Mining Arbitrations – A Perspective from China

This article looks briefly at how China is adapting to resolve mining disputes within its jurisdiction and how international arbitration is being used to safeguard investments and maintain stability in the sector.

1. Introduction

Mining disputes are vulnerable to factors such as regulatory changes, resource nationalism, and global geopolitical tensions. The parties involved are often complex corporate structures spanning the globe. Effective dispute resolution is essential in facilitating mining operations and international arbitration provides a stable framework for resolving conflicts in a fair and efficient manner. Indeed, there are several international arbitration cases involving Chinese parties.

Within China, in recognition of China’s vast global presence in mining projects and the expansion of the sector in its own jurisdiction, various arbitration bodies have developed to provide specialized services that integrate both mediation and arbitration to ensure effective resolution of mining-related disputes.

This article looks at how China is adapting to resolve mining disputes within its jurisdiction and how international arbitration is being used to safeguard investments and maintain stability in the sector.

2. Arbitration Institutions and Their Roles in Resolving Mining Disputes in China

There are several key arbitration institutions involved in resolving mining-related disputes in China. This section highlights their roles and contributions to the arbitration process within the mining sector.

2.1 The Beijing Arbitration Commission (the Commission)

The Commission specializes in resolving disputes related to contracts and property rights among individuals, companies, and organizations. Its primary objective is to deliver high-quality arbitration services that ensure fair and efficient resolution of commercial disputes, particularly in mining-related matters.

On 13 September 2024, the Commission collaborated with the China Metallurgical and Mining Enterprises Association and Beijing Haotian Law Firm to host the China Mining Dispute Resolution Annual Observation (2024). This event examined the growing importance of critical minerals in the new energy sector and their impact on mining activities. The rise of regional protectionism has intensified tensions between foreign enterprises and host governments, creating both challenges and opportunities for resolving mining disputes in China. It was observed that, in nations with scarce critical mineral reserves, government intervention in production has altered the competitive landscape, raising investment risks for mining companies.

The event also addressed the increasing prevalence of disputes over exploration and mining rights within China, highlighting the heightened risks involved in mineral property transactions. Notably, 9 of the world’s top 40 mining companies are Chinese, many of which face disputes abroad. The event emphasized the need for a blend of legal expertise and specialized mining knowledge to navigate these challenges. As China's domestic mining market continues to mature, dispute resolution mechanisms are expected to become more standardized and technologically advanced.

2.2 China Mining Association (CMA) Mediation and Arbitration Center

To foster efficient dispute resolution in the mining sector, the CMA partnered with the Shenzhen Court of International Arbitration on 20 October 2018, to establish a mechanism that integrates industry-specific mediation with commercial arbitration.

On 28 May 2019, the CMA officially launched the International Mediation and Arbitration Center to offer specialized dispute resolution services for the mining industry. This initiative seeks to establish a “China platform” for handling international mining disputes and create a more favorable business environment for Chinese mining enterprises.

The Mediation and Consultation Mechanism, launched in November 2022 by the Responsible Critical Mineral Initiative (RCI) and the China Chamber of Commerce of Metals, Minerals and Chemicals Importers and Exporters (CCCMC), aims to address the social and environmental impacts of overseas mining projects. It offers a voluntary platform for affected parties to raise concerns and seek redress through mediated dialogue and, if necessary, independent expert fact-finding. The mechanism ensures both parties’ rights are protected, following UN Guiding Principles, and draws on the experiences of the OECD, IFC, World Bank and others, with input from experts and organizations. While it lacks enforcement power, it provides a non-legal way to resolve disputes. This approach encourages dialogue, reduces conflicts, and may prevent costly arbitration. Public consultations were held from September to December 2022, and the mechanism entered its pilot phase in 2023.

A guide is provided to this mediation mechanism, explaining the process for filing complaints, the role of independent experts, confidentiality and potential outcomes. It helps affected parties understand the mechanism’s steps and what to expect from the process. Given its focus on voluntary, collaborative resolution, it is envisaged that this mechanism should be used as a first step before arbitration. ​​​​

2.3 Shenzhen Court of International Arbitration Mineral and Energy Committee

Formed on 19 April 2019, this committee was established to implement the cooperation agreement between the Shenzhen Court of International Arbitration and the China Mining Association. It focuses on resolving mining and energy disputes involving Chinese companies according to industry practices and legal standards, with a goal of enhancing risk management and dispute resolution in the sector.

