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(a) “Stability Period” means that period of time beginning on the Effective Date and ending on the ___th anniversary of the [Date of Commencement of Commercial Production][production of the quantity of commercial Minerals identified in the Feasibility Study][date of termination of this Agreement][date of recovery of capital costs plus a rate of return identified in the Financing Plan].
(b) During the Stability Period, the provisions of this Agreement shall control
(c) If, during the Stability Period, a provision of the Tax Law in existence at the date of the State’s signature on this Agreement is changed or repealed, or new or increased fiscal impositions in the nature of a Tax or duty on the Company or a royalty or Tax on Minerals or on the production of Minerals are made by the State, except for changes expressly provided for in this Agreement, and as a result the Company is adversely and significantly financially affected or its liabilities are materially increased, the Parties must agree on a fair and reasonable method to compensate the Company for those changes or new fiscal impositions.
(d) The State shall reimburse the Company as soon as is practicable (or at the State’s option, make offsetting changes in any law, statute, regulation or enactment applicable to the Company) to ensure the Company is fully and fairly compensated for any losses, costs or other adverse effects incurred by the Company by reason of a failure by the State to comply with the foregoing provision.

*For related clauses, see 8.5 State Guarantees and 14.0 Fair and Economical Project Operation.

** Stabilization Clauses are very controversial, even within the MMDA Working Group. Neither this generic clause nor the example clauses provided reflect the opinions of the Working Group. They are merely examples. For more information, see Additional Resources.

Example 1
Article 15 Taxation Stability
15.1 [Government] undertakes that it will not for a period of fifteen (15) years commencing on the Effective Date:

(a) increase corporate income tax or withholding tax rates applicable to the Company (or decrease allowances available to the Company in computing its liability to such taxes) from those prevailing at the date hereof; or
(b) otherwise amend the VAT and corporate tax regimes applicable to the Company from those prevailing as at the date hereof; or
(c) impose new taxes or fiscal-imposts on the conduct of Normal Operations,
(d) alter the right of any non-[Country] citizens (and entitled dependents) (on his or their arrival or permanent departure from [Country]) to;

(i) import within six (6) months from the date of arrival free of duty and tax, for personal use, household and personal effects;
(ii) export, without let or hindrance or the imposition of duty or tax on export, all personal effects originally imported or acquired during residency in [Country]; and
(iii) freely remit all income earned in [Country] during such residency,
so as to have, in each case, a material adverse effect (the issue of whether or not such effect is materially adverse to be determined by a Sole Expert in accordance with Clause 19 in the event of disagreement between the Parties) on the Company’s Distributable Profits or the dividends received by its shareholders.

[Government] further undertakes that for the same period of fifteen (15) years, it will not:
(e) increase

(i) the rate of Royalty referred to in Schedule 8 from the level prevailing at the date hereof; or
(ii) import duty rates applicable to the Company so as to result in the weighted average import duty rate to which the Company is subject on the import goods and materials required for the Approved Programme of Operations or Normal Operations and which would, at the date hereof, be exempt from customs and excise duties under Section [x] of the Act, above a level of zero per cent. (0%); or
(iii) import duty rates applicable to the Company so as to result in the weighted average import duty rate to which the Company is subject on the import of goods and materials required for the Approved Programme of Operations or other Normal Operations and which do not fall under Clause 15.1(d)(ii) above a level of fifteen per cent. (15%); or
(iv) the Excise Duty on Power applicable to the Company’s electricity purchases above the rate prevailing at the date hereof,

For the purposes of Clause 15.1(e)(ii) and (iii) the Facilities will be deemed to be a “mine” and the operations conducted in connection therewith to be “mining” for the purposes of Section [x] of the Act.

(f) impose other royalties or duties on Normal Operations, so as to have a material adverse effect on the Company’s Distributable Profits or the dividends received by its shareholders.

