South Africa’s department of trade and industry (DTI) has issued a touchy-feely reaction to the conclusion of international arbitration proceedings brought against South Africa in 2006, challenging the Mineral and Petroleum Resources Development Act No. 28 of 2002 (MPRDA), and the Broad-Based Black Economic Empowerment Mining Charter.

The DTI has overarched itself in stressing, first, that the claimants, mainly a number of Italian investors with interests in granite mining in and around Rustenburg, in the heart of the country’s Bushveld Igneous Complex, had now had their claims dismissed, after previously attempting to withdraw all of their claims. Second, the DTI crowed that the tribunal ordered the claimants to contribute EUR 400, 000 (about ZAR 3.8m) to the government’s costs.Looking beyond the DTI’s spin, the facts lead elsewhere. During 2009, South Africa’s Department of Mineral Rights (DMR) granted the claimants’ operating companies an (unheard of) 21% equity offset for all their "old order" mining rights (and a 15% offset for any new order rights). That done, the claimants decided to withdraw from the international arbitration proceedings which they had initiated against the South African government in November 2006.Peter Leon, a Johannesburg-based partner with Webber Wentzel, and co-head of its ?mining, energy and natural resources practice, and one of a number of claimant representatives, reacted by saying that "In my view, the [DTI] media release is misleading in a number of respects. The reality is that the DMR only converted the claimant’s old order rights on such generous BEE [black economic empowerment] terms as a result of the arbitration."I am not aware of any other South African mining company which has been treated so munificently when it comes to BEE, or indeed whether any other mining company has been granted a beneficiation offset, not least on such generous terms!"South Africa’s notoriously opaque BEE legislation requires mining companies to sell 26% of equity pertaining to domestic operations to "HDIs", or historically disadvantaged individuals, which essentially means non-whites. While the racial classifications may be offensive to some, HDIs rarely have the kind of capital to purchase such equity, forcing mining companies into horribly complicated transactions which rarely connect with any kind of commercial, or other, reality.In cases where such deals have worked out - for example, a miner makes windfall profits and pays hefty dividends - BEE investors have inevitably been quick to sell out, leaving the miner "disempowered".Mining minister Susan Shabangu has recently hinted, strongly, some would say, that mining companies must remain empowered. This implies that miners which have seen BEE investors cash out may be forced back to the drawing board. In yet another horribly complicated BEE transaction, announced this week, Gold Fields, a global Tier I gold miner, is seeking to lock-in BEE investors for 30 years, in respect of South Deep. To lure the investors in, significant discounts are on offer.The claimants in the arbitration were essentially given an "offer you can’t refuse" by the DMR: a 21% beneficiation offset i.e., beneficiating - processing and adding value to the quarried granite stone, and providing a 5% employee share ownership program (known as an "ESOP"). As such, the required equity intervention was reduced from 26% to 5%, and was apparently acceptable to the point where the claimants would quit the arbitration.As to the issue of costs, under the relevant arbitral rules of ICSID, the World Bank’s dispute settlement facility, any withdrawal requires the other side’s agreement. The South African government refused to provide such consent unless the claimants agreed to pay a whopping EUR 5.33m bill run up by their lawyers - Freshfields, Paris, and the redoubtable Seth Nthai, a South African senior counsel.After the claimants formally applied to discontinue the arbitration in November, 2009, the South African government, through Freshfields (and Nthai at the time) opposed. Nthai tried to solicit a ZAR 5m bribe from Finstone’s Mario Marcenaro to "settle"??????? the case. On 16 April 2010 Nthai was formally struck from the bar in Johannesburg and Pretoria, and proceedings were initiated to have him removed from the roll of advocates.The matter accordingly went to a three day hearing before the arbitral tribunal in The Hague in mid-April. The tribunal this week released it findings. Contrary to the DTI’s assertions, the tribunal specifically found that there was "no real winner and no real loser in this case" and that the dispute "cannot be understood in terms of success or failure for either side."The tribunal found, further, that some elements of the claim were abandoned rather than settled, for reasons of commercial pragmatism; had the case actually resulted in an award, it would have found that the claimants succeeded in part. In the result, the tribunal awarded the South African government a derisory 7% of its total EUR 5, 333, 146 costs claim, amounting to EUR 400,000.