Transcript Transitional provisions under MPRDA

MPRDA AND A POSSIBLE BREACH OF SA’S
BILATERAL TREATY OBLIGATIONS
Research Q: Whether MPRDA, both in terms of its transitional
provisions, and its possible granting of ‘new order rights’ amounts to
expropriation of mineral rights in terms of South Africa’s Bilateral
Investment Treaty obligations
Structure
Transitional Provisions
Nature of common law/old order/new order rights
BIT’s
Expropriation in international law
Analysis
Scope: Int’l investors/mining operations in place before operation Act
Ripe for judicial inquiry
Commercial relevance
MPRDA
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In force on 1 May 2004
Act repealed Minerals Act of 1991 and
concomitantly private law (common-law)
mineral, mining and prospecting rights
which existed under previous dispensation
(S110 read with Sch 1)
Transitional provisions under MPRDA
Schedule II of the Act
Purpose: to provide security of
tenure for holders of ‘rights’
under 1991 Act and the new
system of ‘rights’ introduced by
the Act
Common-law
mineral rights +
mining authorisation under 1991
Minerals Act + active mining
operation = ‘old order mining
right’
‘Continuation’
Holders
of common-law mineral
and prospecting rights ‘with or
without authorisations’ (became
known as ‘old order rights’) had
specified period to convert these
‘old order rights’ into ‘new order
rights’ under the Act
of ‘old order
mining right’ for pd of 5 years (May
2009)
Preferential
right to ‘convert’ ‘old
order right’ into ‘new order’ mining
right subject to requirements of the
Act
(BEE/Environmental/Socio-economic
requirements)
Lost old order rights
Lost
order right: common-law real
right + mining authorisation
Common-law
mineral right, either
as incident of ownership or
separated from full dominum as
LRR
Mining
authorisation (1991 Act)
necessary to exercise common
law rights (type of ‘statutory
license’) however, not affect
underlying mineral right
Content
of common-law right,
included perpetual duration, freely
transferable.
However, mining auth not freely
transferable + subject to
Ministerial oversight
Old order right
Content of right
2 approaches
Common-law right remains in
existence, based on wording in
Act, ‘continuation of old order
rights’
Alternative approach (Dale) new
statutory right created
consisting of elements of old
order rights, specifically only
authorisation to mine and other
terms/conditions attaching to
the right
‘New order right’/Right to mine minerals
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Statutory ‘LRR in land’ with right to mine, granted by Minister.
Theoretical construct: Van der Walt: ‘extinguishing of private law rights,
replaced with state controlled system of use rights’
Right enables holder to enter land, mine and remove minerals
Mining rights last for 30 years
Transferability/alienation of right subject to Ministerial approval
Minister may suspend/cancel right
Payment of royalties to State
BEE/Social Plans
Bilateral Investment Treaties
between states that
provide nationals of each
contracting state when investing
in the other state, certain
protections and remedies
BIT(1999): ‘Investments
not subject to any measure which
might limit right of ownership,
possession, control or enjoyment
of investments, permanently or
temporarily.’ (Piero Foresti)
Treaties
SA-Italian
Common
SA-UK
feature: ‘no
expropriation without
compensation clauses’ and
international arbitration in case of
disputes
SA’s
BIT’s provide varying levels
of protections to foreign
companies
BIT : ‘Investments shall not
be nationalised, expropriated, or
subject to any measures having an
effect equivalent to expropriation’
same as Canadian BIT
BIT: ‘denial of benefits
clause,’ provision for precluding liability
if for purposes of equality.
(interpretation) same as with Czech
and Iran BIT’s
SA-Israel
Expropriation in international law
Iran/US
Claims Tribunal: intent
less important than effect, form of
measures less important than
impact
Direct
expropriation: overt taking
of title, or rights of o/ship
Metalclad:
not only taking of title,
‘but interference with
property…that deprives owner in
significant part of the use or
reasonable economic benefits of
the property.’
Philips
Indirect
expropriation: Continuum
‘owner deprived of
fundamental rights of ownership’
Tippets:
‘deprivation of functional
control of the property’
Rexnord:
Petroleum: creeping
expropriation-series of measures
which ‘significantly reduce
investor’s property rights.’
Meyers:
regulation lesser
interference, can have economic
consequences.
NB MRPDA ‘exchange of rights’
Expropriation?
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Inception of the Act: ‘lost rights’ to ‘old
order rights’
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Content based approach: Dale,
argues ‘old order rights’ are new
statutory rights, which basically
encompass only authorisation to
mine,without any substantive
common-law content.
Therefore
expropriation has occurred,
as common-law rights as ‘incidences of
ownership’ have been extinguished by
the act, and replaced by ‘transitional
rights’ without underlying content of
common-law mineral right. (similar
argument made by Piero Foresti)
Counter Argument/ Content based
approach
That old order rights are same rights
that existed before the Act came into
force.
Function/based approach
As old order rights ‘were created
with reference to total underlying
substratum’ of ‘lost rights’ (eg, c-l
rights + authorisation) that what was
exchanged is the ‘functional
equivalent,’ of pre-existing rights
Therefore
with ‘old order rights’
nothing has changed (transitional
period: can still mine, no additional
requirements)
Expropriation?
Critical
Date: May 1, 2009,
extinguishing of ‘old order rights’ and
either replaced with ‘new order rights’ or
where failure to ‘convert’ total
termination of ‘old order rights’
In
case of latter, will be expropriation,
even on narrow definition. Will be a
‘taking’ of rights of ownership without
any ‘substitution of rights’ ‘exchange
argument’ doe not cover this
contingency.
critical question, will there be
expropriation on conversion to ‘new
order rights?’
•
Content based approach:
Mineral right under
common-law mining right under
the act.
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Has been deprivation of commonlaw ‘rights of ownership,’ (right in
rem) or deprivation of ‘use of the
property,’ at least in terms of
content, and replaced by a
statutory mining right without
similar content (eg, duration,
transmissibility, state control)
1.
Italian/SA BIT: ‘substantial
deprivation’ not required, only
limitation on ownership/ or
possession?
More
Expropriation?
Function based argument (GOSA)
1. Common-law right cannot be
seen in isolation, but must
looked at in terms of state
authorisations under Mineral Act
of 1991
2. Thus while under old regime, ability to
mine involved holding common-law
mineral right + authorisation, new
system combines two, in that new
mining right accomplishes same result
(eg, grants authorisation coupled with
right to mine and retain minerals)
Therefore from a functional
perspective, both rights operate
substantially the same.
Counter-argument to functional
approach:
loss
of economic value of right
(equity shares, less valuable)
Or
could be lawful regulatory
action?