MLR approval no longer required for exploration / exploitation of mineral resources in China in the form of a Sino-foreign joint venture
The State Council's decision, made public on February 15, 2014, eliminates further administrative approvals in the domestic minerals industry and confers administrative powers to government authorities at a lower level (the "Decision") 1. According to the Decision, certain items which previously required approval from ministerial level authorities now no longer require such approval.
Specifically, in relation to the energy and resources sector, approval from the MLR 2 is no longer required for the exploration and exploitation of mineral resources in China in the form of a Sino-foreign joint venture. Accordingly, the process for international companies engaging in the development of mineral resources in China has been simplified.
The Decision is part of a series of actions taken by the State Council to streamline the administrative approvals process in the energy sector and other industries. In May 2013, the State Council similarly eliminated the need for MOFCOM's 3 approval of Sino-foreign cooperative petroleum contracts for the exploration of oil, gas and coal-bed methane. Please see our client alert dated May 2013 and client alert dated August 2013 for more information. 4
Before the Decision
By way of background, the approvals that were previously needed for the exploration of mineral resources (including oil, gas and coal-bed methane) were as follows:
Before May 2013
- A Chinese entity (the licensee) had to obtain MLR's approval for the exploration and exploitation of mineral resources before entering into a Sino-foreign cooperative contract. 5 Documents containing information about the exploration blocks and types of mineral resources had to be submitted to the MLR.
- Upon obtaining MLR's approval, the Chinese and foreign entities could sign a Sino-foreign cooperative contract for the exploration and exploitation of mineral resources, which contract had to be filed with MLR.
- With respect to the exploration and exploitation of oil, gas and coal-bed methane, the Chinese entity also had to obtain MOFCOM's approval of the relevant Sino-foreign cooperative contract. 6
After May 2013 and before the Decision
- In May 2013, the requirement for MOFCOM's approval was abolished. Information about the relevant Sino-foreign cooperative contract, however, still had to be submitted to MOFCOM.
- A licensee still had to obtain MLR's approval for the exploration and exploitation of mineral resources and file the relevant contract with the MLR for recording purposes.
Now – after the Decision
The requirement for MLR's approval has been abolished and is no longer required. A Chinese entity that holds an exploration / exploitation license can now freely cooperate with a foreign entity without having to obtain an approval for the exploration and exploitation of mineral resources in China.
Although not entirely clear from the Decision, it appears that the relevant Sino-foreign contract still needs to be submitted to the MLR for recording purposes. The Decision expressly eliminates the requirement for MLR's review (审查) of the contract, however, it does not expressly eliminate the requirement to file (备案) the contract with MLR. Similarly, information about contracts relating to the exploration and exploitation of oil, gas and coal-bed methane still needs to be submitted to MOFCOM.
The recent elimination of the requirement for MLR's approval (and last year's elimination of the requirement for MOFCOM's approval) continues a trend by the State Council to streamline the administrative approval process in the energy sector (and other industries). The elimination of MLR's approval will save time and simplify the process for both Chinese and foreign entities wishing to jointly explore and exploit mineral resources in China.
1"Decision to Further Eliminate Certain Administrative Approval Items and Delegate Administrative Power to Lower Government Authorities (Guo Fa (2014) No.5) «国务院关于取消和下放一批行政审批项目等事项的决定»(国发(2014)5号), which was made public on the Central Government's website on February 15, 2014.
2Ministry of Land and Resources or its competent local counterpart.
3Ministry of Commerce.
4"MOFCOM Approval on Sino-Foreign Petroleum Contracts No Longer Required" dated May 2013 and "Information about Petroleum Contracts to be submitted to MOFCOM" dated August 2013.
5See Article 38 of the "Administrative Measures for the Registration of Mineral Resources Blocks for Exploration" («矿产资源勘查区块登记管理办法») (国务院令第240号) and Article 29 of the "Administrative Measures for the Registration of Mineral Resources Exploitation" («矿产资源开采登记管理办法») (国务院令第241号), both issued by the State Council and effective as of February 12, 1998.
6Article 7 of Regulations on Sino-foreign Cooperative Exploitation of Offshore Petroleum Resources ("State Council Decree No. 607") (中华人民共和国对外合作开采海洋石油资源条例) and Article 8 of Regulations on Sino-foreign Cooperative Exploitation of Onshore Petroleum Resources ("State Council Decree No. 606") (中华人民共和国对外合作开采陆上石油资源条例).
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