Signed Affidavit of Andrew Gibson

8/7/2019 Signed Affidavit of Andrew Gibson

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IN THE HIGH COURT OF NAMIBIAHELD AT WINDHOEKCase no:

In the matter between:

PETRONEFT INTERNATIONAL LIMITED First applicantGLENCORE ENERGY UK LIMITED Second applicantandTHE MINISTER OF MINES AND ENERGY First respondentTHE PERMANENT SECRETARY OF MINES AND ENERGY Second respondentTHE GOVERNMENT OF THE REPUBLIC OF NAMIBIA Third respondentNATIONAL PETROLEUM CORPORATION OF NAMIBIA(pROPRIETy) LIMITED Fourth respondentNAMCOR PETROLEUM TRADING &DISTRIBUTION(PTY) LTD CORPORATION OF NAMIBIA (PTY) LTD Fifth respondentNAMCOR INTERNATIONAL TRADING LIMITED Sixth respondentNAMCOR INTERNATIONAL LIMITED Seventh respondent

FOUNDING AFFIDAVIT

I, the undersigned, Andrew Gibson make oath and state as follows:

1. I am a director of both the first and second applicant. I am duly authorised to deposeto this affidavit and to institute this application on behalf of both applicants.


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2. The facts set out in this affidavit are, save where the circumstances indicate otherwise,within my personal knowledge and are true and correct. Where I make legalsubmissions I do so on advice by the applicants' legal representatives.

A. The Parties

3. The first applicant is Petroneft International Limited ("Petroneft"), incorporated underthe laws of the British Virgin Islands. Its registered office is at Road Town, Tortola,PO Box 3174, British Virgin Islands 1412547. Petroneft is a party to the joint ventureagreement and deed of novation, to which I refer in section B below.

4. The second applicant is Glencore Energy UK Limited ("Glencore"), a privatecompany registered under the laws of England with registration number 4542769. Itsregistered office is at 50 Berkeley Street, London WlJ 8HD, England. Glencore

International AG, of which Glencore is a subsidiary, holds a 50% shareholding inPetroneft. Glencore International AG has guaranteed Petroneft's sufficient funding toperform under the joint venture agreement. Glencore has also issued a performancebond, indemnifying the third respondent against default by the fourth respondent.

5. The first respondent is the Minister of Mines and Energy ("the Minister"), care of theGovernment Attorney. He is cited in his official capacity as head of the Ministry ofMines and Energy, and thereby the member of the Executive with responsibility forthe procurement and supply of petroleum products in Namibia. The Minister,alternatively the second respondent, is indeed responsible for the direction to thefourth respondent to terminate its performance obligations under the supplyagreement to which I refer in section B, to the prejudice of the applicants.


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6. The second respondent is the Permanent Secretary of the Ministry of Mines andEnergy ("the Permanent Secretary"), care of the Government Attorney. He is cited(ex abundante cautela) in his official capacity, being responsible, insofar as the actionwas not taken by the Minister, for the direction to the fourth respondent to terminateits obligations under the supply agreement.

7. The third respondent is the Government of the Republic of Namibia, care of the

Government Attorney. It is cited as the responsible entity for the decision (taken, as ithappens, via Cabinet, but being a decision for and on behalf of the Government) toterminate the mandate of the fourth respondent to supply 50% of the annual petroleumrequirements of the Namibian oil majors.

8. The fourth respondent is the National Petroleum Corporation of Namibia (Pty) Ltd("Namcor"), a parastatal incorporated under the laws of Namibia with registrationnumber 164/67. Namcor is tasked with advising the Minister on matters concerninginter alia the importation and distribution of petroleum products in Namibia.

9. The fifth respondent is Namcor Petroleum Trading & Distribution (Pty) LtdCorporation of Namibia (Pty) Ltd ("NPTD"). NPTD is incorporated under the lawsof Namibia with registration number 2000/421, and registered place of business atPetroleum House, 1 Aviation Road, Windhoek, Namibia. NPTD is the companythrough which Namcor gave effect to its mandate to import petroleum.


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10. The sixth respondent is Namcor International Trading Limited ("the joint venturecompany"). It is a private company, registered under the laws of the British VirginIslands. Its company registration number 1417830 and registered office is at 325Waterfront Drive, Omar Hodge Building, 2nd Floor, Wickam's Cay, Road Town,Tortola BVI 3..

11. The seventh respondent is Namcor International Limited ("the assignee"), a privatecompany incorporated under the laws of Mauritius. Its registration number is 085189ClIGBL, and its registered office is at 5T Floor, Chancery House, Lislet GeoffroryStreet, Port Louis, Mauritius..

12. The fourth to seventh respondents are cited only by virtue of any interest they mayclaim to have in these proceedings. No relief is sought against them in the event thatthey do not oppose this application.

13. Throughout the negotiations and duration of the relevant contracts Glencoreplayed anactive part as an associated company of Petronefi (as the third respondent, theGovernment of Namibia, did, being the substantial shareholder in the fourthrespondent).

14. The rights and interests of the parties vis-a-vis one another are set out in the relevantcontractual and regulatory relationships, and factual circumstances to which I nowtum.


