ECUADOR Law and Practice Contributed by: Roque Bernardo Bustamante and Claudia Bustamante, Flor Bustamante Pizarro & Hurtado
2.6 Community Development Agreement for Mining Projects Community development agreements are pos - sible, but not mandatory. It is advisable to have co-operation agreements with local communi - ties and to include them as much as possible as part of the project. 2.7 Environmental, Social and Governance (ESG) Guidelines and Regulations Former President of Ecuador Guillermo Lasso issued Executive Decree No 754 by which the Regulations to the Environmental Organic Code were reformed, and a chapter regarding environ - mental consultation was included. Environmen - tal consultation must be carried out during the process of obtaining an environmental registry for initial exploration and environmental licens - ing for advanced exploration and exploitation. Indigenous groups filed a constitutional action against the Executive Decree, claiming that environmental consultation should be regulated by virtue of an organic law and not subsidiary regulation. The Constitutional Court ruled that the Execute Decree No 754 is not constitutional because environmental consultation shall be regulated by organic law. However, it ruled that the Executive Decree will be valid and in force until the National Assembly issues an organic law regulating environmental consultation. 2.8 Illegal Mining Illegal mining has become an issue in Ecuador in recent years, posing challenges to both the gov - ernment and the legal mining sector. Large illegal mining operations, such as the one named the “Buenos Aires Mine”, have gained control over some areas of the country, making it difficult for authorities to effectively intervene. Additionally, small but recurrent illegal mining operations have occurred within concessions legally held
by mining companies, disrupting lawful industrial mining activities and creating environmental and social issues. The Ecuadorian government has taken increas - ingly strict measures to address illegal mining, particularly in the last year. However, the prob - lem remains widespread and challenging to con - trol. Illegal mining is classified as a serious crimi - nal offence under the Criminal Code and comes with severe penalties. Individuals engaging in unauthorised extraction, exploitation, explora - tion or commercialisation of mineral resources face imprisonment of 16 to 20 years. If the activ - ity causes environmental damage, imprisonment increases to 22 to 26 years. In cases where the activity is linked to organised crime or armed groups, the penalty escalates to 26 to 30 years, along with fines ranging from 1,000 to 1,500 times the unified basic salary (the minimum wage for private sector workers se annually by the Ministry of Labour). Despite these severe penalties, illegal mining persists as a pressing issue. Mining concession holders are legally required to report instances of illegal mining within their concessions. How - ever, such reports often fail to produce effective results, highlighting the ongoing challenges in combating this issue. 2.9 Good and Bad Examples of Community Relations/Consultation Impacting Mining Projects The worst example is Cooper Mesa v Republic of Ecuador, regarding a large copper deposit. After several years of debate between the com - pany and the community leaders, and indepen - dently of winning in court, the government of Ecuador declared unilateral termination of the mining concessions. This resulted in Cooper Mesa winning an arbitration award. The project
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