University of Zambia lecturer Dr Sishuwa Sishuwa says the Zambian Government has a very good case against Vedanta Resources that owns majority stake in Konkola Copper Mine, but it is messing up and will instead pay a heavy price for failing to “follow the legal procedure”.
Dr Sishuwa warned that the country risks paying hefty dollars in damages if the KCM issue was not resolved properly.
He was responding to a press query on the ruling from South Africa’s High Court ordering ZCCM-Investment Holdings and Provisional Liquidator Milingo Lungu to halt the liquidation of KCM, pending the resolution of the dispute through arbitration.
“I advise the Government to consider going for an out of court settlement such as mediation or negotiation. The route they have taken will most likely cost the country heavily in damages. I urge President Edgar Lungu and the Minister of Mines Richard Musukwa to listen to other voices, including those of critics. Ordinarily, I should not plead with my elected leaders in Government to listen to me as a concerned citizen. We all do not have to line up outside State House or any ministry to convey our concerns to the Government. We can communicate with our leaders through any medium including by way of sharing our views in national newspapers. Please do not dismiss us as prophets of doom. I mean well and am motivated only by the defence for public interest because this issue affects me as a citizen and a taxpayer. We the taxpayers will be the ones to bear the burden of paying for the hefty liabilities or damages that would arise from a poorly handled process or resolution of the KCM problem”, complained Dr Sishuwa.
“Like many Zambians, I want Vedanta out of KCM. It is public knowledge what a terrible investor Vedanta has been and that its presence in areas where it operates from, such as Chingola, Chililabombwe and Nampundwe, has not improved let alone had any positive impact on our brothers and sisters in those areas. Many Zambians have suffered terribly at the hands of this cruel and horrible investor, Vedanta. Suppliers went for months without pay, very little investment has actually taken place at KCM in recent years despite Vedanta’s repeated verbal pledges of massive investments, and we know how it became more profitable for Vedanta to play with “transfer pricing” by shifting profits and importing most of its copper concentrates for processing rather than actually mining it. Vedanta has been awful and I totally support the government’s position that the company must go. In kicking Vedanta out of KCM, however, let us follow the legal procedure provided in the shareholders’ agreement. That way, we will minimise the costs of getting rid of this appalling company from KCM so that we do not end up paying more. Procedural impropriety may water down the strong case that the government has against Vedanta, and risks exposing the already burdened taxpayers to hefty and unnecessary financial penalties” he said.
Dr Sishuwa disagreed with Musukwa’s argument that the verdict from South Africa has no bearing on the ongoing liquidation of KCM in Zambia.
“I think that the Zambian Government is making matters worse by issuing statements. The judgement that was delivered by the South African High Court is against ZCCM-Investment Holdings. It is ZCCM-IH that petitioned for liquidation of KCM in the Lusaka High Court, so how does the Minister of Mines and the Minister of Justice come into this case? The actions of the Government show that this is an indirect nationalisation of assets, or what is generally referred to as ‘constructive nationalisation’ under international law. You cannot sale someone’s assets. The Minister of Mines will very quickly find that the ruling of the South African High Court is binding when they move to arbitration. Musukwa’s argument on jurisdictional sovereignty is weakened by the fact that the shareholders’ agreement relating to the sale of KCM provides for the mode of dispute resolution and the place where disputes arising out of the agreement would be resolved. Section 26.1 of the original shareholders’ agreement between Vedanta and ZCCM-IH explicitly provides for Johannesburg as the place of arbitration. Now, it is normal in arbitration for parties to choose places that are neutral to both of them, or one where neither has affiliation. I imagine that at the time of the signing of the shareholders’ agreement, Vedanta had no presence in South Africa, as KCM was their first acquisition in Africa, so Johannesburg may have seemed like a suitable neutral place. What this means is that since the parties to the agreement chose Johannesburg as the place where disputes arising out of the agreement would be resolved, they are bound to submit to that jurisdiction. The problem is that we are never fully conversant with the agreements or contracts we, as a country, sign. And so we mess up and are made to pay even more. I hope we will learn from this experience”, stated the UNZA researcher.
He said the South African High Court’s ruling relates to the fact that the parties to KCM agreed to the use of arbitration rather than litigation as the mode of dispute resolution.
