SA holds key in billion pula BCL battle
Mbongeni Mguni | Friday July 27, 2018 13:10
During a heated debate in Parliament recently, minerals minister, Eric Molale touched on a case which, while less high profile than the London and Gaborone battles being fought, has the potential to end the BCL, Norilsk Nickel battle.
Following the closure of BCL Mine in 2016, Norilsk Nickel attempted to open arbitration against BCL Mine in London for the recovery of a US$271 million claim involving the sale of the Russian giant’s African assets to the local group. In Gaborone, Norilsk Nickel has a reckless trading suit outstanding against BCL directors and government to the effect that their misgovernance caused the closure of the Mine and the subsequent failure of the US$271 million deal.
The October 2014 deal involved BCL purchasing Norilsk’s assets which included a 50% stake in Mpumalanga mine, Nkomati Nickel, as well as Tati Nickel Mine near Francistown. Payment would be made once several regulatory conditions were concluded, the last of which was the transfer of Nkomati mining rights to BCL, by South African authorities.
That Gaborone and London are the battlegrounds for the blowout between BCL and Norilsk is natural. The October 2014 transaction was based on English law with provisions for dispute resolution in the London Court of International Arbitration, via application through the Botswana High Court. However, as alluded by Molale, a battlefield has opened up in South Africa, with a High Court judge there due to pronounce a judgement that lies at the centre of the dispute – is the October 2014 contract valid or void?
Nigel Dixon-Warren, BCL Mine’s liquidator, is arguing that the 2014 contract is null and void, as the last condition for it to come into effect, should not have been affected. Effectively, the SA Mines minister incorrectly approved the transfer of mining rights as BCL had not demonstrated the necessary financial capacity to take up the rights. “My lawyers reviewed the entire contract and found that approval for the transfer of mining rights should not have been granted by the Mines minister in South Africa, based on the information he had before him,” explains BCL Mine liquidator, Nigel Dixon-Warren. “The lawyers recommended that we apply to have that decision ruled unlawful and we had to make sure we had in front of us, everything the minister had in front of him when he gave his approval.” The liquidator says his lawyers faced an uphill battle to recover the record the SA minister used to make his decision.
The decision would have been a recommendation starting from provincial authorities and forwarded up the ladder. With stiff resistance, it finally took a contempt order to force the SA ministry to produce the record, Dixon-Warren says.
“The record showed that the decision was not correct and we have told the court that the approval granted was unlawful, meaning the conditions precedent were not fulfilled. “The contract is void and cannot go for arbitration or anything else. It means the contract never existed.”
However, as with the battles in Gaborone and London, Norilsk Nickel has its own side of the story. The Russian giant has successfully applied for its own record of the minister’s decision or an affidavit of its contents. Since 2016, Norilsk has argued that all conditions necessary to make the contract come into effect were fulfilled. Everything else, the Russians say, is time wasting and legal trickery to avoid payment.
This week, in a rare appearance via video, Norilsk Nickel Africa CEO, Michael Marriott said the outstanding claim was burning a hole in the group’s finances.
“We have a very difficult situation with the Botswana government failing to honour its obligations regarding the sale of our business interests to BCL,” Marriott said in the video, a Skype interview with CNBC. “We are adamant that we will resolve this in a proper manner. “It is a large amount of money and we have been seeking legal recourse but we find that we are blocked at every opportunity. “The matter is now extremely complicated (but) we are going to go all the way.”
In London, arbitration is frozen after the Gaborone High Court ruled against granting Norilsk leave, noting that the Russian firm had previously begun arbitration without leave. In Gaborone, the reckless trading case is yet to receive a judge’s full attention since being filed in October 2017.
The outcome of the South African case could render both routes moot. “People tend to hang everything on one decision,” says Dixon-Warren. “If the liquidator loses and the court rules that the approval was granted lawfully, then it means the agreement was in force and I may look at terminating the contract.” Terminating the contract, the liquidator says, would mean Norilsk looking for a new buyer for its assets, then – after that – filing an equivalent damages claim with the BCL estate.
“They say Botswana is frustrating their efforts, but the reality is that they seem to have made a number of errors in trying to secure legal remedy, through no one’s fault but their own,” Dixon-Warren says.