The Royal Group has been granted the right to sell seized ETG assets (agricultural commodities) which an earlier court ordered it to seize as an economic bond for the USD60m losses and damages caused by ETG to Royal Group. This order was made pending the outcome of the main case. Ahead of the sale of the seized assets, Royal has been ordered to provide an immediate guarantee of USD39m to the court, which it has done.
This amount includes an approximate USD32m for the value at cost of security, plus a 20% margin for potential changes in market pricing.
The Judicial Court of Nacala-Porto authorised the sale of ETG’s seized assets to avoid the deterioration of the agricultural commodities, and the consequent irreversible loss of asset guarantees.
ETG’s international shareholders include Japan’s Mitsui, the South African Public Investment Corporation (PIC), and Saudi Arabia’s Sabic chemicals company.
Hassnein Taki, CEO of the Royal Group says: “This is a fair, albeit onerous decision by the courts. While it protects the rights of both Royal and ETG, it is not easy to secure such a large guarantee, given that Royal has already suffered severe financial losses due to the actions of ETG. This decision is of course an interim measure; what both companies need is a decision in the main case as soon as possible.”
Background to dispute between Royal Group and ETG
Taki says: “In an effort to claw back its dominance in the Mozambican agricultural export market, ETG has waged a two-year campaign to discredit and undermine Royal Group’s export operation and reputation. Prior to Royal’s entry into the commodities export market in 2016, ETG had controlled approximately 90% of all agricultural (cereals, legumes, oilseeds) exports from Mozambique.”
The dispute between ETG and Royal Group began in 2022, when, according to the statement of claim that Royal submitted to Mozambican courts, ETG sent an anonymous tipoff to the Indian authorities, saying that Royal Group was shipping Genetically Modified Organism (GMO) soya beans to India. The shipment was in fact non-GMO, and Royal Group, during a subsequent court case against ETG in Mozambique, established that ETG was the anonymous party that tipped off the Indian authorities. This claim is still pending before Mozambican courts.
As India does not allow the import of GMO agricultural products, Royal Group’s shipment was seized, at a huge cost to the Royal Group, not only in lost business, but also because it had to pay for the time and business that the shipping company had lost, and the costs of keeping the seized ship in India for many months. Royal Group’s reputation as a trade partner with India also took a severe knock.
Indian phytosanitary authorities put the soya beans through rigorous laboratory testing, and concluded that the soya beans that Royal Group had imported to India were, in fact non-GMO. The Indian courts ruled in Royal Group’s favour, and the shipment was released.
Royal Group, who could not sustain its business without regaining the significant losses it incurred due to ETG’s actions, approached the courts in Mozambique. The court ordered Royal Group to seize ETG products and assets worth USD60 million, equal to the losses the small Mozambican company had suffered, however, in effecting the seizure, agricultural products worth only USD30 million were found.
Royal Group has stored the seized ETG product (agricultural commodities) in its warehouses in Mozambique since December 2023.
In January this year, ETG approached the courts, accusing Royal Group of ‘stealing’ its seized agricultural commodities, and attempting to sell and ship them to India. Through the courts, ETG demanded that the containers belonging to Royal Group be searched.
In its accusations to the Maritime Court, ETG used falsified documents allegedly written by the maritime navigation agency, CMA. However, the CMA went to court to deny the authorship and authenticity of the documents, stating that they are false.
Nevertheless, ETG was successful in preventing the ship (MV UBENA, belonging to global container shipping company CMA CGM Group) carrying Royal Group containers from leaving the port. The port was also closed for all commercial activity. This action caused both Royal Group and the local economy further financial hardship.
ETG, in the presence of port authorities and Royal representatives, inspected 15 out of the 250 Royal Group containers and none were found to contain any of ETG’s seized cargo. ETG then asked to inspect a further 20 containers, which yielded the same result. The product that Royal Group was shipping was soya and mung beans, and not ETG’s agricultural commodities.
Despite the courts in India and Mozambique having ruled in Royal Group’s favour, ETG, still unsatisfied, submitted a motion of suspicion to declare the judge who ordered the seizure of ETG’s product in December 2023 disqualified, alleging that he favoured Royal Group.
According to Mozambican law, a party not agreeing with a promotion of the District Attorney, in this case ETG, may request the intervention of the Attorney General of the Republic.
Instead of submitting its request to the Attorney General, as is regular, ETG filed it with the Deputy Attorney General, who ordered the case archived, effectively annulling all acts carried out by the main prosecutor on the case. It’s important to note that under Mozambican criminal procedural law, the decision to dismiss a case does not constitute a final decision that closes the case since, and according to the same law, there is still room to request the intervention of higher hierarchical authorities who can uphold or overturn the decision to dismiss the case.
In response to this unusual move by ETG, Royal Group approached the Deputy Attorney General’s superior, the Attorney General of the Republic, requesting intervention to repair the deficiencies evident in the Deputy Attorney General’s archiving order.
Most recently, ETG warned the Mozambican government that it intends to seek international arbitration to settle the dispute it started with Royal Group.
Taki says: “This threat was premature and irregular, and is a clear attempt by ETG to circumvent the courts and justice system in Mozambique. These are classic bully tactics. Instead of waiting for the courts to finalise the matter between ETG and Royal Group, ETG chose to deploy the familiar and much-abused narrative that all African countries are lawless and corrupt. It’s essentially saying: ignore the Mozambican courts and ignore due process. ETG’s actions show nothing but contempt, and a total lack of respect for the country and her people,” he says.