3. Recent Arbitration Cases Involving Chinese Investments in Mining

This section examines two notable arbitration cases related to Chinese investments in the mining sector, focusing on the challenges posed by policy changes and geopolitical dynamics, as well as the approaches taken to resolve these disputes through international arbitration mechanisms.

3.1 AsiaPhos and Norwest v. China

AsiaPhos Limited and Norwest Chemicals Pte Ltd, both companies registered in Singapore, held mining and exploration rights for phosphate and barite deposits located within and around the Jiuding Mountain Nature Reserve in Sichuan Province, China. In 2016-2017, the Chinese government designated the area as part of the Giant Panda National Park and implemented a mining prohibition, which led to the closure of the mines and the revocation of the companies’ mining rights. In response, the companies filed an arbitration claim under the China-Singapore Bilateral Investment Treaty (BIT), arguing that the mining ban constituted an expropriation of their investments. They cited Article 13(3) of the BIT as the basis for the tribunal's jurisdiction over expropriation claims and invoked the most-favored-nation (MFN) clause under Article 4 to extend jurisdiction to other claims.

On 16 February 2023, the arbitral tribunal ruled by a 2-1 majority that Article 13(3) of the BIT did not confer jurisdiction over expropriation claims, nor did the MFN clause extend jurisdiction to broader claims. As a result, the arbitration was limited to compensation disputes for expropriation, excluding indirect expropriation claims or jurisdiction expansion. The tribunal also ordered the claimants to pay over $280,000 and over ¥6.35 million in legal costs to the Chinese government.

After the ruling, AsiaPhos appealed the jurisdictional and cost decisions to the Swiss Supreme Court on 20 March 2023. However, the appeal was dismissed on 11 January 2024, with an additional cost order of CHF 250,000 which was deducted from a security deposit made in July 2023. On 3 September 2024, the applicants reached a settlement with the Chinese government, agreeing to pay ¥8.37 million to finalize all outstanding legal expenses.

3.2 Barrick v. Papua New Guinea

The Porgera Gold Mine, ranked among the world's top ten gold mines and the largest under Zijin Mining's portfolio, was initially 95% owned by Barrick Gold through its subsidiary Barrick Niugini Limited (BNL), with the remaining 5% held by local stakeholders. In 2015, Zijin acquired a 50% stake in BNL for $298 million, securing a 47.5% ownership interest in the mine. By 2019, Porgera contributed 20% of Zijin’s total annual gold production of 40 tons.

When Porgera’s mining license expired in August 2019, its renewal required approval from the Papua New Guinea (PNG) government. In April 2020, under a new president seeking to increase State control over natural resources, the government denied the renewal application, citing the high market value of gold and the desire to maximize national revenue. Failed negotiations resulted in BNL halting operations and facing a $131 million tax demand. Subsequently, BNL sought judicial review in PNG’s courts and initiated conciliation before ICSID in July 2020. The dispute was ultimately resolved through a confidential settlement.

In April 2023, Zijin Mining announced a tripartite agreement with the PNG government and a new joint venture to restart mining operations. The mine officially resumed production on 12 December 2023.

This case serves as a milestone for Chinese mining companies, demonstrating the strategic use of international dispute resolution mechanisms to safeguard investments amid evolving regulatory landscapes and international tensions. It provides a framework for other Chinese enterprises to address similar challenges effectively.

4. Conclusion

From China’s perspective, arbitration is playing an increasingly vital role in resolving mining disputes, both within the country and internationally. China has been actively enhancing the capabilities of its arbitration institutions to address the unique challenges of the industry, including promoting voluntary international commercial mediation as a preliminary step. These institutions are continually refining their functions to provide specialized dispute resolution services, reflecting China’s commitment to strengthening its legal framework for mining-related conflicts.

About the author

Christian Liu is a Legal Director in Clyde & Co’s Shanghai Office. He represents both local and international clients and advises on a wide range of insurance and shipping-related disputes. He also has experience in handling disputes relating to road and air carriage, affreightment and international trade. Christian is a Member of the Chartered Insurance Institute and holds the Diploma in Insurance issued by the Chartered Insurance Institute.​​​​​​​

This article was originally published on Daily Jus on Friday 13^th December, with thanks to Jus Mundi & Jus Connect.