The conflict gradually intensified, with the Government taking increasingly assertive actions that culminated in the seizure of gold stocks from the mine. As a result, the suspension raised critical legal considerations for mining companies and investors, particularly those operating in politically unstable regions such as Mali.

Political and legal risk exposure in Mali

The seizure of gold stocks at the Loulo-Gounkoto mine highlights a key challenge faced by mining companies: the exposure to political and legal risks in foreign jurisdictions. Mali, a country with a history of political instability, has experienced a military coup and the installation of a junta, which raises questions about the protection of foreign investments. Mining companies in such jurisdictions must contend with risks such as expropriation, abrupt regulatory changes, and the arbitrary seizure of assets. In this case, the Government’s decision to seize gold exemplifies how volatile political environments can directly threaten the stability and security of mining operations.

From a legal perspective, mining companies must carefully evaluate the political landscape of the host country before proceeding with investments. The legal framework in countries with unstable governments may not offer the same protections as those in more stable jurisdictions. The absence of a strong rule of law guarantees significantly raises the stakes for foreign investors.

The role of force majeure and stabilisation clauses

To mitigate political risks, mining companies must strategically design their contracts, especially with regard to force majeure and stabilisation clauses. Force majeure provisions are designed to protect parties from being held liable for non-performance due to circumstances beyond their control.

The seizure of gold by the Malian junta, following an interim order to attach the gold amid a revenue dispute, may raise the question of whether it constitutes a force majeure event in Barrick Gold’s contract. Force majeure typically covers unforeseen events beyond a party’s control that prevent them from fulfilling their obligations, but the key issue here is whether the seizure was an unexpected and uncontrollable occurrence. Given the ongoing nature of the revenue dispute, the seizure might be seen as a foreseeable government action rather than an unforeseeable event. Whether it qualifies as force majeure depends on the specific terms of Barrick Gold’s contract with the Malian Government, including any clauses related to political instability or interventions, and/or asset seizures, and whether the event directly impairs the company’s ability to perform its obligations.

Thus, force majeure clauses must be carefully negotiated and clearly drafted to avoid ambiguity. The language must explicitly cover political risks such as government seizure of assets or actions that render it impossible to continue operations. Mining companies should also consider including specific provisions related to political instability, ensuring that both parties are aware of the potential legal remedies in the event of government actions that disrupt operations.

Additionally, stabilisation clauses serve as an important safeguard against abrupt regulatory changes, including the introduction of new taxes, nationalisation or expropriation. These clauses effectively ‘freeze’ the operating environment for the duration of the contract, providing the mining company with legal assurances that its rights will not be altered without compensation. Barrick Gold may have benefitted from such provisions in the event of the political seizure of assets by the junta, which could provide a legal foundation for challenging the action.

Legal protections and remedies

The potential for expropriation – whether direct or indirect – is one of the most critical legal risks in international mining. Although the junta in Mali has not yet nationalised Barrick Gold’s mine, the seizure of gold raises concerns about future expropriation. Under international law, expropriation is generally not allowed without adequate compensation, as stipulated in bilateral investment treaties (BIT) and multilateral agreements such as the International Centre for Settlement of Investment Disputes convention. If Barrick Gold (Canada) has entered into a BIT with Mali, this could provide a legal avenue for the company to seek compensation in the event that the Malian Government proceeds with more severe measures, such as nationalising the mine.

The presence of such legal frameworks, however, depends on the specific treaty provisions and the enforceability of international law in Mali’s legal system. If Barrick Gold’s agreements with Mali do not include BIT protections or are not enforceable due to the country’s unstable political environment, the company may face significant challenges in securing compensation for any expropriated assets.

Dispute resolution mechanisms

An essential component of international mining contracts is the dispute resolution mechanism. Barrick Gold, operating in Mali, would benefit from having robust arbitration clauses in place to ensure that any disputes arising from the political situation could be resolved in a neutral forum. Arbitration provides a fair and impartial method of resolving conflicts, particularly in politically unstable jurisdictions where local courts may not be perceived as neutral.

For Barrick Gold, the inclusion of an arbitration clause in its agreements with the Malian Government would enable the company to seek redress in international arbitration forums, such as the International Chamber of Commerce or the London Court of International Arbitration. These platforms provide an independent, predictable process for resolving disputes, which is particularly valuable in high-risk jurisdictions. By using internationally recognised arbitration mechanisms, Barrick Gold can protect its interests and seek compensation for any illegal actions taken by the Government.

Political risk insurance and its role in safeguarding investments

In addition to contractual protections, mining companies can mitigate political risk through political risk insurance (PRI). PRI policies are designed to provide financial protection against the risks of expropriation, political violence, currency inconvertibility, and other government actions that could jeopardise the financial stability of a project. Barrick Gold may have benefitted from such insurance policies, which could cover losses incurred from the seizure of gold stocks or other disruptions caused by the Malian Government.

Political risk insurance provides a safety net for investors operating in regions where political instability is a significant concern. For companies operating in African countries with fluctuating political climates, PRI policies can be a cost-effective way to safeguard investments. These policies are typically offered by multilateral agencies such as the Multilateral Investment Guarantee Agency or private insurers, which specialise in providing coverage for political risks in emerging markets.

Strategic considerations for mining companies

The situation at Barrick Gold’s Loulo-Gounkoto mine serves as a stark reminder of the legal complexities and risks that mining companies face when operating in politically volatile regions. To mitigate these risks, mining companies should prioritise strong legal protections in their contracts, including force majeure and stabilisation clauses, and ensure that appropriate dispute resolution mechanisms are in place. Additionally, political risk insurance and the strategic use of BITs can provide additional layers of protection against the unpredictable nature of political instability.

Ultimately, while Mali presents legal complexities, Barrick Gold and other mining companies can foster a mutually beneficial relationship by aligning their investment strategies with strong legal frameworks and collaborative engagement. By implementing robust legal safeguards and working closely with local stakeholders, mining companies can support sustainable resource development while ensuring long-term operational stability and shared economic growth.