[DEBATE] : More details emerge of miner’s case against South Africa
Riaz K Tayob
riazt at iafrica.com
Fri Nov 30 17:16:11 GMT 2007
Investment Treaty News (ITN), November 30, 2007
Published by the International Institute for Sustainable Development
More details emerge of miner’s case against South Africa,
By Luke Eric Peterson
A recent speech by counsel for a group of European mining companies
embroiled in an international arbitration with South Africa offers
further details of the claimants’ case.
As earlier reported in ITN, the firms accuse South Africa of violating
protections contained in investment protection treaties between SA and
Belgium-Luxembourg and Italy.
The claimants, who hold investments in two major players in South
Africa’s stone industry, Marlin and Red Graniti, filed their Request for
Arbitration with ICSID on November 1 2006.
The investors posit two main claims: that South Africa’s new system of
mining rights effectively expropriates the claimants’ pre-existing
mineral rights, leases and authorizations; and that a series of
obligations imposed upon mining companies, including hiring
“historically disadvantaged South Africans”, violates treaty
undertakings by South Africa to provide fair and equitable treatment to
More specifically, the claimants maintain that South Africa’s Mineral
and Petroleum Resources Development Act, which entered into force on May
1, 2004, “extinguished” their long-standing ownership and lease of
various mineral rights. While there remains a possibility for holders of
“old order rights” to convert these into “new order rights”, the
claimants argue that the latter are of “lower value” and subject to a
variety of conditions and restrictions.
In addition, the claimants note that they are obliged to comply with a
Broad-based Socio-Economic Mining Charter for the South African Mining
Industry – a document which had been endorsed by a majority of investors
in the South African mining sector, but not by the claimants.
Notwithstanding the fact that they may convert their existing mineral
rights to new-order rights, the claimants view these as less valuable –
and subject to various restrictions. As such, they say they have
suffered an expropriation of their existing mining rights, leases and
authorizations, in violation of South Africa’s investment treaties with
Italy and Luxembourg.
The claimants also take issue with the fact that their “old order”
rights will be converted to new order rights only if they comply with
South Africa’s Mining Charter, which obliges that 15% of equity be sold
to “historically disadvantaged South Africans (HDSAs)” within 5 years
after the entry into force of the Minerals and Petroleum Resources
Development Act, and that 26% equity be divested by 10 years from that date.
According to the claimants, these equity divestitures are unfair and
inequitable and serve to discriminate against European nationals
contrary to South Africa’s treaty obligations.
The implications of the pending ICSID arbitration were elaborated upon
by the claimants’ lead lawyer in a recent speech to Harvard University
In an October 1, 2007 presentation, Peter Leon, Partner at the South
African law firm Webber Wentzel Bowens, argued that South Africa’s new
minerals regime, “however well intended, has created an unpredictable,
discretionary regulatory environment which hampers, rather than promotes
According to Mr. Leon, the key tenets of the new mining regime,
including the Black Economic Empowerment requirements, “potentially
conflict with South Africa’s international law obligations”.
Mr. Leon opined that bilateral investment treaties should afford foreign
investors higher levels of financial compensation than would be
available under South Africa’s Constitution. He added that by signing
and ratifying a series of bilateral investment treaties, South Africa
“has, in effect, outsourced the adjudication of key elements of its
public policy to foreign arbitral tribunals”.
Thus far, the South African Government has made little in the way of
public comment on the pending arbitration at ICSID. In response to a
query from ITN, a senior government official, speaking through counsel,
offered this statement:
"It is difficult to do justice, in a few lines of text, to the
regulatory and policy considerations that are apposite to this case. The
RSA Government trusts there will be future opportunities to offer
comprehensive commentary, in a way that is not coloured by litigation needs"
The Government has not, as yet, had to file counter-arguments in the
ICSID proceeding. A procedural hearing in December will likely set a
timetable for an exchange of written legal arguments; it remains unknown
at this stage whether the parties will elect to release to the public
some or all of those written briefs.
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