Senegal’s extractive sector, encompassing oil, gas and mining resources, occupies a strategic position in the national economy, offering significant prospects for economic development. While the mining industry has been active since 1950, with the opening of two large phosphate mines in the Thi\u00e8s area, the year 2024 marks the start of production of offshore oil and probably gas, signifying a boom in the hydrocarbon industry. These natural resources are an essential lever for generating revenue and attracting large-scale foreign investment. However, in view of market developments and socio-economic dynamics, the Senegalese authorities are showing a willingness to redefine national priorities, placing the country’s economic and social interests at the heart of this process.<\/p>\n\n\n\n
However, this renegotiation process is provoking strong reactions from both the administration and foreign investors. From a legal point of view, renegotiating extractive contracts in Senegal is a complex exercise and raises a number of legal risks that require careful attention.<\/p>\n\n\n\n
The risk of breaching stabilisation clauses<\/strong><\/p>\n\n\n\n Stabilisation clauses are generally included in mining agreements and oil and gas contracts. The stabilisation clause in extractive contracts is designed to protect the investor from interference by the host state by guaranteeing a fixed legal framework. It prevents any legislative or administrative changes that could affect the rights of the private investor, thereby limiting the State’s legislative prerogatives throughout the life of the mining or oil contract. For example, Article 72 of the 2019 Senegalese Petroleum Code provides that a production sharing contract may include a stabilisation clause from the time the contract comes into force, with the aim of freezing the legislative and regulatory context. In addition, Article 17 of Regulation 18\/2003\/CM\/UEMOA on the Community Mining Code ensures the stability of the tax and customs regime for holders of mining titles, prohibiting any new taxes during the validity of these titles.<\/p>\n\n\n\n The risk of international arbitration<\/strong><\/p>\n\n\n\n Arbitration is the preferred dispute resolution method for mining agreements and production sharing contracts. International arbitration is an alternative dispute resolution method that is seen as a form of private justice. It is based on an agreement between the parties, either pre-existing in an arbitration clause inserted into a contract, or drawn up after the dispute has arisen in the form of an arbitration agreement. As with the other methods, the third party involved is an arbitrator whose task is to settle the dispute, and whose decision is binding on the parties as a real judgment that can be enforced after an exequatur procedure. This recourse to arbitration, which is frequent in the event of a dispute, is generally costly and often leads to the suspension of extractive operations.<\/p>\n\n\n\n Senegal’s extractive sector, encompassing oil, gas and mining resources, occupies a strategic position in the national economy, offering significant prospects for economic development. While the mining industry has been active since 1950, with the opening of two large phosphate mines in the Thi\u00e8s area, the year 2024 marks the start of production of offshore oil […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[47],"tags":[],"class_list":["post-6587","post","type-post","status-publish","format-standard","hentry","category-news"],"acf":[],"yoast_head":"\n
The inclusion of this stabilisation clause in extractive contracts was initially broad and included a whole legal arsenal. In recent years, the scope of stabilisation clauses has been restricted. States are now increasingly tending to limit the scope of stabilisation clauses to tax, financial and customs aspects only.<\/p>\n\n\n\n
Renegotiating contracts in spite of these clauses could expose the host country to claims for compensation or international recourse, due to the infringement of investors’ contractual rights. Any renegotiation should therefore be conducted with caution to avoid costly litigation and preserve the host country’s reputation as a reliable investment destination.<\/p>\n\n\n\n
In connection with the stabilisation clause, some investors may, during arbitration proceedings, invoke the existence of a bilateral investment treaty to argue that the host state has breached the principle of legitimate expectations. Renegotiation that amounts to indirect expropriation or infringement of investors’ economic rights is likely to result in costly and protracted international litigation for the host state.<\/p>\n","protected":false},"excerpt":{"rendered":"