Hopes and RealityUS/UK Investment Forum Niger - LondonStéphane Brabant, Senior Partner, Herbert Smith LLP14 June 2012

Table of contents1. Niger at a glance2. Niger profile3. Niger’s aspirations4. Overview of African legal systems5. A civil-law based country6. Sub-regional organisations within francophone West African countries7. African sub-regional legal systems8. Mining regulations9. Conditions to be fulfilled for the granting of mining titles10. Overview of existing mining titles11. Overview of tax regime12. Main tax exemptions13. Large-scale mining projects: concept14. Large-scale mining projects: overview of benefits available15. Is a mining convention negotiable?16. State’s right to participate in exploitation projects17. Stability of the tax regime18. Niger’s local content requirements19. Settlement of disputes20. International treaties

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1. Niger at a glance

French speaking country in West (and Central) Africa

Legal system is civil-law based

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2. Niger profile

Growth: 4% in 2011 and expected to be 14% in 2012

Population: 16 million in 2011 and 55 million in 2050; by then it will be the second largest country in West Africa after Nigeria

Capital: Niamey

Area: 1.27 million square km (489,000 square miles)

Life expectancy: 55 years (men), 56 years (women) (UN)

Major languages: French (official), Arabic, Hausa, Songhai

Major religions: Islam, indigenous beliefsChallenges:

• Climate• Landlocked country• Population unequally spread and excessive population growth

Main exports: Uranium currently constitutes up to approximately 70% of export revenues but oil & gas might take lead from 2013. Also coal and hydroelectric power.

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3. Niger’s aspirations

Democratically elected governmentThe Niger presidential election: an example for Africa•His Excellency Mr Mamadou Issoufou’s election marked a return to democracy after a year of military rule. Stabilised currency•The CFA franc (as member of the "Banque Centrale des Etats d’Afrique de l’Ouest"); •The CFA is linked to the EURO with a rate of 655.957 CFA per EURO.

A (large) mining potential•Third largest uranium producer in the world, slightly ahead of Kazakhstan and Russian Federation in terms of output;•Uranium mining is the largest Niger industrial employment provider;•Niger is also rich in other minerals: coal, gold, gypsum, iron ore, tin, salt, petroleum.

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4. Overview of African legal systems

French legal system (Napoleonic Code)

Portuguese, Spanish and Italian legal systems(largely based on Roman law)

Systems based on common law principles

Mixed civil law / common law based systems

Two main legal systems in Africa (sometimes complemented by Islamic law or customary law)

NATIONAL LEGAL SYSTEMSCommon law and civil law traditions

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* OHADA signatory States

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Common Law(usual law for financing, international contracts and of a number of energy/

natural resources companies)

Contractual approachLaw of precedents

• Negotiation (negotiable vs. non negotiable)

• Drafting

• Settlement of disputes

Civil Law

(Law of projects in mostnon-English speaking countries)

Main source of law: • Written rules• Administrative law and courts• Mandatory provisions

Differences in: • Property Law• Criminal Law• Company Law• Laws on taking

security• Insolvency Law

5. A civil-law based country

OHADA WAEMU CAEMC

6. Sub-Regional organisations within francophone West African countries

* membership pending

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ECOWASOrganisation for theHarmonisation of

Business Law in Africa

West AfricanEconomic and

Monetary Union

Central AfricanEconomic and

Monetary Community

EconomicCommunity of

West African States

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16 signatory States(including 14 Sub-Saharan Franc zone States): • Benin, Burkina Faso, Cameroon, Central African

Republic, Comoros, Republic of Congo (Congo Brazzaville), Côte d'Ivoire, Gabon, Guinea (Conakry), Guinea-Bissau, Equatorial Guinea, Mali, Niger, Senegal, Chad, Togo.

• Democratic Republic of Congo (pending)

Ambition of extending to non French-speaking States (adoption of new working languages, although the French version prevails)

Aim • Harmonising business law with a view to securing

legal certainty and to encourage investments

• Implementing a legal and judicial environment favourable to economic activities

• Progressive unification of legislations

7. African sub-regional legal systemsOHADA: Organisation for the harmonisation of business law in Africa

8. Mining regulations

The mining industry is regulated through national legislation and regulations issued by the Niger Parliament and the Niger executive branch, mainly by the Mining Code.

• Constitution of the VIIe République, adopted on 25 November 2011.

• Mining code enacted by Ordinance No 93-16 of 2 March 1993 as further amended by Law No 2006-26 of 9 August 2006 (the “Mining Code”).

• The implementing measures of the Mining Code are provided by Decree No 2006-265/PRN of 18 August 2006.

• Law No 2008-30 of 3 July 2008 granting derogatory advantages for investments in large-scale mining projects.

