Court ruling for Patrice Motsepe after $195m mining deal with US company turns sour

African Rainbow Minerals (ARM) executive chairperson Patrice Motsepe. Photo: Simphiwe MbokaziThe Gauteng High Court, Johannesburg has ruled that businessman Patrice Motsepe’s African Rainbow Capital cannot be sued for US$195 million for a Tanzanian mining deal – instead legal action can be taken against his other company, African Rainbow Minerals. The Gauteng High Court, Johannesburg has ruled that businessman Patrice Motsepe’s African Rainbow Capital cannot be sued for US$195 million for a Tanzanian mining deal – instead legal action can be taken against his other company, African Rainbow Minerals.

Billionaire businessman Dr. Patrice Motsepe’s African Rainbow Capital (ARC) cannot be sued for US$195 million (about R3.2 billion) for breach of a confidentiality agreement for investing in its partner’s competitor. On Tuesday, the Gauteng High Court, Johannesburg ruled that US company Pula Group and its Tanzanian subsidiary Pula Graphite Partners are prevented from filing the lawsuit against ARC.

Instead, Judge Leicester Adams declared that if the Pula Group, which is chaired by former US ambassador to Tanzania Charles R Stith, is able to prove a breach of the agreement and damages arising from that breach, its contractual remedies are only against another of Motsepe’s companies,African Rainbow Minerals (ARM). The breach of confidentiality relates toPula Groupand Pula Graphite Partners who accuse ARM and its affiliates of acquiring confidential information from the Pula Group, which enabled them (ARM and its affiliates), to invest in an Australian company Evolution Holdings to become part and parcel of the Chilalo Graphite Project, which is a direct competitor of Pula Group and Pula Graphite Partners in Tanzania. Pula Group and Pula Graphite Partners state that the acquisition of 40 million shares in Evolution Holdings constitutes the breach of the confidentiality agreement and that this placed them at a severe competitive disadvantage and deprived them of the opportunity to increase investor value in the project.

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Judge Adams also declared that the confidentiality agreement was concluded between Pula Group and ARM. He ruled that Pula Graphite Partners has no contractual rights derived from the confidentiality agreement and that the company cannot suffer contractual damages flowing from a breach of the confidentiality agreement. In addition, Judge Adams found that ARC has no obligations arising from the confidentiality agreement.

“The applicant (ARC) cannot be in breach of the confidentiality agreement. The applicant cannot be held liable by the first and/or the second respondent (Pula Group and Pula Graphite Partners) for contractual damages flowing from a breach of the confidentiality agreement,” reads the judgment. The judge said Pula Group and Pula Graphite Partners made out no cause of action based on breach of contract against ARC and that the relief sought by the companies, if based on breach of contract, does not arise from the agreement and are not competent orders against Motsepe’s firm (ARC). ARC approached the high court seeking orders declaring that the relief sought by Pula Group and Pula Graphite against it in the Tanzanian High Court is fundamentally flawed and based on an incorrect understanding of South African law, which governs the confidentiality agreement.

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