Illegal sand mining - a crime or a real disaster?

All mineral resources in our country belong to the state.

The use of certain subsoil on state-owned territories is possible legally only with the appropriate license. Unauthorized unlicensed attempts to extract raw materials are fraught with criminal liability. Sand is one of the most popular types of raw materials.

Sand is an indispensable material in construction and other areas of life. It is also subject to special rules for obtaining mining permits.

Illegal sand mining is, of course, a good business, but, above all, it is a criminal offense, for which you can even get a real prison sentence.

General requirements for sand mining

Sand is not only a universal building material, but also belongs to the category of minerals. Accordingly, an appropriate license is required for its extraction. The legality of the use of subsoil is controlled by the environmental prosecutor's office.

The following may extract sand without a license:

1. Individuals owning household plots or vegetable plots. If a citizen carries out work on his site, then his actions are legal. It is a crime to mine sand outside your own property.
2. Legal entities engaged in sand extraction on the territory of a geological land allotment or mining allotment. The main permitting document for such organizations is an entry in OKVED about conducting such activities.

Current requirements for sand mining

So, the main question in this situation is whether a license is needed for sand extraction? Sand is classified as a mineral, which indicates that its extraction must be strictly licensed.

The country's environmental prosecutor's office monitors the legality of the use of all subsoil resources, including sand.

The relevant regulations reflect the categories of those entities that have the right to freely carry out sand extraction without obtaining a license for this type of activity.

These include:

• Companies mining sand within the boundaries of a mining or geological land allotment. For them, the main requirement is only the presence of a record in OKVED about the conduct of such activities.
• Owners of gardens, vegetable plots and personal plots. Their activities will be considered legal until they leave the boundaries of their site when extracting sand, trying to steal sand from a neighbor.

Sand mining is an attractive type of business. That is why commercial activities for the extraction and sale of sand are strictly licensed.

In order to start sand mining, you need:

• Obtain a license to carry out this type of activity;
• Open an individual entrepreneur or legal entity;
• Have ownership rights to the cultivated area or permission to use it from the owner of this territory.

To engage in sand mining, you must have special equipment, sand quarry development specialists and surveyors. Without all this, it will be simply impossible to extract sand.

But the most important thing is rights . Illegal sand mining is grounds for administrative and criminal liability.

Sand mining on agricultural lands is strictly prohibited. These lands have a completely different purpose and should not be exploited to support commercial sand mining.

General requirements for sand mining

In the Russian Federation, sand mining activities are associated with compliance with licensing requirements for this type of activity, since sand is a mineral resource and is classified as a subsoil object.

At the same time, subjects who can freely mine sand without fear of sanctions for this type of activity are legally defined:

1. Owners of land plots whose use category is defined as household, garden or vegetable gardening. It is not illegal to extract minerals on the territory of such land within the boundaries of private property.
2. Legal entities that mine sand in the territories of geological land allotment or within the boundaries of mining allotment. Moreover, such activities must be entered into the OKVED of such an enterprise.

A commercial enterprise deciding to mine sand on an industrial scale must ensure that it has:

1. 
   Relevant qualifications of sand quarry development specialists.

   Read also:  Article 226. Theft or extortion of weapons, ammunition, explosives and explosive devices
2. Equipment that is designed for work in a quarry.
3. Specialists in the field of taking measurements at the quarry site and further displaying it on specialized maps of the area. Such specialists are called surveyors, and an enterprise that claims to mine sand is obliged to employ such engineers or technicians on staff.

In addition to the availability of personnel and equipment, you should have certain rights to the site.

Current Sand Mining Requirements

The main question in this situation is whether a license is required for sand extraction?

Sand is classified as a mineral, indicating that its extraction must be strictly licensed.

The relevant regulatory legal acts reflect the categories of those persons who have the right to freely extract sand without obtaining a license for this type of activity.

These include:

1. Firms specializing in sand extraction within a mining allotment or geological land allotment. For them, the main requirement is only the presence of a record in OKVED about the conduct of such events.
2. Owners of personal plots, vegetable gardens and personal plots. Their activities will be considered legal as long as they do not leave their site, mining sand, trying to steal sand from a neighbor.

Sand mining is an attractive business. That is why commercial activities for the extraction and sale of sand are strictly licensed.

