High Court judgment ‘damning’ cancels mining Charter rehabilitation obligations


A full Gauteng High Court bench ruled this week against the Minister of Mineral and Energy Resources and in favor of the Minerals Council of South Africa, overturning a number of key clauses in Mining Charter III, including the rehabilitation clause which required holders of mineral rights to maintain black economic empowerment (BEE) property goals of 26% for pre-existing mineral rights and 30% for new mineral rights.

The objectives of the charter in terms of procurement, supplier and business development, as well as some of its provisions relating to sanctions and enforcement, are also set aside.

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“The judgment confirms my long-held view that the charter, in all of its iterations, was nothing more than a socio-economic pact between government, workers and the mining industry,” said Peter Leon, Global co-chair for Africa of the law firm. Herbert Smith Freehills. “The original charter, signed in October 2002, reflected exactly this principle. Unfortunately, the 2010 and 2018 versions claimed to transform what was only a pact into a binding legislative instrument with all the associated regulatory uncertainty.

“I hope this carefully reasoned and strong judgment will give DMRE an opportunity to reflect on what has gone wrong over the past decade and put the industry back on the much-needed path of certainty and predictability. regulatory. ”

The case was originally brought in May 2020 by the Minerals Council against the minister and 13 other defendants, including a number of unions and community groups. The ruling indicates that the issue at issue was whether the Minister has the power, under Section 100 (2) of the Mineral and Petroleum Resources Development Act (MPRDA), to make laws in the form subordinate legislation, and whether the charter constitutes law or policy.

The minister and other respondents argued that the minister did indeed have the power to legislate through the charter, which would then impose binding obligations on holders of mineral rights.

The Minerals Council disagreed, arguing that the charter is a formal policy document and is only binding on holders of mineral rights “to the extent that its terms have been legally incorporated by the Minister into those rights. mining “.

In response to the ruling, the Minerals Council South Africa says it welcomes the ruling that “the 2018 Mining Charter is a political document, that the lingering consequences of previous black economic empowerment agreements should be recognized and that the specific provisions challenged in the document should be withdrawn.

“The Minerals Council and its members remain fully committed to the transformative goals of the Mineral and Petroleum Resources Development Act (MPRDA), but the goals must create political and regulatory certainty for long-term investments and inclusive growth. in the area. ”

The minister argued that the transformation goals of the MPRDA cannot be achieved unless the charter is binding subordinate legislation. The Gauteng High Court said the flaw in this argument is that it ignores the enforcement structure provided by the MPRDA.

The Minister is able to enforce the authorization obligations by issuing mining rights, which impose obligations on the rights holder by virtue of the law and not of the charter. Some of the enforcement tools available to the minister include approving a social and labor plan which, if violated, allows the minister to suspend or cancel the duty.

The minister said he needed the power to craft subordinate legislation in the form of a charter to advance the transformation of the mining sector – which he failed to do, he said, despite previous charters. In support of this argument, he presented internal studies to the tribunal, although these were challenged by studies presented by the Minerals Council showing that there had indeed been a substantial transformation in the sector.

The minister also argued that incorporating charter provisions into mining rights would be ineffective in achieving transformation due to the relatively short term of mining rights.

The impact

Commenting on the judgment, Herbert Smith Freehills said the court once again upheld the “once empowered, always empowered” principle.

This means that the historically disadvantaged South African property status (HDSA) of existing mineral rights holders who wish to renew or transfer their rights must be automatically recognized by the Department of Mineral Resources and Energy (DMRE).

“The judgment has a significantly positive impact on the security of tenure of existing mining rights holders. As a result, existing mineral rights holders now know that if they previously met the licensing requirements imposed by any version of the charter, they will no longer be required to do so, ”said Herbert Smith Freehills.

Since the court determined that the charter was a policy document rather than a legally binding instrument, mineral rights holders can, but are not legally required to, comply with the other requirements imposed by the charter. This is subject to two qualifications:

  • All the provisions of the charter have not been reviewed and discarded. For example, clauses concerning employment equity, human resource development, community mining development, and housing and living conditions are still part of the charter. These clauses will not automatically impose obligations on existing mineral rights holders, but may do so if such requirements are incorporated into specific terms or conditions of mining law.
  • Second, the excluded clauses have now been removed from Mining Charter III. A significant example is the charter’s procurement, supplier and business development requirements.

The judgment also set aside the 2018 Charter provisions relating to the Diamonds Act and the Precious Metals Act to impose charter objectives on licensees under those laws.

The judgment also removed from the charter provisions of the 2018 charter relating to mining companies that do not comply with the ownership and development requirements of the mining community and are therefore in violation of the MPRDA.

In the previous version, this meant that rights holders could potentially have their mineral rights suspended or canceled.

“The Minerals Council will continue to engage the DMRE on a constructive basis to create the necessary political and regulatory certainty and to attract much more investment in the exploration and mining sectors,” the Minerals Council statement said. .



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