By Loyiso Solethu Sidimba
The Constitutional Court is today set to hear arguments on South Africa’s jurisdiction to adjudicate the long-running US$4.2 billion (R68 billion) dispute between telecommunications giant MTN and its competitor East Asian Consortium (EAC) for a licence in war-ravaged Iran.
The Netherlands-based EAC held a 60% interest in the Turkcell Consortium, which was set up to bid for Iran’s first licence to provide a global system for mobile communications, but was usurped by MTN in later bidding rounds.
Court documents show that the legal battle over the deal is set for the apex court today, August 31, as the telecommunications giant and its former chief executive Phuthuma Nhleko and Irene Charnley, the firm’s former vice-president for the Middle East, North and East Africa, fight damaging claims made during the legal battle surrounding the transaction.
MTN has since exited Iran following US sanctions. Nhleko was MTN head honcho from June 2002 to March 2011 and then became non-executive chairman from May 2013 until November 2015.
In November 2015, he became the executive chairman until he resigned in March 2017, when he again became the non-executive chairman.
Nhleko served as an MTN director from May 2013 to December 2019, and as its non-executive chairman until December 2019.
Charnley and Nhleko are challenging the Supreme Court of Appeal (SCA) judgment handed down in April last year. According to the SCA judgment, the Gauteng High Court in Johannesburg ruled in January 2022 that it lacked jurisdiction because Iran was involved and dismissed EAC’s damages claim.
Additionally, the high court declined to grant EAC an order in relation to the Act of State Doctrine, which governs disputes between official acts between governments. The SCA then, in April last year, overturned several parts of the High Court order.
Aggrieved, Nhleko and Charnley are arguing that the orders were wrong and are seeking an order stating that “the appeal against the High Court’s decisions is dismissed with costs, such costs”.
In his court papers filed in Braamfontein, Johannesburg, Nhleko states that there were no inducements in the deal sealed in the early 2000s.
“It will be apparent from the pleaded inducement claim that what led to EAC’s replacement was the passage of the Irancell Act (which provided that 51% of the licensee should be owned by Iranians and 49% by the winner of the tender), followed by the addendum, which set the deadline by which, in order to participate in the licensee, EAC had to obtain the 49% in Irancell Telecommunications Services Company.”
EAC is demanding US$1.18bn of MTN’s 2005 to 2010 earnings before interest, taxes, depreciation and amortisation (EBITDA) achieved, plus market-related interest.
The company is demanding a further US$1.81bn, being the discounted net present value of the projected EBITDA for the period 2011 to 2019 inclusive, using conservative assumptions of market share and other factors.
In addition, they are demanding a discount by an appropriate and conservative risk factor and by appropriate interest rates to a net present value calculation, and an amount of US$ 1.21bn being the discounted net present value of the value of 49% of the interest in MTN-Irancell which the second defendant will own at the end of the 15-year licence term.
In addition, Nhleko seeks to strike out allegations made by EAC that he deems to be derogatory “unpleaded allegations which should not have been introduced in the answering affidavit”.
The allegations relate to EAC’s assertion that the courts of Iran are impartial.
“Vast swathes of commentary are publicly available that highlight the general lack of confidence internationally in the Iranian courts, and the judiciary of that country. Those courts and their unreliability as far as the protection of rights and freedoms go, is no secret. It requires no expert evidence,” EAC’s response to the strike out application reads.
The consortium insistsed: “While the Iranian courts are notorious when it comes to criminal prosecutions and punishment, there is ample public evidence, too, of the dysfunctionality of and the difficulties besetting the civil court system”.
“In such a draconian system, the applicants (Nhleko and Charnley) cannot seriously say EAC would be able to ventilate its claims. Precisely the opposite is true. EAC would not be able to litigate in Iran. It would be the end of the road for EAC’s attempts to keep MTN accountable,” the company continued.
EAC added that unlike the position in South Africa, where the Constitution is aimed at the protection of human rights in favour of all those within our borders, Iran’s constitution does not extend protection to foreign litigants.
The matter is set to be heard over two days, today and on Tuesday.