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15. Before I do so, the Court may be assisted by this outline. In short, this application isconcerned with an interference by the Government of Namibia (through the Staterespondents cited) with a vital set of contractual relationships involving theimportation of petroleum products into Namibia by Glencore through Petroneft andthe joint venture company, and the State respondents through Namcor. What theapplicants seek in the first place is the interdicting of that interference and thepreservation of the status quo prior to its occurrence, and in the second place thereview of the decisions giving rise to the interference. A considerable degree ofurgency attaches to the interdict for the reasons set out below. In brief, theinterference by the State respondents by simply issuing directives to Namcor,disregarding its corporate structure and fiduciary duties of its directors, is (I amadvised) so far as is known unprecedented in Namibia, and raises inherently urgentconstitutional and corporate governance issues

B. The ContractuaL Regulatory and Factual Background

(1) The Contracts

16. The relevant background to this application is formed by three contracts: a jointventure agreement between Petroneft and Namcor (dated November 2008); a supplyagreement between Namcor and the joint venture company (dated 13 March 2009);and a tripartite deed of novation between Petroneft, Namcor and the assignee (dated20 August). These contracts are attached, marked "A", "B" and "C" respectively.The contracts were executed by me in London on behalf of Petroneft and Glencore, inWindhoek by the managing director (or, in one instance, actingmanaging director) of


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6Namcor on its behalf, the chief executive officer of NPTD on its behalf and twodirectors of the assignee (one of whom signed atMauritius) on the assignee's behalf.

17. I briefly set out the core content and purpose of each contract separately.

18. Firstly, Petroneft entered into the joint venture agreement with Namcor duringNovember 2008. In terms of the joint venture agreement the parties established thejoint venture company, the sixth respondent, to source and sell petroleum productsand crude oil (clause 2). The joint venture agreement reflects that Namcor andPetroneft are equal shareholders in the joint venture company, and that are each wasentitled to appoint two directors to the joint venture company's board (clause 4). Thisagreement is extant and unaffected by the purported termination of Namcor'smandate. But because the joint venture it contemplates is the importation ofpetroleum pursuant to Namcor's mandate, this agreement's purpose would beundermined by the withdrawal of the mandate.

19. Secondly, pursuant to the joint venture agreement, NPTD and the joint venturecompany concluded a supply agreement. It provides for the supply of petroleumproducts exclusively by the joint venture company to Namcor (clause 4.1). Neither ofthe applicants is a party to the supply agreement, but by virtue of their interest in thejoint venture company they have a direct and substantial interest in the continuation ofthe agreement intended to give effect to the joint venture. Indeed, the joint venturecompany is the contemplated vehicle through which Glencore and Petroneft giveseffect to their undertaking to Namcor to enable the latter to comply with its mandate.Their investment and interest in the composite contractual relationship is further


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secured by Glencore acting as guarantor in terms of clause 4.2 of the supplyagreement. Thereby Glencore committed itself to Namcor for the joint venturecompany's obligations towards Namcor.

20. Clause 9.2 of the supply agreement provides for its own termination in the event thatthe "Government [of Namibia] ... [revoke] the supply mandate referred to in thepreamble to this agreement". Itis thus the validity of this purported revocationwhichis the subject-matter of this review application.

21. Thirdly, a deed of novation was entered into by Namcor, Petroneft and the assignee.In terms of the deed of novation, Namcor transferred its whole interest in the jointventure company to the assignee, and guaranteed the latter's performance in terms ofthe joint venture agreement to Petroneft (clause 2).

22. In short, the result of the contracts referred to above is that the contractualrelationshipestablished by the joint venture subsists between Petroneft and the assignee. In termsof this relationship Petroneft is entitled to enforce Namcor's obligation in terms ofclauses 6.6 and 6.7 of the joint venture agreement against the assignee, and againstNamcor (as the assignee's guarantor). These clauses require Namcor's assignee touse its best efforts to ensure the satisfactory performance of the joint venturecompany's business, i.e. concluding sales for importing petroleum products intoNamibia in terms of the supply agreement between Namcor and the joint venturecompany. The petroleum products which were supplied in satisfaction of thearrangements described were procured by Glencorewho entered into supply contractswith the sixth respondent.


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23. In the light of the above contractual matrix both Glencore and Petronefi each have adirect and substantial legal interest in the continuation of and compliance with thesupply agreement, and in Namcor's continued mandate, I am advised. Converselyeach in its own right starts to suffer loss and disruption of contractual relations by thepurported revocation of the mandate and termination of the agreement, as describedbelow. Further and in any event, both Glencore and Petronefi are (I am furtheradvised) each entitled in the circumstances of this matter to bring this application inthe public interest. These aspects are further a matter for legal argument, to beadvanced in the appropriate way.

(2) The Regulatory Framework

24. The mandate forming the basis for the joint venture and supply agreement has beenconferred on Namcor by the Minister pursuant to the Petroleum Products and EnergyAct 13 of 1990 ("the Act") and regulations issued thereunder. In terms of thesestatutory instruments the Minister regulates inter alia the importation and distributionof petroleum in Namibia.

25. Unlike South Africa or Angola, Namibia has no local production of petroleumproducts (in South Africa's case via the triple facility of the extraction and refining ofown resources, oil-from-coal production, and the refining of imported crude product).Before the above contractual arrangements were in place, Namibia imported itspetroleum supplies exclusively from South Africa. However, this source becameunreliable when South Africa itself became a nett importer of petroleum. The

.~ .,


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consequential strategic vulnerability of Namibia, wholly dependent on what oneneighbour might consider surplus to its needs is both obvious and serious. Thatsituation continues. It was because of the substantial public interest in reducing riskand excessive dependence as regards a sustained and reliable supply of petroleum thatthe Minister granted the mandate to Namcor during 2004. This the Minister didpursuant to Regulation 30(10) of the Petroleum Products Regulations, 2000 ("theRegulations"). As mentioned, in terms of the mandate Namcor was authorised toprocure (obviously, for the reasons 1have given, by import) 50% of Namibia's annualrequired petroleum products. To give effect thereto the Minister amended local oilcompanies' wholesale licences by imposing a condition that they had to procure 50%by volume of each of the petroleum products delivered by them per annum under thelicence from NPTD. It is of course this mandate which is recorded in the preamble tothe supply agreement.

