These Guiding Principles were developed by the OECD Development Centre to provide resource-rich developing countries and investors negotiating extractive contracts with a common reference to shape durable, equitable and mutually beneficial relationships. The Guiding Principles are the result of a process that included multi-stakeholder consultations hosted by the Development Centre between December 2015 and June 2019.
There is clear value in balanced and therefore more durable extractive exploration and production contracts. The Guiding Principles aim to provide guidance for the content and negotiation of mutually beneficial, sustainable and therefore enduring extractive exploration and production contracts and thus reduce the risk of disputes and demands for contract renegotiation by either party over time. The Guiding Principles are intended to assist host governments and investors to:
i. structure their on-going relationship in an integrated manner to promote long-term sustainable development, while attracting and sustaining investment;
ii. foster alignment of expectations and convergence towards agreed objectives;
iii. provide mechanisms that can accommodate and respond in a predictable manner to potentially significant changes in circumstances;
iv. build trust to strengthen mutual confidence and reduce risk for both parties; and
v. ensure a fair share of the benefits of the development of the resources for all parties to the contract and optimise the value from resource development through equitable, sustainable and mutually beneficial contracts and operations.
The Guiding Principles are grounded on the principle of permanent sovereignty over natural resources, as recognised in the United Nations General Assembly resolution 1803 (XVII) of 14 December 1962.
It is recognised that a robust legal framework with comprehensive laws and regulations, setting out conditions of general application for extractive operations and non-discriminatory treatment of investors under like circumstances, and limiting the scope for project-specific negotiated terms, provides a stronger foundation upon which a country can manage its extractive industries according to national priorities, thus increasing transparency and accountability by strengthening institutional checks and balances, reducing administrative costs and possibly investors’ perceived risks.
There exists a variety of systems to award oil, gas, and mining exploration and production rights. These Principles are without prejudice to the choice of the preferred allocation mechanism. Nor do they imply a preference for contractual regimes versus legal systems providing for non-negotiable provisions.
In practice, negotiated agreements are more commonly used in countries where legal systems are not yet comprehensively developed. Even in jurisdictions where well-developed legal regimes govern the relationship between host governments and investors and regulate the majority of extractive exploration and production contracts, the domestic legal framework may still leave room for negotiable elements, especially for large investments and complex projects.
There are instances in which renegotiation may be warranted to avoid issues escalating into a dispute as contracts cannot anticipate all possible outcomes and consequences at the time they are negotiated. These Principles aim to provide guidance for the content and negotiation of mutually beneficial, sustainable and therefore enduring extractive contracts and thus reduce the risk of disputes and demands for contract renegotiation by either party over time.
Recognising the benefits of transparency and reporting in the extractives sector, the parties should anticipate during the negotiation process the public disclosure of their future signed contracts in accordance with international good practice, with due regard taken to both protecting proprietary or commercially sensitive information and the public interest in transparency. Agreeing to publish contracts adds an important dimension of ex post accountability to negotiation processes. This means that the parties are likely to negotiate and draft in a manner to ensure that terms are able to withstand public and commercial scrutiny.
There is complementarity between these Principles and the policy tools developed as part of the OECD Policy Dialogue on Natural Resource-based Development to foster collaborative strategies for in-country shared value creation. These include tools to identify, prevent and address heightened corruption risk, where mineral, oil and gas rights are awarded through negotiated deals; and to enable effective government engagement in contract negotiations, including through access to specialist expertise and advice. These Guiding Principles further recognise the importance of the principles on responsible business conduct, as reflected in the OECD Guidelines for Multinational Enterprises and the OECD Due Diligence Guidance for Responsible Business Conduct.
These Guiding Principles are not presented in hierarchical order. They interact with each other and should be considered together. They are high-level in nature and should be read in conjunction with relevant detailed international guidance on specific topics.
The Guiding Principles do not purport to be an authoritative statement of domestic and international law relevant to the contract. Rather, they are intended to facilitate a common understanding between the parties to the contract about how they will approach certain aspects of their contractual relationship to ensure that the contract is as durable as possible, to the benefit of all parties. They can serve as a common reference for extractive contract negotiations, in accordance with applicable international and/or national laws and international commitments, and taking into account national, and broader, sustainable development objectives and priorities.