Premium Leaf Zimbabwe (Private) Limited v Tilroy Enterprises (Private) Limited and Advocate Firoz Girach

The applicant, a tobacco merchant, contracted the first respondent to raise a crop in the 2018/19 tobacco farming season. Under the commercial tobacco growers' contract, the applicant provided working capital in United States dollars, borrowed from offshore creditors to fund the farmers. The first respondent became liable to pay US$510,388.39 as at 30 September 2019. A dispute arose regarding the currency of repayment. The first respondent argued that advances made up to 22 February 2019 should be repaid in Zimbabwean dollars at a 1:1 rate, and advances after that date should be repaid in Zimbabwe dollars at the prevailing Reserve Bank of Zimbabwe auction rate of exchange, relying on SI 33 of 2019. The matter was referred to arbitration before the second respondent (Advocate Firoz Girach). The arbitrator issued an award on 25 February 2021 ordering partial payment in RTGS dollars and partial payment in Zimbabwe dollars at the interbank rate. The applicant sought to set aside the award as contrary to public policy, arguing that the arbitrator failed to consider the precedent in Zimbabwe Leaf Tobacco Company (Pvt) Ltd v Mushayakarara HH 220/20, which had been upheld by the Supreme Court, and which established that repayment must be in United States dollars.

• Whether the arbitral award was in conflict with the public policy of Zimbabwe as contemplated in Article 34(2)(b)(ii) of the Model Law on International Commercial Arbitration
• Whether an arbitrator's failure to consider binding precedent from superior courts renders an award contrary to public policy
• Whether the arbitrator's finding that the contract made no mention of the currency of payment was tenable given Clause 9.3 of the agreement
• What constitutes a conflict with public policy sufficient to set aside an arbitral award

1. The award issued by the Second Respondent dated 25 February 2021 is declared to be contrary to public policy and is hereby set aside. 2. The first respondent shall pay the applicant's costs.

An arbitral award will be contrary to public policy and liable to be set aside under Article 34(2)(b)(ii) of the Model Law where: (1) the arbitrator fails to consider binding precedent from superior courts that is directly applicable to the dispute, neither following the ratio decidendi nor distinguishing it from the facts before him; and (2) the arbitrator makes findings of fact that directly contradict express terms of the contract between the parties. While an award is not contrary to public policy merely because the reasoning or conclusions are wrong in fact or law, arbitrators are bound by decisions of superior courts and must apply their minds to relevant binding authorities. The failure to engage with applicable precedent violates fundamental principles of law and constitutes a ground for setting aside an award on public policy grounds.

The court noted that the applicant and first respondent argued their cases as if the court were an appeal court, but clarified that the decision of the arbitrator is not contrary to public policy simply because the reasoning or conclusions were wrong in fact or in law. There must be a violation of "some fundamental principle of the law or morality or justice." The court also observed that the dispute was fundamentally one of law concerning whether a tobacco merchant who made advances in United States dollars from funds sourced offshore is entitled to repayment in United States dollars despite the provisions of SI 33 of 2019. While the first respondent argued that the Mushayakarara case was distinguishable, the court noted that the key issue was that the arbitrator did not even recognize its existence or engage with it in the award.

This case is significant in South African and Zimbabwean arbitration jurisprudence as it clarifies the public policy grounds for setting aside arbitral awards under the Model Law on International Commercial Arbitration. It establishes that while courts adopt a restrictive approach to setting aside awards to preserve finality in arbitrations, an arbitrator's failure to consider binding precedent from superior courts can constitute a violation of fundamental principles of law sufficient to render an award contrary to public policy. The case reinforces the principle that arbitrators, while having considerable autonomy in their decision-making, remain bound by the hierarchy of courts and must engage with applicable binding precedents. It also confirms that factual findings by arbitrators that directly contradict express contractual terms can support a finding that an award is contrary to public policy. The judgment provides important guidance on the limits of arbitral discretion and the circumstances in which courts will intervene to set aside awards, balancing the policy of finality in arbitrations against the need to uphold fundamental legal principles.