Republic of Sierra Leone v SL Mining Ltd: Key Developments in the Sierra Leone Mining Licence Dispute

In the Sierra Leone mining licence dispute, significant developments have taken place regarding the suspension and cancellation of a large-scale mining licence and licence agreement granted to SL Mining Ltd (SL) by the government. This post highlights key rulings and issues that have emerged throughout the dispute.

Ruling on Jurisdiction Challenge

On 2 February 2021, the government of Sierra Leone's challenge to the jurisdiction of the arbitrators was dismissed under Section 67 of the Arbitration Act 1996 (Sierra Leone v SL Mining Ltd [2021] EWHC 286 (Comm) 2021 WL 00536678). The dispute centered around SL Mining Ltd's claims and the government's actions regarding the mining licence.

Application for Indemnity Costs

Subsequently, on 16 April 2021, SL Mining Ltd pursued an application for indemnity costs against the Republic of Sierra Leone following Sierra Leone's discontinuance of its second challenge under Section 67 of the Arbitration Act 1996 (The Republic of Sierra Leone v SL Mining Limited [2021] EWHC 929 (Comm)). This application was based on Sierra Leone’s reliance on a foreign act of state doctrine after the dismissal of its initial challenge.

Court’s Decision on Indemnity Costs

The court ruled in favor of SL Mining Ltd, ordering Sierra Leone to pay indemnity costs. Sierra Leone's persistent non-compliance with orders and failure to meet payment deadlines were cited as reasons for this decision. Despite having funds available for other purposes, Sierra Leone evaded agreed sanctions for non-payment. The court declined a summary assessment of costs but ordered an interim payment on account of £210,000. The parties were invited to agree on payment terms.

Background

The core issue revolved around the interpretation of Clause 6.9(c) in the mining license agreement (MLA), which delineated the steps for resolving disputes. According to this clause, if a settlement couldn't be reached within three months of a written notice of dispute, either party could escalate the issue to a board of arbitrators following ICC rules.

After the mining company issued a notice of dispute on 14 July 2019 and subsequently requested arbitration (RFA) on 30 August 2019, the government contested the jurisdictional timing, arguing that arbitration could not begin before 14 October 2019, three months post the notice of dispute. Nevertheless, the arbitrators dismissed this argument, confirming their jurisdiction as outlined in Clause 6.9(c) of the MLA. This decision highlights the critical role of precise contractual language and adherence to established dispute resolution protocols within commercial agreements.

Key Issues and Rulings

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Jurisdiction/Admissibility Issue. The court addressed the government's challenge regarding the alleged prematurity of the arbitration claim and clarified that it was not a jurisdictional matter but rather a question of admissibility. The court emphasised that determinations regarding compliance with conditions precedent should be made by the arbitrators themselves. The court relied on the guidance provided by the Chartered Institute of Arbitration Practice, recognising that arbitrators are in the best position to decide such matters. By deferring to the expertise of the arbitrators, the court affirmed the importance of allowing them to make determinations on issues related to the admissibility of claims in arbitral proceedings.
Consent/Waiver Issue. The court acknowledged that the claimant had given its consent to the jurisdiction of the emergency arbitrator. However, the court noted that by insisting on the service of the Request for Arbitration (RFA) on August 30, the claimant effectively waived the three-month settlement period provided for in the contract. The court emphasised that the claimant had a clear understanding of the contractual provisions governing the timing of arbitration proceedings. This highlighted the claimant's awareness and agreement to proceed with arbitration without waiting for the expiration of the settlement period.
Clause 6.9(c) Compliance. In analysing the case, the court focused on the interpretation of clause 6.9(c) of the mining license agreement, which specifically dealt with the parties' ability to achieve an amicable settlement. After careful examination, the court determined that as of August 30, it was objectively evident that reaching an amicable settlement by the specified deadline of October 14 was not feasible. Consequently, the court concluded that there was no breach of clause 6.9(c) by the party involved.

Implications and Future Outlook

The developments highlights the importance of clear contractual language, adherence to procedural protocols, and the proper interpretation of dispute resolution clauses in commercial agreements. The rulings provide guidance on jurisdictional nuances and the role of arbitrators in resolving complex disputes. They also set a precedent for future arbitration cases in the mining sector and beyond

The judgments clarify that compliance with a multi-tier dispute resolution clause is a question of admissibility, not jurisdiction, and should be determined by the tribunal, not the court. This aligns English law with the positions taken in the United States and Singapore and favored by international commentary.

It has been also emphasised a purposive and commercially sensible approach to interpreting multi-tier dispute resolution clauses. If the purpose of a cooling-off period is not achievable, such as when an amicable settlement is highly unlikely, the court may not consider it an absolute bar to commencing arbitral proceedings.

However, the decisions do not suggest that claimants can ignore escalation requirements in dispute resolution clauses without risk. Tribunals still have the discretion to find that a claimant has breached the terms of the escalation clause, which could result in remedies such as a stay of proceedings or cost sanctions.

The consequences of breaching an escalation clause could be significant. A tribunal may order a stay of proceedings and impose cost sanctions, or even dismiss an RFA as premature. In the latter case, the tribunal's mandate would end, and the parties would need to appoint a new tribunal after complying with the escalation clause. This could have adverse effects on the suspension of limitation periods.

Therefore, parties are advised to comply with multi-tier dispute resolution provisions whenever possible to avoid potential risks and consequences associated with non-compliance.