To start sand mining, you need to: obtain a license to conduct this type of activity; Open an individual entrepreneur or legal entity; They have the right of ownership to the cultivated area or permission to use it from the owner of this area.

But the most important thing is rights. Illegal sand mining is grounds for administrative and criminal liability. Sand mining on agricultural land is strictly prohibited. These lands have a completely different purpose and should not be used to support commercial sand mining.

Responsibility for illegal sand mining

All mineral resources in our country belong to the state.
The use of certain subsoil on state-owned territories is possible legally only with the appropriate license. Unauthorized unlicensed attempts to extract raw materials are fraught with criminal liability. Sand is one of the most popular types of raw materials.

Sand is an indispensable material in construction and other areas of life. It is also subject to special rules for obtaining mining permits.

Illegal sand mining is, of course, a good business, but, above all, it is a criminal offense, for which you can even get a real prison sentence.

if the sand cost more than 2000 rubles

If the stolen sand cost more than 2,000 rubles, much more serious liability arises - criminal liability.

Criminal liability for sand theft

For the theft of sand worth more than 2,000 rubles, the following liability is provided:

• a fine of up to eighty thousand rubles or in the amount of the wages or other income of the convicted person for a period of up to six months;
• compulsory work for a period of up to three hundred and sixty hours;
• or correctional labor for up to one year;
• or restriction of freedom for a term of up to two years;
• or forced labor for up to two years;
• or arrest for up to four months;
• or imprisonment for a term of up to two years.

Legislative regulation

1. Theft, that is, the secret theft of someone else’s property, -

shall be punishable by a fine in the amount of up to eighty thousand rubles, or in the amount of the wages or other income of the convicted person for a period of up to six months, or by compulsory labor for a term of up to three hundred sixty hours, or by corrective labor for a term of up to one year, or by restriction of liberty for a term of up to two years. , or forced labor for a term of up to two years, or arrest for a term of up to four months, or imprisonment for a term of up to two years. (as amended by Federal Law dated December 7, 2011 N 420-FZ)

2. Theft committed:

a) by a group of persons by prior conspiracy; b) with illegal entry into the premises or other storage; c) causing significant damage to a citizen; d) from clothes, bags or other hand luggage that were with the victim -

shall be punishable by a fine in the amount of up to two hundred thousand rubles, or in the amount of the wages or other income of the convicted person for a period of up to eighteen months, or by compulsory labor for a term of up to four hundred eighty hours, or by corrective labor for a term of up to two years, or by forced labor for a term of up to five years. with restriction of freedom for a term of up to one year or without it, or imprisonment for a term of up to five years with restriction of freedom for a term of up to one year or without it. (as amended by Federal Law dated December 7, 2011 N 420-FZ)

3. Theft committed:

a) with illegal entry into a home; b) from an oil pipeline, oil product pipeline, gas pipeline; c) on a large scale, -

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shall be punishable by a fine in the amount of one hundred thousand to five hundred thousand rubles, or in the amount of the wages or other income of the convicted person for a period of one to three years, or by forced labor for a term of up to five years with or without restriction of freedom for a term of up to one and a half years, or imprisonment for a term of up to six years with a fine in the amount of up to eighty thousand rubles or in the amount of the wages or other income of the convicted person for a period of up to six months or without it and with restriction of freedom for a term of up to one and a half years or without it. (as amended by Federal Laws dated December 27, 2009 N 377-FZ, dated March 7, 2011 N 26-FZ, dated December 7, 2011 N 420-FZ) (part three as amended by Federal Law dated December 30, 2006 N 283-FZ)

4. Theft committed:

a) an organized group; b) on an especially large scale, -

shall be punishable by imprisonment for a term of up to ten years with or without a fine in the amount of up to one million rubles or in the amount of the wages or other income of the convicted person for a period of up to five years and with or without restriction of freedom for a term of up to two years. (as amended by Federal Laws dated December 27, 2009 N 377-FZ, dated March 7, 2011 N 26-FZ)

notes. 1. Theft in the Articles of this Code means the illegal gratuitous seizure and (or) conversion of someone else’s property for the benefit of the perpetrator or other persons, committed for mercenary purposes, causing damage to the owner or other holder of this property.

