$4.2bn MTN Iran case halted by court

A US court has halted proceedings in the US$4.2 billion case against the MTN Group, which sees the group accused of corruption, bribery and assisting in arms provision to Iran.

The court has decided to halt the case examining the actions of South Africa’s largest mobile telecoms provider until judgment is handed down in a separate case involving Royal Dutch Shell.

While the cases are unrelated, the Shell case may have important implications for MTN, given that the court is due to rule on whether a US court can have jurisdiction in cases where the plaintiff is suing a non-US, foreign entity.

Should the court decide in the Shell judgment that it cannot rule on a case involving a foreign company, the MTN/Iran case will become inadmissible before the US court and as such the plaintiff will have to look for alternative routes to stake its legal claim.

The MTN case began earlier this year, when the company was taken to court by Turkish rival telecoms operator Turkcell. Turkcell is suing MTN for US$4.2 billion in damages with respect to an Iranian mobile network contract.

Turkcell claims that MTN was awarded the lucrative contract in 2004 as a direct result of corrupt activities, including bribery, assisting in arms dealing, and the provision of US technologies to Iran in contravention of US sanctions.

Responding to an invitation for bids for the second ever mobile network operating licence in Iran, Turkcell initially won the bidding war in 2004.However, due to uncertain circumstances – to which the court case relates – the contract was nonetheless awarded to a consortium led by MTN.

MTN owns a 49 per cent stake in the Iranian operator, MTN Irancell.

In the US court case,Turkcell alleges that MTN was involved in a number of corrupt activities in order to secure the contract, and that all of the dubious moves were consented to directly by the Group’s South Africa-based top executives.

Accusations include paying bribes to state officials, most prominently, to Iran’s deputy foreign minister Javid Ghorbanoghli, who is alleged to have accepted $ 400,000 from MTN in return for manoeuvring Turkcell out of the contract on the government’s side. Turkcell also claims that MTN paid South Africa’s Ambassador to Iran Yusuf Saloojee $200,000 to influence Iran’s reputation at the International Atomic Energy Agency (IAEA), a bribe which apparently formed a condition to the MTN consortium securing the contract.

MTN also stands accused of introducing Iranian defence officials to South Africa’s former defence minister Mosiuoa “Terror” Lekota with a view to providing Iran with arms in contravention of a UN arms embargo.

Finally, it is alleged that MTN acted in violation of a US embargo on provision of technologies to Iran, by acquiring technologies from companies including Sun Microsystems, Hewlett-Packard and Cisco Systems and passing them to Iran.

The possibility that the case may be called off is good news for the MTN Group and South Africa. The country may find itself in the centre of a rather unflattering spotlight, should it be uncovered that a South African company was intrinsically entwined in the alleged corrupt practices, also involving certain South African state officials.

Irancell itself has not been affected by the legal proceedings, recording strong growth over the past months. At year end in June, the company held a 47 per cent stake of the Iranian market, boasting 38.3 million subscribers.

The Iranian unit in 2011 accounted for 9 percent of the MTN Group’s global revenue, and as such forms an important part of the business income of the company.

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