projects Go to resource

  • Sector:  Extractive Industries, Infrastructure, Oil & Gas
  • Source:  Energy Charter

The Energy Charter Conference welcomed the work of the Energy Charter Secretariat, with the valuable assistance of the Legal Advisory Task Force in preparing and updating Model Agreements as a set of non-legally-binding guidelines for the negotiation of cross-border projects.

These have been developed with a view to providing interested parties to energy-related projects with a neutral and non-prescriptive starting point for negotiations, and thus, facilitating project-specific talks. This work was done with the help of a professional consultant and with the valuable assistance of the voluntary Legal Advisory Task Force. The Model Agreements were prepared based on best international practices and with the aim of reflecting as much as possible the interests of the different parties concerned.

This work began with the preparation of Model Agreements for Cross-Border Pipelines (Pipeline Model Agreements, or PMAs), which were released in 2004 following the approval of the Energy Charter Conference. Subsequently, the PMAs were revised and updated; this second edition was published in 2008.

The Secretariat then developed Model Agreements for Cross-Border Electricity Projects (Electricity Model Agreements, or EMAs) and, as a supplement to EMAs, the Market and System Inter-Operability Agreement Guidelines for Cross-Border Electricity Projects (Guidelines to Electricity Model Agreements, or GEMA).

Currently, the Secretariat is working on an Investment Model Agreements (IMAs).

IISD Handbook on Mining Contract Negotiations for Developing Countries Go to resource

  • Date:  2015
  • Sector:  Extractive Industries, Mining, Oil & Gas
  • Source:  IISD

Many governments lack the experience or human resources to prepare effectively for a negotiation, and are unable to make the investments needed to overcome these difficulties. Yet without preparing properly, there is little hope of achieving the desired national and community objectives. This guide provides a comprehensive approach that allows governments to set priorities and address critical issues in the preparation process.  It will assist governments in developing internal capacity and understanding where outside experts can best help. The guide addresses the process before negotiations begin, where the hard work gets done to lay the groundwork for a successful negotiation.

Mining Contracts: How to Read and Understand Them Go to resource

A book created to highlight strong contract clauses and explore how others could be improved. It goes beyond legal considerations to explore the policy questions and company interests underlying contract provisions—issues that are crucial for understanding and negotiating contracts, and for monitoring their enforcement.

Available in English and French

Natural Resource Contracts as a Tool for Managing the Mining Sector Go to resource

This study examines the different types of legal regimes governing mining projects in 18 countries around the world with a particular emphasis on the key provisions in mining contracts as well as in law where countries have adopted a licensing regime. In so doing, it discusses some of the reasons for which some countries have adopted a licensing regime to fully or partially regulate the rights and obligations of the parties in a mining project, whereas other countries have opted to use mining contracts to do so. Where a country relies on contracts to govern some or all aspects of a mining project, the study further examines the relationship between country's mining contracts and its legal framework, taking into account the trend - towards more legislated terms - that minerals regimes are taking. In addition, it analyzes the mining contract negotiation and implementation process and attempts to identify potential opportunities to support resource-rich, low-income countries in managing their mining investments from the planning and preparation for a contract negotiation or licensing round to the implementation and monitoring of the mining investment.

Oil Contracts: How to Read and Understand Them Go to resource

  • Date:  2012
  • Sector:  Extractive Industries, Oil & Gas
  • Source:  OpenOil

Walk-through guide on oil contracts: what they are, who participates in them, how the revenues should be handled and divided, what the different impacts of an oil project are, what its role is in fostering economic development, and how disputes between parties can be resolved.

Principles for Responsible Contracts: Integrating the Management of Human Rights Risks into State-Investor Contract Negotiations: Guidance for Negotiators Go to resource

  • Date:  2011
  • Sector:  Extractive Industries, Infrastructure, Land & Agriculture, Mining, Oil & Gas
  • Source:  UN Human Rights Council

A guide that sets out and explains 10 principles that can help guide the integration of human rights risk management into contract negotiations.

Safeguarding land tenure rights in the context of agricultural investment Go to resource

Ce guide a été développé en réponse aux préoccupations face aux acquisitions des terres à grande échelle et à la nécessité d’augmenter les investissements agricoles. Le guide soutient l’application des Directives volontaires en fournissant des recommandations techniques permettant de protéger les droits fonciers dans le contexte des investissements agricoles, y inclus ceux à emprise foncière. Il vise notamment à fournir des recommandations supplémentaires aux autorités gouvernementales engagées dans la promotion, l’approbation et le suivi des investissements dans toutes les phases du cycle d’investissement. Ce guide peut également servir comme outil de référence pour la mise en œuvre des Principes pour un investissement responsable dans l’agriculture et les systèmes alimentaires, approuvés par le Comité de la sécurité alimentaire mondiale en 2014.

Safeguarding land tenure rights in the context of agricultural investment Go to resource

This guide has been developed in response to concerns regarding large-scale land acquisitions and the need to increase investment in agriculture. The guide supports application of the Voluntary Guidelines on the Responsible Governance of Tenure for Land, Fisheries and Forests in the Context of National Food Security at the national level by providing technical guidance on how to safeguard tenure rights in the context of agricultural investments, including in land. It aims to provide additional guidance to government authorities engaged in the promotion, approval and monitoring of investments at all stages of the investment cycle. The guide also serves as a reference for implementation of the Principles for Responsible Investment in Agriculture and Food Systems endorsed by the Committee on World Food Security (CFS) in October 2014 (CFS, 2014).