President Robert Mugabe of Zimbabwe, who has been in power since 1980, was re-elected to another term on July 31, 2013. On August 6, 2013, the government announced plans to seize control of foreign-owned mining interests, with no compensation in return, as part of a program to accumulate assets worth US$ 7 billion.1 Zimbabwe has a high concentration of foreigninvestment in platinum, gold, diamond and aluminum businesses. The program aims to force foreign companies to cede 51% of their assets to local investors or to the government.2 On August 7, 2013, Mugabe’s Zanu-PF party announced it will launch a new stock exchange “in which only blacks [would] be able to trade shares in foreign owned companies it plans to seize.”3 Zimbabwe is no stranger to such large-scale expropriations. In 2000, President Mugabe launched the controversial fast-track land reforms, seizing the majority of the country’s 4,500 commercial farms without providing compensation. Faced with this new wave of State-sponsored expropriations, what legal options are available to international mining investors active in Zimbabwe?
Foreign mining companies with investments in Zimbabwe whose assets are seized as a result of Zimbabwe’s actions may be able to bring compensation claims against Zimbabwe before international investment arbitration tribunals. Compensation claims are not restricted to active mining properties as exploration and development properties may also have significant value that can be determined by expert means on an independent basis. Zimbabwe has entered into a number of bilateral investment treaties (“BITs”) and the treaties that are in force may be relied upon by investors to bring claims against Zimbabwe. The bilateral investment treaties that are currently in force include those between Zimbabwe and China, Czech Republic, Denmark, Germany, the Netherlands and Switzerland, respectively.4 Bilateral investment treaties entitle investors from one State party to submit claims against the other State party to international arbitration.5 Even if no treaty exists between an investor’s home State and Zimbabwe, the investor may be able to bring claims under a treaty between Zimbabwe and a third country if its investment is held through a subsidiary incorporated in that country.6
While the language of each bilateral investment treaty must be carefully examined, most treaties mandate that an investor’s investments shall enjoy “fair and equitable treatment,”7 “full protection and security,”8 and treatment no less favorable than that granted to the host State’s own investors of any other State.9 Most treaties also entitle the investor to “adequate and effective compensation” if the host State expropriates or nationalizes its investment,10 and some also protect the investment from “unreasonable and discriminatory treatment.”11
Bilateral investment treaties also contain dispute resolution clauses that, as noted above, allow investors to submit disputes with the host State to international arbitration, in particular to the International Centre for Settlement of Investment Disputes (ICSID) or by way of ad hoc arbitration under the Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL).12 Here too, it is important to carefully examine the language of each bilateral investment treaty.13
Zimbabwe signed the ICSID Convention on March 25, 1991, and became a Contracting State on June 19, 1994.14 As a result, international investment arbitrations may be brought against Zimbabwe before ICSID, as has already happened. In Bernardus Henricus Funnekotter and others v. Republic of Zimbabwe, a group of Dutch landowners and farmers initiated ICSID arbitration proceedings against Zimbabwe after being deprived of their property, in violation of the Netherlands-Zimbabwe BIT, as a result of the State’s fast-track land reforms referred to above.15 The Arbitral Tribunal in that case found in favor of the investors and awarded compensation.16 Two other ICSID cases against Zimbabwe are currently pending, also involving the expropriation of commercial farms and of forestry and timber processing enterprises.17
Therefore, if the government of Zimbabwe successfully forces foreign mining companies to cede 51% of their assets to local investors or to the government itself without compensation, foreign mining companies that are protected by bilateral investment treaties that are in force may be able to claim against Zimbabwe for breach of the treaties’ provision prohibiting expropriation without adequate and effective compensation.18
Other legal options may be available to foreign investors to bring claims against Zimbabwe before international arbitration tribunals if they are unable to rely on bilateral investment treaties that are currently in force. First, companies may have entered into a concession contract or a joint venture agreement with a governmental authority which may contain its own dispute resolution clause. These clauses need to be carefully reviewed, and may provide for disputes to be resolved through international commercial arbitration before an internationally recognized body such as the International Chamber of Commerce in Paris, or the London Court of International Arbitration.19
Second, if there are no contract-specific dispute resolution clauses, it may be possible for foreign investors to bring claims against Zimbabwe before international arbitration tribunals by way of Zimbabwe’s own laws. The relevant laws of Zimbabwe in the context of mining disputes appear to be the Mines and Minerals Act,20 and the Zimbabwe Investment Authority Act.21 There are no general dispute resolution provisions in either of these two Acts that wouldallow foreign investors to bring claims against Zimbabwe before international arbitration tribunals.
However, the Mines and Minerals Act refers in several places to arbitration as a way of determining the appropriate level of compensation in a given situation.22 In particular, Article 401(1) provides that “the holder of any registered mining location may apply in writing to the Board for the issue of an order authorizing the transfer to him of a registered mining location held by any other person, hereinafter referred to as the other location.”23 Article 401(9) further provides that “[a]ny person who may be adversely affected by the exercise of the rights granted under an order shall be entitled to be paid such compensation by the person in whose favour the order has been made as may be agreed upon or, failing agreement, as may be determined by arbitration.”24 In other words, if a foreign mining company’s registered mining location is transferred in accordance with these above-cited provisions, recourse to arbitration may theoretically be possible. In that case, the arbitration procedure would take place in accordance with Zimbabwe’s Arbitration Act, which is based on the UNCITRAL’s 1985 Model Law on International Commercial Arbitration.25 Notwithstanding the above, it appears unlikely that the government-announced plan to seize control of foreign-owned mining interests would abide by the requirements of Article 401 of the Mines and Minerals Act, and thus allow affected foreign investors to have recourse to the arbitration provisions under Article 401(9) of the Mines and Minerals Act.
In conclusion, if the Government of Zimbabwe does implement its plan to seize control of foreign-owned mining interests without paying compensation in return, these investors would be well-advised to ensure that they can rely on bilateral investment treaties entered into by Zimbabwe. In these circumstances, and as compared to other options that may be available, there is no doubt that the protection provided by bilateral investment treaties is the most effective form of protection for foreign investments, including mining concessions, given that foreign investors are granted access to independent and effective international investment arbitration tribunals for the resolution of their disputes.