Nicola Mawson
In what will be a seminal case that will help craft the future of South Africa’s law, MTN and Turkcell will be appearing in the Supreme Court of Appeal this week to argue a matter over whether a South African court can rule on alleged activities that happened in another country.
Turkcell seeks to have MTN found guilty of bribery and corruption, alleging that it didn’t win its 49% of a telecommunications licence in Iran fairly. Before this issue can be heard, a full bench of judges in Bloemfontein needs to decide whether a South African court has jurisdiction over the matter.
Turkcell’s bid to have MTN found guilty of bribery and corruption dates to 2013, when the Turkish operator initially approached the US courts in an action it later withdrew.
The Iranian Ministry of Communications and Information Technology had been in negotiation for about 18 months over granting the licence to a consortium that included Turkcell subsidiary EAC. That consortium had first been chosen as a provisional licensee, but negotiations broke down before the deal was finalised.
Cedric Soule, counsel at King & Spalding, global counsel for Turkcell, told Business Report that the case being heard this week will set a precedent in South African case law as it deals with two areas of law, sovereign immunity and act of state doctrine, that have previously not been the focal point of a legal hearing such as this.
Soule explained that, under sovereign immunity, countries are exempt from being named in lawsuits. However, Soule said that Iran is not named in the lawsuit and that Turkcell’s claim is not against Iran. Instead, it covers allegations that MTN secured its GSM licence in the Middle Eastern country, in 2004, through illicit means. Turkcell is claiming damages of $4.2 billion (R75.3bn at the time), which it believes are the profits it would have made had it won the cellular licence.
The principle of the act of state doctrine, Soule explained, is that one country cannot make a ruling against another as this would embarrass that jurisdiction. There are, he said, exceptions to this rule, such as when the allegations involve conduct that breached South African public policy.
“Turkcell’s allegations involve corruption by a South African company, and South Africa is known internationally to be fighting corruption,” Soule said. “This case will set a precedent as no South African judgment has really delved into the meaning of these two doctrines.”
MTN, in its papers, is arguing that Turkcell’s contention, which it denies, that it bribed Iranian officials and sought to enable arms trade means that findings will have to be made against the Iranian government, and South African courts do not have jurisdiction over foreign governments. Therefore, South Africa is not the correct country in which to bring a lawsuit as the issues in Turkcell’s papers fall outside South Africa’s jurisdiction.
Soule said that, if both points of law are ruled in its favour, Turkcell can bring its main case to the Gauteng High Court, Johannesburg. The Turkish operator lost its bid for its allegations of bribery and corruption to be heard in the Gauteng High Court, Johannesburg, two years ago, with a finding then that South Africa was not the correct geography to hear the matter.
Soule disagrees with the Johannesburg high court. He said that MTN and the other respondents are based here, and having the case heard in Iran would be pointless as the courts there are not independent. “The Iranian court system is completely under the power of the government.”
He added that there is also a higher likelihood that the respondents, which include the then MTN CEO Phuthuma Nhleko, and Irene Charnley, previously VP for the Middle East and North and East Africa, will appear to defend themselves in South Africa, where they live, as opposed to Iran.
Charnley told Business Report that she stood by the findings of the independent special committee led by the UK’s Lord Leonard Hoffmann, which investigated the charges when they surfaced in 2012. His findings read, in part: “All the allegations are a fabric of lies, distortions and inventions.”
All reasonable efforts were made to contact Nhleko, without success. However, he has also previously been exonerated by the Lord Hoffmann report.
“These are serious allegations. We think that it is important for a South African court to examine these allegations, look at the evidence and come to a decision. Ultimately, if it decides that there was no bribery or corruption, then that’s the decision,” said Soule.
“But we believe that, in reviewing all the evidence, a South African court would conclude that MTN behaved improperly and find in favour of Turkcell. But unfortunately, we are essentially being told that the case shouldn’t be heard in South Africa,” he added.
MTN, Africa’s largest cellular operator by subscribers, said its legal strategy is fully aligned with the current procedural requirements. “We remain confident in our position.”
The group said it maintained its position that all claims brought against the company by Turkcell are without merit. “MTN has zero tolerance for corruption and unethical business practices.”
Soule said no decision had been made yet as to whether the matter would be taken to the Constitutional Court should Turkcell fail in its bid at the court in Bloemfontein.
BUSINESS REPORT