• A model mining agreement is attached to Decree No 2006-265/PRN of 18 August 2006.

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9. Conditions to be fulfilled for the granting of mining titles

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Rights conferred Duration Renewal conditions Is a mining convention executed?

Prospecting authorisation

Right to prospect for one or several mineral substances in areas not considered to be closed areas, nor subject to any mining title.

One year Renewable indefinitely for periods of one year.Holder’s right to renewal if it has met all its obligations under the mining law.

No

Exploration permit

Exclusive right to explore for the type of mineral substances for which the permit is granted, within the limit of the permit perimeter and without depth limitations.

Three years Renewable twice for periods of three years.Holder’s right to renewal if he has met all its obligations under the mining law and the mining convention.

Yes

Exploitation permit

Exclusive right to search, explore, exploit and freely dispose of mineral substances for which the permit has been granted, within the limits of the perimeter specified and without depth limitations.

For small-scale exploitationThe permit is granted for five years. For large-scale exploitationThe permit is granted for ten years.

For small-scale exploitation The permit is renewable for periods of 5 years until the depletion of the mining deposits for which it has been granted. For large-scale exploitationThe permit is renewable for periods of 5 years until the depletion of the mining deposit for which it has been granted.

Yes

Artisanal exploitation authorisation

Right to prospect for and exploit the substances for which it has been issued within the boundaries of the defined perimeter and up to a depth of 30 metres for exploitation works using terracing and 10 metres for excavation works.

Two years Renewable one or more times.Holder’s right to renewal is subject to its maintaining a sufficient activity during the previous period of validity of the authorisation. 

No

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10. Overview of the existing mining titles

11. Overview of the tax regime

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12. Main tax exemptionsEXEMPTIONS EXPLORATION PHASE EXPLOITATION PHASE

Value Added Tax Throughout exploration phase For a period ending on the date of first production

Income Tax Throughout exploration phase For a period of three years, starting on the date of first production

Minimum Flat Tax Throughout exploration phase Throughout the exploitation phase

Apprenticeship Tax

Throughout exploration phase For a period of three years, starting on the date of first production

Occupational Tax Throughout exploration phase For a period of three years, starting on the date of first production

Land Tax Throughout exploration phase Throughout the exploitation phase

Others Registration fees on contributions made at the time of incorporation or capital increase

• All taxes and duties on any interests and other proceeds accruing from amounts borrowed by the company for its equipment and operations needs

• Benefit from accelerated depreciation rehime

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13. Large-scale mining projects: concept

Law No 2008-30 of 3 July 2008 granting derogatory advantages for investments in large-scale mining projects defines “large-scale” mining projects as follows:

a)Any new mining project with a positive social and economic impact on the country and fulfilling the following two cumulative conditions:

Investments of at least CFA300 billion (taxes excluded); and Creation of at least 800 new permanent jobs for Nigeriens.

•Any existing mining exploitation about to be expanded, diversified or modernised and which therefore has a positive economic and social impact for the country and meets both the aforesaid cumulative conditions.

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14. Large-scale mining projects: Overview of benefits available

Mining Phase / Investment

Amount

From XAF300 Billion to XAF600 Billion

From XAF600 Billion to FCFA1,000 Billion

From FCFA1,000 Billion to FCFA1,500 Billion

More thanFCFA1,500 Billion

Until the date of first production

Exemption from all fees and taxes, including VAT, payable on:

•equipment, spare parts, excluding those for passenger cars and any private vehicle; and

•materials and equipment to be integrated permanently in the works.

Exemption from all fees and taxes, including VAT, payable on:

•equipment, spare parts, excluding those for passenger cars and any private vehicle; and

•materials and equipment to be integrated permanently in the works.

Exemption from all fees and taxes, including VAT, payable on:

•equipment, spare parts, excluding those for passenger cars and any private vehicle; and

•materials and equipment to be integrated permanently in the works.

Exemption from all fees and taxes, including VAT, payable on:

•equipment, spare parts, excluding those for passenger cars and any vehicle for private use; and

•materials and equipment to be integrated permanently in the works.

For a period of three years, as from the date of first Production

Suspension of customs duties and taxes payable on the entry, including the VAT on goods.

Suspension of customs duties and taxes payable on the entry, including VAT, on goods.

Suspension of customs duties and taxes payable on the entry, including VAT on goods / equipment imported for mining operations and their registration in the temporary normal admission regime throughout the duration of use.

Suspension of customs duties and taxes payable on the entry, including VAT on goods / equipment imported for mining operations and their registration in the temporary normal admission regime throughout the duration of use.

