Transnet SOC Limited v Total South Africa (Pty) Ltd and Another

Following World War II, the South African government sought to establish an inland petroleum refinery at Sasolburg to meet increased demand. Total South Africa agreed to participate only after the government undertook that the inland refinery would not be disadvantaged compared to coastal refineries in respect of crude oil transportation costs. This undertaking became known as the 'neutrality principle'. A refinery (Natref) was established, jointly owned by Total and Sasol. The neutrality principle was honoured for decades and later embodied in a 1991 variation agreement between Transnet (successor to the state transport services), Total, and Sasol. After the enactment of the Petroleum Pipelines Act 60 of 2003 and the National Energy Regulator Act 40 of 2004, Transnet contended that the new regulatory regime abolished the neutrality principle. When NERSA approved new tariffs from 2010 onwards, Transnet refused to apply the neutrality principle. Total instituted action seeking a declaration that the variation agreement remained binding and enforceable.

The appeal was dismissed with costs, including the costs of two counsel. The High Court’s finding that Transnet’s defences failed was upheld, confirming that the variation agreement and neutrality principle remain binding.

The case affirms that pre-existing contractual rights can coexist with and survive subsequent regulatory regimes unless expressly extinguished by legislation. It clarifies the interaction between regulatory tariff-setting powers and private contractual arrangements in the energy and transport sectors, and confirms that NERSA-approved tariffs may operate as maximum tariffs permitting discounts. The judgment is significant for public enterprises and regulated industries in South Africa.