ECUADOR Law and Practice Contributed by: Roque Bernardo Bustamante and Claudia Bustamante, Flor Bustamante Pizarro & Hurtado
is formed by all taxes and royalties paid by the company in the same fiscal year. An adjustable formula called “ ajuste soberano ” is incorporated into the contracts to ensure that the benefits to the State remain higher than the benefits to the operating company throughout. If a project is considered to be large-scale before entering into the exploitation stage, the conces - sion holder must execute a contract with the State of Ecuador where minimum investments on the project and future royalties are set up. Termination and Transfer of Rights The State of Ecuador may declare unilateral termination of a mining concession if the com - pany has breached certain provisions of the law, including non-payment of annual per-hectare maintenance fees or royalties, not meeting mini - mum commitment investments, employment of children, material environmental damage duly proven through the Ministry of Environment and pertinent courts, and transference of mining rights without prior approval of the ministry. Unilateral termination is conducted through a process where the company has the right to defend itself and, if possible, correct – and com - pensate for – the fault that led to the unilateral termination. Mining rights are transferable, provided prior approval is granted by the Ministry of Energy and Mines. For the transfer process, a request must be submitted to the Ministry specifying the per - centage of the area to be transferred and attach - ing supporting documents. If the documentation is complete, the Ministry will request ARCOM to issue three reports: legal, technical and econom - ic. With these ARCOM reports, the Ministry will issue a resolution approving the transfer of con - cessions. This resolution must be registered in
the Mining Registry under the charge of ARCOM. Subsequently, a Public Deed must be executed between the assignor and the assignee, attach - ing the registered approving resolution. At the end of the process, the Public Deed must also be registered in the Mining Registry under the charge of ARCOM. Commercialisation, Marketing and Export The mining law establishes the right to free com - mercialisation; the holders of mining conces - sions can commercialise their production freely inside or outside the country. However, in the case of gold from small-scale mining and arti - sanal mining, the Central Bank of Ecuador will market it directly, or through public and private economic agents previously authorised by the Bank. Natural or legal persons who, without being holders of mining concessions, are engaged in the marketing or export of metallic mineral sub - stances or in the export of non-metallic mineral substances, must obtain the corresponding licence from the Ministry of Energy and Mines, in accordance with the provisions of the general regulations of the law. The same licence must be obtained by the mining concessionaires who trade in metallic mineral substances or export non-metallic substances from areas outside their concessions. Natural or legal persons engaged in the inter - nal commercialisation of non-metallic mineral substances, as well as jewellery artisans, will not require this licence. The marketing licences granted are valid for periods of three years, are non-transferable and can be renewed for the same periods. Clandestine trade in mineral substances is con - sidered in the case of:
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