“I do not understand why the Government did not go for arbitration in the first place. They have a very good case against Vedanta, but now find themselves in a position where they risk paying more money, both in damages and legal costs, to a company that should have instead paid Zambia more. Clause 26.1 of the Shareholders Agreement, which deals with arbitration, provides that ‘Subject to the provisions of Clauses 24 and 25 above, the parties hereby consent to submit any Dispute to be resolved by arbitration in accordance with the UNCITRAL Arbitration Rules (“the Rules”) as in force and effect on the date of service of Notice of Dispute under Clause 23 above, save as modified by the provisions of this Clause 26. The tribunal shall consist of a sole arbitrator (the “Tribunal”) and the appointing authority shall be the Secretary General of the Permanent Court of Arbitration at the Hague. The place of arbitration shall be Johannesburg and the language of the arbitration shall be English’, he said quoting the arbitration clause.
The UNZA academic wondered why the Government did not invoke the procedure provided for in the arbitration clause.
“My reading of this clause is that the High Court in Johannesburg is within its rights to grant such an order. ZCCM-IH is therefore bound by the shareholders’ agreement to submit to the arbitral process in South Africa. By deliberately ignoring the obligations under the shareholders’ agreement and court orders related to it, we will only aggravate the extent of the liability or end up paying more damages and legal costs. The argument of sovereignty would be persuasive if this was an issue of deciding on which court presides over the matter. My reading of the issue however is that this is not about a litigation procedure, but an arbitration process coming out of a shareholders’ agreement between the two parties on how disputes would be resolved and that the arbitration resolution would be final. In other words, the court order is a result of what is contained in the shareholders’ agreement on how to deal with conflicts or disputes. In this case, Vedanta and ZCCM-IH agreed that this process would be through arbitration and would take place in Johannesburg, hence the interim injunction that has arisen from the question of respecting the arbitration clause”,explained Dr Sishuwa.
He argued that the Government’s announced plan to appeal against the order suggests an acknowledgement of the validity of the judgement.
“I have read that Attorney General Likando Kalaluka will travel to South Africa to appeal against the judgement and defend the integrity of the Zambian courts. It would appear to me that this is merely a delaying tactic since the order cannot be enforced if there is an appeal pending against it in South Africa. The Attorney General, more than anyone else, should know that jurisdiction in this instance flows from the arbitral clause in the shareholders’ agreement, and the Zambian Government is appealing the judgement precisely because they know it is valid. Otherwise why would anyone appeal against a judgement they do not recognise as valid?” he asked.
“I wish the Lusaka High Court had declined to hear this matter when it was taken to court for the first time on the ground that, according to the shareholders’ agreement, they have no jurisdiction to entertain it. That would have enhanced the integrity of our Judiciary. The failure to do so, alongside a series of other questionable actions from the Government and the Judiciary, have brought us to this situation, where we the taxpayers would now have to finance the Attorney General’s travel to and from South Africa, which could have been avoided, and his stay there. We, the taxpayers, are already paying for the continued running of KCM. In addition, the Provisional Liquidator, Milingo Lungu, flies in and out of Chingola using a ZAF plane or a chartered one. Do you see how costly this route is already turning out to be, even before more expensive losses in court occur?” Dr Sishuwa asked.
ZAF plane used in KCM saga? No kidding!! Atase bane, ZAF flying Milingo Lungu? What kind of abuse Ba Edgar is this?
Change the color of card!!!
I think you over stepping the mark with this guys shuwa’s opinion being headline news.
He writes well but confine his writing to a column of his and stick to headlining news any tabloid would do.
We are losing it LT. I appreciate he has more than average clicks on his article and rightfully so but no headline news. It’s his opinion be it he is entitled to it. Stick this to a column
I hold a phd
Thanks
BB204,2016
The thinking of our journalists is unbelievable! Instead of seeking clarifications from legal experts in commercial law, they send a press query to Sishuwa a historian with ZERO industry experience!
Reading the whole article Will.make you understand that the man actually has a valid point. The problem is the architects of privatisation were a bit more intelligent than crop we have in government now. Eclipse may mean well but he has no advisory team and the whole transaction may wrote on his head.
