Brazilian Legal Mining Framework Under Decree-Law 227/67

Brazilian Legal Mining Framework Under Decree-Law 227/67

wf_h

The study of the brazilian legal mining framework can be divided into three separate groups of rules:

  • Legal structure core;
  • Administrative proceedings; and
  • Organization of the mining regulation agencies.

Legal structure core

The legal structure core of the brazilian legal mining framework is outlined in article 176 of the federal constitution and in some laws:

  1. deposits and other mineral resources belong to the union;
  2. mining shall be conducted in the national interest;
  3. ownership of the land does not include the ownership of the mineral wealth contained in the subsoil, even when said mineral wealth extends to the surface;
  4. legislative authority on mining and geology belongs solely to the union, that has exclusive power to make laws governing mining;
  5. the exercise of mining activity requires the authorization or concession of the union;
  6. only brazilians or companies established under brazilian law, which have their headquarters and management in brazil can hold mining rights;
  7. miners own the product of their mining;
  8. the union has the right and the duty to exercise the police power: granting, monitoring and sanctioning;
  9. mining is an activity of public utility (dl 3.365/41);
  10. the landowner is entitled to receive a share of the results of the mining;
  11. there is a charge for occupation in the exploration phase, called the annual tax per hectare;
  12. there is no occupation charge in the mining phase. however, the miner must comply with the approved economic use plan;
  13. the union has the right to financial compensation as the owner of the mineral wealth, at a maximum rate of 3% of the net result of the activity;
  14. a miner that presents a valid exploration application for a free area will be entitled to obtain the exploration authorization. after the exploration has been concluded and a positive final deposit report has been presented, the miner will be automatically entitled to apply for and obtain the development concession. the exception is the rule in article 42 of the mining code: the development concession may be denied if the mine is considered harmful to the public good or compromises interest that goes beyond the usefulness of the industrial development.
    this is an exception to the rule and must be justified, and the administrative decision that applies it must also be justified;
  15. the mining must be conducted in an environmentally sustainable manner.

In accordance with article 176 of the federal constitution,

Deposits, whether mined or not, and other mineral resources, as well as hydraulic energy potential, are property that is separate from the soil for purposes of exploration or development, and belong to the union, with the concessionaire entitled to own the product of the mining.

Paragraph one of article 176 of the brazilian federal constitution states that mineral resources can only be explored and mined with authorization or concession of the union, in the national interest, by brazilians or companies established under the laws of brazil, and which have their headquarters and management located in Brazil.

When the mining occurs in a border strip, a specific, more restrictive law must be obeyed.

The means and the manner under which the union will exercise the police  power are covered in the federal constitution and in administrative laws.

Article 37 of the federal constitution affirms:

“direct and indirect public administration of any of powers of the union, the states, the federal district and the municipalities shall comply with the principles of legality, impersonal nature, morality, publicity and efficiency…”

The federal administrative proceeding is also regulated in law 9.784/99. The reality in brazil is that although the federal constitution and the law contain excellent principles, they are not respected.

The recognition of the public utility of mining is found in decree-law 3.365/41: industrial development of the mines and mineral deposits, water and hydraulic energy are considered to be cases of public utility.

In accordance with article 22 of the federal constitution, the union has the sole authority to legislate on deposits, mines, other mineral resources and metallurgy (item xii) and the national statistical, cartographic and geological systems  (item 18).

The brazilian constitution established the right to participation by the landowner in the result of the mining due to the mere ownership of the land. This share can reach up to 1.5% of the net result of the development, depending on the substance.

Society’s concern over environmental sustainability in mining is so relevant that it was raised to the level of a constitutional precept: “those who develop mineral resources must restore the degraded environment, in accordance with the technical solution required by the competent public body.”

