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Legal Risk Rating
32
0
100
Score: 32
Severe Risk
In reading the Balochistan Pakistani legislation one imagines a well-intentioned foreign advisor emailing a well-drafted document to a group of well-educated politicians in advance of her trip to defend her work and, during the flight to Pakistan to review the text with her client, arriving to find her document mildly disturbed with the introduction of "minor amendments" the consequence of which is to completely undermine the security of title she sought to embed in her workl. After trying for several days to move her audience, only to see that more discussion results in the concept of foreigners having to declare their innocence from the "espionage" trade, she retreats to her New York apartment resting on the comfort that the opportunity remains for the foreign investor to negotiate a specific mining agreement and avoid the hooks and snags now showing in her work. Thus reads the Balochistan mining code.

Regulatory Corruption Risk

Very High Corruption Potential

Corruption Exposure Risk

Moderate Corruption Risk

Legal Risk Rating

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Mining Overview Commentary plus sign

PAKISTAN MINING REGULATION

GENERAL

Pakistan has deposits of quality gemstones, along with coal, copper, iron ore, limestone and salt. Most of the country’s minerals have not been explored or mined due to lack of infrastructure and investment. Mineral production accounted for less than 1% of GDP in 2006. One and one- half percent of the labor force was employed in the mineral industry. The minerals manufacturing sector is dominated by the cement industry, which uses indigenous limestone. Other minerals mined in Pakistan are antimony, aragonite, barite, celestite, chromite, gypsum, marble and salt.

Minerals other than nuclear minerals and those occurring in special areas (Federally Administered Tribal Areas (FATA), Islamabad Capital Territory (ICT) and International Offshore Water Territory (IOWT)) are a provincial matter under Pakistan’s constitution. Provincial Governments and federall territories are responsible for regulation, detailed exploration, mineral development and issues of safety in respect of mineral operations, whereas geological/geophysical survey and mapping, national and international coordination and formulation of national policies and plans are federal responsibilities.

PRINCIPAL LEGISLATION AND REGULATOR

The Ministry of Petroleum and Natural Resources (MPNR) is responsible for the administration and control of the mining sector through the Federal General Director of Mines. The National Mineral Policy of 1995 provides for the establishment of a Mining Investment Facilitation Authority (MIFA) in each province, FATA, and the disputed territories. MIFA members include the Chief Minister of the province, the Minister of Mineral Development, and officials from other departments. The MIFA’s responsibilities include: directing and monitoring mineral activities; reviewing the regulatory regime and administrative functioning of the sector within the province; reviewing progress on investment in the sector; ensuring protection of the environment, and assisting with support for investors (such as access to land). In this last, MIFA serves as an appellate forum for resolution of disputes between investors and the licensing authority. The Geological Survey of Pakistan is responsible for creating the geological and geophysical maps necessary for mineral exploration (GOP National Mineral Policy 1995; GOP 2003b).

The Regulation of Mines and Oil Fields and Mineral Development (Federal Control) (Amendment) Act 1976, which is a federal act, governs mineral rights at a policy level and each province and territory has adopted regulations consistent with federal policy. For example, few differences exist between the mineral regulations of the Provinces of Balochistan and Sindh. Mining regulation in Pakistan is not in accordance with international standards insofar as the holder of an exploration license does not have the right to obtain a mining lease where inconsistent with the best “interest” of the relevant province in such development. Recognising the need for updated legislation, the federal and provincial governments jointly developed the National Mineral Policy of 1995 to establish a regulatory framework, institutional arrangements and equitable fiscal regime. The government has yet to draft a new mining law as called for by the National Mineral Policy.

GRANT AND FORMS OF MINERAL TITLE

The Provincial mineral titles granted in Pakistan are small-scale or large-scale. For small-scale, they include mineral permits, exploration (prospecting) licenses and mining permits. For large-scale, they include reconnaissance Licenses, exploration Licenses, mineral deposit retention licenses and mining leases. Considerable discretion exists within the regulations as to the grant or refusal of various licences, but - once granted - the holder of a mineral title, subject to payment of dues and compliance with other prescribed obligations, has the exclusive right to explore or produce minerals, as the case may be, including the right to enter upon the licensed/leased area (subject to the rights of surface owners) and to carry out operations in accordance with the terms of the mineral title and applicable laws.

