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FREE: NGOs seek leave to intervene in ICSID arbitration arising out of South Africa’s treatment of foreign mining companies
publication date: Jul 21, 2009
By Luke Eric Peterson
A group of 4 non-governmental organizations have petitioned an arbitration tribunal at the International Centre for Settlement of Investment Disputes (ICSID) for leave to intervene in a politically-sensitive arbitration between the European owners of certain South African mining companies and the Republic of South Africa.* The arbitration, Foresti and others v. South Africa**, has attracted considerable public interest because a part of the investors’ claim centers upon the implementation of so-called Black Economic Empowerment (BEE) measures in South Africa. However, it remains to be seen whether the arbitration itself will proceed, as the case has been suspended for parts of this year as the claimants pursue certain domestic administrative processes related to their investments (see below). Background to the case The claimants in the Foresti arbitration allege that their investments in the South African mining sector have been harmed by the Minerals and Petroleum Resources Development Act (MPRDA), leading to an expropriation and unfair treatment contrary to the terms of South African investment protection treaties with Italy and Belgium & Luxembourg. The MPRDA vested all mineral rights with the South African state – and invited long-standing owners to apply for permission to convert their “old order rights” into “new order rights” within a prescribed timeframe. As part of this conversion process, license applicants would need to demonstrate their commitment to so-called Black Economic Empowerment objectives, including plans for meeting specific social, labour and development objectives. In response to the MPRDA, a clutch of Italian and Luxembourg-based investors, with investments in South Africa’s mining sector, turned to arbitration at ICSID in 2006. The case has moved slowly, and has been suspended for several months this year while the claimants pursue certain conversion applications in South Africa. Recently, this stay has lapsed, however the claimants are asking the tribunal to extend the stay. The Republic of South Africa has opposed an extension of the stay. Under the current procedural calendar, the claimants are required to file their Reply memorial in early October. Already, the claimants and the respondent have filed a Memorial and Counter-Memorial in the case; however in keeping with the practice in most ICSID cases, these documents have not been made public. As is described below, a key objective of the would-be intervenors in the Foresti case is to obtain copies of the key documents filed in the ICSID arbitration. Would-be intervenors want BITs to be interpreted in light of equality goals In their petition to intervene in the ICSID arbitration, the applicants emphasize that the case raises “a number of issues that are of direct concern to South African citizens and the civil society groups that represent them, as well as a wide range of issues of concern to the citizens of all countries.” In particular they stress that the legislation at the center of the ICSID arbitration, the 2002 Mineral and Petroleum Resource Development Act (MPRDA), was “enacted in South Africa for important public policy reasons and in furtherance of constitutionally mandated goals” including “human rights advancement, and in particular the pursuit of substantive equality … and the need to proactively redress the apartheid history of exploitative labour practices, forced land deprivations, and discriminatory ownership policies which previously characterised South Africa’s mining sector for decades.” To this end, the applicants profess a desire that international investment treaty obligations are interpreted and applied in such a way that states can pursue affirmative action measures in furtherance of the human right to equality. Coherence between domestic law and international law urged The applicants point to human rights obligations in South Africa’s Constitution, as well as in various international human rights treaties, and the need for arbitrators in the Foresti case to take an approach which promotes a harmonious and coherent vision of international law. The applicants cite the potential for “conflicting rulings” in the South African courts and in investment treaty arbitration with respect to what constitutes a permissible government regulation under each regime. In addition, they raise another potential “clash” with respect to the validity of South Africa’s investment treaties: “The South African Government’s domestic constitutional obligations to pursue the progressive realisation of human rights – including substantive equality and the right to a healthy environment – are clear. Any award by this Tribunal that directly contradicts or effectively nullifies the South African Constitution, even if unwittingly, could potentially lead to a domestic invalidation of the BITs, which would obviously be to the detriment of all concerned.” Indeed, the applicants advert, in passing, to their own expertise with respect to “holding the South