Croatia has a long mining tradition. According to some estimates, the value of annual production of mineral raw materials in Croatia exceeds HRK 6 bln (ca EUR 800 mln), out of which 88% is energy raw materials (oil, gas and condensate) and 12% non-energy raw materials (technical construction stone, dimension stone, carbonate mineral raw materials for industrial processing, etc). Despite the fact that mining is an important industry for the Croatian economy, it still lacks stable and predictable legal and procedural framework as an important prerequisite for the development of and investment in the mining sector.
The Mining Act 2009
The Mining Act 2009 is the principal piece of legislation governing mining in Croatia. The Mining Act 2009 applies to the exploration and production of mineral resources in general. Oil and natural gas production are predominant in the Croatian mining industry, but no separate law in the Mining Act governs hydrocarbons exploration or exploitation activities. For the time being, the issuing of authorisations is primarily controlled by the Mining Act. This is often criticised by the oil and gas industry professionals as being inappropriate since it does not take into account the development and particular needs of the oil and gas sector.
The mining licencing & concession regime
A main reason for adopting the Mining Act 2009 was to implement the EU Hydrocarbons Licensing Directive 94/22/EC1 (Directive), which aims to ensure competitive, non-discriminatory and transparent access to the activities of prospection, exploration and production of hydrocarbons. In line with the Directive, the Mining Act 2009 introduced a public tendering procedure for granting approval for exploration (odobrenje za istraživanje) and concession for production of mineral resources (koncesija za eksploataciju). At first glance, the public tendering procedures seem to be open to all interested entities, as required by the Directive. However, many of the criteria, conditions and requirements for granting the respective authorisations set out in the existing law violate the main principles set forth in the Directive, such as competition, equal treatment and non-discrimination and thus may not be implemented in practice. So it probably does not surprise that a tender for exploration of oil and gas within 14 exploration areas in northern Croatia, launched by the former Croatian Government in December 2011, was soon annulled due to irregularities in the tender. To date, no new tender has been re-launched.
Time for comprehensive mining law reform
Many critics have argued that the Mining Act’s lawful implementation has become impossible. To remove legal uncertainties and inconsistencies with provisions of the Physical Planning and Construction Act (Zakon o prostornom uređenju i gradnji), the Environmental Protection Act (Zakon o zaštiti okoliša) and the Concession Act (Zakon o koncesijama), necessary legislative amendments of legislation in the mining sector are underway. According to the published Working Draft of the Mining Act (Draft Act)2, one of the major amendments is the introduction of the new criteria, conditions and requirements required for granting authorisations for exploration and production of mineral resources. But some provisions of the Draft Act are unclear and legally problematic. A main concern over the proposed authorisations procedures is that the Draft Act, despite the need for simplification, actually introduces a more complex procedural framework for granting authorisations.
A second major amendment and positive feature of the legal reform is that exploration and production of hydrocarbons will no longer be regulated under the Mining Act, but under the new Act on Hydrocarbons. However, no draft proposals are publicly available yet. It will thus be interesting to see whether the intended legal reforms will provide further guidance to the oil and gas industry’s development and investment in Croatia.
The outcome of a comprehensive mining law reform is yet to be seen. Considering the importance of the mining industry in the Croatian economy, the pending law reform should provide appropriate solutions to key omissions and shortcomings in the existing mining legal framework and ensure full and effective enforcement of the new legal framework – and so end the current disorder.
At first glance, the public tendering procedures seem to be open to all interested entities, as required by the Directive. However, many of the criteria, conditions and requirements for granting the respective authorisations violate the main principles set forth in the Directive.
1Directive 94/22/EC of the European Parliament and of the Council of 30 May 1994 on the conditions for granting and using authorisations for the prospection, exploration and production of hydrocarbons.
2The Croatian version of the published Draft of the Mining Act is available on the Ministry of Economy’s website: www.mingo.hr. Last draft consultations were opened to the public from 28 August until 28 September 2012.