24 July 2014

English High Court judgment in ongoing Zambian dispute

On 15 July 2014, the High Court in London handed down a further judgment in the ongoing dispute between Konkola Copper Mines (KCM) and U&M Mining Zambia Ltd (U&M).

KCM owns a number of mines on the Zambian copper belt.  It is a Zambian company majority owned by Vendanta Resources Plc, which is listed on the London Stock Exchange.  The remaining stake in KCM is held by a company which is in turn majority owned by the Government of the Republic of Zambia.

The Government also holds a Golden Share.  U&M, which is a Zambian subsidiary of a Brazilian mining conglomerate, was contracted from around 2007 to operate one of KCM's mines.  From 2012, a number of disputes arose between the parties in relation to their various contractual arrangements, including in relation to invoices allegedly unpaid by KCM.

In common with other disputes between locally incorporated mining companies with parents in the UK or elsewhere, action has been taken in more than one jurisdiction.  The parties' disputes were referred to arbitration at the London Court of International Arbitration and there have been related court proceedings in Zambia, Brazil and London.

It appears from the English High Court judgments that there are currently several outstanding arbitral awards against KCM, totalling in excess of USD56 million, but that KCM is resisting enforcement of the first award in Zambia and brought proceedings in the English court seeking to challenge the second award on various grounds.  

It was the dismissal of KCM's challenge to that second award that was the subject of the latest English High Court judgment.  In another decision some two weeks prior, KCM had been directed to pay security for U&M's costs of defending that challenge. Of interest was the Court's reasoning that KCM, which was found itself to have insufficient liquid funds to pay U&M's costs and no assets in the jurisdiction, could not rely on the significant financial strength of its LSE listed parent to defeat the application as there were no undertakings in place from that parent company.

This is an engaging though apparently bitterly fought dispute and we will await any further developments with interest.

This article was written by Joanne Keillor, Senior Associate, London.  For further information please contact Joanne Keillor or your usual Herbert Smith Freehills contact.

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