ECL not eclipse sorry my phone
Danielle – You dont need a lawyer to explain to you something that is crystal clear that’s why you waste money unnecessarily ….I am you want to lied to, Sishuwa is an academic and a theorist. Already Lazy Lungu has cost the nation $5 million in legal charges….this is a lot of money and lawyers will be queuing up to take up this case for KCM as they are dealing with a state entity who always pay.
This guy is here to get his 15 Minutes of Fame. He is purely thinking from the Academic Point Of View. On the other side, he also sounds like a hired gun. But I will [+]refrain from accusing him to be a hired gun. Therefore, lets stick to what is at hand.
Here is what he says in one of his lines.
“I do not understand why the Government did not go for arbitration in the first place. [ Dr Sishuwa ]
Well, the government decided NOT go for Arbitration first because it has a stronger case than your preferred route. And what makes you think the government have not studied this case thoroughly. Here you are sounding like you know more than anyone else.
cont..
Dr Sishuwa, it one thing to provide advise and the other thing just to assume the other party is not knowledgeable
It’s the plain truth that Vedanta have not paid the creditors for a long time.
Liquidation is an official insolvency practise/process/procedure where a company is brought to termination. This act allows all of its assets are stripped, liquidated and the advance and proceeds from the sale/auction of assets are used and accustomed to repay creditors.
There are two main types of liquidations for insolvent companies. (i) Compulsory Liquidation & (ii) Creditor’s Voluntary Liquidation. The question is which one has the government opted for.
cont..
Yes, the the parties to KCM agreed to the use of arbitration rather than litigation as the mode of dispute resolution.
But there is nothing that can stop the government to use the liquidation route if they have strong cases and evidence that falls under liquidation matters.
Now!Arbitration is mostly used to decide cases of alleged prejudicial/biased or unfair dismissal or claims under the flexible working legislation. Arbitration is often used for shared or collective employment correlated disputes. Also it can be used to settle individual quarrels/disputes etc.
cont…
Therefore, since the government have a strong evidence of hundreds of suppliers and employees who have not been paid. They have a stronger case than going via Arbitration which mostly deals with disputes/prejudicial/biased claims etc.
Its like saying you kicked your wife who has two of your kids out of the family house and changed the locks and insist that you did it because she was unfaithful and comes home late…she takes you to court and you still insist that she was unfaithful you took upon yourself to change the locks and kick her in the streets. This is how some of these chaps who keep talking about insolvency sound…keep listening to them charges are mounting all this money is coming from ZCCM IH (you) costs that could have been avoided.
The only worry that we should carry is the lawyers messing it up technically. Else the case is strong and the route government has taken is also very strong.
This dude from user prefers different options which can take long in courts because it becomes a case of arguments and the best presenter wins the case.
This more reason why Vedanta want to have in court. Just to win from the debate point of view, and not from using the evidence which is in black and white. The evidence is that they have not paid Creditors, Tax, Employees. Lets not forget the polluting of our rivers in Chingola. Plus 17 other failures that have not even been mentioned.
It’s rare that one would agree with Mushota’s random oratory but on this occasion I agree to her/him. Shishuwa with due respect much of the language here is of highly legal technicalities which might not be relevant to the wide audience making what you are trying to say to filter only a narrow audience (What I am saying is that is your writing is then reduced to a ‘show-off’). You could serve better if you were, like Mushota confined to a special column rather than headline news. Alternatively water down your language. You could also use this to send as a letter to the Attorney general or such specialist people as advise, if you haven’t done this already. The legal jargon does not appeal to most people narrowing down you audience. I am sure you are well schooled and we can’t take…
The legal jargon does not appeal to most people narrowing down you audience. I am sure you are well schooled and we can’t take it away from you but that should have also helped you to understand how tailor the very vital and timely information to the majority of the Zambians like the affected miners at KCM who will be wondering what you are talking about! You’ve done great injustice here, perhaps worse that the PF government!
analyser – what legal jargon are you on about you want him to write in Bemba?
and in Gay language.