15.2 Upon expiry of the period specified in Clause 15.1, [Government] shall ensure that no law, statute, regulation or enactment shall be passed or made which would discriminate against the Company in respect of any such matters as are referred to in Clause 15.1 or otherwise in its conduct of Normal Operations or any other circumstances under this Agreement when compared to other mining companies or joint ventures conducting similar operations on a scale equivalent to those conducted by Company in [Country] provided that [Government] will be at liberty to pass or make any such law, structure, regulation or enactment to enable the performance or amendment of a development agreement entered into by it and another mining company or joint venture prior to the expiry of such period.

15.3 [Government] covenants to reimburse the Company as soon as is practicable (or, at its option, make offsetting changes in any law, statute, regulation or enactment applicable to the Company) to ensure the Company is fully and fairly compensated for any losses, costs or other adverse effects on its Distributable Profits incurred by it by reason of a failure by [Government] to comply with the provisions of Clauses 15.1 and 15.2 provided that (if [Government] opts to make such legislative changes) [Government] shall reimburse the Company for any loss, costs or effects incurred along with interest at a rate of one (1) month LIBOR whilst offsetting changes in any law, statute, regulation or enactment are being enacted. The Company acknowledges that this will be its sole remedy for such failure to comply with Clauses 15.1 and 15.2.

15.4 In the event there is a dispute as to whether or not the Company has suffered any losses, costs or other adverse effect on its Distributable Profits the matter shall be referred to a Sole Expert in accordance with Clause 19.

Example 2
Stabilization

(a) In the event of changes in any Law, the provisions of which are more favorable to the Company, then such provisions shall apply to the Company if Company so requests.
(b) In the event there occurs any change in the legislation of the Government or local legislation (including provisions relating to imposts, duties, fees, charges, penalties, and tax related legislation) after the date of this Agreement, and if in the Company’s sole and good faith opinion such change would have the effect of divesting, decreasing, or in any way limiting any rights or benefits accruing to the Company under this Agreement or under current legislation, then the Parties shall, in good faith, negotiate to modify this Agreement so as to restore the Company’s economic rights and benefits to a level equivalent to what they would have been if such change had not occurred.

Example 3
Stabilization
The Government hereby undertakes and affirms that at no time shall the rights (and the full and peaceful enjoyment thereof) granted by it under Article [X] (Income Taxation), Article [X] (Royalty), and Article [X] (Other Payments to the Government) of this Agreement be derogated from or otherwise prejudiced by any Law or the action or inaction of the Government, or any official thereof, or any other Person whose actions or inactions are subject to the control of the Government. To the extent there is inconsistency between the [Tax Law] as defined in Article [X] (Taxation), the Agreement shall govern.

Example 4
2.1. Except as provided elsewhere in this Agreement, the Investor shall only be subject to the Taxes listed in Article [X] of the General Taxation Law as in force on the date of this Agreement. The Parties agree that, in accordance with Article [Y] of the Minerals Law, the following Taxes are Stabilized (the “Stabilized Taxes”):

2.1.1. Income tax of business entities (corporate income tax);
2.1.2. Customs duty;
2.1.3. Value-added tax;
2.1.4. Excise tax (except as provided for in Clause 2.23);
2.1.5. Payment for use of mineral resources (royalty) (as specified in Clause 3.13);
2.1.6. Payment for mineral exploration and mining licenses;
2.1.7. Immovable property tax and/or Real Estate Tax; and
2.1.8. Tax on price increase of some products, which as from 1 January 2011 shall be invalidated by the WPT Invalidating Law.

Taxes listed in Article X of the General Taxation Law (as in force on the date of this Agreement) not listed above will be payable in accordance with the laws and regulations effective in that tax year of Country (the “Non-Stabilized Taxes“).

[…]

REFER TO MMDA DISCLAIMERS AND MMDA USER’S GUIDE
PRIOR TO ANY USE OF THIS DOCUMENT.

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