26. 1 note at this stage that there is no provision in the Act or the Regulations whichprovides for either the revocation of the mandate granted to Namcor or a power to theMinister or Permanent Secretary to terminate contracts concluded by Namcor or itstrading arm (or to order that its contracts be terminated). This, it will be argued, isunsurprising: it would constitute a legislative authority to the State to breach itscontractual obligations, hardly consistent (I am advised) with the principle of legality,the rule of law and the division of powers of the constitutional democracy constitutedby the Namibian Constitution. As will be shown below, there is no other legalauthority for these acts either.


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(3) The Factual Background

27. Prior to concluding the above contracts, and in order to enable Namcor to complywith its mandate and to ensure a sustained fuel supply to Namibia, it approachedGlencore. Acting through its subsidiary Petroneft, Glencore agreed to serve asNamcor's partner. Thus Glencore accepted sharing the risk involved, and providedessential capital, expertise and international connectivity required by Namcor toachieve its mandate. By thus concluding (through Petroneft) the joint ventureagreement, Glencore not only provided indispensable capital to fund supplies andabsorbed the risks inherent in international petroleum procurement, but alsoundertook to made good losses on imports; share half of the joint venture's profitswith Namcor; and to introduce Namcor to other business opportunities. I attach aletter date 27 November 2008 from Namcor to the Ministry, marked "D", confirmingthe role Glencore performed unfailingly to ensure a sustainable fuel supply toNamibia.

28. Glencore's involvement was crucial, because Namcor was not sufficientlyexperienced, or capitalised by the third respondent, to perform its mandate. Afundamental factor adversely impacting on Namcor's ability to perform its mandatesustainably was the on-sale price of petroleum. This price is determined by the BasicFuel Price ("BFP") formula. The formula is an import parity price construct devisedin South Africa, and used to ensure a harmonised customs regime within the SouthernAfrican Customs Union ("SACU"). The BFP formula was introduced when SouthAfrica served as the exclusive supplier of petroleum to the other SACU members.Because the BFP was designed for use within the customs union, it does not make


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provision for numerous costs components inherent in intercontinental procurementinvolving currency exchange. It is an artificial price-regulating mechanism. Forinstance, it does not provide for specific freight charges, decreases in product densityduring transport or currency fluctuations. These factors impact heavily on bulk tradein petroleum, and have a very substantial impact on the costs involved in importingfuel to Namibia. Because these costs components are not represented in the on-saleprice (based on the BFP formula) to the Namibian downstream distributors, Namcorinvariably operates at a loss.

29. For this reason Glencore and Namcor approached the Minister to substitute a market-related formula for the BFP formula, in order to provide a realistic pricing method.(See e.g. Namcor's letters and memorandum of 28 March 2008 at paragraph 3; 10October 2008; 10 May 2010 and 22 July 2010 S.v. "Cost reflective pricing", attachedmarked "E", "F", "G" and "R" respectively.) The Ministry has however rejected thisrequest, despite having previously acknowledged the need to revise the BFP in itsletter of 26 March 2008, attached marked "I". It appears that the about-tum ispremised inter alia on Government's stance that Namcor was "expected to findcheaper products in the market and make a profit at the prescribed selling price andnot to escalate the prescribed selling price in the country", that it should not "comeback to the Ministry when the going gets tough" and that "it [was] high time thatNamcor especially the Board due to its fiducial [sic] responsibility and obligations ...come up with mitigating measures" and be "shrewd and negotiate a deal that would beprofitable to itself and by extension to the country but not to become another financialstrain on public resources." This is how the Permanent Secretary considered it


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appropriate to express himself in a letter dated 19 December 2008, attached marked"J".

30. The fact of the matter is that through Glencore Namcor indeed obtained "the bestpricing for the product with a massive discount considering the limitations ascontained in the Basic Fuel Pricing formula". What is more, Glencore has providedNamcor with a US$20 million revolving credit loan facility, which substantiallymitigated the Government's failure to properly capitalise Namcor. In truth, as hasbeen communicated to the Ministry on numerous occasions and conftrmed byindependent experts, the situation in which Namcor found itself "has everything to dowith the Basic Fuel Pricing formula and little to do with the current supply contract".(The quotations are from a letter dated 6 August 2010 by the Chairman of Namcor tothe Minister, attached marked "K".) There was no reason why the third respondentcould and should not have revised the pricing methodology already in 2009, when thesupply agreement was concluded (as clause 5.1 contemplates). Indeed, the BFP iscapable of being adjusted by an individual country to accord with local requirements,and protestations that SACU members are bound to it are clearly misconceived, asboth Botswana and South Africa's revisions thereto demonstrate.

