These days, the term “social license to operate” is commonplace. Its use is testament to an industry-wide recognition that, in many parts of the developing world, achieving local resource growth requires mining companies to go beyond just obtaining government permissions, such as licenses and permits to conduct business. Also necessary is the the much more intangible and informal “social permission” from the local communities and other stakeholders.
Social License: A Modern Mining Prerequisite
Part of the broader concept of Corporate Social Responsibility or “CSR,” the goal in obtaining the trust-based social license is to ensure the local communities’ acceptance not only of a mining company’s general presence, but also of its specific projects. And make no mistake about it; obtaining community approval and buy-in is not just part of being a “good corporate citizen.” Failure to obtain the social license to operate will almost certainly have a very direct impact on whether and when local agencies of elected governments are willing to grant operational permits or licenses.
Local conditions of course vary from country to country and region to region, but frequently the communities and stakeholders of greatest concern to mining operations are indigenous peoples. As part of their long-standing cultural norms and practices, the leaders and elders from local tribes, clans, ethnic or religious groups, and families, as well as military and political strongmen, expect representatives of mining operations to provide financial and other assistance.
Sometimes such gifts or patronage are extended to compensate for services provided or negative impacts sustained. Sometimes they are made to build trust, show appreciation, and gain favor. And sometimes they are little more than a personal payment to get the required approval from those in power. Drawing the fine lines between these alternatives may be a manageable task when done in an internal memo or via government guidance, but becomes a much more nuanced and complicated challenge in the real world.
Mine operators’ desire to ensure sustained investment in this social capital makes both business and ethical sense. But there are some very real, but oft-overlooked, compliance pitfalls that need to remain front of mind as those involved in front-line mining operations address this delicate area.
One Man’s Gift As the US Department of Justice’s Bribe
The key question whenever a mining operation provides something of value to a traditional authority is whether and when this conduct threatens to trigger the U.S. Foreign Corrupt Practices Act’s (“FCPA’s”) prohibition against bribery of foreign officials.
To be continued in Part Two.
Guest Contributor T. Markus Funk is a partner in Perkins Coie’s White Collar and Investigations Practice. A former Assistant U.S. Attorney and USDOJ Resident Legal Advisor in the Balkans charged with combating corruption, Markus now serves as the Co-Chair of the American Bar Association’s Global Anti-Corruption Committee and regularly provides compliance and investigations counseling to multi-national mining industry clients. Markus is also the lead appellate counsel in United States v. Esquenazi, the first-ever challenge to the constitutionality of certain FCPA enforcement practices (a ruling on appeal is pending).