Premium Leaf Zimbabwe (Pvt) Ltd v Kuaranda Farming (Pvt) Ltd and Others

The applicant, a Zimbabwean legal entity, contracted with the first respondent (a tobacco grower) to grow tobacco for the 2018-2019 season. The second and third respondents bound themselves as sureties and co-principal debtors. The first respondent failed to deliver sufficient tobacco to offset its liability of US$427,024.90. The respondents admitted liability but contended they were liable to pay in Zimbabwe dollars (ZWL427,024.90), not United States dollars, relying on Statutory Instruments 33 of 2019 and 142 of 2019 which changed Zimbabwe's currency regime. The applicant rejected this offer, insisting on payment in US dollars. The matter was referred to arbitration, and the fourth respondent (arbitrator) decided in favour of the respondents, ruling that the debt should be paid in Zimbabwe dollars at a 1:1 rate. The applicant sought to set aside the arbitral award on grounds that it was contrary to public policy.

• Whether the arbitral award was contrary to public policy and should be set aside under Article 34(2)(b)(ii) of the Model Law
• Whether the debt constituted a 'foreign obligation' exempt from currency conversion under s 44C(2) of the principal Act and related Statutory Instruments
• Whether Statutory Instruments 33 of 2019 and 142 of 2019 required the debt to be paid in Zimbabwe dollars at a 1:1 conversion rate
• Whether the arbitrator properly applied his mind to the issues and legislation before him
• The correct interpretation and application of Exchange Control Directives in relation to domestic versus foreign obligations

The application to set aside the arbitral award was dismissed with costs.

An arbitral award will not be set aside as contrary to public policy merely because the arbitrator's reasoning or conclusions are wrong in fact or law. To warrant setting aside on public policy grounds, the reasoning or conclusion must go beyond mere faultiness or incorrectness and constitute a palpable inequity that is 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 concept of justice would be intolerably hurt by upholding the award. Where an arbitrator has properly applied his mind to the issues, correctly identified the dispute, considered the relevant law and arguments, and reached conclusions (even if potentially incorrect on points of law), such award does not meet the threshold for being set aside on public policy grounds.

The court observed that the interpretation of Statutory Instruments 33 and 142 of 2019 has exercised and continues to exercise the minds of many judicial officers in Zimbabwe, and that their coming into existence brought about unpalatable results to many litigants in the applicant's category. However, the court noted that law is what the legislature says it is, and until changed, a person who suffers consequences of the law cannot successfully move the court to view his case in a manner favourable to him where the circumstances, as construed by the court a quo, are not favourable. The court also commented that the arbitrator's definition of 'foreign obligation' as referring to loans involving a non-Zimbabwean party or territoriality between parties with cross-border fund flows was a reasonable interpretation in the circumstances.

This case is significant in Zimbabwean jurisprudence for clarifying the limited grounds upon which arbitral awards can be set aside on public policy grounds. It reinforces the high threshold established in ZESA v Maphosa - that mere incorrectness in law or reasoning is insufficient; there must be palpable inequity that is outrageous in its defiance of logic or moral standards. The case also demonstrates judicial deference to arbitral awards and the principle that courts will not readily interfere with arbitrators' decisions. Additionally, it provides guidance on the interpretation and application of Zimbabwe's currency reform legislation (SI 33/2019 and SI 142/2019), particularly the distinction between domestic and foreign obligations, confirming that domestic transactions between Zimbabwean entities conducted in Zimbabwe fall outside the exemption for foreign obligations and must be settled in local currency.