Mittal Steel mines and exports iron ores from several mountains ranges in Liberia
Comments and Analysis by Cllr. Sayma Syrenius Cephus
A critical review of the structure, character and nature of Mittal Steel’s Mineral Development Agreement (2005) titled: “MDA 1 and MDA 2” with respect to its purported adherence to the tenets of the agreements has exposed what seems a pattern of sustained criminality of underperformance and non-tax compliance policy mainly developed incognito with the aid of some government officials at the Ministry of Lands, Mines and Energy to defraud the government of Liberia of needed revenues and sabotage the economy. The analysis which was done by a cream of renowned and experienced economists and geologists from the United States of America and the United Kingdom is quite frightening to the say the least, and it unmasks Mittal steel’s secret agenda to engage in economic sabotage by not adhering to the tenets of the agreements through an evasive non-tax payment scheme by and through the support or uninhibited acquiescence of certain officials.
According to the expert analysis, under the MDA1 and MDA2 (Act), Mittal Steel is under obligation to pay to the Liberian Government royalties amounting to 4.5% of the invoiced sales of iron ore whether weekly or monthly. The surest way of achieving this goal that will provide the benchmarks for checks and balances, calls for proper periodic reporting of the quantity of iron ore being exported. Sadly, the report laments: “This exercise is not being implemented because there seems or so aptly put, there exists a collusion between Mittal Steel and certain officials in the Cadastral Department-Geological Survey to underreport the quantity of iron ore exported.” The nonperformance of such a key contractual term and condition with the support of some Liberians only interested in lining their pockets is solely part of the modus operandi of Mittal Steel. Of course, this is counterproductive to the intent and purpose of the agreement. Moreover, it is inconsistent with section 3(b) of the MDA (2005).
The object and purpose of the periodic reporting regime requirement would have given the Government of Liberia the opportunity to clearly determine the number of sales made weekly or monthly; the total amount of the revenue generated from each sale mainly to ensure proper accounting in determining and applying the 4.5% requirement but for strange or dubious reasons apparently intended to evade taxes and thereby sabotage the Liberian economy for some vested political interest, Mittal Steel has ignored, neglected or deliberately refused to provide up to date proper reporting of the number of sales made thus far, and where it is made, it is either underreported together with the total amount of revenues generated or hardly ever any report at all.
As a consequence of this, it is difficult, if not impossible to objectively analyze and effectively apply the 4.5% royalty tax regime requirement; hence, Mittal Steel has been having a field day. The true enemies of the Liberian economy are not those who refused to pay taxes because a careful review of the records will ultimately pinpoint their misdeeds but those who like Mittal Steel pretend to pay taxes which when critically analyzed often turn to reveal an awful lot of their misdeeds only intended to strangle the Liberian economy.
That said, the most effective way to deal with this scheme and unravel what seems a calculated ploy to defraud the Liberian government and sabotage the economy is to conduct an inquest into the number of sales made between 2005 up to 2018; the total amount of revenues generated therefrom; total amount royalties paid under the MDA. This is fundamentally central in determining the 4.5% requirement of revenue that is due to the government of Liberia. Another point of interest is that any inquiry must also insist upon the production of the financial statement of revenues paid to the Government of Liberia by Mittal Steel since its inception in order to be able to properly determine whether or not the 4.5% royalty require regime has been applied, excluding the year 2014 as the period of force majeure.
The analyst’s report shows that there’s an incredibly huge loss of revenue to the Government of Liberia because of the willful and deliberate and intentional departure of Mittal Steel or Arcelor Mittal, “whatever the difference” from the agreed annual iron ore production level. For instance, between 2005 t0 2013, and excluding 2014 which constitutes the force majeure period, the projected iron price on the world market was US$73 per ton and Mittal Steel under the MDA was required to export a total of 18,000,000 tons (Eighteen Million) per annual. This means, the resulting generated revenue that should have accrued to the Government of Liberia under the period in the review should have been US$59m (US Fifty-Nine Million Dollars) annually, but Mittal Steel has been paying US$13.1m or far less to the Government, leaving out the balance of US$46m in losses.
A demand for a proper accounting of the total amount of revenues paid to the coffers of the Liberian Government must include evidence of financial statements supported by payment receipts covering 2005-2013 and 2015 to December 2017. Notwithstanding the force majeure production hiatus effect of Ebola on Mittal by section XXXii of the MDA 2005 and Article 30 of the amended 2006 MDA. This will show a significant loss of revenues and evidence of underpayment of royalties by Mittal steel with the assistance of certain officials within the government of President Ellen Johnson Sirleaf. The fight against corruption must include the right to collect what Mittal Steel legitimately owes the Government of Liberia!
Finally, the scheme to undermine the economy is reflected in the method of deliberately engaging in underperformance by means of an artificial shortfall initiated by Mittal Steel on a year to year basis since its inception as follows:
- In 2011, Mittal Steel produced 1.1m tons of iron ore but only recorded shipping 200,000 leaving a shortfall of 900,000of tons unaccounted for as lost revenue to the government of Liberia.
- 2012—expected to have shipped 2.5m tons of ore
- 2013—expected to have shipped 5m tons but only shipped 1m tons resulting in the shortfall of 4m tons. The price of iron ore in that year was US140 per ton on the world market and when that is multiplied by the 4.5% royalty of the Liberian government the amount in revenue that should have accrued to the Liberian Government is US$6.3m in 2013.
- 2014—expected to have shipped 9m but prorate for 7 months and shipped 5m at an average market price of US$95 per ton. They shipped 1.66m multiply by US$95 the resulting revenue should have been US$7.12m.
- 2015—Ebola—Period of Force Majeure
- 2016—Expected to ship 9m tons but only shipped 4m tons leaving the shortfall of 5m. The 5m tons of US$60 per ton per average market price of 4.5% is US$13.5m;
- 2017—expected to ship 9m but only 4m was shipped leaving a shortfall of 5m. The 5m tons at US$70 times 4.5% is US$15.75m in lost revenue to the government of Liberia;
- From 2013 to December 2017, there has been a shortfall of 42.67m tons without any justifiable reasons. The continued introduction of shortfalls is either deliberate or is part of the scheme of underreporting or dereliction of duty or both to undermine the Liberian economy.
- 2018—expected to ship only 4m tons and have a shortfall of 14m tons at US$70 times 4.5%, the anticipated revenue should be US$44m.
The total number of revenue lost to underreporting by Mittal Steel is US$130m. The Government of President George Manneh Weah must write a letter demand to Mittal Steel and request the immediate and unconditional payment of this amount.
About the Author:
Counselor Sayma Serenius Cephus is an internationally acclaimed counsel certified by the International Criminal Court(ICC)(The Hague), European Criminal Bar Association(ECBA), Association of Defense Counsel Practicing Before International Criminal Court and Tribunals(ADC-ICT)(The Hague), International Law Association(ILA)(London, UK), Association of European Abogados(AEA)(Madrid), European Fraud and Complaisance Lawyers(EFCL) (London, UK) & African Court on Human and Peoples’ Rights(ACHPR), based in Arusha, Tanzania. He is also a candidate for admission to the list of counsel, United Nations Special Tribunal for Lebanon(STL), Mechanism for International Criminal Courts and Tribunals under Rules 43 and 45 having met all the requirements of Rule 42 and given a certificate of Good Standing.