Expropriation of "old order" mineral rights in South Africa: the Constitutional Court has its say (twice)

The Mineral and Petroleum Resources Development Act 28 of 2002 (ZA) (MPRDA) makes provision for the conversion of so-called “old order” rights to prospecting and mining rights. The consequences of the failure of holders of old order rights to apply for (a) Conversion or (b) new rights under different circumstances were decided by the South African Constitutional Court in two decisions during 2013. These cases are discussed against the background of the nature, content and termination of old order rights. It is also discussed whether such rights were expropriated by the MPRDA and, if so, whether compensation is payable by the state.

Status of tailings dumps : let D5s go working in the past?

It was decided in the De Beers v Ataqua Mining (Pty) Ltd that ''tailings dumps'' created by mining companies before the Mineral and Petroleum Resources Development Act, 28 of 2002 ("the MPRDA") came into operation are not governed by its provisions because such dumps are not "residue stockpiles" or "residue deposits" for purposes of the MPRDA. Ownership of tailings dumps is determined by the common law principles of accession. Ownership of a movable dump has to be transferred by one of the recognised forms of delivery of movables. Processing of these dumps will, however, still be subject to compliance with South African environmental, health and safety laws in general. It is submitted that mine dumps or tailings dumps created upon the exercise of "old order mining rights" before the commencement of the MPRDA and even after commencement of the MPRDA until eventual termination of the "old order mining rights" are not subject to the extensive, mining, environmental, empowerment provisions of the MPRDA. Termination of "old order mining rights" takes place upon: (i) refusal of an application for conversion of a mining right during (or even after) the period of transition, (ii) conversion into and registration of new order mining rights during (or even after) the period of transition or (iii) termination of unconverted "old order mining rights" on 30 April 2009. To the extent that this decision has made it possible to embark on a shorter and less cumbersome route in the reprocessing and eventual disappearance of most tailings dumps, it is to be welcomed from an economical, environmental, job creation and aesthetic perspective. Proposed amendments to the MPRDA to undo the impact of the De Beers decision should be carefully considered against these mentioned benefits and a possible finding that it may amount to an expropriation without compensation.

The role of board independence in mitigating agency problem II in Australian family firms

We investigate the impact of board independence on earnings management on a sample of family controlled firms listed on the Australian Securities Exchange (ASX). Using panel data over the period 2000–2004, we find evidence of earnings management among family controlled firms in Australia, an environment of high investor protection and private benefits of control. Findings show that a higher proportion of independent directors on boards is effective in reducing earnings management, thereby mitigating agency problems associated with entrenchment and expropriation in family firms. We also find that managers of family firms are less aggressive in managing earnings via discretionary long-term accruals compared to non-family firms.

A tale of two expropriations: Newcrestia and Agrizania

A comparison will be made between the decision of the High Court of Australia in Newcrest Mining (WA) Ltd v The Commonwealth1 (“Newcrest”) and the decisions of the South African Courts in the Agri South Africa line of cases.2 Although the mineral law systems of the two countries differ insofar as historical development and content,3 the simplified facts of the Newcrest and Agri SA decisions and principles of expropriation law are similar enough to draw an interesting comparison between the respective cases. Both cases dealt with the issue of whether the mineral rights/mining rights of private holders were expropriated by legislation which prohibited mining in one way or another. A comparison between the cases shows the approaches towards the issues and what exactly constitutes deprivation and/or acquisition of property for purposes of expropriation and whether deprivation and/or acquisition actually took place.The differences between the mineral law systems of Australia and South Africa (before the enactment of the Mineral and Petroleum Resources Development Act 28 of 2002 (hereafter “MPRDA”)) and the protection afforded against the resumption/expropriation of mineral rights or mining rights will be set as background information for a better understanding of the respective decisions. The facts of the two cases will first be set out and simplified for comparative purposes before the respective decisions are discussed. At the end, a comparison will be made between the decisions and a conclusion reached about the similarity of principles and the correctness of the respective decisions.

Corporate opacity and cost of debt for family firms

This paper uses a sample of Chinese firms to examine the impact of corporate opacity on the relationship between family control and firms’ cost of debt. We find that family control is associated with a lower cost of debt on average, and a negative impact exists mainly in firms with relatively low corporate opacity. We further provide evidence that the moderating effect of corporate opacity becomes more pronounced when investors’ perception of controlling families’ moral hazard of expropriation is higher. Our results are robust to alternative opacity proxies and controlling for endogeneity of family control using the instrumental variable method. Our study highlights that controlling families are heterogeneous in their impact on the shareholder–debtholder relationship in family firms, and debtholders view corporate opacity as an important reference in assessing the extent of potential agency conflicts in China.