Zim govt pays heavily for seizing timber company’s land

Zimeye | 25th January 2024

By Zimeye

A London court has ordered Zimbabwe to pay US$125 million to two timber firms whose land was seized by the government, rejecting its claim of state immunity in a case that tests the enforcement of international arbitration awards.

The High Court said on Friday that Zimbabwe had waived its immunity by signing the 1965 Washington Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention), which provides a mechanism for resolving disputes between investors and states.

The case stems from Zimbabwe’s expropriation of farms and forestry plantations owned by Border Timbers Limited and Hangani Development Company, both incorporated in Switzerland, as part of its fast-track land reform program in the early 2000s.

The firms sought compensation under a bilateral investment treaty between Zimbabwe and Switzerland, and won an arbitration award from an ICSID tribunal in 2015.

The tribunal ordered Zimbabwe to pay US$124 million plus interest, as well as US$1 million in moral damages and costs.Zimbabwe unsuccessfully challenged the award through an annulment process within the ICSID system, and was ordered to pay more costs.

The firms then applied to the English court to register and enforce the award, which was granted in May 2022.

Zimbabwe sought to set aside the order, arguing that it was immune from the jurisdiction of the UK courts under the State Immunity Act 1978.

But High Court judge Julia Dias dismissed the application, saying that state immunity was irrelevant to the registration of ICSID awards, which are final and binding and have the same force as a judgment in the High Court.

She said the court’s role was not to review the merits or the jurisdiction of the tribunal, but to give effect to the firms’ right to the award as provided by the ICSID Convention.

She added that the court was not exercising any coercive power over Zimbabwe, until the order was served on it and execution proceedings began.

“In this specific context, I regard it as highly relevant that ICSID is a self-contained regime and that the only permitted avenue of challenge to an award is via the process for annulment within the confines of the convention,” she said in the judgment.

The judge also stated that applications for registration of arbitral awards are only for “recognition and enforcement of an award which is the result of a prior adjudicative process” and that by being party to the Convention, Zimbabwe had agreed to be bound by the award – thus waiving its immunity.

“The question of sovereign immunity does not arise in relation to an application to register an ICSID award. It is therefore not open to Zimbabwe to apply to set it aside on that basis, although it may of course claim immunity in relation to any further steps towards execution,” she said.

She concluded by saying that the claimants’ failure to make “full and frank disclosure” about state immunity as a potential defence by Zimbabwe in their application for registration was only culpable as it was not deliberate.

She said this was immaterial to the case.She affirmed the claimants’ entitlement to the award, saying they were merely “exercising a statutory entitlement” by seeking legal status of “something that had already happened (the award)”.