SPOTLIGHT #10: Resource nationalism in Africa
At Lead up, we are committed to providing our clients with the most innovative dispute resolution solutions to fit their specific industry contexts. To do that, we have to stay on top of the recent developments in our clients’ sectors, and analyse these developments in line with our clients’ needs. Every month, in “Lead up Spotlight”, we share with you – our colleagues, clients and prospective partners – our analysis on a recent development relating to dispute resolution in an industry that matters to us and to our clients.
This month’s Lead up Spotlight focuses on the resurgence of resource nationalism in Sub-Saharan Africa, notably further to the desire of military governments in Mali, Guinea, Niger or Burkina Faso to tighten control over local natural resources production and ensuing revenues.
Resource Nationalism: Definition and Context
Resource nationalism refers to the strategy by which States increase control over natural resource exploitation by foreign investors. This involves discriminatory restrictions against foreign investors based on nationality, renegotiating investment agreements, and even expropriating foreign assets.
Although not unique to Africa, resource nationalism has become prominent in sub-Saharan Africa, especially following the rise of military juntas. These regimes have altered legal and contractual frameworks to strengthen State control over natural resource projects.
A recent example is Niger’s takeover of Orano’s local mining subsidiary after revoking its permit to operate the Imouraren Uranium mine in June 2024. As highlighted in Spotlight No. 7, States pursuing resource nationalism typically begin by revising mining and investment codes, as seen with new mining codes in Mali (2023) and Burkina Faso (2024). These changes sometimes apply new legal provisions retroactively to existing mining projects.
Reports confirm military juntas also pressure foreign companies through tax audits, suspending tax exemptions, criminal investigations, and detaining employees to force contract renegotiations. Such reports leave investors questioning their legal remedies to protect their assets and contractual rights.
Two-Step Response for Investors
1. Negotiation:
Negotiations are often essential, especially for active projects, even if they come with risks or concessions. Investors should communicate with State authorities while protecting their rights, such as contesting alleged breaches or adjusting agreements strategically. Concessions might include changes to profit-sharing agreements, legal stability clauses, or increasing local participation. If a project has been suspended or permits revoked without justification, negotiations may prove less effective, particularly if the permit has already been reassigned.
2. Litigation:
These actions can strain relationships with commercial partners and subcontractors, potentially impairing operations and leading to commercial or investment arbitration if disputes cannot be resolved through negotiation. Arbitration can shift negotiation positions and secure shareholder value, even in difficult situations involving military states.
However, initiating arbitration requires thoughtful preparation, including evaluating the nature of arbitration, commercial or investment, recovery likelihood, financing for legal costs (see Spotlight No. 6), and selecting arbitrators experienced in navigating economic or legal interference with investments.
Conclusion: Mitigating Resource Nationalism Risks
The political instability in Sub-Saharan Africa have intensified risks for foreign investors, manifesting as forced negotiations, violence, and disputes. While these risks threaten projects, they are not insurmountable. Investors can manage these challenges through proactive negotiation and, when necessary, arbitration—strategically employed to prevent disputes from derailing operations and minimize financial losses.