In simultaneous judgements handed down by the Court of Appeal in Sundsvall on June 17, 2019 (case numbers 1409-18 and 1410-18) an operator was not considered to have the right to extend two exploration permits according to Chapter 2, Section 7 of the Minerals Act (1991: 45) due to conditions arising in adjacent areas.
In the cases in question, a mining company (the Company) had applied for the extension of two exploration permits that were directly adjacent to an area for which the Company was awaiting a decision regarding an exploitation permit for the same mineral deposit. The exploration of the two areas, which the company had previously obtained exploration permits for, was intended to ascertain the total extent of the deposit. The company argued that if they did not receive an exploitation concession for the area in question, it would make no sense for them to carry out exploration work at the two sites. However, the company wanted to retain the exploration permits until a decision was made regarding the exploitation concession in the event of an exploitation concession being granted. In both cases the exploration permits granted had already been extended once in accordance with Chapter 2, Section 6 of the Mineral Act. The question therefore became whether there were special circumstances that allowed for a second extension of the exploration permits.
Exploration permits are regulated in Chapter 2 of the Minerals Act and in accordance with Chapter 2, Section 5 of the Minerals Act are valid for three years from the date of issue. According to legislative history exploration permits must be used to carry out active exploration work. An exploration permit may, after the initial issue period of 3 years, be extended by up to three years (Chapter2, Section 6 of the Minerals Act) if an appropriate level of exploration has been carried out in the area, or if the permit holder has acceptable reasons for not carrying out exploration work within the initial permit period.
For the further extension of an exploration permit to be granted it is a requirement of Chapter 2, Section 7 of the Minerals Act that special circumstances exist. The Administrative Court of Appeal has previously considered special circumstances to include, for example, situations wherein the applicant has already undertaken significant exploration work.
During the trial the Company argued that the fact that the case regarding the issue of an exploitation concession had been delayed was beyond their control. The Company believed that it could not be considered reasonable that they should be required to continue with expensive investments in order to retain the right to conduct exploration work. The Company further argued that it would be potentially harmful to the Company if other operators could take over the exploration permits whilst a decision regarding the exploitation concession was ongoing. The Company stressed that according to legislative history it is clearly stated that the concept of special circumstances should not be interpreted too narrowly and that the special circumstances outlined in legislative history could not be considered an exhaustive list. An overly narrow interpretation would run counter to the purpose of the Minerals Act for efficient utilization of mineral resources. In light of the above it was the Company’s view that it would be unreasonable for the Company to be required to continue costly exploration work when it was unclear if, or when, the exploitation concession would be granted.
However, both the Administrative Court in Luleå and the Administrative Court of Appeal in Sundsvall found that the Company’s level of activity in the areas covered by the exploration permits had been too low. According to the Courts it is important that an exploration permit is actually used for active exploration work and not held solely to block a certain area from other potential prospectors. In the judgment handed down by the Administrative Court of Appeal it was stated that both the legal text and legislative history indicate that it is the conditions in the area covered by the application for an exploration permit that are to be used as the basis for any assessment regarding special circumstances. Therefore, an exploration permit cannot be extended solely due to conditions relating to nearby areas.
Finally, the Administrative Court of Appeal made it clear that the ongoing processing of the application for an exploitation concession in the area directly adjacent to the areas covered by the exploration permits had not prevented or made it difficult for the Company to conduct exploration work. Furthermore, the Court of Appeal clarified that the delay of the decision regarding the exploitation concession was not an obstacle comparable to the list of special circumstances outlined in the legislative history for the Mineral Act (e.g. natural disasters). In the Court’s opinion the Company had chosen to await the outcome of the case regarding the exploitation concession for business reasons. Against this background, the Administrative Court of Appeal in agreement with the Administrative Court, held that the circumstances presented by the Company did not constitute the special circumstances necessary to further extend the validity period of the exploration permits.
This sets an interesting precedent regarding the limitation of “special circumstances” considering the already lengthy processing times for exploitation concessions at the Mining Inspectorate. Mining companies will need to consider this new precedent in their planning. Active exploration work is more likely to have to be carried out to achieve an extension of exploration permits.
Do you have questions about mines or mining activities, for example questions regarding permits, agreements or land access?
Pia Pehrson, Partner Foyen Advokatfirma
Isabel Andersson, Associate, Foyen Advokatfirma
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