One of the main amendments introduced by this new Code of Mines relates to reversion of assets to the State, free of cost, at termination of a mining contract. The new Code of Mines regulates reversion in the following manner:
a) As per the terms of article 113, the following assets are subject to reversion, free of cost, to the State upon termination of a mining contract:
(i) all immovable assets and fixed facilities built and exclusively used by the contractor for the transportation and shipment of coal; and
(ii) assets incorporated to the mine and to its ways of access, which cannot be removed without causing an adverse effect to the mine.
b) In this connection it is important to note that said article 113 does neither mention movable equipment, nor does it include any reference to the operational status of the assets.
c) This article 113 also states that reversion will only apply if the mining authority considers that the relevant assets serve as infrastructure for the public service of transportation and shipment or may be used by the community. Therefore, if the mining authority decides that the relevant assets do not comply with the above requirements, reversion would not apply.
d) On the other hand, article 352 of the new Code of Mines establishes that mining contracts executed before the enactment of said Code shall be ruled by the terms set forth in the above-mentioned article 113 and in article 357 thereof.
Pursuant to article 357, in the case of contracts executed before the enactment of the new Code, the contractor may agree with the mining authority to substitute the obligation to transfer the assets for the obligation of paying the value of the relevant assets.
This substitution would be possible only if the assets do not serve as infrastructure for the public service of transportation and shipment or that may not be used by the community.
It is the State who has the right to decide whether the assets serve for the above-mentioned purpose. Thus, it would seem that the contractor would not be able to negotiate with the relevant State entity the latter's decision not to receive the assets in exchange of the payment of their value.
e) On the other hand, it is worth noting that there is no reference in this article as to the way of determining the value of the assets (i.e. book value, commercial value, replacement value). However, should there be a discrepancy as to the value of the assets, both parties may submit it to technical arbitral proceedings as set forth in article 294 of the new Code.
f) As a way of conclusion, the new Code of Mines provides for new rules on reversion that are mandatory for all mining contracts, even to those executed before its entrance into force.
This report was prepared and is copyrighted in 2001 by PARRA, RODRÍGUEZ & CAVELIER, a law firm with offices in Bogotá, Colombia. The general information herein contained does not constitute legal advice. Transcriptions and quotes are permitted citing the source.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.