31. Despite this continued failure by Government, Cabinet now purported to terminate themandate and the Minister (or Permanent Secretary) purported to terminate the supplycontract. The basis for purporting to do so is apparently - no reasons having beenprovided to this day - that Namcor's "financial predicament is largely blamed on itscurrent oil supply contract" and its "financial woes are largely blamed on the contractentered into between Namcor and Glencore". This is reflected in a document titled


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"Briefing on the Status of the national Petroleum corporation of Namibia", dated 23September 2010. I attach a copy, marked "L". I respectfully ask that the remarkablyblunt terms of "0" be noted: they clearly reveal the determination of Government,without any consideration of the legalities involved, to achieve a revocation of themandate and a termination of the contractual obligations. The document concludeswith the recommendation that the "agreement between Namcor and Glencore [i.e. thesupply agreement] should be terminate [sic] because the latter is pushing Governmentinto deep dept [sic], which Government may find difficult to pay back, thusempowering Glencore to dominate the local oil industry in one way or another" (at p13).

32. Itwill be noted that, as a matter of substance over form and with regard to the keyeconomic and strategic interests involved, the Government itself recognises that theprimary actors are Glencore and Namcor, whatever the vehicles used and relatedcontractual structuring. Secondly it is to be noted that Government has, in its ownwords, seen fit to "terminate" contractual obligations which it implicitly accepts arebinding on it, to do so by resort to purported public law powers (but without these intruth being authorised by any stated statutory or other provision) and prompted by thereason that those binding obligations are financially less beneficial than it nowwishes. (As shown below, the latter consideration is not only ulterior in law butwrong in fact.)

33. Pursuant to this recommendation, by letter dated 21 October 2010 the PermanentSecretary of the Ministry of Mines and Energy asserted that the Cabinet has"approv[ed] the revocation of Namcor's current mandate of importation of 50%


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petroleum products" [sic] and directed "Namcor ... to clear all its current obligationsand commitments with its supplier before the 1st of February 2011". I attach a copyof this letter, marked "M". (From the letter it is not apparent that whether it is theMinister or the Permanent Secretary who has purported to issue the instruction toterminate the supply agreement. Accordingly I refer to the directive as being issuedby the Minister, alternatively the Permanent Secretary.)

34. The applicants submit that the purported revocation and directive are unlawful for anyof the nine reasons set out below.

C. This Application In Outline

35. As set out in the notice of motion filed together with this affidavit, this is anapplication for an order (as regards Part B):(a) declaring that-

(i) the purported revocation of Namcor's mandate to import 50% of theRepublic's petroleum requirements is of no force and effect, and

(ii) the directive that the supply agreement (concluded pursuant to themandate) between NPTD and the joint venture company be terminatedis invalid, and accordingly the supply agreement is of full force andeffect and binding on NPTD,

and further, to the extent necessary(b) reviewing and setting aside -

(i) the purported revocation of Namcor's mandate; and


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(ii) the decision to direct Namcor to terminate its contractual obligationsunder the supply agreement.

36. Pending the determination of Part B (which I am advised may be delayed by the Staterespondents in producing the record of their decisions), by the fact that it may benecessary in the light thereof for the applicants to exercise their rights under Rule53(4) to supplement this founding affidavit as regards any further review groundsestablished by the record, and time taken thereafter to furnish, in tum, answeringaffidavits to Part B and a reply thereto, the circumstances outlined in this affidavitmake the restoration of the status quo ante on an urgent basis necessary. The need forthe Part A relief will only fall away if the Government respondents tender, as they arehereby invited to do, the suspension of its purported revocation of the mandate and itsdirective aforesaid. In the absence of any such undertaking the Government willregrettably leave the applicants with no alternative but to seek the urgent interim reliefcontained in Part A.

37. The application is based on nine independent, but in some instances overlapping,grounds, namely:(1) the lack of legal authority for the purported revocation and directive, beingultra vires the Constitution and other relevant legislation;

(2) the failure to provide an administratively fair procedure before purporting torevoke the mandate and direct the termination of the contract;

(3) the unfairness of the decisions, being the product of a process in which therelevant authorities failed to disclose the gist of adverse information on which

the decisions were sought to be based;


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(4) the failure to provide reasons for the decisions, which demonstrates inter aliathe decisions' lack of reasonableness and fairness;

(5) the unreasonableness of the decisions, being based on one-sided andmisleading information;

(6) the arbitrary and irrational nature of the decisions, in the respects elucidatedbelow;

(7) the improper purpose of the decisions, namely to extricate by purportedexercise of public power the Government from binding contractualobligations; and

(8) the mala fides and/or ulterior motive underlying the decisions, being intendedto oust Glencore in order to introduce alternative suppliers; and.

(9) the decisions are vitiated by bias, in that there is a reasonable apprehensionthat the relevant authorities did not act independently, impartially andobjectively when making the impugned decisions.

38. I elaborate on these grounds in section D below. As will be seen, the purportedrevocation of the mandate and direction to terminate the agreement is premised on thelegally unsustainable (and, for that matter, factually insupportable) basis that thecontract with Glencore was undesirable. For reasons I understand are further a matterfor legal argument, a government or organ of State may not in law use its public lawpowers to avoid the obligations it has incurred in private law, as it has purported to dohere. (As set out more fully below, it is moreover and in any event factually incorrectthat the contract was a loss-leader, because (i) it expressly contemplated areassessment of the on-sale price; and (ii) it procured petroleum on the mostfavourable basis available in the circumstances.) The true purpose of and basis for the


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17impugned decisions is, on the first to third respondents' own documentation, theulterior object of displacing the second applicant - which, in Namcor's chairperson'swords, has "impeccable credentials" (in his letter dated 6 August 2010, annexure "N"a t p 2 in fin) - with alternative suppliers.