Administrative proceedings

Administrative proceedings are basically regulated in the mining code, decree-law 227/67, and in law 9.784/99. The most relevant aspects of administrative proceedings in brazilian mining law under the scope of decree-law 227/67 are:

  1. the term of mining concessions are undetermined, since they are linked to the depletion of the deposit;
  2. the mining concession is granted through an administrative act, not a contractual act;
  3. the exploration authorization is for a set period (1 to 3 years, renewable);
  4. mining rights are granted through a double regime: one title for exploration authorization and the other for the development concession;
  5. the temporary or definitive assignment of mining rights requires prior consent of the national department of mineral production – DNPM;
  6. access to third party property is done through an amicable agreement or judicial judgment: judicial assessment of income and damages in the exploration phase and constitution of a mineral easement in the mining phase;
  7. there may be a division of the mining right by an underground limit (applies especially in favor of very deep gold and coal deposits);
  8. several development concessions held by the same party for the same mineral substance, located in areas of the same deposit or mineralized zone, can be grouped together into a single mining unit called a mining group;
  9. the sanctions for failure to comply with mineral legislation are: warning, fine and expiration (caducity) of the mining right;

Nature of mining rights (titles)

With this introduction, it is now possible to describe the attributes of mining law in brazil:

  1. it has a constitutional origin, which gives it its form, limits and guarantees;
  2. its object is potential or known mineral resources;
  3. it must be exercised in the national interest;
  4. its content is a public interest activity, which is the transformation of mineral resources into economic and social benefits;
  5. it is complete. it is an autonomous legal unit and creates effects by itself, not depending on any accessory law to be complete.
  6. its economic goal is to promote mining;
  7. it is granted by the union through national department of mineral production or the ministry of mines and energy;
  8. it contains the same attributes as domain;
  9. it is exclusive, since the holder will have priority for exploration and mining of other substances contained in the polygon defined by his mining right;
  10. it can be given as a guarantee for the compliance of any obligations, including mortgages;
  11. it can be given in execution, or execution may be levied on it, both in regular execution proceedings and in tax foreclosures;
  12. it can be freely sold to whomever has the capacity and legitimation to receive it, through prior consent of the dnpm;
  13. it is granted to whomever regularly applies first;
  14. it must be exercised by the private sector;
  15. it must be exercised by brazilians, native born or naturalized, or by a company established in accordance with brazilian law, and which has its headquarters and management in brazil;
  16. there is a single holder for each mining right;
  17. it has the same validity requirements as for administrative acts and proceedings in general;
  18. it does not distinguish between the surface soil and the subsoil. its object affects outcroppings or underground resources and deposits;
  19. it is perpetual, since it is linked to the depletion of the deposit.

Structure of mining bodies

The mining bodies in brazil have the following structure:

Ministry of mines and energy, which is the organ linked to the federal government.

The national department of mineral production — dnpm, which was created as a federal autonomous agency, with legal personality subject to public law. It is linked to the ministry of mines and energy. Its headquarters is in the federal district and regional units in the states.

According to the law that created the dnpm, law Nº 8.876/1994, art. 3, its purpose is to “promote the planning and execution of the exploration and development of mineral resources and to superintend geological and mineral technology research, control and monitor the exercise of mining activities throughout brazil, in the manner stated in the mining code and the mineral water code.”

in Brazil, in spite of the fact that the federal constitution provides that the union, federal district and municipalities have the power to register, accompany and monitor exploration and development rights for mineral resources inside their territories (not to be confused with the power to grant and apply sanctions, which belongs to the federal government, and is exercised by the MME and DNPM), this monitoring is actually carried out by the federal government through the national Department of Mineral Production.

Conclusions

Brazil adopts a mixed system of access to mineral wealth, which has the following structure:

System of priority;

System of availability (specific bidding procedure for mining rights);

National reserves of certain substances chosen by the union because they are strategic: special areas where the mining rights are granted through special conditions “in accordance with the interests of the union and the national economy.”

this is an interesting legal structure, which gives the government tools to manage brazilian mining activity. All that the federal government needs is knowledge – intellectual and geological, and the capacity to manage or develop the mineral wealth efficiently.

Download PDF