The architects of this mess should pay for it,infact this should carry criminal liability. If this case is an example of how PF is running the country we are without doubt in a mess. Why the hurry,are the PF under chinese pressure?Maybe they have already been paid.And when one recalls how the f00ls drove into Chingola with guns blazing it is not suprising that they have created such a mess…Follow the procedure yaaba,ifikopo fyali fulisha mu PF
The “Architect of this mess” spoke from a tarmac at an airport right at the begining of this mess. He should pay!!
There should be laws against bad investors which should forfeit their rights when they breach the contractual terms. We all agree that we are dealing with a very bad investor, therefore, we should use everything in our power to kick them out. They will set a very bad presidency if we allow these thieves to take more of our money.
The problem with you people is you are too lazy to read….the laws are there but you chose to ignore them look at you thinking with your heart, this is why your dull ministers are taking advantage of you. You expect KCM to pay legal charges…this is just the tip of the iceberg continue stating that SA courts have no jurisdiction and carry on with the sale you will see the bill KCM will give regarding loss of investments and loss of earnings it will be billions of dollars. Anil will make speeches laughing at you and raise more money for his philanthropy work in India where he takes all his funds.
@jay Jay, your problem is that you are not Zambian and you over analyse things. Contracts do have clauses and if triggered they change the dynamics of things. If you punch your colleague at work for instance, you could be dismissed for gross misconduct and forfeit your employment rights. Why should this rogue investor be given full contractual terms when they have breached the terms over and over? We all agree they have to go so “Let right be done”.
The preferred Chinese KCM Investor will not buy Disputed Assets. They will have to wait for the Arbitration Court to pass its judgment. GRZ is not Party to the Judgement so cannot Appeal. Its up ZCCM-IN to appeal the Judgement or commence the Arbitration Process. If ZCCM-IN appeal the Judgement they are just prolonging the inevitable. Now ZCCM-IN has no choice but to negotiate and Agree with Vedanta on KCM Exit Package. Vedanta is quite happy to walk away from KCM with dignity and a hefty package in fines ,damages and compensation. There are very serious consequences for defying International Arbitration Law. Zambia can ignore International Arbitration Law at its Peril. The writing is on the Wall.
…will just prolong the suffering of the stakeholders- mostly Zambians. The good Dr. himself quoted the DRC case in which properties belonging to FQM were expropriated by the state. What he didn’t say is that this is one saga that begun way back in 1999 and was only settled in 2012!
The DRC never paid a penny to FQM. The subsequent owners (ENRC) paid $1.25bn for the Kolwezi Tailings, Frontier and Lonshi Mines.
Even if we were to pay compensation to Vedanta, how much could it cost us bearing in mind that this is a facility that was given on a platter – $25m? And the fact that the Indian only has the ISA smelter to point to as credible investment over 16 years. This is against a backdrop of a myriad of problems ranging from operational, environmental pollution, racial segregation…
It’s both legally and logically not proper to resolve insolvency of a company arising out of improper management and outright greed of stealing from innocent stakeholders through negotiations or arbitration. Vendata declared in a public statement that they were not profitable, we all know that.
The clause in the international dispute resolution mechanism internal logic was not meant for cases of the nature of insolvency. Under any law insolvency is resolved through national law mechanism. Notwithstanding; national law cannot be superseded by international law, when it’s invocation protects the inherent interests of the innocent stakeholders.Suffice to note that; Act. 9 of 2017 cap 279 of the laws of Zambia was crafted in comformity with international commercial law, where Zambia has…
Are you listening to yourself? “… national law cannot be superceded by international law..”! Tell that to DRC who have to pay $4Billion to FQM.
Let’s not deceive ourselves. We are not bluffing our way out of this one.
Typical PF way of reasoning and arguing from a point of ignorance. Your foolish president has landed us in a mercy and you can’t see anything. Get it in your thick heads that there are laws to follows and you cannot corrupt international courts like you do the Zambian ones.
Listen to yourself still spewing the same drivel about insolvency…read the whole article above. What type of rubbish is that stating that national law can not supersede international law…you are not dealing with a Katemba in Chelston here, You are dealing with a commodities giant…have they told you they are insolvent? You think that man in State House has any brains …really laughable…go and read the SA ruling point by point instead of showing your ignorance here.