2. Significant damage to a citizen in the Articles of this chapter, with the exception of part five of Article 159, is determined taking into account his property status, but cannot be less than five thousand rubles. (Clause 2 as amended by Federal Law dated 07/03/2016 N 323-FZ)

3. In the Articles of this chapter, premises are understood as buildings and structures, regardless of the form of ownership, intended for the temporary residence of people or the placement of material assets for production or other official purposes.

In the Articles of this chapter, storage means utility premises separated from residential buildings, areas of territory, pipelines, and other structures, regardless of the form of ownership, that are intended for permanent or temporary storage of material assets. (as amended by Federal Law dated December 30, 2006 N 283-FZ)

4. Large size in the Articles of this chapter, with the exception of parts six and seven of Article 159, Articles 159.1, 159.3, 159.5 and 159.6, is recognized as the value of property exceeding two hundred and fifty thousand rubles, and especially large - one million rubles.

General requirements for sand mining

In order to avoid liability for the illegal extraction and use of minerals, you need to know the approved rules and regulations. The legislator does not prohibit the use of sand by owners of land plots that are classified as household, garden or vegetable garden areas. The owner can cultivate lands within the boundaries of private property at his own discretion; he can even extract minerals without permission.

The legislator does not prohibit the extraction of sand in the territories of geological land allocation for legal entities. It is only important that the activities of a legal entity are included in the enterprise’s OKVED.

If sand mining acquires a commercial scale, then the staff must have specialists in the development of a sand quarry, appropriate equipment that is designed specifically for work in the quarry, as well as qualified workers in the field of taking measurements on the ground. Such people are also called surveyors.

A mandatory point is the existence of ownership rights to the cultivated area or an agreement on the right to use it for commercial purposes from the owner. A license to carry out such work is required, as well as the status of an individual entrepreneur or legal entity. If a gardener starts extracting sand on his plot and selling it, his actions will be regarded as illegal business activity, even though he is using natural resources on his territory.

In most cases, violators of sand mining rules will be held accountable under the Administrative Code, and directly under Part 3 of Article 8.13 of the Code of Administrative Offenses of the Russian Federation. This legislative norm contains 8 dispositions, including sand mining.

Satisfying your own water supply needs – without profit and without a license

This circumstance, namely, the extraction of groundwater for purposes unrelated to business activities, was noted by the court when considering case No. A41-49928/15 and the decision of the administrative body to collect a fine from PTF Beton LLC was canceled.

Just as in case No. A12-25600/2012, the Arbitration Court of the Volgograd Region refused to hold RiLmet LLC liable for the extraction of groundwater without a license. The court pointed out that there was no evidence from the authorized body refuting the company’s arguments about the use of produced water exclusively for water supply to the organization itself.

What is a license

This is a document that authorizes an individual or legal entity to conduct certain activities legally. The license confirms the qualifications. Accordingly, when turning to a licensed specialist, a person can be sure that he will be provided with services of the appropriate level. Carrying out medical activities without a license entails a fine.

The current legislation of the Russian Federation obliges all private clinics, pharmaceutical companies and other medical institutions that conduct medical practice on a paid basis to obtain a license. It is a criminal offense to engage in private medical practice illegally. Moreover, the choice of preventive measure depends on the presence/absence of damage caused to the patient’s health.

How to get a license

To obtain permission to conduct medical activities, a medical education or an appropriate certificate is required. The latter is issued to persons engaged in healing activities. The validity period of a healer's diploma is 3 years. No medical education is required.

The legislation of the Russian Federation prohibits healers from conducting ordinary medical practice. The activities of folk doctors are subject to strict control. Therefore, when complaints are received, appropriate checks are initiated, as a result of which the healer may be deprived of his license.

Permission is issued to legal entities for an indefinite period. This is stated in Article 5 of Federal Law No. 99. To obtain a license to conduct medical or pharmaceutical activities, a private clinic must meet the following criteria:

1. Availability of a lease or purchase and sale agreement for premises that will be used to receive patients.
2. Availability of necessary equipment and tools.
3. Each specialist working in the clinic must have a diploma confirming their qualifications.
4. The premises must comply with established sanitary standards.

if the sand cost less than 2,000 rubles

The assistance of a professional lawyer significantly increases the likelihood of a positive outcome of the case.

if the sand cost less than 2,000 rubles, then such an act can be recognized not as theft, but as petty theft, and then it falls under the Code of Administrative Offenses of the Russian Federation, which does not entail a criminal record.