D. The Purported Withdrawal Of The Mandate And Instruction To Terminate TheSupply Agreement Were Unlawful

39. For the reasons set out below the purported withdrawal of the mandate by the Cabinetand instruction to terminate the contract by the Minister, alternatively the PermanentSecretary, were unlawful and fall to be declared invalid, alternatively are to bereviewed and set aside. As mentioned, these grounds constitute separate bases onwhich the withdrawal and instruction are attacked, but some grounds overlap to anextent. The first ground relates only to the instruction to terminate the supplyagreement, however, but the further grounds apply equally to the withdrawal of themandate and the purported instruction to terminate the agreement.

(1) Ultra Vires (not authorised by law)

40. There is no constitutional or statutory power to direct Namcor to terminate itsobligations under the supply agreement. No provision in the Act or Regulationsmakes provision therefore and neither Cabinet, nor the Minister nor the PermanentSecretary is authorised to do so under the Constitution, the State-owned EnterprisesGovernanceAct 2 of 2006, the Companies Act 61 of 1973or any other law.


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1841. Firstly, as regards the Constitution, there is nothing in article 40 of the Constitution

(which provides for the powers and functions of Cabinet Ministers) that suggests thata minister is authorised to direct that commercial transactions of parastatals, likeNamcor, be terminated. Accordingly no constitutional competence on the part of theCabinet, the Minister (or, for that matter, the Permanent Secretary) to conclude orcancel parastatals' contracts exists.

42. This is secondly confirmed by the State-owned Enterprises Governance Act. Itprovides for proper corporate governance of parastatals. While this Act does notprovide so explicitly, the implication is that State-owned corporate entities aregoverned by autonomous boards with independent contractual authority. Purportingto conclude contracts or terminate them by Government fiat is thus implicitlyproscribed by the Act.

43. Thirdly, under the Companies Act Namcor's capacity to enter, and by implicationterminate, contracts is exercisable by any person acting under its authority (section69), i.e. any individual authorised by the board. There is no indication that Namcorhas resolved to terminate the contract or authorised any individual to do so on itsbehalf. And a corporate entity acts only by adopting a valid resolution. NeitherCabinet nor the Minister nor the Permanent Secretary can adopt resolutions on behalfof an independent corporate entity. Only the board of directors of Namcor canterminate its contracts, and must do so in accordance with law, and discharging theirindependent fiduciary duties as directors - not by default consequent to Governmentfiat.


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44. The direction to terminate the contractual obligations was not supported by any legalbasis and none presents itself. To the contrary, the Act, its Regulations, theConstitution, the State-owned Enterprises Act and the CompaniesAct all contemplatethat only the board of Namcor has the authority to terminate its contracts.

45. Therefore, in purporting to issue the directive the relevant authority failed to actwithin its powers conferred by law. Therefore the directive is invalid for exceedingCabinet's authority.

(2) No Administratively Just Procedure

46. The purported revocation has taken place without proper prior notice to any affectedparty. This is, I am advised, contrary to the constitutional and legal requirementapplicable to all exercises of public power, including administrative action, thatindividuals affected by the exercise of public power be granted an opportunity tomake representations thereon, having been given sufficient prior notice of theproposed decision.

47. From the above contractual matrix it is clear that not only Namcor, but also the jointventure company, Petroneft and Glencore indeed had a legitimate expectation. Thisboth Namcor and the Minister accept. Namcor specifically communicated to theMinister that "the PetroNeftiGlencore top management is very eager to presentthemselves to you and Cabinet in detail [sic] our strategic relationship on the 50%import mandate, and is scheduled to arrive during the period of August 11-13, 2010"(letter by Namcor's chairman to the Minister dated 23 July 2010, attached marked


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"0"). And the Minister himself, in response to Glencore's letter requesting anaudience with the Minister, invited representatives to the meeting held on 8 December2010. Had there been any supportable basis on which to contend that Glencore didnot have a legitimate expectation to be advised in advance of the proposed decisions,the Minister would have asserted this at the time. Instead the Minister - acting,presumably, on legal advice and without reservation of rights - granted a right ofaudience to Glencore.

48. But this post hoc consultative process does not, I am advised (for reasons which arefurther a matter for legal argument) constitute just administrative action in general andcompliance with the audi rule in particular. Moreover it was not intended to purge theprocedural invalidity of terminating a vested right without hearing the partiessubstantially and adversely affected. Nor could it ex lege remedy retroactively the

fatally flawed exercise of public power, I am advised. At best for the first to thirdrespondents, the Permanent Secretary's letter of21 October 2010 communicated afaitaccompli, it clearly was no prior notice at all and did not provide an opportunity for aconsultative exercise required by the constitutional right to just administrative action,as entrenched by section 18 of the Constitution.

49. Indeed, Glencore's letter of 26 October 2010 confirms that five days after thePermanent Secretary's letter Glencore still had no reason to believe that terminatingthe mandate or the supply agreement were seriously or genuinely contemplated.Otherwise Glencore would not in its letter Glencore have requested a consultation,expressed its continued commitment to perform as partner pursuant to the mandate,reiterated that there was a problem with the pricing formula and advised as regard the


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correct factual position. Regrettably the Ministry's letter of 27 October 2010 inresponse to Glencore's letter misleadingly omits to mention the purported withdrawaland instruction to terminate the supply agreement. And in the light of the concludingparagraphs Glencore's letter under reply this omission is curious. It was only twodays later, on 28 October that Namcor informed Glencore of the Ministry's letter of21 October.

50. Thus even if adequate prior notice had been accorded (which is denied), what ensuedconstituted no administratively just procedure as required by art 18.

