Nationalisation

Last week’s high court ruling in favour of AgriSA’s expropriation claim against the minister of mineral resources is a judicial shot across the bows for advocates of mine nationalisation.

The Pretoria High Court’s decision that the mere enactment of the Mineral and Petroleum Resources Development Act (MPRDA) in May 2004 brought about an uncompensated expropriation of AgriSA’s unused old-order coal rights is bound to resonate well beyond the corridors of the court. All the more so when the Department of Mineral Resources (DMR) claimed in evidence to the court that an affirmative ruling in this test case would cost the government R90bn in compensation, a claim the court rejected as speculative.

If this decision is upheld on appeal, however, all holders of unused old-order mineral rights who have lodged claims for compensation with the DMR will be entitled to "just and equitable" compensation in accordance with section 25(3) of the constitution for the expropriation of their mineral rights.

The DMR has long argued that the MPRDA did not bring about any expropriation of common law privately owned mineral rights as all it did was regulate the use of mineral rights that the act placed under state custodianship in accordance with internationally recognised principles. In a two-week hearing before the court in March, the DMR (and "friend of the court", the Centre for Applied Legal Studies) argued that the MPRDA did not deprive AgriSA of its coal rights, it merely regulated them.

The court made short shrift of this argument, finding that the "coal rights … had been legislated out of existence" and that "regulating the use of property presupposes that the person whose use is regulated still has the property".

Although the decision in this case can apply only to holders of unused old-order rights who have lodged claims for compensation with the DMR (the window for which closed on April 30), it is bound to have a much wider effect, not least in the light of the African National Congress Youth League’s calls for the nationalisation of SA’s mining industry. The league’s most recent proposal for the uncompensated expropriation of the entire mining industry (with concomitant amendments to the constitution) must not only be seen in the context of the estimated R850bn market capitalisation of SA’s mining companies (and the likely compensation bill), but in the light of the AgriSA decision, which is a timely reminder of the supremacy of the rule of law and of the constitution.

Leon is a partner at Webber Wentzel and co-chairman of the International Bar Association’s mining law committee.

Source:Peter Leon Nationalisation Business Day, May 4, 2011

For text: http://www.businessday.co.za/articles/Content.aspx?id=141623

First published by the Business Day

FMF Policy Bulletin/ 4 May 2011