Elias Chipimo Jr, leader of the opposition National Restoration Party (NAREP), has said even if government proceeds to sell Konkola Copper Mines (KCM) to another investor, the arbitration process started by Vedanta Resources in South Africa will not stop.
Chipimo, a lawyer, stated that the Zambian government is, however, more likely to pay huge sums of money as compensation to Vedanta for not following procedure in terminating the agreement that existed between the two parties for the assets in KCM.
“The sad reality, however, is that in spite of the questionable nature of some of the procedures so far, a sale of KCM’s major assets by the provisional liquidator may still take place – such is the chaotic nature of the system we are all forced to live with for now. However, even if such a sale does take place, this will not prevent an arbitration process from taking off and is more than likely to result in substantial damages being awarded to Vedanta and any other person with a legitimate claim resulting from these questionable procedures,” Chipimo stated. “Given that we are still reeling from the compensation claims arising out of the Zamtel sale arbitration and given the significant debt burden hanging over us, the actions of the PF administration are not only reckless and dangerous but give rise to concerns about a growing pathological criminality – the type that takes full root when there is a feeling of complete impunity amongst the leaders of a nation.”
He further stated that the route taken by the government to liquidate KCM was against the law.
“Let us all be clear, it is only the provisional liquidator (someone appointed after a petition has been filed but no final winding-up order has been made yet), the liquidator (the person appointed after a winding-up order has been made) or the Official Receiver (essentially a government official either appointed by the court or who assumes office by the operation of law) that can legally manage a liquidation procedure. The steps the government is taking to progress the asset sale (appointing negotiators and directing matters from behind the scenes) amount to an illegal interference of the liquidators powers (see section 74(4) of the Insolvency Act) and are likely to be a factor in an inevitable compensation claim that will no doubt form part of the arbitration proceedings. Any members of any such illegal government committee will also face claims for any allowances they might receive from KCM (or from any other official source) for participating in this process without the backing of the law,” Chipimo stated.
“In addition, given that the arbitration will be between Vedanta and ZCCM-IH, Vedanta will have a viable basis to lodge a separate claim against the government in respect of the violation of its property rights under the Constitution. What has essentially happened is that the government has sought to carry out a compulsory acquisition without paying compensation to an investor perceived legitimately by the majority to have failed to live up to its expectations.”
He made suggestions of how the government could have gone about claiming KCM’s majority shareholding held by Vedanta.
“Two things, simultaneously: (a) ZCCM-IH should have triggered the arbitration procedure under its agreement with Vedanta; and (b) government should have started compulsory acquisition procedures. There are those that advocated either the appointment of a receiver or the application of the business rescue procedure under the Insolvency Act. Unfortunately, none of these options were viable for the simple reason that: (i) the appointment of a receiver can only be triggered by a secured or preferential creditor; and (ii) the business rescue procedure would have required KCM as a company to pass a special resolution, meaning the consent of Vedanta would have been required. It is highly unlikely that this would have been forthcoming,” Chipimo stated.
“The Chinese have a saying: ‘May you live in interesting times’. This can be read as either a blessing or a curse. Sadly for many Zambians living under the tyranny of the current regime, it tends to only be read as the latter. Any costs arising from the PF administration’s careless approach to resolving the KCM challenge will be borne by innocent Zambian taxpayers already burdened by debilitating debt, whose repayment will outlive many of them. But then again, does concern for public interest and future generations really concern the PF? Apparently, not one bit.”