Do Critical Mineral MOUs Need Embedded Compliance Components?

Highlights

• Rebecca Vergara Gaona proposes adapting corporate compliance strategies to intergovernmental critical minerals agreements to address sovereignty, environmental, and transparency challenges.
• Proposed solutions include:
  • Pre-agreement due diligence
  • Stakeholder engagement
  • Continuous monitoring to prevent corruption and regulatory violations
• While the approach offers potential improvements, significant challenges remain in implementing cross-jurisdictional compliance frameworks, including:
  • Enforcement mechanisms
  • Funding
  • Geopolitical complexities

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Should compliance principles traditionally applied to corporate oversight be integrated into intergovernmental agreements on critical minerals? With critical minerals powering renewable energy storage, electric vehicles, and other essential technologies, securing stable supply chains is a geopolitical priority. However, the author of a recent article in Corporate Compliance Insights asserts that existing memorandums of understanding (MOUs) between nations lack sufficient compliance measures to prevent risks such as corruption, environmental damage, and human rights violations.

That’s the premise of Rebecca Vergara Gaona, arguing that historically, compliance emerged in response to corporate fraud and governance failures, but its roots lie in public oversight.

Now, Ms. Vergara Gaona suggests that returning compliance to the public sphere—by applying corporate lessons to intergovernmental agreements—could mitigate the risks associated with mineral sourcing and trade. Specifically, critical minerals MOUs face challenges related to sovereignty, environmental concerns, and financial transparency. Sovereignty disputes, such as in Argentina’s lithium sector, where local jurisdictions and Indigenous rights complicate ownership, demonstrate the complexity of these agreements.

According to Ms. Vergara Gaona, a lawyer specializing in compliance with experience in the mining, corporate finance, and capital markets sectors,

the lack of transparent pricing in mineral markets increases the risk of fraud and corruption, as private companies often operate outside disclosure requirements. So, to strengthen MOUs, the article proposes several compliance-driven solutions:

• Due diligence before agreements are signed to assess the backgrounds of involved parties;
• Stakeholder engagement, particularly with vulnerable communities impacted by mining operations and
• Continuous monitoring and audits to detect corruption, conflicts of interest, and regulatory violations.

Though potentially viewed as bureaucratic delays, these measures are essential for ensuring mineral agreements’ long-term success.

Some natural questions arise concerning the attorney’s proposals.

One major issue the article does not address is how compliance frameworks would be enforced across sovereign jurisdictions. While it assumes that compliance measures can be applied uniformly, national laws and regulatory environments differ significantly. This raises the question of how oversight would be structured and which entity—whether an international body or a coalition of participating nations—would hold governments accountable for meeting compliance standards.

Another key concern is the financial burden of compliance in intergovernmental agreements. Unlike corporate compliance, where businesses are responsible for internal oversight costs, MOUs involve multiple stakeholders, including governments, private companies, and international institutions. It remains unclear who would fund compliance efforts and whether nations—especially resource-rich but economically developing ones—would be willing or able to absorb these costs.

Political incentives also play a crucial role in determining the feasibility of compliance measures. Governments negotiating MOUs primarily focus on securing mineral access rather than implementing long-term governance reforms. If compliance mechanisms introduce delays or add complexity to negotiations, will nations be willing to accept these trade-offs, particularly in a highly competitive global market?

The article also overlooks how China and other dominant players in the critical minerals supply chain handle compliance. China leads in mineral processing and often secures agreements through state-backed investments and direct control over supply chains. If Western nations impose stricter compliance measures, could this put them at a competitive disadvantage, pushing resource-rich nations toward agreements with less restrictive partners like China? Understanding how different geopolitical actors approach compliance is essential to assessing the viability of such frameworks.

Finally, the article does not explore whether compliance failures in MOUs are unique or simply reflect broader governance issues in the resource extraction industry. Corruption, environmental degradation, and human rights violations are long-standing challenges to mining and trade agreements. Strengthening MOUs may improve transparency, but without deeper structural reforms, would these efforts be sufficient to drive meaningful change? Addressing these broader governance concerns is essential to ensuring that compliance measures effectively mitigate risks rather than simply adding another bureaucratic layer to an already complex global supply chain.

Rare Earth Exchanges suggests that while the article presents a compelling case for a compliance-centered approach to critical minerals agreements, it lacks a clear framework for implementation and does not fully address geopolitical and economic incentives that may hinder these reforms. The feasibility of enforcing compliance across multiple jurisdictions and the potential unintended consequences—such as slowing down mineral access in a competitive global market—remain open questions.