Court verdict casts shadow over Kilembe Mines deal

Government is yet to against the order for cancellation of the concession agreement for Kilembe Mines between the government of Uganda and Chinese firm, Tibet Hima Mining Company Limited, senior government officials have revealed.

Last week, court ruled that government through the Attorney General (AG) and Kilembe Mines Limited acted wrongfully and unlawfully when they concessioned the shares of Kilembe Mines, belonging to the late King of Tooro, Sir George David Kamurasi (GDK) Rukidi III, without the consent and participation of the administrators.

Mr Moses Mwase, the director of the Privatisation Unit in the Finance ministry, yesterday said the court judgment raises issues that need to be clarified.

“That judgment is appealable because the court seems to have ignored some of the evidence on record,” he said in a telephone interview.

On what next for the government, Mr Mwase said: “We shall wait to hear from the office of the Attorney General (AG) because it (judgment) is strongly appealable.”

The plaintiffs,  who are Tooro princes; Gilbert Mujogya and Franklin Jocelyn Kato Rukidi, sued the AG, Kilembe Mines Limited and Tibet Hima Mining Company Limited for alienating their late father’s 380 shares in Kilembe Mines without their knowledge, consent and participation and also re-allotting their shares to only 10 shares.

The duo, according to the court document, are the administrators of the estate of late Sir George David Kamurasi Rukidi III who died in 1965.
The Commercial Division of the High Court ruled that the award of the concession to Tibet Hima Mining Company Limited was illegal because the government did not involve or consult the complainants, who are shareholders, while making decisions.

According to the court document, the mines at Kilembe, in Kasese District are owned by a limited company; Kilembe Mines Limited and government is a majority shareholder and thus cannot make decisions alone without going through the company organs like holding shareholders’ meetings.

A source privy to the matter revealed that over the years, the government has single-handedly managed the affairs of Kilembe Mines as though it is the sole owner.

What court judgment means
Mr Alfred Okello Oryem, the lawyer representing Tibet Hima Mining Company, said it was wrong for the court to declare null and void the concession because internal processes of a government entity that led to the concession/ contract should not affect its validity.

“Tibet Hima Mining Company is now considering suing the government for causing it to invest more than $33m on a contract that is illegal. For the government, it should appeal,” said Mr Oryem.

On the issue of acquiring a new investor, Mr Oryem said: “As far as Tibet Hima Mining Company is concerned, the government has no legal basis to procure a new investor in Kilembe before the disputes are resolved with shareholders.”
    
But a lawyer who did not want to be named but is privy to the matter explained that the government can always acquire an investor so long as it is done legally by involving all shareholders.

“Under the law, the government is not supposed to trade in Kilembe Mines whether finding an investor. All the government can do is to sell its shares,” he says.

The court decision for which the government has not started an appeal process means that any serious investor, during due diligence must exercise caution to ensure that matters raised in the judgement are attended too to avoid indulging in illegalities.

“It calls for caution and most importantly to ensure that all shareholders are on board. Dealing with the government solely will be illegal,” the lawyer said.

Currently, the government is embroiled in another case with Tibet Hima Mining Company over breach of contract. The case has since been referred to London for arbitration.

In 2013, Tibet Hima Mining Company, a consortium of Chinese companies, was awarded a concession to revive the mining activities at Kilembe Copper Mines.

According to Mr Oryem, Tibet Hima was awarded a 25-year concession and was supposed to pay $1.5m (Shs5.4b)per year after paying an initial deposit of $6.5m(Shs23b) and invested $33m (Shs120b)to revive the mines but it was in possession for only three years.

Court orders and declarations against AG, Kilembe Mines Limited and Tibet Hima Mining Company

• It is hereby declared that Sir GDK Rukidi III was the proprietor of 380 shares in Kilembe Mines Limited at the time of his demise in the year 1965
• It is hereby declared that the plaintiffs, being the administers of the Estate of the late Sir Rukidi III are now the proprietors of the said deceased’s shares in Kilembe Mines
• It is hereby declared the plaintiffs are entitled to receive payment of dividends in respect of the said shares for the period from 1967 to date.
• It is hereby declared that the AG and Kilembe Mines wrongfully alienated the plaintiffs’ 380 shares in Kilembe Mines and re-alloted them 10 shares
• It is hereby ordered that the taking of accounts be made in respect of Kilembe Mines’ financials including but not limited to; dividends declared from the year 1967 to date, amounts now due to the plaintiffs in unpaid dividends, amounts received by Kilembe Mines in respect of the concession granted to Tibet Hima Mining and their expenditure.
• It is hereby declared that AG and Kilembe Mines wrongfully and illegally alienated the plaintiffs’ 380 shares in Kilembe Mines and re-allocated them 10 shares.
• It is hereby declared that the dividends due to the plaintiffs be paid.
• It is hereby declared that AG and Kilembe Mines acted wrongfully and unlawfully when they concessioned Kilembe Mines to Tibet Hima Mining without the consent and or participation of the plaintiffs.
• It is hereby ordered that the concession of Kilembe Mines’ assets at Kilembe to Tibet Hima be and hereby cancelled
• A permanent injunction is hereby issued restraining the defendants and any persons, whether acting independently or under the defendant from further concessioning Kilembe Mines’ assets or otherwise dealing with the same in any manner, without the consent and participation of the plaintiffs as shareholders and all other officially listed shareholders.
• A permanent injunction is hereby restraining the AG and Kilembe Mines and any person whether acting independently or under them from further holding meetings to deliberate on the affairs of the company without notifying and ensuring the attendance of the plaintiffs and other listed shareholders
• Payment of general damages
• -Costs of the suit and interest on all sums awarded at 6 percent per annum from the time filing the case.