(3) Unfair

51. Cabinet's and the Minister's (alternatively the Permanent Secretary's) conduct was

further unfair in that they failed to disclose to Namcor and the applicants the contentsof the adverse reports on which the decisions were based.

52. It is an established principle of administrative law, I am advised, that a publicauthority is under a duty to act fairly by disclosing adverse factual material on whichit relies when contemplating to act in a way that adversely affects an individual'srights and interests. Thus by failing to disclose even the gist of the cabinet document,the decision-making process was fatally flawed for being unfair.

53. But the one-sided nature of the cabinet document is further so apparent as to confirmthat the process was wholly unfair also for failing to provide an objective presentationof the relevant facts. As already mentioned, a balanced presentation of the relevant


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circumstances would have indicated the true basis for incurring losses - namely theMinister's failure to heed the caution that the BFP was unsustainable, a warningexpressed over years and confirmed by independent experts. These issues arecanvassed in a Ministerial Brief prepared by Namcor and submitted to the Ministry in2008, to which no reference is made in the briefing document of 23 September 2010on which Cabinet purported to act. The latter document merely states that Namcorholds a different view (purporting to summarise it in one sentence), but dismisses itwithout fair presentation or any analysis. (The document simply rejects Namcor'sviews on the basis of "not [being] shared by the Ministry of Mines and Energy, theLine Ministry that serves as Namcor's regulatory body".)

54. This clearly does not constitute a fair decision-making process, I respectfully submit.Thus its resultant decisions are unlawful for being unfair.

(4) NoReasons

55. In addition, the Minister was further obliged to act fairly and reasonably, and had togive reasons for the decision to revoke the mandate and direct the termination of thecontract. To date no such reasons had been given.

56. Therefore the purported exercise of public power is further fatally flawed also for thisreason. Moreover, the failure to give reasons further serves to confirm that theimpugned decisions were procedurely unfair and substantively unreasonable, arbitraryand irrational, and that no supportable reason existed therefore. I tum to these furthergrounds of attack separately.


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(5) Unreasonable

57. Further, the decisions are wholly unreasonable too. This is because there is nosupportable, reasonable basis for either of the revocation of the mandate or theinstruction to terminate the contract. The evidence communicated to the Ministersupports the opposite conclusion, namely that Glencore is by far the most cost-effective supplier of petroleum. There is no basis for the insupportable suggestionthat Glencore "push[es] the Government into deep dept [sic]".

58. Moreover, an independent expert analysis by Price Waterhouse Coopers determinedthat the "dept" is the result of an improper pricing formula. It suggested that amarket-related on-sale price be substituted for the unrealistic and under-inclusive

BFP. Terminating Namcor's downstream operations was not an option, the analysisdemonstrated.

59. In any event, the Ministry's stance that Namcor should be creative and make a profitdespite being locked into a loss-leading BFP is utterly unreasonable. In thecircumstances no reasonable public authority could have come to this conclusion. Asmentioned, the assumption on which the BFP was based - namely that petroleum wasavailable from South Africa - was not only undesirable when the best interests of theNamibian consumers are considered. It was also wholly unfeasible, because SouthAfrica had no petroleum to export (having become itself a nett importer during thelast few years).


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(6) Arbitrary And Irrational

60. The expert assessment by Price Waterhouse Coopers further demonstrates thatdecision to terminate Namcor's mandate (and consequently the purported instructionto terminate the supply agreement concludedpursuant thereto) is wholly irrational andarbitrary. In their analysis Messrs Nico Week and Heiko Deal advised against this"option", considering it to be "not really ... an option" at all - because it would notbe in the national interest to place the security of fuel supply in the hands of privatecompanies. Private companies are driven purely by profit and not by public policyconsiderations. They are not committed to maintain a sustainable fuel supply toNamibia. Their interest is to make as much profit as possible, regardless of thenational interests and the consequences for the consumer. I attach, marked "P", theBoard minutes of the meeting of directors held on 11 February 2009 and refer toparagraph 8 thereof. In this regard I refer to the "Turnaround Strategies forSustainableFuture Operations report" dated 15October 2009, attachedmarked "Q"

61. As Namcor's board minutes further reflect, the viable options were to recapitalise (byanyone of at least three different means, including a governmental investment inNamcor, granting it a cash injection; Government grantingNamcor a loan; or Namcorobtaining a loan from another financier, backed by a government guarantee) or toamend the Basic Fuel Price formula/mechanism and the Pump Price Calculation(which had been set without regard to relevant fmancial factors - having completelyfailed to take into account actual charges incurred, costs of hedging andadministrative and operational costs). The external experts recommended a


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combination of these two options, and the Board on this basis assessed the situationand resolved that ceasing downstream operations was not an option.

62. Notwithstanding this, the Minister adopted none of the recommended options, butopted for the measure which was universally rejected on the basis that it wasdetrimental to the national interest. I submit that there is no supportable basis for thisabsolute abolition of the downstream system and that the decision is rash andirrational.

63. Moreover, and in any event, to the extent that the decision may be sought to bedefended with regard to any perceived obligation to adhere to the BFP as formulatedpursuant to any SACU arrangement, I submit that such considerations constitute anunwarranted fetter on the Minister's discretion to adopt an appropriate, rational andsupportable solution which takes into consideration all relevant factors, including thedensity of the petroleum products sourced from abroad, the freight element, wharfage,coastal storage, industry margins and risks inherent in market pricing, foreigncurrency exposure and freight differential. And as already mentioned, it is clear thatother members of the customs union do not regard themselves constrained by theBFP.

