By Deogratias Mmana:
The High Court sitting in Lilongwe has ruled in favour of arbitration for all parties involved in the wrangle between Salima Sugar Company and its partner shareholder AUM Sugar and Allied Limited.
The parties involved in the case are AUM Sugar and Allied Limited, as claimants, and Greenbelt Initiative Holdings Limited, Greenbelt Authority, Salima Sugar Company Limited and the Attorney General as defendants.
The bone of contention, according to a ruling dated May 2024 and made by Judge Charlotte Malonda, is that the shareholders had a meeting in 2023 and decided, though acrimoniously, to dissolve the joint venture agreement between the parties.
The effect of the termination of the joint venture was that the board was dissolved, names of signatories to the company’s accounts changed and the replacement of the applicants as partners in the business venture is underway.
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According to the ruling, the shareholders agreement was terminated on December 19 2023 and AUM Sugar and Allied Limited decided to invoke the arbitration provisions in the agreement between the parties and applied for the same to the International Chamber of Commerce (ICC), where proceedings are underway.
The substantive application before the court is to stop in its tracks the implementation of the decision by the defendants to move on, in the absence of the claimant as a business partner.
The application was meant to stay the implementation pending the decision or conclusion of arbitration proceedings before the ICC.
The court was moved to decide whether to dismiss the application for stay as an abuse of the court process and whether the court should stay application of the proceedings in favour of arbitration, pending criminal proceedings.
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Further, the court was to decide whether the application was defective because the sworn statement of the claimant had used an electronic signature which was said to be not compliant with the law and, finally, to decide whether the commencement of arbitration proceedings before the ICC was valid.
In her ruling, Malonda ordered that the parties should proceed with arbitration without delay.
“The grounds argued for preliminary objections are without merit. However, the preliminary objection raised against the application for stay is upheld only on the basis that all interim or urgent matters must be dealt with by the arbitrator and not be prematurely argued before the courts of law in Malawi. That is the current position of the law,” the ruling reads.
The ruling adds: “It is the further order of this court that the claimant should make an application for any urgent or interim orders before the same arbitrators within 14 days. The arbitrator before the International Chamber of Commerce is fully seized of this matter and to dispose of the matter expeditiously based on the burning issues raised by the parties.”
Malonda argues that the commencement of the arbitration before the ICC is valid and further that the arbitrators seized of the case are the right forum to deal with all urgent and interim issues brought by any of the parties in the absence of any undermining or pre-emptying by the court.
“The arbitrators will also be in a position to make any determination based on issues related to jurisdictions and public international law which the parties may wish to argue.
“However, this court cannot preempt the outcome of arbitration by making pronouncements on issues which should rightfully be dealt with by the arbitrator. My court is, therefore, shut out from such proceedings based on Section 26 of the agreement between the parties, which provides that arbitration is the preferred form of dispute resolution “without recourse to the ordinary courts of law”.
According to a forensic audit report for Salima Sugar Company dated November 20 2023, issued by Audit Consult Advisory Services Limited, 60 percent of its shares are supposed to be held by Aum Sugar and Allied Limited while 40 percent of the shares are supposed to be held by the government through Greenbelt Initiative Holdings Limited (GBIHL).
The report says while GBIHL introduced $11.4 million as its share capital and $23.6 million as loan capital, AUM Sugar and Allied Limited failed to fully pay its $17.1 million share capital. The company introduced $1.472 million as at May 31 2017, which was the due date for the company to fully make good of its $17.1 million share capital contribution.
The audit report further says that AUM Sugar and Allied Limited introduced $7.174 million as at March 31 2023, excluding the Malawi Kwacha contribution, thereby failing to fully subscribe for its share capital contribution.
The report says AUM Sugar and Allied Limited also introduced a further $K3.741 billion towards its share capital contribution in 2022, which was translated into $4.40 million, taking the tally of its contribution to $11.574 million.