As from the date of first Production

and throughout the exploitation

phase

VAT exemption and 20% reduction on the rights and taxes payable on:

•equipment, spare parts, excluding those for passenger cars and any private vehicle; and

•materials and equipment to be integrated permanently into the works

VAT exemption and deduction of 40% on the rights and taxes payable on:

•equipment, spare parts, excluding those for passenger cars and any private vehicle; and

•materials and equipment to be integrated permanently into the works.

VAT exemption and deduction of 60% on the rights and taxes payable on:

•equipment, spare parts, excluding those for passenger carsand any private vehicle; and

•materials and equipment to be integrated permanently into the works.

VAT exemption and reduction of 80% on the rights and taxes payable on:

•equipment, spare parts, excluding those for passenger carsand any private vehicle; and

•materials and equipment to be integrated permanently into the works.

As from the fourth year of the First

production

VAT exemption and abatement of 20% of the customs duties and taxes payable on the entry of new acquisitions / capital goods imported for mining operations.

VAT exemption and abatement of 40% of the customs duties and taxes payable on the entry of new acquisitions / capital goods imported for mining operations.

VAT exemption and abatement of 60% on customs duties and taxes payable on the entry of new acquisitions / capital goods imported for mining operations.

VAT exemption and abatement of80% of the customs duties and taxes payable on entry into new acquisitions / capital goods imported for mining operations.

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15. Is a mining convention negotiable?

• Its purpose is to define the rights and obligations of the parties with respect to the legal, technical, financial, fiscal, administrative, environmental and social terms and conditions applicable to mining titles (i.e. an exploration or exploitation permit).

• It covers the exploration period as well as the first validity period of the exploitation permit.

• Valid for a maximum period of twenty (20) years.

• Negotiable upon each renewal.

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16. State’s right to participate in exploitation projects

• The granting by the State of an exploitation permit entitles it to benefit from a non-dilutable 10% participation in the share capital of the company throughout the exploitation phase.

• The State is also entitled to contribute, either financially or in-kind, directly or through a public entity, to the exploitation of mineral substances by partnering with the exploitation permit holder.

• The nature and terms of this participation shall be expressly defined by mutual agreement between the parties to the mining convention.

• State’s participation in the operating company shall not exceed 40%.

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17. Stability of the Tax Regime

• Exploration or exploitation mining companies benefit from tax stabilisation and other advantages granted by the mining law, from the date of execution of the mining convention and during its period of validity.

• During the stabilisation period, rates, tax bases and tax recovery rules will remain the same as those which were in place on the date of entry into force of the mining convention: no new tax or requirement of any kind shall apply to the holder or beneficiary during this period.

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18. Local content requirements(as provided by the Mining Code)

Local preference• to Nigerien companies for any construction, supply or

service contracts.• to Nigerien labour.

Training and Promotion Obligations• Transfer of skills in favour of Nigerien contractors and

workers.

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19. Settlement of disputesUnder the Mining Code:•Nigerien Administrative Courts (tribunaux administratifs) have jurisdiction over any dispute arising out of the application of an administrative act.

•Nigerien Courts have jurisdiction over other disputes.

The arbitration clause contained in the model mining agreement provides for the following:•Parties undertake to seek amicable settlement of any dispute which may arise out of the interpretation or performance of the mining convention.

•Any dispute arising out of the interpretation or performance of the mining convention shall be settled by the Court of Justice of UEMOA, in case of failure to reach an amicable settlement.

•Any dispute relating to technical aspects, which cannot be settled through an amicable procedure, shall be settled by an expert.

•Any other dispute shall be settled through ICSID arbitration:oarbitration shall take place in Paris, and in French;othe arbitration tribunal shall be made up of three (3) arbitrators; andothe law applicable shall be that of the Republic of Niger.

•In the event the Centre declares itself incompetent, the Common Court of Justice and Arbitration of the OHADA shall have jurisdiction.

 

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20. International treaties

  Date of signature Date of entry into force

New York Convention of 10 June 1958 on the Recognition and Enforcement of Foreign Arbitral Awards

14 October 1964 14 December 1965

Washington Convention of 18 March 1965 on the Settlement of Investment Disputes between States and Nationals of Other States

23 August 1965 14 December 1966

Double Taxation Avoidance Agreement concluded with France

1 January 1964 1 June 1965

Bilateral Investment Treaty concluded with Algeria

16 March 1998 N/A

Bilateral Investment Treaty concluded with Egypt

4 March 1998 23 March 1998

Bilateral Investment Treaty concluded with Germany

29 October 1964 10 January 1966

Bilateral Investment Treaty concluded with Switzerland

28 March 1962 17 November 1962

Bilateral Investment Treaty concluded with Tunisia

5 June 1992 N/A

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