In this case, the decisive factor is whether related actions were committed that entail criminal liability, regardless of the cost of the sand. For a list of such actions, see this link.

Administrative liability for sand theft

For the theft of sand worth up to 1,000 rubles, the following liability is provided:

• a fine in the amount of up to five times the value of the stolen property, but not less than one thousand rubles;
• or administrative arrest for up to fifteen days;
• or compulsory work for up to fifty hours.

for the theft of sand worth from 1000 to 2000 rubles the following liability is provided:

• a fine in the amount of up to five times the value of the stolen property, but not less than three thousand rubles;
• or administrative arrest for a period of ten to fifteen days;
• or compulsory work for a period of up to one hundred and twenty hours.

Legislative regulation

Article 7.27 of the Code of Administrative Offenses of the Russian Federation, petty theft (version current for 2022)

1. Petty theft of someone else’s property, the value of which does not exceed one thousand rubles, by theft, fraud, misappropriation or embezzlement in the absence of signs of crimes provided for in parts two, three and four of Article 158, Article 158.1, parts two, three and four of Article 159, parts two, three and four of Article 159.1, parts two, three and four of Article 159.2, parts two, three and four of Article 159.3, parts two, three and four of Article 159.5, parts two, three and four of Article 159.6 and parts of the second and third of Article 160 of the Criminal Code of the Russian Federation, with the exception of cases provided for in Article 14.15.3 of this Code - (as amended by Federal Law dated 02/05/2018 N 13-FZ)

punishment: entails the imposition of an administrative fine in the amount of up to five times the value of the stolen property, but not less than one thousand rubles, or administrative arrest for up to fifteen days, or compulsory labor for up to fifty hours.

2. Petty theft of someone else’s property worth more than one thousand rubles, but not more than two thousand five hundred rubles through theft, fraud, misappropriation or embezzlement in the absence of signs of crimes provided for in parts two, three and four of Article 158, Article 158.1, parts two, three and fourth article 159, parts two, third and fourth of article 159.1, parts second, third and fourth of article 159.2, parts second, third and fourth of article 159.3, parts second, third and fourth of article 159.5, parts second, third and fourth of article 159.6 and parts the second and third articles 160 of the Criminal Code of the Russian Federation, with the exception of cases provided for in Article 14.15.3 of this Code - (as amended by Federal Law dated 02/05/2018 N 13-FZ)

punishment: entails the imposition of an administrative fine in the amount of up to five times the value of the stolen property, but not less than three thousand rubles, or administrative arrest for a period of ten to fifteen days, or compulsory labor for a period of up to one hundred and twenty hours.

Quarry license

Our company’s land lawyers will help you obtain a license to develop a quarry for the extraction of sand, peat, crushed stone, and stone, and will challenge refusals.

Illegal mining of sand, stone, peat or other minerals is punishable by a fine. The size of the administrative penalty is much higher than the cost of obtaining a license. Our company’s specialists will help you obtain a development license in a short time. We work with all types of documents and guarantee a positive result.

Obtaining a license for sand mining

It is issued only to an entrepreneur or organization. Therefore, you need to start with registering a legal entity. When this issue is resolved, it is time to move on to renting or purchasing a site where the quarry will be organized. And after this, the actual registration of the license begins.

• An auction is held for the development of subsoil, the victory of which guarantees the receipt of such a document.
• You first need to prepare the site for the start of sand mining, and also confirm the availability of well-functioning infrastructure.
• Also, the enterprise must have the resources to transport sand and store it. And at the end of the work, the quarry must be properly closed.
• You will need specialized equipment, personnel and evidence of the financial feasibility of subsoil development.

These requirements will have to be met in order to be allowed to attend the auction. A license is issued within 45 days.

A documentation package will also be required. It includes constituent papers, title documents for the site, a list of equipment, a work program, etc. If your company is unable to carry out certain activities, you must provide contracts with contractors who carry out such work.

How to obtain a peat extraction license?

The issue of issuing such a license is decided at the level of the subject where the land plot is located. But first you need to take possession of it by preparing a site for peat extraction. When a package of documentation has been collected, confirmation of the availability of quarry development opportunities is ready, you can proceed to issuing a license.