64. In any event, the Ministry itself recognised that the components comprising the pricecalculated under the BFP was "a matter of concern", already in its letter dated 26March 2008 (attached,marked "R"). The letter acknowledged the need to undertake astudy into the BFP cost components and to consider revising the formula. Indeed, inthe light of the substantial losses incurred under the BFP pricing mechanism, the "de-


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linking of Namibia's 'umbilical cord' with South Africa [was] ... imperative", as theexperience in Botswana confirms. (See in this regard the latter to the Ministry dated28 March 2008, attached marked "S".)

65. Furthermore, the volte face of terminating Namcor's mandate instead of seeing thestudy through is patently arbitrary. As late as 16 March 2010 the Minister confirmedthat the downstream strategy "f[e]l1 within [his] very personal vision for NAMCOR"and that the benefits it represents "to the nation and to NAMCOR as a Company willbe many fold [sic]".

66. I therefore submit that the impugned decisions are both arbitrary and irrational andshould be set aside also for this reason.

(7) Improper Purpose

67. The Briefing Document dated 23 September 2010, attached marked "T", concludesthat the "agreement between Namcor and Glencore should be terminate [sic] becausethe latter is pushing Government into deep dept [sic], which Government may fmddifficult to pay back, thus empowering Glencore to dominate the local oil industry inone way or another" (at p 13).

68. This is the basis on which the impugned decisions have been made. It is deeplydisturbing, in its blunt admission that the decisions have been crafted as a device torelease a contracting party from the contractual obligations it is bound to honour, or toafford compensation if it resorts to breaching them. Exercising public power to avoid


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the consequences of a binding contract is unauthorised by law, and demonstrates thatthe decisions were made for an improper purpose. It is unlawful for any of the actorsto seek to escape from what was perceived to be an inconvenient contract. To do so isinimical to the principle of legality, the rule of law and the division of powers, all (Iam advised) hallmarks and cornerstones of constitutional democracy in Namibia,through the Constitution.

69. Therefore, even had there been any public benefit in terminating the mandate andsupply agreement by Governmentfiat (which I deny), this does not constitute a properpurpose for the purported exercise of public power. The decisions are accordinglyunlawful also for this reason.

(8) Ulterior MotivelMala Fides

70. The Briefing Document further recommends that "Government should explore thepossibility of finding an alternative supplier of petroleum products within the region"(p 13). It goes on to refer to Namcor's experience with foreign contracts andconcludes that "co-operation '" should be sought at government level so thatregional oil suppliers, mainly SASOL, PetroSA and Sonangol would supply Namibiawith petroleum products ... " (p 14). This is nothing but a thinly veiled attempt toelbow out Glencore.

71. In an article published in The Namibian of 16 November 2010, it is reported that"Trafigura and Sonangol appear by name on a handwritten note of Presidential Affairs


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Minister and Attorney-General Albert Kawana which he, together with a joint venture(JV) proposal, delivered to Namcor managing director Sam Beukes in May." I attacha copy of the article, marked "U". Tomy knowledge this article's correctness has notbeen denied by either the Namibian Government, Trafigura or Sonangol or anyoneelse. Had its truth been resisted, vigorous denials would have been madeimmediately.

72. To the contrary, it is by now a matter of notoriety that Trafigura backs a consortiumheaded by politically-connected individuals who were intent on muscling outGlencore. See in this regard a newspaper article of 5 November 2010, attachedmarked "V", referring to a diagram drawn by the Presidential Affairs Minister andAttorney-General, setting out how the proposed scheme would work. From thediagram it is clear that the scheme is for Trafigura to displace Glencore. In fact, thisarticle contains startling revelations (on p 2, under the heading "Kawanamasterminds" - the reference is to the Hon Presidential Affairs Minister andAttorney-GeneralAlbert Kawana) about a concerted effort to "team up with membersof the NLF [Namibian Liquid Fuel] to snatch the tender from Glencore", allegedlyinvolving the Permanent Secretary. Again this report has not been denied and isaccordingly to be accepted as admitted.

73. The Briefmg Document further evidences a marked animosity towards Glencore. Itaccuses Glencore for instance of bad faith and ambitions to control the oil industry,and describes Namcor's business with Glencore as an "unhealthy relationship".


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74. In this regard there can be no doubt, I submit, that the decisions are have been madeacting on ulterior motives and mala fide. They therefore are unlawful also for thisfurther reason.

(9) Bias

75. In any event, the circumstances set out above raises (at the very least) a reasonableapprehension of bias on behalf of the applicants. There is every reason to apprehendthat the relevant authorities did not act independently, impartially and objectivelywhen making the impugned decisions. Not only is the Briefmg Documentantagonistic towards Glencore, the Permanent Secretary also made adverse officialexhortations regarding the implementation of Namcor's mandate, and the reportedprejudging of the issue by at least the Hon Kawana (who of course is a member ofCabinet responsible for the first impugned decision, and who, in terms of theundenied reports, "masterminded" Glencore's exit to make space for others) vitiatesthe decision.

