Monrovia — Liberia risks being dragged to a court of arbitration and could be subjected to paying millions in damages if it continues to fail to meet the milestones agreed upon in the Framework Agreement with HPX, Ivanhoe Liberia, and SMFG for the usage of the rail for the export of iron ore from Guinea through the Port of Buchanan.
The Framework Agreement between the companies and the government was signed in December 2019 and amended in April 2022, which confirms the Liberian government's principles for HPX's non-discriminatory access to Liberian rail and port infrastructure and identifies HPX's requirements for the future evacuation of ore from the Guinean Nimba Iron Ore Project.
The signing of the Framework Agreement came with a whopping US$30 million from the company to the government of Liberia, which the Minister of Finance and Development Planning, Samuel Tweah, said was necessary at the time to pay civil servants salaries.
In April 2022, Minister Tweah told members of the Senate that the Liberian government was constrained to accept the US$30 million offer from HPX as a signing fee because the government was faced with the challenge of raising civil servants' salaries for a month at the time.
The Framework Agreement, which came into effect immediately upon the signing, also sets out a timetable for detailed negotiations and the implementation of a definitive Concession and Access Agreement for HPX's infrastructure requirements.
As per the Agreement, HPX looks forward to having the right to extend the railway facility from Yekepa to the Guinea-Liberia border and have access to the Yekepa-Port of Buchanan rail.
In its recent communication to the Liberian government outlining the government's failures to meet key milestones, the group of companies indicated that there would be consequences, including paying liquidated damages.
The communication, a copy of which FPA has obtained, was addressed to the Managing Director of the National Port Authority, Diana Nebo, the Minister of Internal Affairs, Varney Sirleaf, and the Minister of Labor Charles Gibson.
It squarely indicated that under the Framework Agreement, it is an event of default if, to the satisfaction of the HPX Group:
a) Parties have not entered into term sheets agreeing to the principal terms of the Concession and Access Agreement by 20 June 2022; b) The Parties have not executed the Concession and Access Agreement and submitted it to the relevant Liberian authorities for ratification by 30 November 2022; c) The Concession and Access Agreement is not fully effective and legally binding by 31 March 2023.
Each of the above is a Framework Agreement milestone that the Liberian government has yet to achieve.
The communication further noted: "As of the date of this letter, despite the Parties' best efforts, the Parties have not met the Framework Agreement Milestones under paragraphs (a) and (b) above and will, consequently, not be able to meet the Framework Agreement milestone under paragraph (c) above. This constitutes an event of default under the Framework Agreement, and the GoL is liable to pay Liquidated Damages to Ivanhoe Liberia."
It continues: "However, in light of the ongoing work of the Special Presidential Committee established on November 25, 2022, and the U.S. Ambassador to Liberia's invitation to host meetings of all key parties to forge a path forward on establishing a non-discriminatory, multi-user, open-access infrastructure corridor, Ivanhoe Liberia, and the HPX Group are prepared to extend all deadlines under the Framework Agreement to June 2023. This should allow the parties sufficient time to reach an agreement on key issues and proceed towards satisfaction of the Framework Agreement Milestones."
The company, however, warned that the time extension must not be construed by the government as a waiver or relinquishing of its rights under the Framework Agreement.
The debate over who should own the right to operate the rail running up from the Nimba Mountain in Yekepa down to the Port of Buchanan lingers on even after major parties - ArcelorMittal and the Government of Liberia - have all voiced their support for a multi-user rail network.
In October last year, President George Weah issued an executive order establishing the National Rail Authority, which will be responsible for managing the state-owned rail network. Issuing the decree, President Weah said the government was committed to the development and enhancement of Liberian infrastructure, which has been underutilized in the past, in order to increase exports of minerals and other goods to improve the Liberian economy.
Not only has the stalemate delayed the government from achieving key milestones prescribed in the Framework Agreement with the HPX Group, but it has also delayed the passage of ArcelorMittal's Third Mineral Development Agreement (MDA), which the company says would launch the biggest mining operation in West Africa, provide job opportunities for thousands of Liberians, and boost the government's revenue.
In February this year, the U.S. Embassy in Monrovia issued a statement expressing its support for the President's decision to establish the National Railway Authority, which would manage the country's rails and ensure non-discriminatory multi-user access. Amb. Michael McCarthy said the President's pronouncement opens new opportunities for Liberia and American businesses. "If we are able to get the rail and passenger trains, for instance, that changes the picture. That makes the difference," he said.
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The Embassy, in the statement Amb. McCarthy alluded to, and pointed out that such a system, as outlined in President Weah's Executive Order, could lead to significant investments by multiple mining companies in the rail corridor and to significant economic benefit for the people of Liberia.
The Embassy stated that in response to President Weah's policy decision to open the rail to multiple users, it has been exploring U.S. private and public sector investment options that could directly support the Liberian government's goals of independent, professional rail operatorship, as well as broader rail access that could include cargo and passenger service.
"In this new policy environment, any deal that favors one corporate interest at the expense of others is only likely to set back the rail and mining development process rather than move it forward through the parliamentary approval process," the U.S. Embassy said.