The time frame for completing such a document depends on the type of activity. It is issued for at least one year if you need to collect collection material. The maximum period is 20 years when mineral deposits need to be developed. The terms of the license specify the period during which the subsoil user is obliged to begin production activities.

Along with such a permit, a topographic map is issued, where the boundaries of the allotments are marked. The license itself is registered in a special register. We will help you prepare for obtaining permits, correctly fill out all the paperwork and register the permit for peat extraction.

License for stone extraction

When you receive the rights to develop a quarry, you will be able to conduct geological exploration, extract stone, create structures that support such work and places for storing resources. However, a license is not required if:

1. The minerals occur within private property;
2. The extracted stone can only be used for domestic needs.

Moreover, it is necessary that both conditions are met. Otherwise, you will have to undergo licensing. And for this you will need to win a tender or competition, or draw up a document on a general basis. Although the second option is a rare case.

In the licensing process on a general basis, in addition to preparing a full package of documents and the organization’s compliance with mandatory requirements, you will have to wait for the convening of a special commission. She makes a decision on the issuance of permits. The work of the commission is organized by the Federal Department for Subsoil Use.

If we are talking about a competition, then the company that offers the most favorable production conditions receives the license. They are drawn up in the form of a project. At the auction, the participant who makes the maximum bid wins. Our lawyers will prepare the necessary papers for the general procedure for obtaining permits or for going through an auction.

How is a crushed stone mining license issued?

Before applying for licensing, it is necessary to prepare a plan for the use of the site where the deposit is located. Confirmation of the availability of finances and technical capabilities to implement the entire list of works will also be required. The project describes:

• preparatory activities at the field;
• quarry development methods and equipment used;
• what companies will be involved in production;
• how the infrastructure and transport links are organized;
• quarry closure measures, etc.

You will need information about the enterprise with its types of activities, a list of machinery and equipment used, experience in participating in similar projects, financial reports, conclusions of the SES, etc. We will prepare all the papers, carry out approvals and obtain a license.

Let us help you obtain a mining license!

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Mining in the context of invalidity

One of the common and serious mistakes that companies in the field of subsoil use often encounter is concluding a contract that provides for the emergence of ownership of the extracted mineral “immediately” from the contractor. At the same time, the parties do not even suspect that they are signing a void agreement, which not only contradicts the mandatory requirements of the law, but also encroaches on public law interests. In addition, such a transaction is mixed, and if the object of the contract is insufficiently individualized, the contractor may lose both payment and the opportunity to recover unjust enrichment. In this case, the subsoil user has the right not to transfer the extracted mineral resource to a contractor who is insolvent.

What is the difference between underground and mined minerals?

The sphere of subsoil use combines private law and public law relations. In this connection, the contract for the extraction of mineral resources must comply not only with the norms of the Civil Code, but also with other laws: including the provisions of the Law of the Russian Federation of February 21, 1992 No. 2395-1 “On Subsoil”, No. 116-FZ of July 21 1997 “On industrial safety of hazardous production facilities” and NK.

Extraction of mineral resources is impossible without an approved mining project and compliance with industrial safety requirements applied during the creation and construction of a mining facility, which is a dangerous production facility and at the same time one of the results of mining operations. In this regard, not just the general rules of the Civil Code on contracts, but special provisions of construction contracts, Law No. 116-FZ and urban planning legislation should be applied to relations in the extraction of mineral resources, which once again confirms the multi-sectoral legal nature of the contract in question.

According to the law, the subsoil within the borders of Russia and the minerals contained in them are state property. Under the terms of the license, minerals and other resources extracted from the subsoil may be in federal state ownership, the property of constituent entities of the Russian Federation, municipal, private and other forms of ownership (paragraph 3 of article 1.2 of Law No. 2395-1). To extract minerals and transfer them to the subsoil user, license holders may engage third parties on a contractual basis [1].

Thus, mineral resources located in the subsoil and owned by the state, after their extraction, become the property of the persons holding the license. They are not obliged to extract minerals on their own, but have the right to engage other organizations for these purposes on a contract basis. A contractor who does not have a special permit to use subsoil has no right to claim the property of the subsoil user - minerals extracted from the subsoil, including as payment under the contract. As a result of mining operations, the ownership of the mineral is terminated by the state and can only be acquired by the subsoil user.