People, people, let us all read the agreement! As the situation stands, neither GRZ nor Vedanta has sought for arbitration. Vedanta took its case to the RSA court contrary to what the agreement states that The Hague is the court that has to appoint an arbitrator. GRZ and KCM settled for RSA Johannesburg as the venue from where the dispute could be head. The Case hearing could as well be before a British, French, American or any other Judge deemed capable by The Hague Not that it should be a South African!
People have been quick to wonder why GRZ lawyers were in attendance in court. It was simply to argue the fact that the RSA court has no such powers to stop the liquidation process as he has not been appointed by The Hague!
The option of following legal proceedings is not feasible as it…
Imwe naimwe…DRC paid $4billion kuti? the cases are not even the same. FQM actually acquired the mines through dubious means in the first place. They lost that case twice and had to use the Canadian government to pull some strings to force one of the shareholders to pay $1.25 billion in return for uncontested title to DRC mines. Even the UN alleged that the manner in which FQM lost the mines in the DRC bears resemblance to the way they acquired them in the first place. Why do you people like to sing and dance to foreigners who are hell-bent at stealing from you? You would rather take your own to the gallows for stealing a penny from you but just gaze and cheer at the international thief taking your billions.
I now believe my white beautiful Swiss wife Elisa when she said that majority of Zambian only say or do things which they think will benefit them and not the country. It is all a symptom of poverty because they are trying to please the powers that be at all costs. This man is hungry it’s clear to see. Anyway the heat wave kuno is too much. Elisa and I slept naked and she has been wearing very short skirts
Suffice to note that; Act. 9 of 2017 cap 279 of the laws of Zambia was crafted in comformity with international commercial law, where Zambia has the legal authority to apply the law to protect the inherent and justifiable national interests. Vendata wants out of court settlement because they know very well that through the channel government has taken it will be them to pay heavily.
U got it all wrong. Vedanta wanted to join the Liquidation Proceedings in the High Court but were blocked by the Provisional Liquidator. Vedanta wanted Dialogue with GRZ but were spurned. Vedanta has used KCM Shareholders Agreement to stop the Liquidation Proceedings and start International Arbitration Processes. ZCCM and GRZ have to resolve this issue thru International Arbitration. Its up to Zambia to pay out Vedanta and they will happily leave with Kasaka kandalama and their image intact. Vedanta wins and is smiling to the Bank. Meanwhile no New Investor can buy KCM Assets until the Dispute between GRZ and Vedanta is amicably resolved. Thats International Law bawishi.
You still spewing your nonsense about Act. 9 of 2017 cap 279 of the laws of Zambia…some people are thick as two short planks, the author has told you that you had a airtight case but you messed up… you think this is the bible were you just recite the same folly and no one challenges it.
SS has hit the nail on the head. Abena clueless, visionless are leading the country into eternal damnation. Please heed Sishuwa’s counsel; its after all free and the best things in life are after all, Free.
LapGreen Part II. Even as recently as last year, we still were paying installments as a result of that judgement seeing as we’re broke as a joke. Excellent article by Sishuwa. No-one can say that Vedanta were good investors but just follow the laid down procedure. Can GRZ have some regard taxpayers for once in their miserable lives? We are already under too much pressure.
It’s must for Vedanta go,if it means to pay them so be it,i see today some Zambians they feel good when foreign investors are treating there fellow Zambians in a bad manner the fact is we need them it’s better they go I would rather suggest mine operations to stop for good than bringing back Vedanta to do it’s operations never.You have spoken well but you are not a mineworker you don’t understand what is happening keep your words at your place.
This is what you nincompoops dont understand everyone agrees that Vedanta Resources needs to go in fact it should have gone long ago not five years but 10 years ago…remember if you follow the procedure you may part company with them by not even paying but if you kick them out you will pay heavily for loss of investment, loss of future investment, they will even produce the real profitable price the sale the copper..that is billions of dollars.
@Musa@10
Still refusing to think. Is it so hard? Vedanta are bad investors, we are all agreed on that. What we do not agree on is how we are getting rid of them. We could have done it according to the Contract we signed with them. This would have cost us next to nothing.
But we have chosen to go against our Contract even though we had a very good case. This is going to cost us a lot of money. And guess where this money is going to come from? The Tax Payer.
