The Government of the Republic of South Africa (SA) is pleased to announce the successful conclusion of international arbitration proceedings brought against SA in 2006 to challenge the Mineral and Petroleum Resources Development Act No. 28 of 2002 (MPRDA) and the Broad-Based Black Economic Empowerment Mining Charter.
The claimants (certain foreign investors in the dimension stone industry) had previously sought to withdraw all of their claims. In an award issued on 4 August 2010, the arbitral tribunal formally dismissed the claims and ordered the claimants to contribute 400 000 Euros (approximately 3.8 million rand) to the government’s costs.
The final decision of the tribunal was as follows:
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“The claimants shall pay the sum of euro 400 000 to the respondent in respect of the fees and costs now claimed by the respondent
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The claimants’ claims are dismissed with prejudice.”
The claimants had argued that the government had settled the claims made against it. The tribunal did not accept that argument. The tribunal noted that “the claimants applied unilaterally for the discontinuance of the proceedings” and that this was an “application opposed by” the government. The tribunal further noted that the very fact that the question of costs was before it “calls into question the idea that there is an agreed settlement terminating these proceedings”.
The tribunal said that foreign investors who start international investment arbitrations “cannot expect to leave respondent States to carry the costs of defending claims that are abandoned”.
This award terminates the case and the claimants may not revive the dismissed claims.
The MPRDA, which came into force in 2004, established a new dispensation designed to redress historical inequities in the mining sector and to promote the efficient development of the sector into the future. As part of the transition to this new dispensation, holders of existing “old order” mining rights were entitled to have those rights converted into “new order” MPRDA rights.
Most old order rights holders, domestic and foreign, pursued the conversion process. A group of investors in the granite industry chose to bring an international arbitration, claiming that the MPRDA and the Mining Charter violated international law. However, as the April 2009 deadline for conversion approached, the claimants’ South African operating companies did lodge their old order rights for conversion, and the decision to convert them was made in terms of the MPRDA and the Mining Charter. It was then that the claimants sought to withdraw their claims.
As has been the case with other mining companies, the conversion process has enabled these claimants to continue their operations uninterrupted. Protecting security of tenure was one of Parliament’s stated purposes in adopting the MPRDA, and this result shows that the MPRDA succeeds in that aim.
The government welcomes the tribunal’s recognition that the claimants and the government have put the adversarial process behind them and started “rebuilding the relationship of trust and mutual commitment between investor and host government”. The government continues to welcome and to work with all responsible mining companies in the country, both foreign and domestic.
The government also welcomes the claimants’ commitment to beneficiate granite in South Africa. Beneficiation is the refinement into a useable product of an extracted mineral. It has long been government policy to promote beneficiation in this country before export, rather than seeing South African raw materials exported for beneficiation elsewhere. The claimants took advantage of the Mining Charter’s provision allowing for beneficiation activities to offset a certain percentage of the equity ownership requirements.
In particular, the Mining Charter calls for Historically Disadvantaged South Africans (HDSAs) to own at least 26 percent of the equity of companies that hold MPRDA mining rights, but the unique nature of the dimension stone industry meant that the claimants operating companies have been able to reduce that percentage to either 11 percent or five percent, depending on the circumstances, by using beneficiation offsets. Domestic beneficiation contributes to the South African economy in general, results in employment for HDSAs, and promotes opportunities for businesses owned or managed by HDSAs that provide services that are part of the beneficiation process.
Enquiries:
Randal Williams
Tel: 012 394 3071
Cell: 082 768 1674
Jeremy Michaels
Cell: 082 772 1122
