Stability Agreement Definition

As noted above, local and foreign investors in mining projects are authorized, in addition to general stability agreements, to implement, on behalf of the Peruvian government, guarantee agreements and investment assistance measures (mining stability agreements) with the Ministry of Energy and Mines (MINEM). The new regime includes a definition of foreign direct investment including any transfer to Chile of foreign capital or assets owned or controlled by a foreign investor, or more than $5 million per transfer of freely convertible foreign currency; The contribution of property, plant and equipment; Reinvestment of products Credit capitalization or the transfer of technologies that can be activated or loans related to foreign investments from related parties. [7] The ICMM notes that “companies emphasize stability and predictability as the most important aspects of tax systems,” ICMM, “Minerals Taxation Regimes: A review of issues and challenges in their design and application,” February 2009, p. 11. A stability company has considerable value outside of the stabilization clause itself. For example, where a contract contains a clear obligation of stability, it can give the company a basis for claiming stays if the law changes and the business suffers a harm that is not properly taken into account by the stabilization mechanism. Similarly, if the company and its investments are covered by a bilateral investment contract (ILO) or a contract with investment protection provisions (which seek all mining companies for foreign projects), the stability company in the contract can prove the frustration of legitimate expectations under the standard for fair and fair treatment of the contract (legitimate RIGHTS of FETs in terms of dementia are one of the most common causes measures in mining cases). The objective of achieving a clear stability undertaking on the part of the host government should therefore be high on the agenda of lawyers advising the company in negotiations with the host government. Since the communication sets the tone for the following negotiations, it should be framed in a way that is not unnecessarily contradictory. It should be remembered that in most cases (except in cases where there is a real freeze clause), the fact that the host government has amended the law does not mean that the host government has violated the treaty, but only that the obligations of the host government are activated by the stabilization clause. As a general rule, a breach of contract occurs only if the host government does not negotiate or negotiate, but fails to reach an agreement that meets its obligation not to compel the company to suffer the adverse effects or burdens of the change in the law. In this scenario, the mining company Cerro Vanguardia challenged in court the application of the compensatory tax for the year 2000 and argued that the tax was collected after receiving tax stability and therefore did not apply to the taxpayer.

Conversely, the federal tax authority asserted that the benefits of tax stability applied only to the company that requested such a scheme, but which had not been extended to Cerro Vanguardia`s shareholders. Therefore, since the compensatory tax on shareholder profits was collected after the distribution of dividends, these situations would not benefit from a stabilization tax benefit. Before discussing how a stabilization clause is applied and applied, it should be noted that the applicability of a stabilization clause depends not only on the clause itself, but also on certain other provisions.