…as South Africa’s appeal court blocks enforcement of massive arbitration award
—protecting the Kingdom’s assets from seizure
Moorosi Tsiane
LESOTHO has secured a major legal and financial victory after South Africa’s Supreme Court of Appeal (SCA) blocked the enforcement of a staggering €50 million (about M1 billion) arbitration award obtained by German company Frazer Solar GmbH (FSG), shielding the mountain kingdom’s assets from international seizure.
However, while the SCA rescinded the enforcement order that allowed FSG to pursue the Kingdom of Lesotho (KOL)’s assets, the court stopped short of overturning the arbitration award itself, ruling that the government had challenged it too late under international arbitration rules.
The judgment, delivered on 22 May 2026, effectively means Lesotho has won a critical battle to protect its assets from immediate attachment, but the underlying arbitration award technically still exists.
In a detailed ruling, the SCA overturned an earlier decision of the Gauteng Division of the High Court in Johannesburg, which had dismissed Lesotho’s application to rescind the enforcement order.
That order had opened the door for FSG to pursue Lesotho’s assets internationally, including attempts to attach water royalties from the Lesotho Highlands Water Project, a shareholding in a cable company and the bank account of Lesotho’s embassy in Brussels.
The SCA found that the High Court had wrongly dismissed Lesotho’s rescission application despite serious questions surrounding the legality of the underlying agreement and allegations that the arbitration proceedings had proceeded without proper notice reaching the Lesotho government.
“The KOL has therefore shown ‘sufficient’ or ‘good cause’ to warrant the rescission of the default judgment and the appeal regarding that issue must succeed,” the SCA ruled.
The dispute stems from a controversial 2018 agreement between FSG and the Lesotho government for an ambitious nationwide solar and energy-efficiency project.
The project was intended to include 40 000 solar water heating systems, 20MW of solar photovoltaic capacity, one million LED lights and 350 000 solar lanterns across the country.
According to FSG, the project was to be financed through the German government via development bank KfW-IPEX Bank GmbH. The company claimed the deal had the backing of then Prime Minister Thomas Thabane and was aimed at reducing Lesotho’s dependence on imported electricity while expanding rural energy access.
However, the project collapsed before implementation after the Lesotho government insisted that then Minister in the Prime Minister’s Office, Temeki Tšolo, had signed the agreement without proper authority.
The agreement contained an arbitration clause requiring disputes to be resolved in South Africa, prompting FSG to initiate arbitration proceedings in Johannesburg in 2019 after accusing Lesotho of breaching the contract.
FSG eventually secured an arbitration award worth nearly M950 million, which in April 2021 was made an order of the Gauteng High Court in Johannesburg after Lesotho failed to oppose the proceedings.
That order effectively empowered FSG to pursue Lesotho’s assets internationally.
In October 2022, FSG announced that it had obtained an order in Belgium permitting the seizure of Lesotho’s assets there.
Lesotho subsequently approached South African courts seeking rescission of the enforcement order and also sought to set aside the arbitration award itself.
The government argued that the award had been improperly obtained and that the underlying agreement was unlawful, unconstitutional and invalid from the beginning.
It further pointed out that the High Court of Lesotho had already declared the supply agreement unconstitutional and void ab initio (from the onset) because proper procurement and financial procedures had not been followed.
Despite those arguments, the Gauteng High Court dismissed Lesotho’s applications in November 2022, finding that the country had failed to adequately explain delays in bringing the matter and had not shown prospects of success.
Lesotho then escalated the matter to the SCA, which heard the appeal on 20 May 2025 before a panel comprising Judges Fikile Mokgohloa, John Smith, Mahube Molemela, Lebogang Modiba and Tati Makgoka.
FSG, Trans-Caledon Tunnel Authority, Lesotho Highlands Development Authority, Standard Bank of South Africa, Sheriff Johannesburg Central, Sheriff Centurion East, the Minister of Justice and Constitutional Development and the Arbitration Foundation of South Africa were cited as first to eighth respondents respectively.
Lesotho was represented by Advocates Tembeka Ngcukaitobi, Isabel Goodman, Nick Ferreira and Pranisha Maharaj-Pillay, while the respondents were represented by Matthew Chaskalson alongside Dave Watson, Ntokozo Qwabe, Chris Georgiades and Nikhiel Deeplal.
Before the appeal court, Lesotho argued that the supply agreement had been concluded without an open tender process in breach of procurement regulations and that it violated section 28 of the Public Financial Management and Accountability Act of 2011.
The government maintained that Mr Tšolo had acted outside his powers when he signed the agreement.
