In May 2026, the Supreme Court of Appeal delivered an interesting judgment relating to an arbitration award governed by the International Arbitration Act, 15 of 2017 (“the Act”), in which a monetary award of €50m had been issued in favour of the claimant.
The two main protagonists in the proceedings are Frazer Solar GmbH, a German company (“Frazer”), as claimant, and the Kingdom of Lesotho (“KOL”) as defendant.
The two central issues in the case concerned:
- the enforceability of the time bar in the Act for challenging an award; and
- whether a court order enforcing the award fell to be rescinded.
Background
In 2017 Frazer approached officials of KOL with a proposal relating to a solar energy project to the value of approximately €100m.
Frazer’s proposal entailed a German bank providing KOL with the necessary finance to enable it to contract with Frazer to supply and install the relevant solar energy infrastructure.
Negotiations and discussions between Frazer and KOL officials and one of its Ministers, the Minister in the Office of the Prime Minister, proceeded over approximately one and a half years and culminated in the conclusion of a supply agreement in September 2018 between KOL and Frazer.
The supply agreement contained an arbitration clause providing for disputes to be resolved by arbitration in Johannesburg.
The project faltered when the Ministry of Finance and Ministry of Energy failed to enter into the necessary funding agreement with the German bank that had offered to finance the project.
Frazer eventually lost patience and, in March 2019, through its legal representatives, issued a letter of demand to KOL requiring it to comply with the supply agreement. This and two follow-up letters were ignored by the Office of the Prime Minister.
In consequence, in July 2019, Frazer terminated the supply agreement and instituted arbitration proceedings for damages of €50m.
The arbitration hearing took place in Johannesburg on 2 December 2019 and an award was issued in favour of Frazer in respect of its claim.
When KOL failed to comply with the award, Frazer launched an application in the Johannesburg High Court for an order enforcing the arbitration award.
The application papers were, with the leave of the court, served on KOL’s Ministry of Foreign Affairs through diplomatic channels via the Department of International Relations and Cooperation and on the Lesotho High Commission.
Despite this and various notifications regarding the enrolment of the application for hearing in April 2021, to be heard virtually, KOL never responded nor did it participate in the virtual court hearing.
The result was that the Johannesburg High Court granted an order making the arbitration award an order of court and authorising the issue of writs of execution for payment of €50m.
In the meantime, KOL’s Attorney‑General, in May 2021, instructed KOL’s Directorate on Corruption and Economic Offences (“DCEO”) to investigate allegations of corruption and fraud in relation to the conclusion of the supply agreement. The DCEO subsequently reported that there was a clear case of corruption and fraud against certain government officials connected with the conclusion of the contract. This resulted in the Minister in the Office of the Prime Minister being charged with fraud and corruption.
KOL then launched an application in the Johannesburg High Court to stay the execution of the writs.
At the same time, KOL launched an application in the Lesotho High Court to review and set aside the supply agreement on the grounds that it had been concluded contrary to the public procurement laws and regulations of Lesotho. This the Lesotho High Court proceeded to do in November 2022.
KOL then applied to the Johannesburg High Court for:
- an order rescinding the court order enforcing the arbitration award; and
- an order setting aside the arbitration award.
The Johannesburg High Court dismissed KOL’s application, finding that the conclusion of the supply agreement had been authorised, that KOL was in wilful default for not opposing the enforcement application and that any application for the setting aside of the arbitration award was, in terms of Article 34(3) of the UNCITRAL Model Law on International Commercial Arbitration, as amended and adopted by the Act, time barred.
KOL appealed to the Supreme Court of Appeal.
SCA Appeal
Unusually, but no doubt due to the complexities, the fact that a foreign sovereign state was involved and the very significant monetary amount involved, the SCA constituted a seven judge bench as opposed to the normal five judge bench.
The judges could not agree on the appropriate decision, resulting in four judges delivering the majority decision, with two dissenting judgments from the other three judges on the bench.
The majority found, as far as the rescission application was concerned, that:
- on the facts, KOL had put up a satisfactory explanation for its default in opposing the enforcement application; and
- it had presented a bona fide defence based on the proposition that the supply agreement was invalid for want of compliance with Lesotho procurement law.
These being the two requirements for a rescission application, the SCA held that the appeal on that score had to succeed.
In relation to the appeal against the High Court’s decision refusing to set aside the arbitral award, the SCA held that KOL was time barred in terms of Article 34(3) which reads as follows:
“(3) An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the award or, if a request had been made under article 33, from the date on which that request had been disposed of by the arbitral tribunal, unless the party making the application can prove that he or she did not know and could not, within that period, by exercising reasonable care, have acquired knowledge by virtue of which an award is liable to be set aside under paragraph (5)(b) [the making of the award was induced or affected by fraud or corruption] of this article, in which event the period shall commence on the date when such knowledge could have been acquired by exercising reasonable care.”
It was common cause that KOL’s application to set the arbitration award aside had been brought outside of the three month period referred to and for that matter more than three years after it had come to know that fraud was involved. The fraud was uncovered circa May 2021 and the application to set aside the award was launched in October 2021.
The SCA rejected KOL’s various grounds for attack on the validity of Article 34(3) which included:
- that the court had the power to condone non-compliance with the time bar;
- that it enjoyed foreign state immunity;
- that it was unconstitutional in that it limited the right of access to court; and
- that the arbitration agreement was void ab initio and invalid.
The court held that, if KOL wanted to raise any of these grounds as a challenge to the arbitration award, it was obliged to have done so within the three month period provided for in Article 34(3).
It held that the court does not have any power to condone non-compliance with the time limit and that the time limit was valid from a constitutional point of view.
Conclusion
A party to an arbitration who wishes to challenge the validity of the arbitration award issued in terms of the Act on any basis must do so within the three month time period specified in Article 34(3) of the Act, whatever the basis for that challenge might be, including fraud.
The upshot of the SCA’s decision is to leave the parties in a somewhat invidious position.
On the one hand, the court has found that the arbitration award is valid and unassailable but, on the other hand, has opened the door to KOL opposing what will inevitably be a fresh application by Frazer to enforce the arbitration award. One is left to wonder on what basis KOL might be entitled to oppose the enforcement application in light of the SCA’s findings.