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FIRST Quantum Minerals (FQM) has dropped a lawsuit against the Zambian Government filed in the United Kingdom (UK) over alleged abrogation of the Bwana Mkubwa Development Agreement (DA).
According to documents obtained by the Sunday Times, the mining company has also agreed to a deferral of the Kansanshi arbitration.
The matter had been set for arbitration in October last year and the Zambian Government had filed in a plea to the claim by FQM, who consequently submitted a counter claim based on the Government’s defence.
But documents accessed by the Sunday Times show that the company has agreed to set aside the Bwana Development Agreement arbitration, which was completed on December 19, 2013.
“The withdrawal of the Bwana arbitration was an important step for us, as it involved releasing our rights under the Bwana Development Agreements, which were arbitrarily breached by the previous government,” states the documents.
“We did this on the basis that during the many discussions we had with your Government, including President (Michael) Sata, we received a strong message that the GRZ did not want to negotiate under the threat of arbitration.”
“We were also assured that if we withdrew the Bwana arbitration, the GRZ would then negotiate with First Quantum in good faith to resolve the Kansanshi Development Agreement dispute, as well as to regularise our relations with the Zambia Revenue Authority (ZRA).”
Sources said during the week that the decision by the mining giant to drop the suit was aimed at promoting dialogue in order to negotiate in good faith for an amicable settlement.
“FQM had initiated a lawsuit in the United Kingdom against the Zambian Government for allegedly abrogating the Bwana Mkubwa DA,” the sources explained.
“The Government filed a plea to the claim by FQM, who filed a counter claim based on the Government’s defence on September 25, 2013.
However, FQM at the beginning of the year agreed to drop the case at the request of Government.”
It is believed that the previous government had arbitrarily breached the DAs that formed a set of unique incentives negotiated by individual mining companies as provided for under the Mines and Minerals Act of 1995.
The 1995 Act in place of uniform tax regime and code of conditions within which the private mining companies were to operate provided for the negotiation of unique DAs with each company.
The Development Agreements reached by mining companies formed part of favourable conditions for increased capital injection in a moribund industry in the post-privatisation era.
The company hoped that with the withdrawal, it would re-engage in the Kansanshi settlement discussions as well as explore ways to rebuild the previously cordial relationship with the ZRA.
