22 June 2012

Namibia: Glencore, Petroneft Lose Against Govt

CABINET didn't act unlawfully in 2010 when it revoked Namcor's mandate to import fuel, which resulted in the termination of a multimillion-dollar contract between Namcor, Glencore Energy UK and Petroneft International, the Supreme Court ruled yesterday.

The Minister of Mines and Energy, the Permanent Secretary of Mines and Energy and the Namibian Government succeeded in its appeal against a High Court ruling which set aside Cabinet's decision to revoke Namcor's mandate to import half of the country's fuel requirements.

Acting Judge of Appeal Kate O'Regan, supported by Chief Justice Peter Shivute and Judge of Appeal Gerhard Maritz, ordered that the High Court ruling is set aside and that Petroneft and Glencore carry the costs of the appellants.

The blow comes shortly after Glencore, holding company of Glencore Energy, bought 80,08 per cent of the shares in Rosh Pinah Zinc corporation.

Glencore Energy, Petroneft International, Namcor and others dragged Government to court after Cabinet in October 2010 suspended Namcor's fuel import mandate, which put the fuel import contract between Namcor and the two international oil

companies into jeopardy. Cabinet took the decision after it had to bail out a technically insolvent Namcor to the tune of N$260 million. Most of Namcor financial woes stemmed from fuel imports, in which Petroneft and Glencore played a central role.

Petroneft, which is a subsidiary of Glencore, and Namcor concluded a joint venture agreement in November 2008. A joint venture company in which Petroneft and Namcor are equal shareholders, Namcor International Trading, was also established, and it was through that company that Namcor's mandate to be responsible for importing half of the fuel required in Namibia was carried out.

Glencore and others won the first round when the High Court last April ruled that Cabinet's decision should be set aside. The Minister of Mines and Energy, the Permanent Secretary of Mines and Energy and the Namibian Government appealed the decision the same day.

Judge O'Regan yesterday ruled that the Constitution gives Cabinet the "power to direct, coordinate and supervise the activities of parastatal enterprises". As Namcor is a parastatal, it falls under Cabinet's mandate.

Judge O'Regan said "it is clear from the record that Cabinet was concerned about the financial viability of Namcor", and that it "acted decisively to resolve the problem, which could otherwise have had serious fiscal, economic, strategic and security implications for the country".

She said Cabinet's decision was consonant with its general powers to direct policy on these matters and its responsibility to ensure that Namcor functions effectively.

"The respondents' argument that there was no legal basis for the decision cannot therefore succeed," she said.

She also shot down Glencore's and Petroneft's argument that Cabinet's decision was unlawful because a fair process wasn't followed, and that the decision was arbitrary and unreasonable.

Judge O'Regan said the question of fairness relates to Namcor directly. Cabinet's decision to revoke Namcor's mandate would primarily have affected the parastatal and, as such, Namcor should have been the first one to have questioned the fairness of it.

However, Namcor in an affidavit said it was not aggrieved because "sufficient and fair consultation" has taken place before the decision was taken, Judge O'Regan noted.

She said fairness is not a rigid principle imposing specific obligations on administrative bodies and officials in an inflexible, invariable way. "What fairness demands is dependent on the context of the decision, and this is to be taken into account in all its aspects."

She further said Government's ability to act efficiently and effectively in carrying out its task should not be unduly restricted. If Government was required to consult with all parties before the contract was terminated, its work would "become unduly burdened".

Judge O'Regan dismissed the respondents' argument that the termination of Namcor's mandate was unreasonable and arbitrary.

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