South African court judgment bolsters expropriation charge over Black Economic Empowerment legislation in the mining sector

By Damon Vis-Dunbar
23 March 2009

A South African judicial ruling has opened the door for two plaintiffs to seek compensation for alleged expropriation of their mineral rights, in a case that echoes the complaints made by European investors in a pending international arbitration against South Africa under bilateral investment treaties.

The judgment* comes in response to claims lodged with the Pretoria High Court, in which the plaintiffs (Agri S.A. and AM van Rooyen) argue that their rights to coal and clay were expropriated without compensation in 2004 under the Minerals and Petroleum Resources Development Act (MPRD).

The MPRD Act is intended to boost the black population’s participation in the mining sector, and forms part of a wider effort by the South African government to address the country’s racial inequalities rooted in a legacy of apartheid.

Under the Act, private ownership of mineral rights was replaced with a system of licenses offered by the government. Companies who held mineral rights under the old regime were given an opportunity to apply for licenses under new regime; however, mining companies complain that so-called new order rights are not equivalent in value to the rights they enjoyed previously.

The Ministry of Minerals and Energy sought to dismiss the lawsuits by Agri S.A. and AM van Rooyen on the ground that they fail to provide sufficient facts to support their claims.

In 6 March 2009 ruling, however, the High Court has rejected the Ministry's charge that the plaintiffs' claims are "vague", allowing the claims to proceed to the merits stage.