MASERU –A protracted international investment dispute that has lasted 28 years between the Lesotho government and a South African owned diamond mining company, Swissbourgh, has cost the country a whopping M3 billion in legal costs. If Lesotho loses the case, the amount could double to M6 billion, MNN Centre for Investigative Journalism, has learnt.
Lesotho has been embroiled in a seemingly endless legal battle with Swissbourgh Diamond Mines (Pty) Limited since the military rule in 1990, with the matter still pending finalisation before the Singapore Williams Tribunal today. The battle is over mining rights Swissbourgh wants back from government after the latter revoked the company’s licenses in 1988, failing which the firm wants to be compensated to the tune of M3 billion on top of legal costs Lesotho has already incurred through the Ministry of Law and Constitutional Affairs.
Finer details of the amounts spent so far are revealed in the audit report for the year ended March 31, 2017, on the consolidated financial statements of the government of Lesotho prepared by Auditor General Lucy Liphafa for parliament. In the report, Liphafa raises serious audit concerns that during the financial year 2016/17, government incurred costs on the compensation claim of M33 million against Swissbourgh for a cancelled mine contract.She said “the amount of M8 million related to legal costs and M25 million lodged as security pending final award by the Singapore Williams Tribunal”.
The Auditor General further points that Swissbourgh “claimed a compensation award of M3 billion from government of Lesotho” and is concerned that “the expenses incurred on this litigation for the past 28 years could be closer to claimed compensation award.” Swissbourgh was registered under the laws of Lesotho and incorporated by a South African national Josias Van Zyl in November 1986.
When the company was first registered, Van Zyl owned five percent of its shares, 85 percent shares were owned by his unidentified nominee and the remaining 10 percent was halved between two other unidentified persons. But in March 1989, all shareholders, other than Van Zyl, diverted their shareholding to the Josias Van Zyl Family Trust (JVZF), which thus acquired 95 percent of the shares in Swissbourgh. In June 1997, the JVZF Trust transferred 90 percent of the shares in Swissbourgh to the Burmilla Trust, established in South Africa.
The Centre discovered through court documents that by 1987, Swissbourgh had submitted applications for five mining leases in five different areas in Lesotho, namely; Matsoku, Motete, Rampai, Orange, and Khubelu. At the time, a review of such applications involved the following stages; first, negotiations between the applicant and a committee of senior government officials who would advise the Ministry of Water, Energy and Mining; secondly, approval by the ministry. And thirdly, approval by the country’s Mining Board. The fourth stage would be a recommendation by the board to the Military Council following consultations with the local chiefs responsible for the land, and fifthly, an approval by the Military Council before final confirmation by the King.
In June 1988, at the conclusion of the above-mentioned process, King Moshoeshoe II approved the Swissbourgh applications for the mining leases.However, the company’s acquirement was short-lived as the government subsequently claimed to discover, after the mining leases had been registered with the Registrar of Deeds in October 1988, that there was no evidence that the local chiefs in the Ha Rampai area had been consulted or had agreed to the granting of a lease. This is what sparked the legal battle as the government had revoked the mining leases.
In terms of the lease for Ha Rampai, Swissbourgh was given an exclusive right to mine for precious stones in the area for a period of 10 years from the date of registration of the lease in the Deeds Registry, with an option for renewal of the lease for a further five years. But, the lease was for land already identified to be part of an area to be submerged in water after the construction of the Lesotho Highlands Water Project’s Katse dam.
This meant that within a few years after the commencement of the Rampai mining lease, a portion of the mining lease area would be flooded and impossible to be mined by Swissbourgh. This happened and Swissbourgh contends it is entitled to claim compensation from Lesotho amounting to about M3 billion.
The Centre understands, Swissbourgh argues the compensation is for loss of profit it says it would have made had it not been prevented from recovering considerable quantities of diamonds which, according to Swissbourgh, lie beyond its reach beneath the waters of the Katse dam. However, the company lost all cases even after taking an appeal on grounds that the issuance of the mining leases did not follow due process in awarding of mining leases in the court of Lesotho.Default Basic Success warning Info Danger Primary