Werner Menges
29 April 2011
The Cabinet decision to end the financially struggling National Petroleum Corporation of Namibia’s mandate to import half of Namibia’s required fuel supplies was reviewed and set aside in a judgement of the High Court yesterday.
While the Cabinet decision, taken on October 21 last year, was set aside in the ruling by Judge Dave Smuts, the court also declared that Namcor remains authorised to import 50 per cent of Namibia’s fuel supplies, and that the supply agreement through which international oil traders Glencore Energy UK and Petroneft International have been supplying Namcor with fuel remains valid and in force.
The court’s judgement means that Namcor would, for now at least, remain locked in a contract that is claimed to have cost the State-owned company some N$538 million so far.
Namcor filed an appeal against the court’s decision yesterday already. The effect of this pending appeal is that the Cabinet decision would remain in force until the appeal has been dealt with.
Petroneft, which is a subsidiary of Glencore, and Namcor concluded a joint venture agreement in November 2008. A joint venture company in which Petroneft and Namcor are equal shareholders, Namcor International Trading, was also established, and it was through that company that Namcor’s mandate to be responsible for importing half of the fuel required in Namibia was carried out.
Government granted Namcor the mandate to procure half of Namibia’s required fuel products during 2004.
After the joint venture deal between Namcor and Glencore had been concluded, Namcor however started running up huge losses as a result of its involvement in the fuel importation.
The Minister of Mines and Energy declined a request to revise the method for the calculation of the basic fuel price that was being used to determine the price of the fuel being imported through the joint venture. Instead, Cabinet decided in October last year to revoke Namcor’s mandate to import half of the country’s fuel, and the Minister of Mines and Energy instructed the termination of the supply contract between Namcor and the joint venture company.
Petroneft and Glencore’s response to this was to sue Government, Namcor, the Minister of Mines and Energy and the Permanent Secretary in the Ministry of Mines and Energy in a bid to have the Cabinet decision set aside.
In terms of the supply agreement, that agreement would end 90 days after Namcor’s mandate to import half of Namibia’s fuel had been revoked.
As a result of the Cabinet decision, private fuel companies again became responsible for all of Namibia’s fuel imports from the start of February.
With the hearing before Judge Smuts on March 14, senior counsel Jeremy Gauntlett, who represented Glencore and Petroneft, argued that those two companies had a vested interest in the continuation of the mandate and should have been given an opportunity to be heard before Cabinet decided to revoke the mandate.
Judge Smuts agreed that the two companies were affected by the decision to end the mandate, and that they had a legitimate expectation to be given an opportunity to be heard before the Cabinet decision was taken.
The joint venture company, too, would have had such an expectation and right to be heard, he found. It however received no prior notification of the decision and was not given an opportunity to be heard before Cabinet revoked the mandate.
Government or the Ministry of Mines and Energy was required to afford interested parties such as Glencore, Petroneft and the joint venture company the opportunity to make representations before it took its decision, Judge Smuts found.
“The failure to have done so, which is common cause in these proceedings, would render the decision to revoke the mandate invalid for this reason alone,” the judge stated. The affected companies were also entitled to be given reasons for the Cabinet decision – but did not receive these either, he found.
As a result, the court found that the Cabinet had acted in conflict with the Constitution’s requirement of fair procedure.
Judge Smuts ordered Government, the Minister of Mines and Energy and the Permanent Secretary to pay the legal costs of Glencore and Petroneft.
The two applicants were represented by Jeremy Gauntlett, SC, and Frank Pelser. Sisa Namandje represented Government, the Minister and the PS.
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