DEVELOPMENT CONSIDERATIONS

Preconditions to the grant of a mining right include the preparation of a feasibility and technical report and an environmental impact assessment. The Provincial Governments may enter into an agreement with an investor to define the terms or to predetermine procedures with respect to certain matters relating to the carrying out of operations under a license/lease, if government is satisfied that substantial foreign investment in exploration and mining operations is likely to be made and it is desirable in the interest of the development of mineral resources, to do so. The Federal Government may also become signatory to such an agreement. The Federal Government proposed to develop a model mineral agreement designed to provide additional comfort to a mining company and its lenders, but - to date - no such agreement has been prepared.

ENVIORNMENTAL REGULATION

See Pakistan Environmental Regulation.

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Environmental Overview Commentary plus sign

PAKISTAN ENVIRONMENT REGULATION

GENERAL

The Islamic Republic of Pakistan was created after the Muslim-dominated parts of Hindu India were given autonomy as British rule in India came to an end in 1947. Pakistan shares its borders with four neighboring countries – Afghanistan, China, India and Iran. It has border access to the Arabian Sea giving it access to international waters. The geography of Pakistan is a profound blend of landscapes varying from plains to deserts, forests, hills and plateaus.

Water pollution from raw sewage, industrial wastes and agricultural runoff, as well as deforestation and soil erosion is principal challenges in Pakistan. Of special concern is the diminishing forest cover in watershed regions of the northern highlands. While there is inadequate capacity of the government in this field of regulation, the central government has shown a commitment to environmental protection and requires environmental impact assessments (EIAs) for all the public sector projects likely to have adverse environmental impacts.

PRINCIPAL LEGISLATION AND REGULATOR

Environmental regulation is on the concurrent legislative list of the Constitution, enabling both the federal and provincial governments to enact legislation. With few exceptions, federal statutes delegate rule-making and administrative powers either to provincial governments or to bodies and authorities specifically established for such purpose. The exception is legislation on fisheries, where federal laws govern. Therefore, depending on the location of a resource project, one will need to work with provincial regulators (i.e., the environmental departments of Punjab, Sindh, Khyber Pakhtunkhwa or Gilgit Baltistan).

The principal legislation governing environmental regulation is the Pakistan Environmental Protection Act, 1997 (1997 Act), where the term “environment” is defined to mean air, water, land and layers of the atmosphere; living organisms and inorganic matter; the ecosystem and ecological relationships; buildings, structures, roads, facilities and works; social and economic conditions affecting community life; and the interrelationship between these elements (Section 2(x)). The provincial governments have adopted the 1997 Act through additional legislation - for example, the Punjab Environmental Protection Act, 1997 and the Northern Areas (Gilgit Baltistan) Environmental Protection (Adaption and Enforcement) Order, 2002.

The 1997 Act requires every provincial government to establish an environmental protection agency to exercise such powers and perform such functions as may be delegated to it under the 1997 Act. It prohibits the discharge or emission of any effluent or waste in excess of national quality standards that are fixed by ordinance and regulates the handling, generation and storage of hazardous substances. It further provides for EIAs and initial environmental impact examinations in respect of projects that are likely to cause an adverse environmental effect (i.e., an impairment of, or damage to, the environment (section 2(i)).

EIA PROCESS

The Pakistan Environmental Protection Agency Review of Initial Environmental Examination and Environmental Impact Assessment Regulations, 2000 (EIA Regulations) regulate mines in accordance with whether they fall within Schedule I or Schedule II to the EIA Regulations. Schedule II includes mines that intend to extract coal, gold, copper, sulphur, precious stones, majority non-ferrous metals and iron, as well as processing plants associated with the foregoing. Schedule I includes mines (and quarries) that intend to mine sand, gravel, limestone, clay, sulphur and other minerals not included in Schedule II. Quarries and “other mineral” mines are initially subject to an "initial environmental examination,” which means a preliminary environmental review of the reasonably foreseeable qualitative and quantitative impacts on the environment in order to determine if an EIA is required. Traditional mining projects are subject to an EIA.

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