| File | Nation Media Group

UK mining firm to pay Kenya Sh300 million after losing licence row

Kenya will recover Sh300 million from a multinational that unsuccessfully challenged cancellation of Sh300 billion mining licence that in 2013 sparked bribery accusations between officials in President Uhuru Kenyatta’s administration and those of his outgoing predecessor Kibaki.

Cortec Mining Kenya Ltd, Cortec (pty) Ltd and Stirling Capital Ltd had sued the government, following the revocation of a mining licence in 2013 by President Kenyatta’s Jubilee administration.

The licence had been awarded on March 7, two days after the 2013 elections, following reported political lobbying of outgoing officials in President Kibaki’s government.

Suspect circumstances 

But in August 2013, the Kenyatta administration revoked several mining licences it said were issued hurriedly in suspect circumstances during the transition, including Cortec’s 21-year licence for the extraction of rare earths at the Mrima Hill project.

Cortec, after losing in Kenyan courts, moved to an international tribunal to challenge Cabinet Secretary Najib Balala’s cancellation on August 5, 2013, of the special mining licence (SML 351) granted by the mining Commissioner, Mr Moses Masibo. 

In the application on June 18, 2018, Cortec argued it had for six years invested millions of dollars in the project at Mrima Hill “home to one of the world’s largest undeveloped niobium and rare earth deposits” but its investment had unfairly been nationalised.

During proceedings before the International Centre for Settlement of Investment Disputes (ICSID), the mining firm alleged that Mr Balala had, in July 2013, attempted to solicit a bribe from officials of the company, which they refused.

Bribery claims

They claimed that it was after they rebuffed the bribery demand that the CS, on August 5, 2013, announced that several licences, including SML 351, issued during the prior administration’s term, were being revoked.

But in response, according to court papers, the Kenya government contended that Cortec’s purported investment was “tainted by corruption – on the part of Mr Masibo and Mr Jacob Juma, a businessman who acted as an intermediary between the claimants and Commissioner Masibo.”

Juma was murdered in 2016 by gunmen who sprayed his car with bullets as he drove along a city road at night. 

“In the course of its analysis, the tribunal declined to accept either the claimants’ or the respondent’s allegations of corruption,” according to the court records.

Mr Balala had announced that all 253 licences issued from January 14 to May 15, 2013 would be suspended.

The government then set up a task force that would afford the affected licence holders an opportunity to have their licences evaluated and, if appropriate, re-issued.

Cortec Mining Kenya Ltd (CMK) did not participate in the process and instead sued the government in the Kenyan courts.

The local courts dismissed the application, finding issuance of the licence contravened the law, and the mining firm moved to the international tribunal.

CMK, a company incorporated in Kenya, as well as Cortec (Pty) Ltd (Cortec UK) and Stirling Capital Ltd, which are both incorporated in England and Wales, were the claimants.

CMK is majority (70 per cent) owned by Cortec UK and Stirling. Cortec UK and Stirling were eventually wholly owned by Pacific Wildcat (PAW), a Canadian company listed on the Venture Exchange Market of the Toronto Stock Exchange.

Tribunal ruling 

The claimants asserted that they owned four investments in connection with the project, the primary one being the valuable mining.

They also claimed that the government had seized its investments and breached the UK-Kenya Bilateral Investment Treaty’s obligation to treat them fairly and equitably.

But the tribunal ruled that the claimants failed to comply with the mandatory preconditions, including undertaking an environmental impact assessment study and obtaining de-gazettement of Mrima Hill as a forest and nature reserve.

It also declined jurisdiction in the award, reasoning that SML 351 was issued contrary to the laws of Kenya and international law and does not qualify as an investment protected by the treaty or the ICSID Convention.

On October 22, 2018, the tribunal dismissed the application by Cortec, ruling that the mining licence had been procured illegally. The claimants were ordered to pay the Kenyan government US$3,226,429.21 in legal costs and US $322,561.14 in arbitration costs.

Aggrieved by the decision, the claimants on February 15, 2019, appealed to the secretary-general of ICSID, seeking the annulment of the award, in whole or in part.

The claimants argued at the tribunal that the revocation violated multiple provisions of the treaty, including those on expropriation, fair and equitable treatment, and unreasonable and discriminatory measures.

But Kenya, yet again, won.

On March 19, this year, the Ad Hoc Committee dismissed the application for annulment of the award and lifted the order that had frozen its enforcement.

The committee further rejected all other claims or contentions of the parties. This means that Kenya will seek to recover from the claimants US $ 3,548,990.35.

Kenya was represented by Attorney General Kihara Kariuki, Solicitor General Kennedy Ogeto, Deputy Solicitor General Njeri Wachira, Deputy Chief State Counsel Emmanuel Bitta, Deputy Chief State Counsel Christine K. Omwakwe and senior state counsel Charles Wamwayi and Ms Sheila Mammet, as well as Queen’s Counsel Michael Sullivan and Dr Henry Forbes Smith of One Essex Court.