By Lucas García, Beretta Godoy*

I. INTRODUCTION In 1994, the amendment of the Argentine Constitution introduced a significant change in relation to the original domain over natural resources. In effect, Section 124 of the Argentine Constitution granted to the provinces the domain over the resources located in their territories, emphasizing the federal system of government. This translated into reality some of the objectives that motivated the amendment and put a final end to many years of discussions over this issue between the federal government and the provincial governments.

However, this provision must be considered together with (i) Section 75(12) of the Argentine Constitution which provides that it is the Federal Congress’ duty to enact substantive codes and, among them, the Argentine Mining Code (the “Mining Code”); and (ii) Section 126 of the Argentine Constitution which sets forth that provinces do not exercise this power delegated to the Federal State and, therefore, cannot enact, among others, the Mining Code.

The real sense of the Argentine federalism is grounded on this delicate balance between reserved and delegated powers, which not only has to be understood as the provinces’ right to protect their powers, but also to delegate them to the Federal State. This delegation is necessary and core to the generation of a strong country unity. It makes us stronger, clearer and more reliable as seen by the world.

Below we will analyze Provincial Law No. 3105 from the legality standpoint. This law (the “Zoning Law”) was issued by the Province of Santa Cruz on November 26 2009 and created an area of special mining interest.

II. ZONING LAW: LEGAL ANALYSIS The purpose of the Zoning Law is to establish an area –wrongly called of special mining interest- defined as a polygon, located to the East of National Road No. 40 , within which, the regular development of mining activities is allowed, just as it is ruled in the Mining Code, provided some exceptions (the “Area of Special Mining Interest”). In effect, the provisions of the Zoning Law set forth that even within the Area of Special Mining Interest, mining activities of the First Category will be excluded: (i) geographical surfaces located less than 10 km from urban centers; (ii) geographical surfaces located less than 4 km from the lakes coastline (provincial water courses line); and (iii) areas that have been declared of cultural heritage and preservation.

On the one hand, the Zoning Law ratified the effectiveness of the Mining Code in the Area of Special Mining Interest and, on the other hand, it determined some limits that, should they have been grounded on technical matters, they would have been worthy of consideration.

However, the Zoning Law is not legal by establishing that: (i) outside the Area of Special Mining Interest, no new applications for mining rights will be authorized for metal minerals ; and that (ii) the metal mineral rights granted outside the Area of Special Mining Interest or the limited areas within such Area of Special Mining Interest will be deemed cancelled.

First, because this Law that is in conflict with the order of hierarchy of Argentina’s laws is unconstitutional as a provincial law cannot suspend -whether in whole or in part- the effectiveness and/or application of the Mining Code. The effectiveness, content, scope and prevalence of this Code were expressly delegated to the federal state.

The same applies to the bi-national treaty executed with Chile and approved by a Law of the Federal Congress , enacted for the promotion of mining exploration and exploitation in the border with Chile, as the Province of Santa Cruz proposes the exclusion of metal mining in part of its territory comprised in said treaty.

Second, it is also unlawful because it implies being retroactively enforceable, thus violating the vested rights of the concessionaires who applied for the mining rights in the areas today prohibited. This, notwithstanding that said concessionaires could have worked, invest and deposit their legitimate business expectations in areas of Santa Cruz today prohibited to them on groundless explanations. This aspect of the Zoning Law is confiscatory; and confiscation in the Argentine law is carefully regulated in order to avoid any arbitrary act. It is not ridiculous to expect claims filed against the Province by these affected parties.

In addition, the Zoning Law provides for the creation of a special commission with the authority to assess, through binding opinions, the Environmental Impact Reports of projects given under concession prior to the enactment of Zoning Law, located in the excluded areas within the Area of Special Mining Interest and outside it. This also implies that said commission could threaten the vested rights of concessionaires already enjoying the concessions granted under the Mining Code.

III. CONCLUSIONS In addition to a case by case basis analysis, and considering the above-mentioned statements, we believe that it is possible that the Zoning Law may bring about controversy regarding vested rights and the supremacy of the Mining Code as an Argentine substantive law code, which can be issued and amended only by the Argentine Congress, as a power expressly delegated by the provinces to the Federal Government under the Argentine Constitution. As we have also mentioned above, the conflicts of law implied by the Zoning Law may also have effects at an international level by reason of the limitations introduced to the Andean Mountains area in the provincial territory, which is also comprised in the geographical area included in the Mining Integration Treaty executed between Argentina and Chile. The situation of the Province of Santa Cruz is not clear for the mining industry and investment and is not consistent with its tradition and present time of a province closely related to mining activities. Upon the interrogatories involved by the Zoning Law, we can only wait for the issue of a regulatory order aimed at reasonably adjusting or clarifying its principles.

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1 These differences generally focused on domain, as the basis of the right to receive the income arising from it, and mainly on the debate about the title to fluid hydrocarbons.

2 Zoning Law, Section 1: “The Area of Special Mining Interest for the development of mining activities is created. This area shall be included within the following polygon: starting from the intersection of National Road No. 40 and the line that divides the Province of Santa Cruz and the Province of Chubut, which coincides with the 46th parallel South, from that point and to the East along the interprovincial border up to the Austral Maritime Coastline, and from there to the South up to the mouth of Santa Cruz River, from there to the West along the northern bank until reaching National Road No. 40, and from there to the North, along National Road No. 40, Provincial Road No. 29, continuation of National Road No. 40 (original trace of National Road No. 40), up to the border with the Province of Chubut, in accordance with Exhibit I which is an integral part of this statute.”

3 The First Category of Mineral Substances of the Mining Code includes all metals, and therefore, this makes us think that the law basically aims at restricting only metal mining (gold, silver, platinum, mercury, copper, iron, lead, tin, zinc, nickel, cobalt, bismuth, manganese, antimony, tungsten, aluminum, beryllium, vanadium, cadmium, tantalum, molybdenum, lithium and potassium).

4 Zoning Law, Section 2.

5 Zoning Law, Section 4.

6 Zoning Law, Section 5.

7 Chilean – Argentine Mining Integration Treaty, approved on March 23 2000 by National Law No. 25143.

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*Beretta Godoy is a full service law firm, with a strong corporate, tax, energy, natural resources, arbitration, labor and foreign trade practice. The firm serves foreign and domestic clients in the energy, mining, and oil & gas sectors, technology infrastructure projects, telecommunications and cross border corporate transactions. Beretta Godoy’ mining practice was singled out by Chambers Latin America Leading Lawyers for Business 2009 and 2010 editions.