African Government accountable to its constitutional obligations.” In a professed effort to avert these potential clashes and conflicts, the petitioners urge the tribunal to hear their legal arguments. Several specific demands presented, including access to documents and hearings The petitioners present several demands in their petition to the ICSID tribunal. First, they seek leave to make written legal submissions in the case. Second, they seek access to certain documents that have heretofore remained confidential. In this context they argue that the ICSID’s Additional Facility rules, under which the arbitration is proceeding, provide discretion to arbitrators to release such documents – even if the parties may not support such disclosure. Further to this, the applicants emphasize that South Africa’s obligations under domestic, regional and international law may oblige the Government to disclose documents at issue in an ICSID arbitration such as this. Indeed, in a footnote to their application, the petitioners reserve their rights to pursue an access to information request in South Africa, and they note, without elaboration, that “any information disclosed by means of a(n) (access to information) request can be freely disclosed to other interested parties.” In an interesting twist, the applicants also acknowledge that their effort to intervene could be obviated if it should emerge that its concerns are being raised by the Republic of South Africa in the Government’s (currently confidential) pleadings. The petitioners add that “(i)f such is the case, a sensible document disclosure policy would allow the Petitioners to avoid the unnecessary expenditure of resources while also reducing the corresponding burdens upon the Tribunal and the Parties.” Petitioners also write to parties requesting voluntary disclosure of info Of some interest, the petitioners have also written to the parties to the ICSID arbitration, requesting voluntary disclosure of documents in the case. In their petition to the arbitral tribunal, the groups acknowledge this parallel effort, and express the hope that the parties will accede to the voluntary disclosure request, in which case the request to the tribunal “may fall away entirely.” A third request by the petitioners relates to the closed nature of arbitral hearings in ICSID cases. The petitioners acknowledge that either party to an arbitration may veto a tribunal’s move to hold open hearings; as such, the petitioners request that the parties adopt a more open posture toward the conduct of the proceeding. In particular, they argue that they should be permitted to attend the hearings, and to make oral presentation of their arguments in the case. Additionally, the petitioners also argue for the virtue of fully public hearings, which would permit other interested outsiders to monitor the proceedings. Indeed, the petitioners raise the spectre of a brewing backlash to the arbitration claim, and the ameliorative effect which open-hearings might have. More generally, the applicants also refer to the benefits of distinguishing ICSID proceedings from the secret and non-transparent” decision making processes under Apartheid and colonial rule in South Africa. Separate amicus curiae bid pending in domestic case One of the four petitioners in the ICSID matter is also involved in a bid to intervene as amicus curiae in a domestic South African case (Agri SA v. South Africa) which takes issue with the same legislation at the centre of the ICSID arbitration. As previously discussed in IAReporter, South African investors are claiming that the Minerals and Petroleum Resources Development Act (MPRDA) has served to expropriate certain mining rights.*** In March of this year, a South African Court dismissed certain preliminary objections to that claim. The case is now proceeding to a hearing on the merits. The Centre for Applied Legal Studies (CALS) filed a petition earlier this month, seeking leave to intervene as amicus curiae in the Agri SA matter.**** In their petition in that case, the CALS seek to argue that the MPRDA has not expropriated so-called old order mineral rights. Rather, they contend that the new South African mining regime was motivated by a fundamental constitutional objective: “transformation and the achievement of substantive equality”. If admitted as amicus curiae, CALS submits that it will present arguments derived from various international human rights law instruments which permit the taking of special measures to advance the socio-economic prospects of disadvantaged groups. Of particular interest, the CALS also adverts in it petition in the Agri SA case to the parallel ICSID arbitration, and expresses a desire to present evidence in the South African courts as to the scope for similar international arbitration claims challenging the MPRDA – as well as the “possible implications of the outcome of the present matter for such disputes”. Copies of the two petitions are available on the website of occasional IAReporter contributor, Prof. Andrew Newcombe. See: http://ita.law.uvic.ca/documents/ForestivSAPetition.pdf and http://ita.law.uvic.ca/documents/AgriSAPetitionofCALS.pdf
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