In this regard, when concluding an agreement, the parties, in order to maintain the legal purity of the transaction, must follow a certain sequence:

• if a subsoil user has engaged a contractor to extract a mineral, the contract must provide for the latter’s obligation to extract the mineral and transfer it to the subsoil user under the relevant act;
• if the parties agreed that the contractor receives the extracted mineral as payment under the contract, then the agreement must include the following condition: the subsoil user is obliged to accept this mineral from the contractor, and then return it back, having documented everything to register the name of the product, its quantity, quality and price.

Taking into account Art. 180 of the Civil Code, the part of the transaction providing that the initial right of ownership of the extracted mineral resource arises from the contractor, is invalid on the basis of Art. 168 and 169 Civil Code. Therefore, it is unacceptable for a situation in which, as a result of the execution of a contract, the subsoil user did not acquire ownership of the extracted mineral resource at least for a “legal second.” Otherwise, there are risks of recognizing such a transaction as void in part and bringing the participants in legal relations to administrative liability: the subsoil user - under Article 7.10 of the Administrative Code for unauthorized assignment of the right to use subsoil, the contractor - under Article 7.3 of the Administrative Code for using subsoil without an appropriate license.

Why a license holder cannot be a “formal” subsoil user

It is impossible to conclude an agreement under the terms of which the contractor acquires and retains ownership of the extracted mineral resource, and the participation of the subsoil user is limited to providing access to the licensed subsoil plot. This may be regarded as the transfer by the subsoil user of all or most of the functions to the contractor, which is the basis for concluding that the transaction is invalid.

At the same time, the current legislation contains at least four grounds for declaring a transaction invalid in the part that provides that the initial right of ownership of the extracted mineral resource arises with the contractor:

• transfer of the acquired right to use subsoil plots to third parties, including through the assignment of rights - by virtue of Art. 17.1 of Law No. 2395-1, clause 16.1 of Decree No. 3314-1, clause 1, 2 of Art. 168 Civil Code [2];
• transfer of a subsoil plot for use (lease) to a person who does not have a license - within the meaning of Art. 1.2, para. 1 tbsp. 11 of Law No. 2395-1, paragraph 1, 2 art. 168 Civil Code;
• transfer to the contractor of all or most of the functions (rights and obligations) of the subsoil user within the framework of the granted license (transfer of the contract) in the absence of the consent of the subsoil owner - by virtue of the provisions of Art. 392.3, paragraph 2 of Art. 391 Civil Code, clause 1, 2 art. 168 Civil Code [3];
• bypassing the procedure established by law for obtaining a permit (license) for the right to use subsoil – under Art. 169 Civil Code.

Inequality of counter execution – what are the risks?

Payment by the customer for completed contract work can be made both in cash and in commodity form (transfer of extracted minerals). An agreement under which the contractor, as payment under the contract, receives ownership of the extracted mineral resource, is mixed, and therefore must take into account that the contractor, as a buyer, has an obligation to pay for the purchased mineral resource, and the subsoil user, as a customer, for payment for work performed.

A transaction under the terms of which the contractor/customer extracts a mineral or sells it free of charge or with obvious damage to himself is invalid in the relevant part - unacceptable from the standpoint of Art. 575 of the Civil Code, donation in relations between commercial organizations (Article 168 of the Civil Code) [4].

However, the fact that the contractor mined coal for a certain time, and the subsoil user accepted it according to the relevant act, indicates the consumer value of the asset. Even if the contract is declared invalid in this part, the subsoil user will have to fulfill the liquidation obligation - to pay for the work performed [5]. Until this moment, the mineral resource saved by the customer will be regarded by the courts as unjust enrichment [6].

The party whose behavior showed the will to maintain the validity of the transaction will not be able to challenge it on grounds that this party knew or should have known about when expressing its will (paragraph 4, paragraph 2, article 166 of the Civil Code of the Russian Federation). However, this does not mean that the transaction will not be challenged, since the law gives such a right not only to the parties, but also to the creditors of one of the parties, the arbitration manager, and in certain cases the prosecutor and other public authorities.

Does the contractor have the right not to pay for mining work?

The contractor's demand for the transfer of mineral resources to him, stated within the framework of a mixed agreement, under the terms of which the contractor receives ownership of them as payment under the contract, is a buyer's claim to the seller for the transfer of goods, a certain quantity and quality.

