Resolving conflict in construction overlap of mining rights

Overlay of mineral resources refers to the overlapping, or less-than-legal distance, between land occupied by the holder of construction land use rights and prospecting or mining areas of the prior holder of a prospecting or mining licence. It’s common for mining rights holders to suffer losses from such constraint on development or utilisation of mineral resources. So, how do mining rights holders safeguard their interests when a construction project overlaps? This article discusses available relief paths and offers advice to mining rights holders in such a predicament.

DUAL LEGAL RELATIONS

In accordance with the Further Review and Management of Overlay between Construction Projects and Key Mineral Resources (MLR Notice), the Ministry of Land and Resources requires constructors to inquire in advance about the mineral resource planning, distribution and status of mining rights of an intended construction site.

In the event of overlapping key mineral resources, an entity with geological exploration qualifications should be engaged to prepare an assessment report, and the construction land use rights holder should enter into a supplemental agreement with the mining rights holder. Once these requirements are met, the natural resource authority decides whether to grant permission for overlay.

Based on these provisions, overlaying construction projects may establish a civil legal relationship between the construction entity/new land user and mining rights holder based on the supplemental agreement and other related civil law codes. The mining rights holder and natural resources authority may also enter into an administrative relationship on the authority approving the overlay. Accordingly, the mining rights holder can proceed with civil litigation or administrative compensation at its discretion.

CIVIL LITIGATION

The MLR Notice obliges new land use rights holders to compensate. Mining rights holders (as plaintiffs) commonly seek relief by filing civil lawsuits against the new land use rights holders or owners of the construction project.

1. Cause of action. Depending on the specific situation, disputes over layover of mineral resources may constitute a tort, property rights or contract dispute. In determining the establishment of a tort, the court primarily reviews whether the constructor has obtained legal approval for overlay from the natural resource authority, unless there is a supplementary agreement between the constructor and mining rights holder. Without approval, the constructor would likely be held liable for tort; otherwise the issue may also be deemed a prospecting/mining rights dispute. When a supplementary agreement has been signed between the constructor and mining rights holder, the dispute is generally held as a contractual dispute.

   

2. Jurisdiction. Jurisdiction of the case may be directly affected by the cause of action, while tort and contractual disputes follow their respective jurisdiction rules. It should be noted that, according to the New Interpretations and Applications of the Supreme People’s Court, disputes over prospecting or mining rights generally fall under the jurisdiction of the local people’s court where the mine is located.
3. Scope of claims. In judicial practice, if there is a supplementary agreement between the constructor and mining rights holder, the amount of compensation generally follows the contract stipulations. Without such an agreement, the MLR Notice often serves as the basis of reference for determining the figure.

Under the MLR Notice, the scope of claims includes direct losses such as the price payable under the current market conditions for the resource reserves under layover, the exploration investment shared by the resources under layover, investments in the built mining facilities, and the relocation of relevant facilities. These conditions are rarely contested.

As for whether the scope of claims should include expected benefits, the mainstream opinion holds that overlay of mineral resources often take place in major government-backed projects involving local development and national security interests. Considering public interests, it would be reasonable to impose certain restrictions on the scope of claims of mining rights holders, which exclude expected benefits.

ADMINISTRATIVE RELIEF

In accordance with principles of the administrative law, if the authority decides to revoke the mining licence, or not renew it, the mining rights holder could claim that revocation of administrative authorisation damages the legal rights of the permit holder, and may file a request for compensation to the administrative authority based on article 8 of the Administrative Licence Law. In theory, mining rights holders may also request compensation from the administrative authority, claiming the approval of overlay or granting land use rights to the constructor infringed the interests of citizens, legal persons and stakeholders.

RECOMMENDATIONS

Considering the dual legal relationships formed under the overlay of mineral resources, mining rights holders can theoretically seek relief by filing civil litigation, or through the administrative route. While the MLR Notice and other local regulations/documents explicitly state that the land user/owner of the construction project is obliged to compensate, it is unclear whether the administrative route will receive sufficient support.

Therefore, in light of the status quo of judicial practice, mining rights holders are recommended to prioritise civil litigation strategy, and decide on a case-by-case basis whether it is necessary to supplement with an administrative relief route.

Chen Zhuo is a partner at Tian Yuan Law Firm. He can be contacted at +86 138 1041 7260 or by e-mail at chenzhuo@tylaw.com.cn
Yin Yutong is an associate at Tian Yuan Law Firm. She can be contacted at +86 138 1139 4158 or by e-mail at yinyutong@tylaw.com.cn