The Mining Industry and Understanding the Rule of Law

Many societies, for many centuries, have agreed on the importance of the Rule of Law (ROL) and the idea that a solid legal system is a foundation for the functioning of society itself, for the economy to flourish and, in general, for the wellness of the people. However, when we try to analyze the concept of Rule of Law, we find it difficult to find a single definition, although we mostly have an idea and we relate the concept with a legal order consisting of predictable, enforceable and efficient rules; truth to be told, ROL is a concept with multiple definitions and multiple concepts, which has been debated throughout history by political theorists, philosophers, lawyers and scholars, from Aristotle, Montesquieu or Locke, and more recently by Weber, Hayek, Dicey and Sen.

In this article, I will analyze four different concepts of ROL and relate them to the mining industry, for a better understanding of how the key players and stakeholders of this important industry can perceive ROL under these concepts, which are going to be organized and divided according to two main criteria: 1) the level or degree of autonomy of the legal order from other aspects, or orders such as morals or politics and 2) the degree of the relative value against other competing considerations analyzed. For you as a reader, the interesting part comes here, where, even if you did not realize it before from a theoretical perspective, you will find that your mindset or your way of thinking or defining ROL most likely will fit into one of the categories that are going to be analyzed below.

According to the first criteria of classification, there is a distinction between an institutional and a substantive concept of ROL.

If you support the institutional concept of ROL, then you would be concerned mostly about the efficacy of the system of rules; meaning, you would strongly support that any government action should be authorized by law (such as granting a mining concession according to the dispositions of the mining law and its regulations, and also respecting the mining concessions already granted according to the law) and also, you would strongly believe that the law should be capable of guiding the conduct of the people, and you would demand your congressman and congresswoman to enact laws and regulations related to the mining industry that are general, public, prospective, clear, non-contradictory, conformable, stable and congruent.  

Dear reader, if you consider that your idea of ROL is institutional, you still have another decision to make, since the interesting part comes when I describe to you that those who support the institutional concept of ROL are also divided into two further categories, which are the Instrumental and the Intrinsic categories, depending on the degree of relative value against other competing considerations.

The Institutional-Instrumental concept of ROL, supported by the German sociologist and economist Max Weber, considers a relationship between “rational law” and economic development; and the most important element of the legal system in this concept is the high degree of stability and calculability of the law and of the institutions that apply the law; therefore, it is most likely that any investor in the mining industry would agree with Weber, and with the fact that the legal system has to be  so clear and transparent to enable predicting the actions of other individuals and the state, and thus to allow individuals to engage securely in economic transactions.

The Institutional-Intrinsic concept of ROL, supported by the British jurist and constitutional theorist A. V. Dicey, considers three elements for the existence of rule of law: a) absence of arbitrary power on the part of the government; b) legal equality of individuals and c) the need that under the rule of law, constitutional norms are the result of ordinary law as established by ordinary courts. Meaning, that if you have ever thought that the mining authorities are forced to follow and obey the due process during the administrative procedures that they execute, and that they should be submitted to their own laws and that the holders of mining concessions should have declared rights that should have enforceable remedies against the actions of the authorities, or if you have ever thought or said things like “nobody  is above the law” or “there should be no impunity,” then surely this is your concept of ROL.

The second main classification of the concept of ROL is the substantive, which takes the formal characteristics of the institutional concept but, in addition, requires the existence of specific rights that are inherent in the legal system. In other words, it does not only require the existence of law, it makes a distinction between good law and bad law. Dear reader, if you agree with this concept and with the fact that there could be bad and good laws, I still can make your decision a little more interesting by explaining that the substantive concept also has two versions, as follows:

The Substantive-Instrumental concept of ROL is supported by the Austrian economist, jurist, and philosopher Friedrich Hayek, who believes that the Rule of Law is “the legal embodiment of freedom.” Therefore, it is based on the daily choices and decisions taken by citizens and companies, and those decisions guiding their activities, opposed to the government choices and decisions that should be limited and should not be completely free or arbitrary, respecting at the same time the basic human rights of the governed (such as property or freedom) and contractual rules. Hayek defines as “arbitrary” a government that tries to direct or control the economy. For example, from Hayek’s perspective, the last reform of the Mining Law in Mexico in which the government reserved the exploration and exploitation of lithium for the Mexican state, would have been considered as arbitrary, since this concept of ROL is not necessarily concerned with whether government actions are legal or not in a juridical sense. The actions of the state might be legal and supported by law but if the law gives the government power to act arbitrarily, then ROL does not really exist. Does the reader identify him or herself with this way of thinking?

Finally, the Substantive-Intrinsic concept of ROL, supported by the Indian economist Amartya Kumar Sen, who believes that any legal system should be judged according to whether it enables peoples’ capability to exercise their rights and reach their own fulfillment. The rule of law enshrines the greatest values that societies can aspire to, such as justice, equality, democracy, economic development, legal development, and freedom, and it cannot be compromised without foregoing these values. For the reader, it is important to mention that according to this concept of ROL, development is an amalgam and an integration of developments in the distinct economic, legal, political, and social domains and is not only focused on the economy. Therefore, if you were to support this perspective of the ROL, you would believe that the legal system should allow the mining industry to freely operate under the existing rules, exercising its own rights, being fully compliant with the law, but also, that the mining industry should be an ally to its own stakeholders to reach their own interests and values, such as justice, equality, human rights, economic development and to be a promoter of the capabilities of the communities and individuals around it to help them achieve their own goals and personal fulfillment, as well as to protect the environment and sustainability.

Since the 1990s, the World Bank and other important international institutions have broadened their rhetoric regarding ROL to include the four concepts previously discussed. We cannot defend or protect what we do not know; therefore, by having a better understanding of the rule of law, as a society we will have more powerful tools not only to defend it, but to promote it and to implement it, and by logic, to demand from our authorities, substantive legal reforms that have important political, social, and economic implications in our countries, including, of course, those legal reforms related to the mining industry.