UK: Zimbabwe suffers top court blow in US$124 million dispute

By UK Correspondent

ZIMBABWE last week suffered a blow in its bid to quash enforcement of a US$124 million arbitration award in a long running dispute arising from the country’s bitterly disputed land reforms.

The Court of Appeal – one of the of the highest courts in London – dismissed Zimbabwe’s bid to rely on the UK’s State Immunity Act (SIA), under which States may be immune from the jurisdiction of United Kingdom courts.

Legal commentators said the eagerly awaited ruling “could have a weighty impact on the enforcement of investor-state awards and the ability of states to play the state immunity card”.

Zimbabwe’s case was handled together with a similar appeal by the Spanish government, with the Court ruling that neither “were entitled to use the UK’s 1978 State Immunity Act (SIA) to challenge International Centre for Settlement of Investment Disputes (ICSID) arbitration awards”.

The ICSID is “the world’s leading institution devoted to international investment dispute settlement” and one of the five member organizations of the World Bank Group,

In the Zimbabwe case, Border Timbers Limited, Timber Products International (Private) Limited, and Hangani Development Co. (Private) Limited are seeking enforcement of a 2015 ICSID arbitration award against the Harare government.

The dispute relates to Zimbabwe’s compulsory acquisition of claimants’ farms and forestry plantations under the land reform, as well as “the alleged expropriation of foreign exchange from claimants’ bank accounts and the State’s alleged failure to prevent invasions to the forestry plantations by illegal squatters”.

The companies claimed some US$345 million in compensation but were awarded US$125 million plus interest and have been seeking to enforce the award in United States and UK courts since then with Zimbabwe trying to rely on State immunity to avoid paying the award.

However, in a ruling handed down by the UK’s Court of Appeal on October 22, Chancellor of the High Court Sir Julian Flaux and Lord Justices Guy Newey and Stephen Phillips unanimously dismissed Zimbabwe’s appeal.

The court allowed Zimbabwe to remit its setting aside application after the country indicated it has other “exceptional” non-immunity defences against enforcement.

A statement issued after the ruling reads, “The Convention (ICSID) is an international treaty which concerns the resolution of investment disputes.

“Article 54 of the Convention provides that each contracting State shall recognize an ICSID award as binding and enforceable as if it were a final judgment of its domestic courts.”

While the judges acknowledged that States are immune from the jurisdiction of the English courts pursuant to section 1(1) of the State Immunities Act (SIA), they noted that section 2(2) of the SIA provides that a State may submit to the jurisdiction of the English courts via a prior written agreement, while section 9 provides that a State is not immune to arbitration proceedings to which the State agreed in writing.

And on the pivotal question of whether State parties, in signing the ICSID Convention, “agreed in writing to submit to the jurisdiction regarding enforcement of ICSID awards, the judges gave a resounding yes”.

The award was secured under a bilateral investment treaty (BIT) between Zimbabwe and Switzerland for expropriation of the claimants’ land.

In 2021, the Border claimants obtained an order recognising the award under the 1966 SIA Act, with Zimbabwe applying to set aside the award.

However, in January 2024, Mrs Justice Dias of the High Court rebuffed Zimbabwe’s contention that it was entitled to immunity from paying the award under the SIA.

And reaching the same conclusion as the lower courts, the Court of Appeal judges pointed to Article 54 of the ICSID Convention, which stipulates that each contracting State shall recognise an ICSID award as binding and enforceable as if it were a final judgment of its domestic courts.

Last month Zimbabwe’s finance minister Mthuli Ncube revealed that the government would start paying compensation to farmers who lost land under the country’s controversial land reforms.

About 4,000 white farmers lost their homes and lands when the Robert Mugabe’s Zanu PF-led government launched the often-chaotic redistribution programme in 2000, which turned violent at times.

Mugabe, who died in 2019, said it was aimed at addressing colonial-era land inequities after the country gained independence from white minority rule in 1980.