“The signing of the supply agreement by Mr Tšolo purportedly on its behalf, involving, as it does, the exercise of public power, was subject to the principle of legality, both under the Constitutions of the Kingdom of Lesotho and of South Africa,” the government argued.
Lesotho further submitted that the agreement, including the arbitration clause, was invalid because it had been concluded in breach of the Constitution and procurement and financial laws of the country.
“Minister Tšolo was acting ultra vires and on a frolic of his own when he signed the supply agreement as he was not authorised to do so by Cabinet, or by the Minister of Finance or the Minister of Energy. Therefore, the arbitration clause could not survive the invalidity and unlawfulness of the supply agreement,” Lesotho argued.
The Kingdom also contended that Mr Tšolo had no authority to waive Lesotho’s sovereign immunity by submitting disputes to arbitration in a foreign country.
FSG, however, argued that Mr Tšolo possessed the necessary statutory authority under section 10 of the Lesotho Government Proceedings and Contracts Act.
The company maintained that agreements signed by a minister purporting to act on behalf of the government were binding on Lesotho.
FSG further insisted that article 34(3) of the UNCITRAL Model Law imposed an absolute three-month time limit for challenging arbitration awards and that Lesotho had filed its application far too late.
In its judgment, the SCA accepted that Lesotho had provided a reasonable explanation for failing to oppose the enforcement proceedings.
The court took seriously allegations that legal notices and arbitration documents may have been intercepted and concealed from senior government officials.
The judgment referred to preliminary investigations by the Directorate on Corruption and Economic Offences (DCEO), which indicated possible fraud and corruption involving some officials.
The SCA also accepted that Lesotho had established a bona fide defence with prospects of success.
The judges found that there was compelling evidence suggesting the agreement had been unlawfully concluded.
The court heavily criticised the absence of an open tender process and said procurement laws existed to ensure transparency, competitiveness and accountability.
“Absent these foundational principles, the supply agreement is invalid, unconstitutional and cannot be enforced,” the court ruled.
The SCA further found that only the Minister of Finance, with Cabinet approval, could lawfully approve borrowing arrangements of the nature contemplated in the FSG deal.
The court noted that Mr Tšolo was not the Finance Minister and that then Finance Minister Moeketsi Majoro had not approved the agreement.
The appeal court also relied extensively on the earlier Lesotho High Court judgment, which had already declared the agreement unlawful and unconstitutional.
However, despite siding with Lesotho on the enforcement issue, the SCA refused to set aside the arbitration award itself.
The court held that article 34(3) of the Model Law imposed a strict three-month deadline for challenging arbitration awards and that courts had no general power to condone delays outside that period except in limited cases involving fraud or corruption.
“Regarding the second issue of the dismissal of the application to set aside the arbitral award, we find that reasonably interpreted, article 34(3) of the Model Law does not bestow on courts a discretion to extend the three-month time limit for applications to set aside an arbitral award,” the court held.
The SCA also ruled that the three-month limitation constituted a justifiable restriction on the constitutional right of access to justice because international arbitration depended on finality and certainty.
In its final order, the court rescinded the April 2021 enforcement order that had enabled FSG to pursue Lesotho’s assets.
“The enforcement order granted by Lamont J on 29 April 2021 is hereby rescinded,” the SCA ordered.
However, the appeal against the dismissal of Lesotho’s application to set aside the arbitration award itself was dismissed.
“The appeal against the order of the high court dismissing the rescission application is upheld with costs, including the costs of two counsel.
“The enforcement order granted by Lamont J on 29 April 2021 is hereby rescinded. Each party is directed to pay its own costs.
“The appeal against the order dismissing the application to set aside the arbitral award is dismissed with costs including the costs of two counsel,” the court ordered.
The result is that, while FSG can no longer rely on the previous South African enforcement order to attach Lesotho’s assets, the arbitration award itself technically remains alive.
Lesotho’s next step regarding this matter is not yet clear as we could not get official comment at the time of going to print. But it seems likely the government will have no option but to seek a complete nullification of the arbitration award on other grounds which may include fraud and corruption.
Efforts to obtain comment from the government were unsuccessful yesterday. Minister of Law and Justice Richard Ramoeletsi’s mobile phone rang unanswered while Attorney-General Rapelang Motsieloa KC said he was “indisposed” via a WhatsApp message.
Meanwhile, Mr Tšolo is set to stand trial in the High Court of Lesotho on corruption and fraud charges linked to the controversial Frazer Solar deal.
This follows the Lesotho Court of Appeal’s decision earlier this month overturning a previous High Court ruling that had permanently stayed the criminal proceedings against him.
The DCEO alleges that Mr Tšolo unlawfully represented the government when he entered into the agreement with Frazer Solar in September 2018 without proper authority, exposing Lesotho to massive financial liability.
