Malawi government wants K350bn from Total fuel retailer for contract breach

The Malawi government is suing fuel giant Total for a breach of contract which could see the firm paying Treasury and a private company about K355.2 billion ($480 million) through an arbitration process.

An agreement between the Malawi government, Total Malawi and Total South Africa, signed 18 years ago, entailed that the fuel and lubricant giant was expected to enjoy rebates of up to 50 percent in arrears equal to 50 percent of the retail margin on every litre of fuel drawn from Total facilities by the Malawi government which were payable by Total Malawi Limited through Prima Fuels.

Prima Fuels is registered in Malawi but is headquartered in South Africa.

Clause 8 is the relevant section of the Agreement and it provides that:

“Total will pay the Government a rebate on fuels in arrears equal to 50% of the retail margin on every litre of fuel drawn from filling stations in any one month. In addition, Total will pay Prima in arrears equal to 50% of the gross margin (as per the official Price Build-up as indicated in Appendix 4 and which can be amended from time to time by PCC) on every litre of fuel imported by Total”.

However, to date, neither Total Malawi nor Total South Africa have remitted any money to the government, prompting the Attorney General to seek legal redress.

Court documents made available to Nyasa Times indicate that Prima Fuels, acting on behalf of the Malawi government, instituted action against Total Malawi and Total S.A. in the Commercial Division of the High Court of Malawi to secure payment of rebates payable to both themselves and the Malawi government concerning an agreement entered into on 11 December 2001.

In its judgement delivered on September 11, the court ordered for an arbitration between the parties in accordance to the terms of their agreement.

The applicants are seeking $480 million (about K350 billion) from Total Malawi and Total S.A. for breach of contract.

Prima Fuels’ South Africa-based legal representative Latham Dixon of Macintosh Cross and Farquharson, that the agreement dictates that the arbitration shall take place in South Africa, “hence our involvement.”

According to Dixon, under the agreement, which is automatically renewable every five years, both Total Malawi and Total S.A are liable to pay rebates to Prima Fuels, as well as the Malawian Government.

Dixon explained that while Total Malawi, in their statement of defence filed in the Commercial Court, Malawi, admits its obligation under the agreement, Total S.A. denies liability.

But the lawyer contends that Total S.A is bound by the terms and conditions of the agreement, as per the definition recorded in clause 2 of the agreement which defines “TOTAL” as “Total Malawi Limited, a company incorporated and existing under the laws of Malawi, with its registered office at Churchill Road, Limbe duly represented for the present purposes by Stephen McGarvie, managing director (hereinafter “Total” which term shall also include any associated companies of the TOTALFINAELF GROUP”.

The latter subsequently changed its name to Total S.A.

According to Dixon’s deposition, the the conduct of the defendants amount to exploitation of one of the poorest African nations.

Although the case is being kept under a tight lid in Malawi, a source working in the Malawi government circles who is privy of the case confided in Nyasa Times that a clandestine agreement was entered into between Total Malawi Limited and Prima Fuels for the supply of fuel and fuel products to the Malawi government.

According to the source, in May this year, the Attorney General wrote Prima Fuels inquiring whether Prima Fuels had made any payments to government under the agreement as the office of the Attorney General did not have any information on this, since this agreement was entered into force, Government has received the rebates pursuant to the Agreement.

The Attorney General further inquired if payment had been made, how much has been remitted to Government so far, said Nyasa Times source.

Total Malawi managing director Samalata Ball declined to comment on the case saying the company adheres to international court practices and regulations of not commenting on on-going court cases.

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