Drastically Increased Fines for Excavation of Mineral Resources Without Approval

The Government of the Republic of Serbia, at its session held on 26 August 2021, adopted the Decree on Determining the Value of Excavated Mineral Resources or Other Geological Resources without the Necessary Approvals (“Official Gazette of the RS”, No. 83/2021) (“Decree”).

The Decree was adopted with the aim to prevent the exploitation works without approvals issued in accordance with the Law on Mining and Geological Research (“Official Gazette of the RS”, No. 101/2015, 95/2018 – other law and 40/2021) (“Law“), as well as to sanction those business entities that alienate mineral resources without approval pursuant to that Law.

Compensation of damages

While the previous regulations concerning the exploitation of mineral resources without the necessary approvals prescribed an obligation to pay the damages in the same amount as when the exploitation was carried out in accordance with the law, Article 8 of the Law now prescribes the following:

The company, i.e. other legal entity and entrepreneur which performs geological research and/or exploitation of mineral resources or other geological resources without the necessary approvals, is obliged to compensate the owner for the occupied land, and the Republic of Serbia or the budget of the autonomous province, when illegal geological research and/or exploitation is conducted on its territory, triple the value of excavated mineral resources or other geological resources, and to rehabilitate and re-cultivate the land on which the exploration and/or exploitation of mineral resources or other geological resources was performed.

Having in mind the mentioned provision, as well as the fact that the Decree determines the market value of mineral resources or other geological resources excavated without the necessary approvals, the consequences of the new regulation regarding the exploration and/or exploitation of mineral resources without approval are drastic.

For example, until the adoption of the Decree, for the use of non-metallic mineral resources, technical-building stone – sedimentary and metamorphic rocks (limestone, dolomite, marble, etc.), the fee per ton of excavated mineral resources amounted to RSD 24.

With the adoption of the Decree, the market value of the same mineral resources has now increased to the amount of RSD 475 per ton of raw exploited material.

In addition to the market value of technical building stone – mineral and metamorphic rocks, the market value of the following mineral resources have also experienced a drastic increase:

  • Technical-building stone – igneous rocks;
  • Architectural and building stone;
  • Clays and raw materials for the brick and ceramic industry;
  • Raw calcium carbonate material as a filler for the industry of paints and varnishes, facade and thermal insulation materials and other industries;
  • Quartz sand and sandstone, construction sand and gravel;
  • Raw materials for refractory and other industries;
  • Raw mineral materials of undetermined quality (or uncategorized raw material),

so that for some of these mineral resources the market value has been increased by 100 to 300 times compared to the period before the adoption of this Decree.

The market value determined in this way is prescribed for a period of two years.

Multiplying the market value of mineral resources in a practical example would mean the following:

In case of exploitation of 50 thousand tons of magnesite without the previously obtained approval, according to the newly determined market value of RSD 5,900 per ton, the compensation would go up to RSD 885 million, i.e. approximately EUR 7.5 million.

The difference in relation to the previous regulation is that for the same amount of exploited magnesite, according to the previous market value of RSD 58.50 per ton, the amount of compensation would have been about RSD 2,9 million, i.e. approximately EUR 25 thousand.

Fines and penalties

In addition to the obligation to compensate the damages, rehabilitate and re-cultivate the land on which the exploration and/or exploitation of raw mineral materials or other geological resources was performed, it is prescribed that a geological inspector may submit a criminal report, a report on an economic crime, or a request for initiating a misdemeanor procedure to the competent judicial body, i.e. he may take other actions and measures for which he is authorized by the relevant laws and other regulations.

In case of an economic crime due to geological research and/or exploitation without approval, the fines can reach up to RSD 3 million for a legal entity, i.e. an entrepreneur, and up to RSD 200 thousand for a responsible person in a legal entity.

FOR MORE INFO CONTACT:

Dušan Vukadin

Dušan Vukadin

Attorney-at-law | Senior Counsel
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