PROFESSOR Muna Ndulo says the arbitration process involving Konkola Copper Mines (in liquidation) will not only be a prolonged process, but will also be a very expensive one for Zambia as it will cost the country millions of dollars in arbitration fees, legal fees and the award.

Last month, the Court of Appeal ordered a stay of the winding-up proceedings that ZCCM-IH has instituted against Konkola Copper Mines (KCM) and referred the matter to arbitration as requested by Vedanta Resources Holdings Limited.

The Court of Appeal ruled that the arbitration would be between the parties to the shareholders’ agreement, the dispute between the parties being a shareholder dispute.

But in an article titled “The Zambia Government Dispute With Vedanta”, Prof Ndulo who is a William Nelson Cromwell Professor of International and Comparative Law, stated that the decision to go to arbitration would prove to be a costly mistake for the country.

He noted that government was well advised to engage KCM and come to an amicable settlement of the dispute.

“The Government is well advised to engage Konkola Copper Mines Ltd and come to an amicable settlement of the dispute. Arbitration will not only be a prolonged process, it will also be a very expensive one for Zambia. It will cost the country millions of dollars in arbitration fees, legal fees and the award. The Zambian law clearly states in section 10 of the Zambia Arbitration Act that “ A court before which legal proceedings are brought in a matter which is subject to an arbitration agreement shall, If a party so requests at any stage of the proceedings and not withstanding any written law, stay the proceedings and refer the parties to arbitration unless it finds that the agreement is null and void, inoperative, or is incapable of being performed.” This language tracks the language of the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, (1958) to which Zambia is a party. The Convention, like the Zambia provision, states very clearly that where an action is brought before a court and one of the parties challenges the institution of legal proceedings on the grounds that there is an agreement to arbitrate, the convention requires courts in contracting states to enforce the arbitration agreement (article II). In McCreary Tire Rubber Company, a US Court of Appeals ruled, “there is nothing discretionary about article II. It required the courts at the request of one of the parties to refer the parties to arbitration where there is an arbitration agreement.” Courts in other jurisdictions have ruled similarly,” Prof Ndulo stated.

He stated that an ACERIS LAW (27/12/2017) report found that an average arbitration case lasted three to four years, adding that Zambia could not dictate the speed of the arbitration proceedings.

Prof Ndulo insisted that an arbitration process was very expensive as you have to pay for everything including lawyers, judges, expert witnesses and administrative costs.

He stated that a recent study by Global Arbitration Review revealed that since 2013, average costs were a massive $7.41 million for claimants and $5.19 million for respondents and that these fees include tribunal costs, administrative costs, tribunal secretary costs and legal fees, both of which were calculated per hour.

“This is a court process and an arbitration will involve all the stages that are necessary to conduct litigation in a trial. “Another matter for Zambia to realize is that should Vedanta and Konkola Copper Mines Ltd obtain an award, it will be able to enforce in all states that are party to the UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which is practically all countries in the world. More than 145 states are party to this multilateral treaty for enforcement of arbitral awards, under which an arbitral award is final and binding with no appeal to any court in the world (article III of the Convention). Arbitration proceedings will be very expensive for Zambia. An ACERIS LAW (27/12/2017) report found that an average arbitration case lasted 3 to 4 years. Contrary to the Minister of Mines statement, Zambia cannot dictate the speed of the proceedings. An arbitrator like an ordinary court is completely in charge of his or her arbitration and cannot be dictated to. This is a court process and an arbitration will involve all the stages that are necessary to conduct litigation in a trial,” he stated.

“An arbitration process is very expensive. You have to pay for everything including lawyers, judges, expert witnesses and administrative costs. A recent study by Global Arbitration Review reveals that since 2013, average costs were a massive $7.41 million for claimants and $5.19 million for respondents. These fees include tribunal costs, administrative costs, tribunal secretary costs, legal fees both of which are calculated per hour.”

Prof Ndulo further stated that the Global Arbitration Review study had revealed that since 2012, the average amount claimed in investment arbitrations had risen to $2.38 billion.

He stated that this meant that the Zambian Government was engaged in a very dangerous gamble with serious financial implications for the country.

“It has to be remembered that this arbitration is going to be under the UNCITRAL Arbitration Rules. Article 42 of the UNCITRAL Arbitration Rules states that “costs shall be borne by the unsuccessful party”. Additionally, there is the possible award of damages for of business to Vedanta. An established principle in international practice and in particular by decisions of arbitral tribunals is that reparation must as far as possible, wipe out all the consequences of the illegal act and reestablish the situation which would in all probability, have existed if that act had not been committed (Charzow Factory Case, PCIK). The Global Arbitration Review study reveals that since 2012, the average amount claimed in investment arbitrations has risen to $2.38 billion. This means the Zambian Government is engaged in a very dangerous gamble with serious financial implications for the country. We could very well be talking about a $1 billion plus award,” Prof Ndulo said.

“Sound legal counsel would suggest that the Government abandon this legally unsound endeavor and approach Vedanta to settle the matter out of court. As to the story that there are investors waiting to buy Konkola Copper Mines Ltd, that is highly doubtful. No sound investor would seek to buy an asset whose title is in dispute and no bank would lend millions of dollars to buy such an asset.”

Meanwhile, Prof Ndulo insisted that although the Zambian Government had genuine grievances against KCM, the liquidation route (initiated by a shareholder and not a creditor) pursued by the Government was legally unsound and indefensible.

He stated that the dispute between ZCCM and KCM was without question a shareholder dispute, adding that the proper approach to dealing with the government grievances against KCM would have been through the Mines and Minerals Development Act of 2011.

“The proper approach to dealing with the Government grievances against Konkola Copper Mines Ltd. would have been through the Mines and Minerals Development Act of 2011. This Act provides for a process to be invoked when a mining company is not mining in breach of its Mining Development agreement,” stated Prof Ndulo.