However, the contractor has no right to demand that the subsoil user (seller) fulfill this obligation if it has not legally arisen. The emergence of such an obligation to transfer goods must be preceded by a procedure for agreeing on essential conditions, which the law includes the name and quantity of goods [7].

Taking into account the specifics of legal relations in the field of mining, when starting work, the parties cannot always determine in advance what quantity and quality of minerals they will extract, including based on mining development plans, geological reports and other technical documentation. At the same time, the subject of the agreement can be determined by the actual actions of the parties to the agreement, for example:

– in the contract, the parties determine the abstract quantity and quality of the mineral that will be extracted during the execution of the contract;

– the parties considered it possible to begin execution of the contract;

– during the execution of the contract, the parties had no disagreements regarding the actually defined subject matter of the contract;

– the subsoil user accepted the result of the work performed by the contractor according to the act [8].

In this case, the contract will be considered concluded, and the obligation of the subsoil user to transfer the extracted mineral resource to the contractor as payment for the work performed will arise.

The uncertainty of the result of the work (quantity, quality of the extracted minerals) is the risk of the parties, but for the most part the risk of the contractor, who is responsible to the subsoil user for the result of mining work both as a contractor and as a future buyer (Article 413 of the Civil Code of the Russian Federation). In this regard, the following conditions should become an integral part of the contract:

– the procedure for determining the qualitative characteristics of the extracted mineral by sampling with the involvement of an independent laboratory;

– the cost of work in monetary terms if the contractor receives extracted minerals as payment under the contract;

– the procedure for determining the cost of extracted minerals (including depending on their quality characteristics);

– the procedure for determining the actual amount of extracted minerals.

Agreeing on these conditions will allow the parties to ensure in advance compensation and equality of the parties in legal relations. In this case, the subsoil user will not be able to refuse to fulfill its obligation to transfer the mineral resource, since:

• if the mineral is extracted and meets the conditions of the concluded agreement, such actions will constitute improper fulfillment of the obligation;
• if the mineral is not extracted (not in full, in violation of the plan), and the agreement does not contain the necessary conditions, then unjust enrichment occurs on the side of the subsoil user.

Should the extracted mineral be transferred if the counterparty is not ready to guarantee payment?

If there are circumstances clearly indicating a difficult financial situation for the contractor and a high probability of his violating his payment obligation, the subsoil user has the right not to fulfill his obligation (Articles 328, 405 of the Civil Code).

However, such an action by the subsoil user must be in reasonable balance with the actions of the contractor, who could actually perform part of the work and has the right to claim payment for it. The subsoil user should not expose himself to negative consequences due to a foreseeable violation on the part of the contractor. The contractor should not do this either due to the subsoil user’s refusal to pay for the work actually performed (part of the work). Otherwise, it will lead to a violation of the principle of equivalence of counter-execution. And, ultimately, the contractor will appeal to the subsoil user with a claim either for payment for the work actually performed [9] or for the recovery of losses (Article 15 of the Civil Code).

According to paragraph 3 of the Resolution of the Plenum of the Supreme Arbitration Court of the Russian Federation dated June 6, 2014 No. 35 “On the consequences of termination of the contract” (hereinafter referred to as “Resolution No. 35”), within the meaning of paragraph 2 of Article 453 of the Civil Code, upon termination of the contract, the obligation of the debtor to perform in the future actions that are subject of the contract (for example, to ship goods under a supply agreement, perform work under a contract, etc.). The terms of the contract, which by their nature imply their application after termination of the contract or are intended to regulate the relations of the parties in the period after termination, remain in effect even after termination of the contract.

However, by virtue of paragraph 5 of Resolution No. 35, if, when considering a dispute related to the termination of an agreement under which one of the parties transferred any property into ownership of the other party, the court found a violation of the equivalence of counter-provisions due to the failure or improper performance of its duties by one of the parties , the party that transferred the property has the right to demand the return of what was transferred to the other party to the extent that this violates the equivalence of the considerations agreed upon by the parties.

Thus, the contractor has the right to demand the transfer of mineral resources in full or in the relevant part if:

– ready to guarantee the fulfillment of the buyer’s obligation to pay for the acquired extracted minerals;

– performed work (part of the work) that the subsoil user did not pay for.