76. Thus also because the decisions are subject to a reasonable apprehension of bias theyshouldbe set aside, I submit.

E. Court Proceedings

77. Before concluding I make brief submissionson the institution of these proceedings.


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78. The decisions (which, as stated, were taken without prior notice) were firstcommunicated by Namcor. This sudden development required the applicants in thefirst instance to establish quite what had happened, which of course they were obligedto do through investigations in Windhoek. They did so as a matter of urgency. Itwasnecessary for the applicants to investigate also the likely outcome for themselves ofthe revocation of the mandate and the termination of the agreement. When it howeverbecame apparent by mid December that the purported revocation and direction wouldnot be withdrawn, the applicants again without delay instructed first London solicitorsand thereafter identified and instructed Namibian legal practitioners (whose officeshave been shut at the time for some three weeks, in accordance with the acceptedNamibian end-of-year practice). Thereafter counsel (in late December) wereinstructed, and their advice urgently obtained (notwithstanding that this was soughtduring the Christmas vacation). Itwas necessary for the applicants to take carefuland appropriate advice and for instructions to be obtained for the preparation of courtpapers. All this was undertaken as quickly as was possible in the last week in Januaryand the first week of February. Following preparation of the draft papers it wasnecessary for these to be considered by counsel, attorneys and solicitors involved,factual enquiries to be resolved and for the text to be finalised, This process(accomplished in the second week of February) has been difficult, because it hasrequired the assembling of contractual documentation, researching statutory and othermaterial, establishing the historical background, taking advice from legalpractitioners, consultations and preparing papers as between London, Namibia andelsewhere.


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79. In these circumstances a period of less than four months has elapsed since theimpugned decision was made. I respectfully submit that this - relatively short, in thecircumstances - period is an entirely reasonable time in which to bring theapplication. I submit that the issues raised are of great national and publicimportance, affecting as they do the legality of purported public-law ousting ofcontractual rights and the public interest not only inherently thereby engaged, but alsoin a secure supply of a vital strategic commodity to Namibia. Moreover vast sums areat risk through the attempt to oust the contracts. In all the circumstances, I submit thatthere is a degree of not only inherent urgency related to important constitutionalprinciples at stake, but urgency occasioned by the consequences.

F. TheGrant ofPart A (UrgentRelieD

80. I respectfully submit that a proper basis has been established for the relief sought inPart A. As already noted, this could be entirely obviated were the Governmentrespondents to demonstrate their desire to facilitate the Court's task and to avoid atwo-stage proceeding by tendering (if they prefer, expressly without admission) tosuspend the purported revocation of the mandate and directive to terminate. Whatfollows is predicated on a refusal by the Government respondent to assist the Court

and to promote an expeditious determination of the whole matter by giving thatundertaking.

81. I submit that on the facts and grounds advanced above, the applicants have establishedat least a prima facie right (on anyone or more of the nine legal grounds advanced). Isubmit further that they have no alternative remedy reasonably adequate in the


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32circumstances. While the applicants assess that the purported revocation of themandate and directive to terminate the contract has caused and will cause themconsiderable damages and loss of revenue, they have been advised both that damagesin this regard are extremely difficult to compute and furthermore that no clearlyestablished remedy for recovery of damages so suffered is known in Namibia. Isubmit further that the same circumstances establish the apprehension of continuedirreparable harm, month-by-month, if the purported revocation and termination arenot interdicted by court order, and the status quo ante as it applied on 31 January2011 reinstated, pending final determination of Part B. Moreover, as stated above,Glencoremay be at risk in various unquantifiable contractual respects, particularly asregards the performance bond to which I have referred.

82. Thirdly, I submit that the balance of convenience is compellingly in favour ofrestoring on a temporary basis a situation which has endured for some two years. Asnoted, annexure L documents the sole key concern of the Government as being therelative lack of profitability of the contractual arrangements Namcor freely chose toenter upon. Even if this were factually correct (which I have shown is not the case),the situation is no different to other State commitments. In particular as regardsNamcor itself, Government from time-to-time in the past has where required madecash injections. In addition, the public interest supports the granting of the temporaryrelief. Clearlythere is a public interest at stake in having the status quo ante restored.

83. Lastly, I respectfully submit that the proper exercise of what I am advised is theCourt's judicial discretion supports the grant of the temporary relief. The choice liesin the Government's hands, as noted, to avert any need for such relief and for the

t',


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33Court to conduct an urgent hearing by the simple undertaking indicated above. If itfails to do so, it itself creates the need. Moreover, important to the exercise of theCourt's discretion is that the Government's own document, annexure L, reflects aserious departure from constitutional and company law requirements. It is inherentlyurgent and intolerable when the State interferes, for the ulterior purpose ofaffordability in the contractual obligations of a separate juristic entity. It isrespectfully submitted that the implications for foreign investment and for confidenceof the rule of law inNamibia are compelling.

G. Conclusion

84. For the above reasons, as to be amplified pursuant to Rule 53(4) to the extentnecessary, I respectfully submit that a proper case is made out for the relief sought inthe notice of motion.

85. I therefore ask that the relief sought be granted, including (as regards the costs ordersought in Part B) costs on the scale of one instructing legal practitioner and twoinstructed practitioners. I am advised and submit that the importance of the matterjustifies instructing senior and junior counsel and accordingly ask that the costs orderreflect this.

ANDREW GIBSON


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Sworn this twenty second day of February 2011

N o t a r y P u b l i c , L o n d o n , E n g l a n dNotary Public ( M i c h e l l e S c o t t )At 50 Berkeley Street, London WlJ 8HD. CHEESWR IGHTS

N O T A R IE S P U B L IC

Before me

B an ks id e H ou se , 1 07 L ea de nb all S tre et ,London EC3A 4AFT el ep ho ne : 0 20 7 62 3 9 47 7F ac si mi le : 0 20 7 62 3 S428

Documents

Signed Affidavit of Andrew Gibson