DRC are paying $4 Billion now to FQM.
KCM is not using taxpayers money to off loads its due,Kcm is generating money just from within.Yes good for the article from the Doc but suffice to say the Doc needs to have more information on the operation of KCM as at now than commenting on things he does not know,second Millingo is working and leave alone. This the problem we have we Zambians.Zambians what is your problem, learn to love your country especially during this trying moments.The fact is VETANDA is going,he was not making profits according to what he as been saying.
The whole problem is that we have taken this issue to Court. This is a simple issue… It’s a question working up and tell them to immediately leave the country with no negotiations like Rapgreen. Why should we even go this far?
Vedanta kuya bebele …
What has this got to do with a couple sleeping naked? I am lost? Can someone educate me?
Vendanta stay put. That is the reason. First, each investor must enjoy full protection from Government and the from the citizenry. Through investment, technology transfer is achieved. Through investment, job creation is guaranteed. Through investment, taxes are channeled into the treasury for national development. Two, weak cases and strong cases is a matter of debate. All cases before a court of law are strong cases. Otherwise, why take cases to court? Courts are not places for playing games. Courts are for providing justice, fairness, satisfaction and upholding good governance. Two, certainly arbitration is the only reasonable way of settling this dispute because that is what the parties to the agreement swore to uphold. Three, whether or not the High Court must refuse to hear the case…
Three, whether or not the High Court must refuse to hear the case or not is purely dependent on the High Court itself. Period. The court has the right to determine what is admissible and what is not admissible. How else can a court registry operate? Courts will always mirror the level of integrity and intellectual credibility.
continued from 5.4
…will just prolong the suffering of the stakeholders- mostly Zambians. The good Dr. himself quoted the DRC case in which properties belonging to FQM were expropriated by the state. What he didn’t say is that this is one saga that begun way back in 1999 and was only settled in 2012!
The DRC never paid a penny to FQM. The subsequent owners (ENRC) paid $1.25bn for the Kolwezi Tailings, Frontier and Lonshi Mines.
Even if we were to pay compensation to Vedanta, how much could it cost us bearing in mind that this is a facility that was given on a platter – $25m? And the fact that the Indian only has the ISA smelter to point to as credible investment over 16 years. This is against a backdrop of a myriad of problems ranging from operational, environmental pollution,…
…racial segregation (Indians pay vs Zambian pay) and non compliance to contract agreements with local suppliers and contractors!
Lastly, we should give those entrusted with this task a benefit of doubt that they know what they need to do and that they have also gone to school!
At least you know how much your Indians colleagues are being paid …when the Chinks come you wont even know as they dont speak English.
It amazes me how people that should be a learned voice use public platforms for self image seeking opportunities. The KCM sale contract has an UNCTRAL arbitration clause for rules to be followed in the process, The matter is still heard and settled by Zambian Law and courts. It’s inflammatory for a person who should know better to suggest that the arbitration clause in any way disadvantages the Government from having the matter settled by Zambian Law and Zambian courts. Lecturers used to be measured in their analysis of issues but now it looks like this younger crop is more interested in making a name for themselves forgetting that Zambia has many educated level headed people that can analyze issues for themselves and call such characters out. No wonder thinking standards at UNZA have…
Mwanawasa’s corruption has cost as us billions, Zambias problem is the position of commander in thief and the vice thief position of finance minister, ever since Chiluba came to the throne, thieving has been the order of the day; scrap position of the presidency and replace it with a position of prime minister like Britain.
Let’s get to grips here and see exactly where we are. There are normally two types of liquidation. One can be started by a creditor or group of creditors owed money that has not been paid. They petition the court for a wind up. The second one can be started by the directors of the company themselves and normally after a meeting where the majprity of the share holders agree to the same. Then they apply to the court for appointment of a liquidator. I believe Vedanta had over 70% of the shareholding? The questions are;
– Which type of liquidation was this? Was it started by creditors or through a resolution of all shareholders?
– Was Vedanta part of the resolution?
– Which debts, if at all, and to whom, had KCM failed to pay, if this was the basis?
– Finally, what did the contract…
state, where one party was not satisfied?
Shishiwa, another useful idio.t