High Court nullifies Frazer Solar contract

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  • but German company dismisses “irrelevant ruling,”
  • vows to pursue litigation in other countries to seize Lesotho’s assets there…

Mohalenyane Phakela

THE government has scored a major victory after the High Court nullified a M1, 7 billion tender awarded to Frazer Solar in 2018 for the supply of solar power to Lesotho.

The court bench comprising Chief Justice Sakoane Sakoane, and Justices Moroke Mokhesi and Realeboha Mathaba, yesterday ruled that the tender was invalid because Lesotho’s procurement laws had not been followed.

The net effect of the ruling is that Frazer Solar, which had been awarded €50 million (M894, 2 million) in damages by a South African arbitrator for the government’s alleged breach of the contract, is not entitled to such damages.

However, the matter is far from over as the German company has dismissed the Lesotho High Court judgment as an “irrelevant ruling”. It has vowed to press on with the other litigations it has instituted on the same matter in courts in South Africa, Mauritius, United States of America (USA) and the United Kingdom (UK) to seize Lesotho’s assets in those countries if it gets favourable judgments.

The latest ruling comes against on the background of bitter exchanges this week between the new Sam Matekane-led government and Frazer Solar who had boasted that a Belgian court had endorsed the €50 million damages award. The government had then accused the German company of acting in bad faith by approaching the Belgian court without its knowledge and in violation of an agreement by the two parties to halt all legal proceedings in other jurisdictions until the finalisation of their court battle before the Lesotho High Court.

This was in reference to the legal battle settled yesterday by the High Court in favour of the Lesotho government.

The judgement was handed down in response to a 21 September 2021 application by then Prime Minister Moeketsi Majoro. He had petitioned the court to reverse the €50 million damages award to Frazer Solar by a South African arbitrator, Vincent Maleka, who had ruled that the Lesotho government had breached its 2018 solar power deal with the German company.

Frazer Solar had in April 2021 successfully petitioned the Gauteng High Court to endorse the €50 million damages award and allow it to garnish Lesotho’s revenue from the sale of water to South Africa in terms of the Lesotho Highlands Water Project treaty entered into by the two countries in 1986.

However, Dr Majoro petitioned the same court to reverse its decision. That case is still pending. This was done to allow the same matter to be finalised in the Lesotho High Court where Dr Majoro had filed another application to reverse the award.

In his Lesotho court application, Dr Majoro argued that the solar power deal was invalid as it was “fraudulently and corruptly” signed by then Minister in the Prime Minister’s Office, Temeki Tšolo, who had no powers to sign.

Mr Tšolo has previously denied signing the deal on behalf of the government.

However, Dr Majoro insisted that Mr Tšolo signed and, in the process, violated national laws which stipulate how such contracts are agreed and how payments to third parties are made.

He accused the former minister of acting outside his powers by “clandestinely” signing the agreement without the knowledge and approval of parliament, cabinet and himself as the finance minister at the time. He further argued that the deal should have been negotiated and signed by the Ministry of Energy and Meteorology, not by Mr Tšolo.

When the matter was heard in September and October this year, the government was represented by a legal team comprising South African lawyers, Steven Budlender and Nick Ferreira and locals, Motiea Teele and Qhalehang Letsika.

Frazer Solar was represented by the South African duo of Advocates Pearce Rood and Frank Pelser.

Adv Budlender had argued that Mr Tšolo and Frazer Solar were aware from the start that they had entered into an illegal contract.

Adv Budlender argued that the procurement regulations were not met and therefore the contract, together with the clause providing for arbitration in the event of a dispute between the government and Frazer Solar, stood to be nullified.

On the other hand, Adv Rood conceded that procurement rules had been flouted when his client was ‘awarded’ the tender by Mr Tšolo.

Despite that, he still insisted that Mr Tšolo had been authorised by the Thabane administration to act on behalf of the then government.

He said even if the Lesotho High Court were to nullify the supply contract, it had no jurisdiction to adjudicate and overturn the arbitration award as this had been endorsed by the Gauteng High Court in April 2020.

Announcing the High Court’s verdict yesterday, Justice Mokhesi said the tender was null and void because even by Frazer Solar’s own admission, the procurement laws of Lesotho had not been followed.

“Frazer Solar concedes that the Supply Agreement breached the Procurement Regulations, the Public Finance Management Act and the Constitution of Lesotho,” Justice Mokhesi said.

“The breaches are flagrant and multifarious. The contract has not been carried out. It would be hard to regard Frazer Solar as an innocent party, as it was fully aware that all these laws were not followed. In order to give their agreement a semblance of legitimacy, Minister Tšolo and Frazer Solar included a clause in the Supply Agreement in terms of which the government of Lesotho warrants that all the procurement laws were followed and all necessary parties who, in terms of those procurement laws, should have green-lighted the contract, did so. This was all a sham because Minister Tšolo and Frazer Solar knew that these laws were not followed, as it correctly conceded before this court.

“In the result, the principle of legality and the need to maintain the rule of law demands that the supply agreement be declared void ab initio (having no legal effect from inception) and set aside together with the arbitration agreement.

“The following order is made: The third respondent (Tšolo)’s decisions to appoint the first respondent (Frazer Solar) as a sole supplier of goods and services and to enter into a supply agreement dated 27 September 2018 are reviewed and set aside.

“The arbitration agreement contained in clause 24 of the supply agreement is declared unconstitutional, unlawful and invalid, and is reviewed and set aside. The supply agreement and the arbitration agreement contained in clause 24 are declared void ab initio.”

The judgement was written by Justice Mokhesi, with Chief Justice Sakoane and Justice Mathaba concurring. The court further ordered Frazer Solar to pay the government’s legal costs.

Not yet uhuru

However, the matter is far from over. Following yesterday’s court decision, Frazer Solar immediately issued a statement, saying the decision had no bearing on its quest to seize Lesotho’s assets around the world.

“Frazer Solar welcomes today’s ruling by the High Court of Lesotho. While the company fundamentally disagrees with the court’s decision, the ruling enables Frazer Solar and its legal team to re-start global enforcement proceedings against the Kingdom of Lesotho.

“Consequently, Frazer Solar’s lawyers plan to re-commence legal action in the USA, the UK, Mauritius and South Africa in the near future. Furthermore, the company will pursue assets owned by Lesotho in other jurisdictions around the world.

“The High Court’s ruling is irrelevant, as we have a legal award from an independent arbitrator that is final, unappealable and globally enforceable (sic)…

“If the government thought that the High Court’s decision could be used as a further delaying tactic, then they face an unpleasant surprise. The Belgium court’s recent ruling in Frazer Solar’s favour demonstrates our ability to target the Kingdom’s assets and bank accounts anywhere in the world.

“The High Court’s decision will only serve to accelerate our plans to launch fresh enforcement proceedings across multiple legal jurisdictions,” Frazer Solar said in its statement.

Meanwhile, Prime Minister Matekane’s press attaché, Thapelo Mabote, said the government was yet to familiarise itself with the judgement and map the way forward.

“Since the judgement was only delivered today (yesterday) the prime minister, his deputy, who is also the Minister of Law and Justice (Nthomeng Majara), and Attorney General (Rapelang Motsieloa) are still to meet to discuss the judgement and then decide on which route to take.

“You will recall that Frazer Solar has launched several litigations in different countries so the government will have to advise itself on the way forward regarding those other cases,” Mr Mabote told the Lesotho Times.

 

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