Extractive contracts can have significant long-term impacts on the achievement of the Sustainable Development Goals. They not only shape the level of public revenues a government can get out of an investment, but also the extent to which that investment creates income-generating opportunities through employment and linkages with the local economy. Moreover, contracts also shape the balance between these economic benefits and social and environmental aspects.
However, when interests are not aligned, where asymmetries of information exist and where negotiating strengths are unequal, resource-rich developing countries can find themselves locked in to unbalanced contracts, which are ultimately unsustainable.
The tools below provide resource-rich developing countries with guidance on negotiating a fair deal, one that (i) reflects the legitimate interests of governments, investors, and communities, and (ii) generates positive development outcomes for the country, both throughout the project life cycle and across a range of outcomes and market conditions.
Co-chairs: Germany and Guinea
Guiding Principles for Durable Extractive Contracts
The Principles provide guidance on how resource projects can reflect the balance of risks and rewards that underpins durable contracts, while taking into account community interests and concerns since the very beginning. They offer a blueprint for the content and negotiation of durable extractive contracts that can reduce the drivers of renegotiation, and provide adaptive and flexible provisions that, for example, automatically adjust to prevailing market conditions. They also aim to help host governments and investors explain the content of the contract to the public, and overcome tensions between stakeholders. The Principles set out eight principles and supporting commentary which host governments, investors, providers of negotiation support and legal practitioners can use as a common reference for negotiations of enduring, sustainable and mutually beneficial extractive contracts.
Guidance to Assemble and Manage Multidisciplinary Teams for Extractive Contract Negotiations
The Guidance offers host governments the tools they need to assemble and manage a multidisciplinary team, and engage effectively in extractive contract negotiations. It helps governments put in place recommended processes and identify the skills they need to prepare for, and conduct effective contract negotiations. Annexed to this Guidance is a Terms of reference template that governments may use to recruit and to monitor external advisers during extractive contract negotiations.
A Toolkit for Addressing Difficulties in Accessing Comparable Data for Transfer Pricing Analyses: Addressing the Information Gaps on Prices of Minerals Sold in an Intermediate Form
The pricing of transactions between related parties in extractive industries is of particular relevance to many developing countries due to the asymmetry of information between revenue authorities and international mining companies – particularly in the case of minerals sold in an intermediate form (such as concentrates) where there is no recognised international pricing benchmark.
The toolkit on mineral product pricing, which has been the subject of extensive consultation, helps revenue authorities address information gaps on the prices of minerals and revenue leakages. It was prepared in the framework of the Platform for Collaboration on Tax by the OECD with the co-operation and input of the International Monetary Fund (IMF), United Nations (UN) and World Bank Group (WBG).
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