Zimbabwe Nantong International (Private) Limited v FBC Holdings Limited and Gideon Mukorombindo N.O

The first respondent (FBC Holdings Limited) floated a selective tender for construction of its head office. The appellant (Zimbabwe Nantong International) was awarded the tender in August 2021. The parties entered into a building contract for USD 24,967,340.02 payable in equivalent Zimbabwean Dollars at the prevailing RBZ auction rate. Construction was to commence on 31 August 2021 and complete by 30 June 2023. The appellant failed to commence construction, raising issues about the contract price and exchange rate fluctuations. The appellant sought payment at open market rate or 40% in USD. On 24 September 2021, the architect issued a breach notice. On 15 October 2021, the first respondent terminated the contract for failure to commence. The dispute was referred to arbitration. The arbitrator found inconsistencies in payment terms, held the contract was defective due to unilateral variation by the first respondent, found the cancellation unsustainable, and awarded damages of USD 967,000 for indirect loss and USD 8,200 for wrongful cancellation to the appellant. The first respondent applied to the High Court to set aside the arbitral award under Article 34 of the Arbitration Act. The High Court set aside the award, finding it contrary to public policy. The appellant appealed to the Supreme Court.

• Whether the court a quo dealt with all the issues before it
• Whether the court a quo erred in setting aside the arbitral award
• Whether the arbitral award was contrary to public policy of Zimbabwe
• Whether the arbitrator exceeded his powers by making a contract for the parties rather than interpreting the existing contract
• Whether the award in USD contravened the Finance Act (No 2) Act No. 7 of 2019

The appeal was dismissed with costs. The judgment of the High Court setting aside the arbitral award was upheld.

An arbitral award may be set aside under Article 34 of the Arbitration Act where it is contrary to public policy. An award is contrary to public policy where: (1) the arbitrator purports to make a contract for the parties rather than interpreting the existing contract between them; (2) the arbitrator ignores fundamental principles of contract law including the parol evidence rule, caveat subscriptor, and principles of contract illegality; (3) the award grants relief in a form (such as payment in a specific currency) that contravenes applicable legislation and is not contemplated by the parties' contract. An award not contemplated by the contract is unlawful, and an unlawful award is contrary to public policy and must be set aside. While courts will not lightly interfere with arbitral awards and will not treat applications to set aside as appeals on the merits, courts retain supervisory jurisdiction to set aside awards that are fundamentally flawed, unlawful, or contrary to public policy.

The Court reiterated the principle that parties who choose arbitration agree to accept the award even if wrong, as long as proper procedures are followed, emphasizing the consensual nature of arbitration. The Court noted that courts should be "loath to interfere" with arbitral decisions and will only intervene if the decision is in contravention of the Arbitration Act or is "so irregular and illogical to amount to a moral turpitude." The Court stated that an arbitral award will not be set aside merely because a party considers the decision wrong - the reasoning must constitute "a palpable inequity so outrageous and far reaching in its defiance of logic or acceptable moral standards as to cause a fair-minded person to regard it as hurting all sense of justice and fairness." The Court also noted procedural concerns about the appellant's case, observing that the grounds of appeal did not align with the heads of argument, and the heads of argument were divorced from oral submissions, though the Court did not dismiss the appeal on this basis. The Court emphasized the importance of courts determining all issues placed before them, citing authorities that failure to resolve a dispute on a material issue vitiates the order and amounts to a gross irregularity.

This case reinforces important principles in Zimbabwean arbitration law: (1) Courts will uphold the finality of arbitral awards and will not interfere lightly, respecting the parties' choice of arbitration as their dispute resolution mechanism; (2) However, courts will intervene and set aside awards that are contrary to public policy, including awards that are unlawful or that represent such gross irregularities as to amount to moral turpitude; (3) Arbitrators must interpret existing contracts, not create new contracts for the parties - introducing terms requiring addendums exceeds arbitral powers; (4) Arbitrators must respect fundamental contract law principles including parol evidence rule and caveat subscriptor; (5) Arbitral awards must comply with applicable legislation, including monetary legislation such as the Finance Act; (6) An award that grants relief in a currency not contemplated by the contract and contrary to applicable law is contrary to public policy and subject to being set aside; (7) The case clarifies the limited grounds under Article 34 of the Arbitration Act for setting aside awards and demonstrates judicial reluctance to transform such applications into appeals on the merits, while maintaining necessary oversight to ensure awards comply with law and public policy.