BPOPF pushes arbitration in P400 million trailblazer
Capital Management Botswana (CMB) is playing hardball with Botswana Public Officers Pension Fund (BPOPF) following the High Court’s rejection of an application by Non-Bank Financial Regulatory Authority (NBFIRA) through which it had wanted to appoint a Statutory manager (Peter Collins) over CMB.
The Partnership Agreement between BPOPF and CMB gives the latter a trailblazer status because they are likely to be the first company to be get over P400 million from a ‘partner’ with little sweat. BPOPF had issued an Arbitration Notice in a bid to recover over P400 million whose whereabouts have not been disclosed and it belongs to the 150 000 pensioners of the Botswana public service.
On 14 May 2018 BPOF lawyers wrote to the Botswana Institute of Arbitrators (BIA) for intervention after CMB failed to honour the Arbitration Notice within the recognized 20 days. CMB has instead made hard demands on the part of BPOPF. “The 20 day deadline has passed. Despite BPOPF having engaged with CMB and with the statutory manager who was appointed to CMB, CMB has, to date, neither accepted the arbitrators proposed in the Arbitration Notice, nor has its suggested any alternative arbitrators.
CMB has, in court papers, suggested that an arbitration should be held in the United Kingdom, but it seems to us that the terms of the Partnership Agreement are clear. CMB have not raised any formal dispute in relation to the forum of arbitration and this would, in any event, be a dispute as defined in the Partnership Agreement which would need to be dealt with, perhaps as a preliminary issue, at an arbitration in Botswana. In any event, the Partnership Agreement does not require that the BIA be instructed by both parties but merely requires that the BIA appoint the Arbitrators if the parties have not agreed within 20days,” wrote BPOPF lawyers, Werksman Attorneys.
BPOPF has asked the Botswana Institute of Arbitrators to appoint three arbitrators in accordance with the terms of the Partnership Agreement. They want the arbitrators to be Senior Counsels to preside over the arbitration in respect of the disputes declared. “The subject of the arbitration is a matter of national importance notably given that the BPOPF represents more than 150 000 pensioners of Botswana public service and that more than P400 million is at risk. It is urgent that the Disputes be resolved efficiently.
We therefore look forward to your prompt response,” further stated the BPOPF lawyers. BPOPF had suggested the names of Mr Virgil Vergeer; Mr Kwadwo Osei Ofei; Ms Pepsi Sibanda; and Mr Sifelani Thapelo as possible arbitrators. BPOPF Acting Chief Executive Officer, Moemedi Malindah had indicated that any three of the listed four could be selected to act as arbitrators.
The Partnership Agreement states that “Any dispute between any of the Parties arising in connection with this Agreement or its subject matter shall be submitted to an finally resolved by arbitration in accordance with arbitration rules of Botswana Institute of Arbitrators (BIA)…”
BPOPF entered into a Partnership Agreement with Capital Management Botswana (CMB) Limited in November 2014. CMB was a general partner of the Botswana Opportunity Partnership (the ‘Fund’) for the period commencing on its formation of the Fund and terminating on 1 December 2017 by BPOPF who are the sole Limited Partner of the Fund.
The Disputes which are to be taken for arbitration arise from the fact that CMB, which has been terminated as General Partner (GP) is yet to transfer the Fund Assets held by it in its own name to the Fund hence BPOPF wants to ensure that all of the Fund Assets are registered in the name of the Fund. Furthermore BPOPF wants CMB to handover to the newly appointed General Partner, Viltry (Proprietary) Limited.
BPOPF is also demanding all documentation relating to the Fund and to each of the Fund’s Investments that are in its possession and which ought to be within its possession in terms of the Partnership Agreement both as its erstwhile General Partner and erstwhile Manager. In addition, BPOPF demands the details of each service provider to the Fund as well as each service provider to CMB as the erstwhile General Partner and the erstwhile Fund Manager in relation to the Fund, including the name of the service provider, the contact details of the service provider, a list of deliverables pending issue from each service provider (if any)), the service level agreement concluded with that service provider and the correspondences with each service provider.
The Pension Fund also procures that any persons nominated and appointed by CMB to represent the Fund on the Board of any Portfolio company pursuant to the Partnership Agreement resign from such office with effect from the date of the Removal Notice and authorize General Partner to nominate and appoint replacement with effect from the date of Removal Notice.
“On 18 December 2017, BPOPF wrote to CMB demanding confirmation of, amongst other things, the identity and contact details of the person or entity to whom BPOPF’s interest in the Fund had purportedly been sold and the purchase price. As at date of this notice, CMB has not complied with these demands. The replacement GP requires the requested information in order to discharge its fiduciary obligations to the Fund, and it is accordingly, in terms of common law and under the Partnership Agreement, entitled to the information and documentation demanded in the Removal Notice as well as the letter dated 18 December 2017,” further writes Moemedi Malindah, Acting BPOPF CEO.
WHY BPOPF SHOULD BEG FOR ARBITRATION
The BPOPF invested the sum of P477 million in the Botswana Opportunity Partnership (BOP) to be managed by CMB in terms of the BOP agreement between the two. CMB then disposed of the investment and only paid P50 million to BPOPF. The BPOPF has tried to tell the court that a balance of P400 million was at stake. But Judge in the NBFIRA case, Justice Motumise has argued that “the question before me is not the recovery of the P400 million or to secure it, wherever it is and thus to protect it from loss. In fact, I have not been told where it is so that I can secure it from such loss. What I am called upon to do, in these proceedings is to decide whether to confirm the appointment of a statutory manager over CMB.”
The money at stake was an investment made in terms of the BOP Agreement which states that: “The General Partner shall be entitled, and is hereby irrevocably authorized by defaulting Limited Partner, to dispose of the Defaulting Limited Partner’s interest in Botswana Opportunity Partnership to one or more third parties at such price and on such terms and conditions as the General Partner, in its sole and absolute discretion, deems fit, provided that the General Partner first offers such interest, at the same price and on the same terms, first to the non-Defaulting Limited Partner pro rata to their respective Capital Commitments and then (if any remains) to the non-defaulting Fund LPs of any Parallel Fund pro rata to their respective capital commitments to such.”
The Agreement further reads: Except as provided in clause 26 or any loss suffered due to any grossly negligent, reckless, fraudulent or willful misconduct activities by the General Partner, neither the General Partner nor the any of its affiliates shall be liable for the return of the Capital Commitments of any Partner, and such return shall be made solely from available Fund Assets, if any, and each Limited Partner hereby waives any and all claims it may have against the General Partner or any Affiliate thereof in this regard.”
It is evident that BPOPF authorized the disposal of its investment or interest under the agreement and the Agreement itself prescribes that resolution of all matters and or claims is through Arbitration. Some BPOPF insiders question the decision to sign such an Agreement and are wondering where the Board and the management were when such a deal slipped through!
WHY THE P400 million is GONE
Except as provided in clause 26 or any loss suffered due to any grossly negligent, reckless, fraudulent or willful misconduct activities by the General Partner, neither the General Partner nor the any of its affiliates shall be liable for the return of the Capital Commitments of any Partner, and such return shall be made solely from available Fund Assets, if any, and each Limited Partner hereby waives any and all claims it may have against the General Partner or any Affiliate thereof in this regard.”