And vice versa, if the contractor’s work has been paid for and there are circumstances that clearly indicate the contractor’s failure to fulfill the counter-obligation to pay, he, based on conscientious and reasonable behavior characteristic of any participant in civil legal relations, has no right to demand that the subsoil user fulfill this obligation.

It is worth mentioning that such provisions of the law, despite their clarity and unambiguity, may not find support from the court. For him, a foreseeable violation does not always matter, and the customer’s inaction to retain the goods is legal only when the contractor has already violated the customer’s rights to pay for the extracted minerals. In order to eliminate future disagreements, an express condition should be included in the text of the contract, according to which the customer, if circumstances arise that clearly indicate the contractor’s failure to fulfill the counter-obligation to pay, has the right to require the contractor to provide evidence of his solvency or security for the obligation. If the contractor violates this obligation (it is better to set a reasonable period), unilaterally declare the termination of the obligation to transfer the goods.

To summarize, I would like to once again focus the attention of readers on the complexity and multi-component legal nature of the contract for the extraction of mineral resources. When concluding such an agreement and, often, balancing between two contractual structures - contract and purchase and sale, the parties, without exaggeration, walk on the “edge of insignificance”. As a result, without maintaining a balance, the parties are left alone with the following problems and risks:

• the risk of the contract being declared void insofar as it provides for the emergence of the contractor's initial ownership of the extracted minerals;
• the risk of recognizing the contract as void in the part that provides that one of the parties fulfills the obligation free of charge or, conversely, at a cost significantly higher than the counter-performance from the other party (a transaction with obvious damage);
• the contractor bears the risk of not receiving the extracted mineral as payment under the contract if the parties do not agree on conditions that allow individualization of its quality and other characteristics;
• the subsoil user bears the risk associated with non-receipt of payment for the goods (mined minerals) from the insolvent buyer if he does not promptly request security for the fulfillment of the counter-obligation and does not refuse to fulfill it if the contractor refuses to provide them.

Avoiding these risks when concluding a contract for the extraction of mineral resources will allow a deep and comprehensive analysis of the features of contractual and administrative legal relations in the field of subsoil use.

Authors:

List of sources:

[1] clause 16.1 of the Resolution of the Armed Forces of the Russian Federation dated July 15, 1992 No. 3314-1 “On the procedure for enacting the Regulations on the procedure for licensing the use of subsoil.”

[2] Similar conclusions are contained in the Resolution of the Supreme Court of the Supreme Soviet of July 28, 2020 in case No. A58-12965/2018.

[3] A similar explanation is given in paragraph 73 of the Resolution of the Plenum of the Armed Forces of the Russian Federation dated June 23, 2015 No. 25 “On the application by courts of certain provisions of Section I of Part One of the Civil Code of the Russian Federation”, Determination of the SKES of the Armed Forces of the Russian Federation dated September 1, 2020 No. 305-ES20-6940 on case No. A41-51209/2019, Determination of the SKES RF Armed Forces dated July 26, 2016 No. 302-ES15-19746.

[4] A similar position is contained in the Resolution of the Presidium of the Supreme Arbitration Court of the Russian Federation dated 02/11/2014 No. 13846/13, Resolution of the Supreme Arbitration Court of the Russian Federation dated 10/04/2019 No. F01-3684/2019 in case No. A29-5490/2016, Resolution of the Supreme Arbitration Court No. of 11/13/2019 F04-5140/2019 in case No. A45-47847/2018.

[5] clause 2 of the Information Letter of the Presidium of the Supreme Arbitration Court of the Russian Federation dated January 24, 2000 No. 51 “Review of the practice of resolving disputes under construction contracts.”

[6] Egorov A.V. Unilateral refusal of the customer from the contract: focusing on practice problems // Bulletin of Civil Law. 2022. No. 3. P. 53–102.

[7] Resolution of the AS SKO dated July 12, 2019 No. F08-4736/2019 in case No. A53-19968/2018; Resolution of the AS CO dated March 29, 2017 No. F10-614/2017 in case No. A14-5160/2016; Determination of the Supreme Arbitration Court of the Russian Federation dated November 21, 2013 No. VAS-16646/13 in case No. A07-15881/2012.

[8] clause 5 of the Information Letter of the Presidium of the Supreme Arbitration Court of the Russian Federation No. 51.

[9] paragraph 11 of Information Letter of the Presidium of the Supreme Arbitration Court of the Russian Federation No. 51.

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