26.1. Article 23 of the applicable rules of the Association confers the powers on me to determine the question of my jurisdiction. The Rules in that regard are consistent with the applicable principles of the South African law relating to jurisdiction of an arbitrator, and the power of the arbitrator to determine that question.1
26.2. By their own agreement the parties have expressly included the application of the rules of the Association. Of necessity that includes the application of Article 23 of the applicable rules of the Association. It follows therefore that the parties have consented to my power to determine the question of jurisdiction.
27.1. Article 30(1)(b) and also Article 30(2) of the rules of the Association make it clear that I am entitled to order that arbitration proceedings shall continue in the event the respondent (in this case the Kingdom of Lesotho) has failed to communicate its response to the notice of arbitration or has failed to file its statement of defence. In this case the Kingdom of Lesotho has failed to do both, notwithstanding notification by the claimant to commence arbitration proceedings, and service upon it of Procedural Order No. 1 setting out, amongst others, the timetable for the arbitration and the date of the hearing, as well as the minutes of the first meeting of the arbitration held on 4 September 2019.
27.2. Article 30(2) of the rules of the Association provides that the hearing of the arbitration may proceed in the absence of a party who was duly notified of the date, time and place of the hearing and has failed to attend without sufficient cause.
27.3. From what I have described in section C above, I am satisfied that the Kingdom of Lesotho was notified of the date, time and place of the hearing of the arbitration. In addition to the service of Procedural Order No. 1, I am satisfied that notice of the hearing was served upon the Kingdom of Lesotho in terms of Procedural Order No. 2.
27.4. No response to the service of Procedural Order No. 2 was forthcoming from the Kingdom of Lesotho. I have not received any explanation why the Kingdom of Lesotho did not respond to Procedural Order No. 2. In the circumstances set out above I am satisfied that the notice of the arbitration hearing specifying the time, date and place of the hearing was reasonable, and having regards to the fact that it was served at the office of the Prime Minister in September 2019, and confirmed in the Procedural Order No. 2 also served on the Kingdom of Lesotho on 29 November 2019.2
28.1. The Arbitration Act, 1965 is a domestic law which does not enjoy extra-territorial application. It is therefore confined to domestic application in respect of which one or both parties to the arbitration dispute, or the cause(s) of action giving rise to the arbitration fall within the jurisdiction of the arbitration, on the well-known grounds of jurisdiction, including the ordinary residence or domicile of the parties to arbitration, or the cause of action having arose within the territorial jurisdiction of the Republic.
28.2. None of the recognised grounds of jurisdiction exist in this case to justify the invocation of the Arbitration Act, 1965: neither the claimant nor the respondent ordinarily reside or is domiciled within the Republic. In fact, their chosen domicilia are elsewhere abroad. The cause(s) of action relied upon by the claimant are based on the anticipated performance of the parties’ obligation in the Kingdom of Lesotho and the alleged breaches of the latter's contractual obligations in Lesotho.
28.3 The fact that the parties have not expressly agreed that the subject-matter of arbitration should be governed by the International Arbitration Act is of no moment because parties specified that the place of arbitration would be Johannesburg, it being a place unconnected to the parties place of residence, domicile and performance or non-performance of obligations specified in the Supply Agreement.
30.1. The first set of breaches of the terms of the Supply Agreement is the following:
30.1.1. Clause 17.1.1 in terms whereof the Government of Lesotho warranted that the Project complies with all the laws and met the requisite approvals of the Government.
30.1.2. Clause 17.1.2 in which the Government of Lesotho warranted that the claimant was expressly authorized to commence with the implementation of the Project without delay.
30.1.3. Clause 17.1.3 in terms whereof the Government of Lesotho warranted that it have signed and bound itself to the terms of the Finance Agreement before or contemporaneously with the execution of the Supply Agreement.
30.1.4. Clause 12.1 in terms whereof the Government of Lesotho agreed to remunerate the claimant for work done in accordance with the draw-down schedule specified in clauses 12.1.1 to 12.1.5 of the Supply Agreement.
30.1.5. Clauses 5.1.4 and 17.2 in terms whereof the Government of Lesotho acknowledged that time was of essence in the implementation of the Project and that it shall do all things necessary to ensure that the Project runs smoothly, without interruption or delay.
30.2. The second category of the breach of the Supply Agreement is founded upon the provisions of clause 18 of the Supply Agreement. In terms thereof the Government of Lesotho granted to the claimant the first opportunity to undertake all other renewable energy or electricity generation opportunities in Lesotho for a period of 5 years from the date of commencement of the Supply Agreement. Given its importance to portion of damages I consider it important to its out its terms in full -
"GOL hereby grants FSG the first opportunity for all other energy, energy efficiency or electricity generation opportunities with GOL for a duration of 5 years calculated from the Commencement Date."
31.1. In its main claim the plaintiff seeks:
31.1.1. payment of €50 million, as liquidated damages payable to it in accordance with the provisions of clause 22.2.2 of the Supply Agreement;
31.1.2. compensation for the value of profits it would have earned had the respondent not breached clause 18 of the Supply Agreement.
