The High Court has ordered the National Oil Infrastructure Company of Zimbabwe (NOIC) to pay a contractor who supplied and installed instrumentation, control and electrical equipment for the Mabvuku Ethanol Storage Tanks Project.
The court ordered NOIC to pay US$164 631 after it had initially refused to honour the arbitration award.
NOIC had approached the court in a bid to stop payment to AC Controls Company insisting on settling the debt through US$1:1 Zimbabwean dollar.
The oil company had cited AC Controls and retired High Court judge Justice November Mtshiya who awarded the arbitration as respondents.
According to court papers, NOIC and AC Controls Company 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 and it was a material term of the agreement that the applicant would defray AC Controls’ costs for materials acquired for the project on production of an invoice, valuation report and interim certificate.
The parties amended the agreement on two occasions to incorporate 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.
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Prior to the coming into force of Statutory Instrument (SI) 33 of 2019 and the amendments, AC Controls had acquired materials worth US$164 631,34 in June, August and October 2018 for use on the project.
AC Controls then demanded settlement of the amount, but NOIC resisted the demand, contending that in the absence of an interim certificate made out in respect of the said materials, as stipulated in the amendment to their contract, the amount could not be dealt with in terms of the amendment to the contract.
They argued that it could only be settled in local currency at the rate of 1:1.
The dispute was referred for arbitration in terms of an arbitral clause in the parties’ agreement.
NOIC maintained that, in the absence of an interim payment certificate, and on the strength of SI 33 of 2019, the AC Controls’ invoice could only be settled in local currency at the rate of 1:1.
The applicant’s argument was that the provisions of SI 33 of 2019 are part of the Finance (No 2) Act of 2019.
However, on January 29, 2021 in the arbitration proceedings, Justice Mtshiya ruled in favour of AC Controls and the relief sought was granted.
NOIC sought to set the award aside arguing that it was in conflict with the public policy of Zimbabwe.
But AC Controls claimed that it had procured the equipment in 2018 and prior to the amendment of the agreement.
Justice Webster Chinamora, who heard the application before he resigned, ruled in the judgment that came out last week that he would not set aside the award saying the court could only interfere where the decision is outrageous in its defiance of logic and offends against the public sense of justice.
“I must hasten to state that it was the applicant who gave a voluntary concession that it owed the first respondent. In my view, such a finding could not have been made if the arbitrator had not considered the applicant’s submissions,” Justice Chinamhora ruled.
“In my view, the parties freely entered the contract between themselves and freely amended it to cater for foreign debts or procurements. 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.”
