RUSSIAN attorneys have warned they will institute international arbitration proceedings against South Africa for failing to protect their client Transasia Mineral’s investment after the company was allegedly defrauded of R458 million by a local businessman. The failure was in accordance with the Bilateral Investment Treaties (BIT) of 1998.
The Department of Mineral Resources (DMR), which had overseen the matter, has since gone silent over the decade-long legal fight. The Russian company had invested in South Africa to acquire valuable mining rights over two sites in KwaZulu-Natal in 2012.
Transasia chief executive Luda Roytblat said their mining rights had not been granted, despite going through the correct channels. And to date, fraud investigations and endless court cases had only resulted in disappointments, dismissed with costs, in favour of the “corrupt”.
Independent Media’s investigations unit learnt how South African-incorporated Transasia, together with 11 Miles Investments, had on January 25, 2010, entered into a Sale of Prospecting Rights Agreement with Umsobomvu Coal owned by Hector Lungani Kunene. But Transasia’s intention to invest in South Africa’s mining industry was halted after Kunene signed the agreement.
Kunene’s company, as the holder of four prospecting rights, was to permit Transasia to take carriage of any applications pending in the DMR under Section 11(1) of the Mineral and Petroleum Resources Development Act of 2002 (MPRDA) or for the grant of mining, as agreed.
Roytblat said Kunene was obliged to submit the application. However, after having received Transasia’s money, he failed to do so and created blockages for Transasia – allegedly with the help of public servants, who included DMR officials, the police, and state attorneys.
Transasia was entitled to the transferred mining rights for both the Malonjeni and Cambrian mining projects, in which they invested with 0% contribution from Kunene, but which today he operates, Roytblat said.
“The mining rights have since been executed, without Transasia’s knowledge or consent, in favour of Umsobomvu. This was done despite Transasia providing documentation to the DMR, that was since day one aware of our interest, rights, and financial contribution.
“This even after Kunene on May 3, 2012, duly executed an irrevocable Power of Attorney (PoA), which Transasia had provided the DMR with later that month,” said Roytblat.
Transasia said the minute Kunene received his R14m settlement with all suspensive conditions fulfilled, and after issuing the PoA, the resolution was to cede all of the rights to Transasia.
“We have opened several charges of fraud and theft against Kunene, who with his lawyers is misleading the courts and bringing false applications to court,” Roytblat said.
Two such matters include a judgment in March 2019 in the local division of the Gauteng High Court, where Kunene obtained an arbitration award. It directed Transasia and its employees to afford his authorised representatives unrestricted 48-hour access to immovable property comprising the two mining rights through the Transasia gate.
This was granted pending the resolution of the main arbitration dispute between the parties, scheduled for June 2019. In the main dispute, Kunene sought an order evicting Transasia from the immovable property for the reason that it has cancelled the sale agreement entered into.
Kunene sought to make the interim arbitration award an order of the court on an urgent basis to enforce it – and succeeded with costs.
However, the judgment was opposed by Transasia, which had counter-applied for an urgent stay and review of the arbitration award, seeking an interdict against Kunene from selling the holdership of the mining rights.
However, he opposed the application, seeing the matter being dismissed in June 2019, again with costs in favour of Umsobomvu.
Attorneys Zaiwalla and Co, one of Transasia’s representatives, wrote a letter to DMR Minister Gwede Mantashe on February 2, 2021. It stressed the seriousness of the matter via a notice of claim pursuant to the agreement between the South African and Russian government for the reciprocal promotion and protection of capital investments of November 23, 1998.
“SA has failed to accord Transasia’s investment the legal protections guaranteed under the Bilateral Investment Treaty (BIT). This has resulted in significant financial damage and potentially enormous future losses, which, under the terms of the BIT, they are entitled to recover from the state through international arbitration, if this claim is not otherwise resolved.
The attorneys warned that in the event that Transasia is unable to resolve this matter with South Africa through negotiation within six months from the date of the letter, they reserved the right to institute international arbitration proceedings against the State in accordance with Article 10(2) of the BIT.
Kunene denied that he or Umsobomvu committed fraud. He said the sale agreement between Umsobomvu and Transasia was cancelled as a result of the repeated and serious breaches of the sale agreement by Transasia.
“Throughout the various litigation, Roytblat mounted an unwarranted and deceitful smear campaign … It is impossible for Transasia to have invested any funds given that it has never enjoyed any mining rights associated with the relevant properties,” said Kunene.
The DMR that has been constantly contacted since last month for two separate mining related-matters, including that of Transasia’s, has yet to comment, due to it awaiting response approvals from the ministry. | Investigations Unit – [email protected]