32.1. loss of profits suffered by the claimants as a consequence of the respondent’s material breaches of the clauses of the Supply Agreement referred to in paragraphs 30.1.1 to 30.1.5 above.
32.2. loss of opportunity claim. This too is based upon the respondent's alleged breach of clause 18 of the Supply Agreement.
69.1. The Project included the supply and installation of 34 000 to 40 000 SWHs, to replace electrical geysers and up to 1. 5 million LED lights in various Government buildings and civil servants residential homes in Lesotho, consistent with the energy policy of that country.
69.2. Had it been implemented, the Project would have saved approximately 200 million kWh per annum of electricity, on the basis that a single SWH has the capacity to save approximately 5 000 kWh per annum.
69.3. A single SWH would have been purchased at €2 500. The maximum of 40 000 SWHs contemplated in the Supply Agreement would have been purchased at total price of €100 million which is equivalent to the value of the Project specified in the Supply Agreement.
69.4. Had the Project been implemented the claimant would have been required to provide a minimum of 300 000 and a maximum of 350 000 solar lanterns (75 000 of which would have been provided without a charge by the claimant) which would have been distributed to non-electrified households in the rural parts of Lesotho.
69.5. The calculation of the expert indicates that each solar lantern would have generated 102.2 kHw of electricity at the cost of €52 per unit, with the total cost of€13 260 00.
69.6. The benefits of the Project arising from the saving of 200 kHw per annum of electricity would have reduced Lesotho's dependence on imported electricity and thus reduce the costs associated with the importation of electricity from South Africa and Mozambique.
69.7. The use of lanterns would also have eliminated the use of paraffin and candle lights in households where there would have been installed.
69.8. The Project would not have involved an upfront payment of the purchases of the renewable energy products by the Government of Lesotho as it would have been funded from loans provided by KfW and the DBSA, repayable from positive cash-flows generated by the Project over a short payback period.
101.1. The Supply Agreement was negotiated over a long period. It was concluded on 24 September 2018 and provided for the commencement date of 1 October 2018, few days after its conclusion.
101.2. Secondly, clause 17.2 of the Supply Agreement expressly communicated to the parties that time was of essence to the implementation of the Project, and that the Government of Lesotho will ensure that the Project was implemented smoothly without interruption and undue delays. Other parts of the Supply Agreement including 5.1.4 repeat a similar acknowledgement by the Government of Lesotho that time was of essence to the implementation of the Project.
108.1. Supply Agreement failed because Minister Majoro refused to sign the Finance Agreement. The explanation of his refusal by Mr Frazer is that Minister Majoro had committed himself to the Mafeteng Project which was competing with that of the claimant.
108.2. In his evidence Mr Frazer regarded the Mafeteng Project as the competing project. He expressly says so in his written statement, particularly in paragraph 87 of that statement. His complaint in that regard is that the Mafeteng Project was higher in cost than what the claimant would have offered to compete with it.
108.3. There is no suggestion, and there was no evidence emanating from Mr Frazer, that the Mafeteng Project was decided upon by the Lesotho Government, and supported by Minister Majoro, as a further project in addition to what the Government of Lesotho had committed itself to implement the Project under the Supply Agreement.
108.4. Far from it, both Projects competed with one another, and the survival of the Mafeteng project meant the demise of the claimant's under the Supply Agreement.
108.5. Finally, the substantive factual basis of the other breaches of the Supply Agreement which gave rise to the cancelation of the Supply Agreement is the Mafeteng Project.
114.1. The value of the Project was fixed in terms of Euros, despite the parties' election of the South African law as the law of arbitration.
114.2. Although performance of the Project by the claimant would have been in Lesotho the claimant would have been compensated in Euros as was agreed to in clause 12 of the Supply Agreement, had the Agreement been implement to its conclusion.
114.3. Compensation in Euros would place the claimant, as far as is reasonably possible, in the same position as it would have been had the respondent not breached the terms of the Supply Agreement, and in the light of the breaches that the claimant has shown. It would not expose the claimant adversely or beneficially to the variation of the exchange rate between the Euros and Malotis.
118.1. The first is from the date on which the breach of the Supply Agreement was communicated to the respondent, 11 March 2019 to the date of the hearing, 2 December 2019. For this period they experts arrived at the value of the pre-award interest of €621 577.
118.2. The second is the period after the hearing, to the date of the delivery of the award. They assumed that the award would be delivered within a period of 60 days contemplated in the rules of the Association. For that period the experts arrived at the amount of €280 560.
126.1. The respondent is directed to pay the claimant liquidated damages in the sum of €50 million.
126.2. The respondent is ordered to pay pre-award interest on the above sum of €50 million in the amount of €754 273.
126.3. The respondent is also ordered to pay the post-interest award in the sum of €50 million calculated at the rate of 1.7% per annum from the date of the award to date of payment, and payable in the Euro currency.
126.4. The respondent is ordered to pay the costs of the arbitration as are described in the schedule attached to the claimant’s note on submission of costs signed by the claimant's legal representatives, Withers LLP, on 19 December 2019.
126.5. In addition, the respondent shall pay the costs of the fees of the arbitrator in accordance with the final invoice submitted by the arbitrator to the claimant’s legal representatives.
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