If “arms deal” inquiry finds corruption South Africa can get refund: lawyer

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A legal expert says if President Jacob Zuma’s new inquiry finds corruption in the ever-controversial 1999 Strategic Defence Package (SDP) acquisitions, better known as the “arms deal”, South Africa could claim its money back. Zuma announced a new inquiry into the matter on Thursday.

Advocate Paul Hoffman SC, lead counsel for anti-arms deal campaigner Terry Crawford Browne and director of the Institute for Accountability in Southern Africa says a “contract that is tainted by fraud is voidable at the instance of the person or the party that has been a victim of the fraud. If you choose, having found out about the fraud, not to abide by the contract, then you are entitled to claim what they call restitutio in integrum which is restoring the position before the contract was entered into.”

He added that this, in effect, meant: “You say to the arms dealer: ‘Here, take your ships, your planes, your submarine(s) back and give me my money back, and if you haven’t paid, (which is the case in respect of a lot of these things) I’m not paying you what I still owe you and I want from you what I’ve yet to pay.
“…Crawford-Browne has got quite a lot of detail about what still has to be paid; some of the planes [a number of SAAB Gripen C] haven’t even been delivered yet. So, it’s not as though it was all a done and dusted deal and we paid cash for our arms. In fact, we had to borrow money and we are paying back in stages for our sins; and the prospect — especially in respect of the Ferrostaal and the BAE deals, where there is public knowledge of bribery – is that we can unravel the deals and claw back the money that’s been spent on them.
“The BAE deals [for the Gripen fighters and Hawk Mk120 fighter trainers] are half of the value of the contracts and Andrew Feinstein estimated that 70 billion rand is involved now so a successful cancellation of the BAE deal which would involve not taking delivery of the planes that haven’t been delivered and returning the slightly-used planes that have been delivered in exchange for repayment. It is definitely a legally sound possibility”, he said.

Touching on the still-to-be-announced commission, Adv. Hoffman said: “It’s possible that this move is just tactical, that it’ll be a funny little commission of inquiry that is designed to bury everything as Mr [Mario] Ambrosini says on behalf of the IFP but it’s also possible that the commission with sufficient clout will do its job properly and that South Africa will be the better for it.

In a letter sent via e-mail to defenceweb as well as some newspapers, he cautioned that much will turn on the identity of the commissioners, their independence, impartiality and willingness to seek truth without fear, favour or prejudice. The resources made available to, and terms of reference of, the commission will also be critical to its legitimacy.

Hoffman added that his client would prefer broad terms of reference and include the possibility of cancelling all deals tainted by bribery so that as much as possible of the public money that has been wasted can be clawed back. “If the commission is to be given powers of granting immunity against prosecution to co-operative witnesses akin to those under s(ection) 204 of the Criminal Code, it may be necessary to get Parliament to so provide,” he adds.

The senior advocate adds that the by far the most interesting legal finding that is relevant to the deliberations of the commission is the decision of the old Appellate Division in Plaaslike Boeredienste v Chemfos in 1986. The headnote of the case included the following: “The term ‘fraud’ apparently has a very broad meaning in the English law, but an analysis of the English decisions on the point in question indicates that the real foundation of the right, which a party has to repudiate an agreement if a bribe has been given to his agent, is that the law views bribery as an immoral and wrongful act and can thus not allow the briber to enforce the agreement, or the other party to be bound thereby. It is therefore not correct to base the right of a principal to repudiate an agreement obtained by the bribing of his agent on fraud, as was done in older cases. It should rather be said that the principal’s right to repudiate the agreement is based on the wrongfulness of the method, viz bribery, used by the other party to influence him into concluding the agreement. As regards the party who gives the bribe to the agent, it should be said that the law does not allow him to enforce, against the will of the other party, an agreement which he has obtained by means of wrongful conduct, viz bribery.”



Hoffman says these findings, “still good law, on the effect of bribes on contracts are the key to obtaining the refund of purchase prices paid to arms dealers who allegedly bribed their way into contention in the arms deals. A R70 billion bonanza for taxpayers is surely a worthwhile endeavour. As Lord Denning famously observed: ‘Fraud unravels everything.'”