NATIONAL Oil Infrastructure Company of Zimbabwe (Noic) has lost a case in which it was seeking the setting aside of a US$10 000 arbitral award made by retired High Court judge November Mtshiya in favour of AC Controls (Pvt) Ltd.
The judgment was handed down by former High Court judge Webster Chinamhora who ruled that Noic failed to argue its case, adding that the arbitral award can be registered.
Noic had made the application in terms of article 34 (2) of the schedule to the Arbitration Act.
Facts are that Noic and AC Controls executed a written agreement for the supply, delivery and installation of instrumentation, control and electrical equipment for the Mabvuku Ethanol Storage Tanks Project.
The contract price was US$2 268 199.90.
The parties agreed that Noic would defray AC Control’s costs for materials purchased for the project on production of an invoice, valuation report and interim certificate.
“The parties amended the agreement on two subsequent occasions in order to address the changes in the country’s monetary policy.
“The main effect of the amendments was to restructure the cost of the contract and make separate provision for payment of local and foreign costs,” the court heard.
Prior to the coming into force of Statutory Instrument 33 of 2019 and the amendments, AC Controls had purchased materials worth US$164 631.34 in June, August and October 2018 for use on the project.
AC Controls demanded a settlement of US$ 164 631.34.
Noic resisted the demand, contending that in the absence of an interim certificate made out in respect of the said materials, as required by the amendment to their contract, the amount not be dealt with in terms of the amendment to the contract.
It was argued that it could only be settled in local currency at the rate of US$1:ZW$1 (“the 1:1 rate”).
The dispute was referred for arbitration in terms of an arbitral clause in the parties’ agreement.
There were two issues agreed for arbitration, the first being whether or not an interim payment certificate and a valuation report had been issued in respect of the amount claimed.
The second issue was on the currency.
Before the arbitrator, AC Controls presented payment of outstanding and unpaid invoice amounting to US$164 631.34 or its equivalent in Zimbabwe dollars, in accordance with the Reserve Bank of Zimbabwe (RBZ) interbank rate and costs of suit on the legal practitioner and client scale.
Noic maintained that, in the absence of an interim payment certificate, and on the strength of Statutory Instrument 33 of 2019, AC Controls invoice could only be settled in local currency at the rate of 1:1.
It was its argument that the provisions of Statutory Instrument 33 of 2019 are now part of the Finance (No. 2 Act) of 2019.
On 29 January 2021 in the arbitration proceedings, Justice Mtshiya ruled in favour of AC Controls and the relief sought was granted.
This triggered the present application.
In its application, Noic said the award is in conflict with the public policy of Zimbabwe, as it is premised on an incorrect interpretation of the law.
The company said the the arbitrator’s findings were made arbitrarily.
Noic said the contract price was originally denominated in United States dollars.
It further said AC Control’s claim arose from materials that it had procured in 2018 and prior to the amendment of the agreement.
Noic contended that until 22 February 2019, this amount was due and owing in United States dollars.
The company however insisted that owing to the advent of Statutory Instrument 33 of 2019, the debt was converted to local currency at the rate of 1:1.
“Consequently, the sum payable became ZWL 164 631.34,” said Noic.
Noic also contended that the award was wrong at law in that it directed it to pay at the prevailing interbank rate yet the debt arose prior to 22 February 2019.
The applicant said on a correct interpretation of the law, Statutory Instrument 33 of 2019, payment ought to be made at the rate of 1:1.
It is on these grounds that Noic prayed that the arbitral award be set aside.
In response, AC Controls opposed that application, arguing that Statutory Instrument 33 of 2019 is not a part of the Finance Act (No. 2) Act of 2019, and that these are two different legal instruments.
AC Controls further argued that the applicant’s argument during the arbitral proceedings was based on Statutory Instrument 33 of 2019 and not the Finance Act.
It further argued that an incorrect reading of the law by the second respondent does not translate to a decision that is in conflict with public policy as contemplated in the Arbitration Act.
In coming up with the ruling, the High Court said a perusal of the award showed that the arbitrator agreed with Noic’s submission that the debt was affected by the provisions of Statutory Instrument 33 of 2019.
“In my view, such a finding could not have been made if the arbitrator had not considered the applicant’s submissions.
“Furthermore, the arbitrator noted in para 30 that the parties’ agreement was that foreign debts be paid in United States Dollars, therefore, could not rule that the amount in question was in Zimbabwean dollars at the rate of 1:1.
“In my view, the parties freely entered the contract between themselves and freely amended it to cater for foreign debts or procurements,” he said.
The judge ruled: “It is on the above that I find no merit in the application to set aside the arbitral award.
“Thus, I am satisfied that the arbitral award is registrable. In the result, I make an order that the application to set aside the arbitral award be and is hereby dismissed with costs.”
He upheld the counter-application by AC Controls.
“The award by second respondent (Mtshiya) be and is hereby registered as an order of this Court.”— STAFF WRITER.
