Delta Operations (Private) Limited v Origen Corporation (Private) Limited

In 2002, the appellant (Natbrew/Delta) and respondent (Origen) entered into a contract for reciprocal deliveries of barley. Natbrew was to deliver 2,400-2,450 tonnes of barley unsuitable for brewing but suitable for stock feed in June-July 2002. Origen was to deliver an equivalent tonnage of barley grown in the 2002 winter season in October 2002. Clause 1.4 stipulated that if Origen failed to deliver, it would pay Natbrew $75,000 per tonne for each tonne not delivered. Natbrew delivered 2,019.28 tonnes, but Origen only delivered 1,127.848 tonnes, leaving a shortfall of 891.432 tonnes. The dispute was referred to arbitration as per the contract. The arbitrator awarded specific performance, and alternatively, ordered Origen to pay the full amount Natbrew would expend in purchasing the barley shortfall. Origen applied to set aside the award under article 34(2) of the Model Law. The High Court set aside the award as contrary to public policy. Natbrew appealed to the Supreme Court.

• Whether the arbitral award was in conflict with the public policy of Zimbabwe under article 34(2)(b)(ii) of the Model Law on International Commercial Arbitration
• Whether the arbitrator was entitled to grant specific performance when the contract provided for a monetary penalty
• Whether the arbitrator exceeded his mandate by granting remedies not contemplated by the parties' contract
• Whether the arbitrator properly applied the penalty stipulation under the Contractual Penalties Act
• Whether the arbitrator created an issue not arising from the parties' submissions

The appeal was dismissed with costs. The High Court's order setting aside the arbitral award in its entirety and dismissing Delta's application for enforcement of the award was upheld.

An arbitral award will be set aside as contrary to public policy where: (1) the arbitrator grants remedies not available under the parties' contract, thereby violating the sanctity of contracts and effectively creating a new contract for the parties; (2) the arbitrator deliberately ignores or disregards statutory provisions (such as penalty stipulations under the Contractual Penalties Act) without lawful basis; (3) the arbitrator creates and decides issues not arising from the parties' submissions; and (4) the arbitrator fails to provide reasons for the award as required by article 31(2) of the Model Law. The test for public policy under article 34(2)(b)(ii) of the Model Law requires that the reasoning or conclusion in an award goes beyond mere incorrectness and constitutes a palpable inequity so far-reaching and outrageous in its defiance of logic or accepted moral standards that a sensible and fair-minded person would consider that the conception of justice would be intolerably hurt by upholding the award. Where parties have contractually agreed on a specific remedy (such as a penalty payment for breach), arbitrators cannot substitute their own view of appropriate relief, particularly where the agreed remedy is enforceable under statute.

The Court cited with approval the statement by Jessel MR in Printing and Numerical Registering Co v Sampson (1875) LR 19 Eq 462 that public policy requires that competent adults have the utmost liberty of contracting and their contracts be held sacred and enforced by courts, and that courts should not lightly interfere with freedom of contract. While not essential to the decision, the Court noted that there was an error in Natbrew's calculation of the alternative claim amount ($66,900,000 instead of $66,857,400), though this did not affect the outcome. The Court's reference to the arbitrator going "on a frolic of his own" in creating an issue not raised by the parties emphasizes the judicial disapproval of arbitrators exceeding their mandate. The judgment implicitly recognizes that while arbitrators have wide discretion in deciding disputes, this discretion is bounded by the parties' agreement, applicable law, and fundamental principles of procedural fairness.

This case is significant in Zimbabwean arbitration law as it clarifies the scope of public policy as a ground for setting aside arbitral awards under the Model Law. It establishes that arbitrators must strictly adhere to the terms of the parties' contract and cannot create new remedies not contemplated by the agreement. The judgment reinforces the principle of sanctity of contracts as a core element of public policy, particularly in commercial arbitration. It provides guidance on when an arbitral award crosses the line from being merely incorrect to being so inequitable as to offend public policy. The case also emphasizes that arbitrators must respect statutory provisions (such as the Contractual Penalties Act), confine themselves to issues raised by the parties, and provide adequate reasons for their awards. It demonstrates the limited but important supervisory role of courts in reviewing arbitral awards, particularly where fundamental principles of justice and fairness are violated.