In April, the Supreme Court of Appeal (SCA) delivered a landmark judgment against the MTN Group, giving the green light for South African courts to hear allegations that it acquired a telecommunications licence in Iran through bribery and corruption.
Behind the shocking allegations and complex legalese are important questions: should South African courts be able to adjudicate matters that involve allegations against South African corporations and foreign governments? And if not, how will this impact the fight for corporations to be held to account for human rights violations?
These questions have become more urgent in the wake of Israel and the US’s latest attacks on Iran in recent weeks. Iran shut down internet access amid the Israeli airstrikes in June, putting civilians in even greater danger. Open Secrets, in its report #ShutdownsEverywhereYouGo, documented how MTN, through its minority stake in Iranian telecoms provider Irancell, was complicit in shutting down internet services in Iran during periods of political unrest. Recent data on Iranian internet shutdowns shows that MTN Irancell continued to shut down internet services across the country between June 18 and June 25, the time of writing.
As Iranian civilians face increased danger, it is becoming vital that allegations of MTN’s corruption in securing its Iranian contract be finally tested to determine whether the company’s Iranian contract flouted law, and if MTN has any legitimate reason to have business in a country where it is also facing accusations of human rights violations.
Who, what, where?
The legal saga between the MTN Group, headquartered in South Africa, and Turkish telecoms operator Turkcell dates back to 2003, when the Iranian government advertised a mobile services tender that would culminate in Iran’s first private cellular network. Initially, the East Asian Consortium (EAC), a subsidiary of Turkcell, was awarded the $31.6bn deal. But in late 2005, the Iranian government changed tack and signed a 15-year renewable mobile licence contract with the MTN Group.
The deal handed the MTN Group, through its subsidiaries, a 49% stake in MTN Irancell, while entities linked to the Iranian government owned a 51% majority. The licence was extremely lucrative: in its first year of business, the MTN Group earned R144m in profits. But Turkcell did not leave the deal quietly.
Since 2005, Turkcell has launched several legal actions against the MTN Group and the Iranian government in courts in Tehran and the US, as well as before international tribunals. Turkcell’s arguments include serious allegations against the MTN Group of bribery of public officials and leveraging political networks to secure the Irancell deal.
As a result, Turkcell is seeking damages for billions of US dollars in losses arising from its ousting from the contract. However, jurisdiction issues – a legal question around where a case can or should be heard – have meant that no court or tribunal has yet adjudicated Turkcell’s evidence of bribery and corruption against MTN.
In 2013, Turkcell approached the South African courts and now its evidence may finally be heard in a court of law. Unless the Constitutional Court decides otherwise.
The South African case
While Turkcell ultimately seeks a verdict on whether the MTN Group obtained the Iranian licence unlawfully, the preliminary question before the South African courts is whether they can hear the merits of the matter at all.
MTN has raised three separate arguments for why the South African courts should not do so. The argument with the most far-reaching consequences for corporate accountability goes as follows: due to the need to respect foreign countries’ sovereignty and autonomy, South African courts should not hear matters related to South African-headquartered transnational corporations (TNCs) and their business dealings with foreign governments.
While the high court agreed with the MTN Group – that to hear this case would result in the Iranian government’s actions being “scrutinised and judged by South African courts” and which went against the relationships between nations – the SCA overturned this ruling. Instead, it stated that competing values and interests must be weighed against one another. In this case these values include the importance of respecting foreign governments’ sovereignty and autonomy versus the constitutional imperative on the state (including courts) to address corruption and uphold the rule of law. The SCA ultimately found that the constitutional rights and duties in question outweighed other considerations.
Why does this matter for human rights?
Recent decades have seen increasing scrutiny on the conduct of TNCs, many of which wield enormous power. There is also an ever-increasing blur between the public and private spheres as government entities procure often essential services from private sector actors, Daniel Nyberg writes in “Corporations, Politics, and Democracy” in Organisational Theory. However, the development of laws and regulations to hold TNCs legally accountable for their wrongful conduct – at both a national and international level – have often not kept pace.
One of the key barriers to accountability is the structure of TNCs themselves. TNCs usually comprise a network of companies spanning multiple countries with some form of centralised control – most often a parent company headquartered in one country. Those in charge – the C suite and board of directors – are often able to plausibly distance themselves from actions taken by subsidiaries in different countries, leading to real challenges in holding parent companies and the ultimate decision-makers liable.
For many, the MTN Group represents a reliable and ubiquitous cellphone network, with cheerful advertising and billboards plastered with sunny yellow. However, it is also a multinational behemoth operating in more than a dozen countries mainly across Africa and the Middle East, and with significant influence. Even its chair, Mcebisi Jonas, has now joined the South African government’s envoy to the US – a marker of the close ties between TNCs and state governments.
While MTN has been lauded as a trailblazing TNC – exemplifying South Africa’s post-apartheid global economic agenda – Open Secrets reporting details credible allegations of internet shutdowns and associated human rights abuses perpetrated by MTN in co-operation with foreign governments in the Middle East and Africa.
Though the particular question of internet shutdowns and their impact don’t make up the current case against MTN, this matter will be a litmus test for how our courts choose to regulate South African TNCs. In a powerful judgment, judge David Unterhalter, writing for the SCA majority, recognised what was at stake. He stated that that while Turkcell “brings a private law claim for damages … it seeks to hold to account defendants […] in respect of a powerful group of South African companies, which are alleged to have corrupted the government of South Africa for private commercial gain”.
He also elaborated on the courts’ role in providing oversight to TNCs, stating: “When a court has before it a case in which defendants are alleged to have committed serious acts of corruption involving high officials of the South African and Iranian governments, which, if proven, are deeply inimical to our constitutional order, it must consider the importance of adjudicating such a case in the interests of affirming the rule of law and upholding constitutional supremacy, as its primary duty … The allegations … are matters our courts will not lightly retreat from adjudicating upon. That is so because conduct of this kind, if proven, is corrosive of our constitutional order.”
While the financial losses of a Turkish telecommunications conglomerate may not keep you up at night, the principles established in this case will have far-reaching consequences for the fight to hold corporations accountable for their wrongdoing. If MTN is ultimately successful, then South African TNCs will be immune from legal scrutiny in South African courts for any unlawful activities, so long as they did their wrongdoing in collaboration with a foreign government. This would be a step back for the global fight against transnational corporate accountability as well as the promotion and protection of South Africa’s constitutional order.
MTN has now filed for leave to appeal the SCA’s judgment in the Constitutional Court, signalling that this particular legal fight is not over yet.
Jane Borman is an attorney at Open Secrets and Ra’eesa Pather is a senior investigator at Open Secrets.
Top image: Rawpixel / Currency collage.
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