Kenya's row with mineral firm to be decided by World Bank tribunal

Mining Cabinet Secretary Najib Balala (second left) operates the New Crawler Mounted Dando Corotec 9000 Diamond Core during the visiting of the Coal Exploration project and Commissioning of the Machine at Taru in Kwale County on Thursday 14th May 2015. He warned those exploring coal without permit will face arrest. [Photo/Kelvin Karani/STANDARD]

The row between Cortec Mining and Cabinet Secretary for Mining Mr Najib Balala over the Sh6.1trillion niobium deposits in Kwale is set to play out at the international stage after the firm took Kenya to a World Bank funded tribunal for arbitration.

Cortec Mining Kenya (CMK) jointly with its parent company in the UK, Cortec (Pty) Ltd and Stirling Capital Limited have filed an application at the International Centre For Settlement of Investment Disputes (ICSID), which is headquartered in Washington.

The firm wants the tribunal to compel Kenya under international investment laws to compensate it an undisclosed amount of money for cancelling its license.

The case is set to put Kenya on sharp focus at the international investment stage, coming at a time the country is struggling to market itself as an attractive foreign investment destination.

The application dated June 18, 2015 seen by The Standard argues that the revocation of a special mining licence (SML), which the firm had been awarded was a breach of the prohibition against unlawful expropriation set out in international law.

Cortec argues that together with its partners, it had invested in the Mrima Hill Project for at least five years and had expected to continue their investment for many more years to come given that it had a 21 year license.

VENTURE FIRM

Cortec UK and Stirling each own a 35 per cent stake in Cortec Mining Kenya.

Cortec UK and Stirling are wholly owned by Pacific Wildcat Resources Corp (“PAW”) which is a Canadian company listed on the Venture Exchange market of the Toronto Stock Exchange.

The dispute referred to arbitration concerns the claimants’ interests in a rare earth’s and niobium mining project at Mrima Hill, an area located in Kwale.

The geological profile of the Mrima Hill area shows it is rich in both niobium and rare earths. The Mrima Hill project is estimated to be the sixth largest niobium deposit and the third largest rare earth deposit in the world.

Rare earth metals are used in a wide range of products, and have become a critical input material for many industries, including consumer electronics, energy transmission and aerospace.

On April 4, 2008, CMK was granted a special mining licence by the Commissioner of Mines and Geological Department of Kenya. The license was renewed on April 16, 2010, for a term of two years.

On July 11, 2010, for the purposes of investing in the Mrima Hill Project, Cortec UK and Stirling each acquired 35 per cent of the share capital of CMK.

In January 2012, CMK applied for a new license to expand its existing prospecting and mining rights. The request for a special license was granted by the commissioner in March 2013, and was to run for a period of 21 years.

This last special mining licence gave Cortec ‘the full and exclusive right, liberty and licence to explore, develop and mine Niobium and Rare Earth Elements (REEs) in the area.’ This license was published on 22 March 2013 in the Kenya Gazette.

But trouble for the company began after the new administration took over.

Days after being sworn in, President Uhuru Kenyatta met with representatives of Cortec to discuss the Mrima Hill project. The President reportedly expressed his full support for the project during the meeting.

Two months later, Cortec announced that it estimated the discovery of rare earths and niobium to be valued at approximately $62.4 billion (about Sh6.1trillion at current exchange rates).

In August 2013, Balala announced that he was revoking Cortec mining’s licence along with 41 other mining permits held by other companies.

Balala also announced that he would form a task force to undertake a review of all mining licences issued since 2003.

Cortec rushed to the high court and was in September 2013 granted an injunction restraining the issuance of any licence in the area.

But in March 2015, after a protracted legal battle, the High Court declined to grant CMK the final relief it sought and instead upheld the Mining Minister’s decision to revoke SML 351.

Cortec has since appealed the decision. But Cortec argues had to rush for an international arbiter because after the High Court decision, Kenya took a number of steps without waiting for the final outcome of the court process.

“These steps taken by the State include announcing that the development of the Mrima Hill Project will be carried out by the State,” the application reads in part.

After the High Court ruling, Balala said the National Mining Corporation, being a state parastatal, will now be the custodian of the niobium asset on behalf of the people of Kenya.

“The conduct of the State strongly indicates that even if CMK is successful in its appeal, the court decision will not be able to be implemented or the State will prevent its implementation,” the application reads.

Cortec wants the tribunal to also declare that Kenya has violated its obligations by unlawfully expropriating its interests in the project.

The claimants are being represented by a British law firm Clifford Chance which is based in London.

Kenya is yet to respond to the application, which is set to be served to the President and Attorney General, Githu Muigai.