Introduction
International commercial arbitration has, over the past four decades, become the default mechanism for resolving cross-border business disputes. Multinational investors, infrastructure contractors, mining houses, financiers and trading companies overwhelmingly prefer arbitration over national courts because it offers neutrality, procedural flexibility, confidentiality and, crucially, the prospect of an award that can be enforced in over 170 countries under the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.
Lesotho is open for business. The Lesotho Highlands Water Project, a vibrant textile and apparel sector, mining, renewable energy and growing cross-border trade with South Africa and the wider SADC region all involve foreign counterparties whose dispute resolution preferences are firmly international. Yet Lesotho’s primary arbitration statute, the Arbitration Act No. 12 of 1980, predates the modern international arbitration framework. It was enacted before Lesotho’s accession to the New York Convention, before the UNCITRAL Model Law on International Commercial Arbitration was ever adopted, and at a time when international commercial arbitration looked very different to what it is today.
The result is a curious gap. Lesotho is a New York Convention State. Lesotho’s courts respect arbitration agreements. But Lesotho has no dedicated international arbitration statute, no legislative implementation of the New York Convention, and a domestic Act that does not address the conduct of international arbitrations seated in Lesotho or the recognition of foreign awards on modern lines. This article examines that gap and asks what should be done, in legislative terms, to fix it.
The Current Legal Framework
The Arbitration Act No. 12 of 1980
The Arbitration Act 1980 is Lesotho’s principal statute on arbitration. It governs arbitration agreements, the appointment and powers of arbitrators, the conduct of arbitral proceedings, the form and effect of awards, and the limited grounds on which the High Court may set aside or refuse to enforce an award. Its drafting borrows heavily from the South African Arbitration Act 42 of 1965, which in turn was modelled on the English Arbitration Acts of the mid-twentieth century.
Several features of the 1980 Act are worth noting:
The Act applies broadly to “any arbitration in terms of an arbitration agreement,” without distinguishing between domestic and international arbitration. It draws no line between disputes between two Basotho parties over a domestic contract and disputes between Lesotho-based and foreign parties under a multi-currency international construction contract. Both fall, in principle, under the same statute.
The Act gives the High Court significant supervisory powers. The court may set arbitration agreements aside on “good cause shown,” may stay arbitral proceedings, may extend statutory time limits, and may make awards orders of court. While the Lesotho courts have generally respected the sanctity of arbitration agreements, as the recent decision in Tlelai v Tholo Energy reaffirms, the breadth of the court’s discretionary intervention powers under the 1980 Act sits awkwardly with the modern international arbitration principle of minimal curial interference.
The Act says nothing about international commercial arbitration as such. There are no provisions on the law applicable to the substance of the dispute, no specific provisions on multi-party or multi-contract arbitrations, no rules on interim measures by tribunals, no provisions on the recognition of awards rendered outside Lesotho, and no provisions on the seat of arbitration as a connecting factor.
The Act predates the New York Convention as far as Lesotho is concerned. Lesotho acceded to the Convention on 13 June 1989, almost a decade after the Act came into force, but no implementing legislation was passed to give effect to Lesotho’s Convention obligations.
The New York Convention Gap
This last point deserves emphasis. Under Article III of the New York Convention, each Contracting State undertakes to recognise arbitral awards as binding and to enforce them in accordance with the rules of procedure of the territory where the award is relied upon, subject only to the limited grounds for refusal in Article V.
Lesotho follows the Roman-Dutch dualist tradition inherited from South African legal practice: a treaty does not become part of domestic law simply by virtue of accession. It must be domesticated through legislation. In the absence of any such legislation, the practical position in Lesotho is that an award creditor seeking to enforce a foreign arbitral award must approach the High Court under common law principles or, by analogy, under the Arbitration Act 1980, neither of which was designed for the purpose. The award creditor proceeds by way of motion under Rule 8 of the High Court Rules, alleging the existence of the award and the arbitration agreement, and asking the court to recognise and enforce it.
This works in practice, Lesotho courts have enforced foreign awards, but it works in spite of, rather than because of, the legislative framework. There is no statutory list of Article V grounds for refusal. There is no statutory definition of what constitutes a “foreign” award. There is no clear rule on the documents required, the time limits, the burden of proof, or the appellate route. Each enforcement application becomes an exercise in legal improvisation, with the result that international parties cannot predict, with the certainty they require, how an award against a Lesotho-domiciled debtor will be treated.
The UNCITRAL Model Law Gap
The UNCITRAL Model Law on International Commercial Arbitration (1985, as amended in 2006) has been adopted, in whole or in part, by 93 States in 127 jurisdictions. It is the international gold standard. Lesotho is not on that list. Neighbouring South Africa adopted the Model Law in its International Arbitration Act 15 of 2017. Mauritius did so in its International Arbitration Act 2008. Rwanda adopted the Model Law in 2008. Across the African continent, the trajectory is unmistakable: jurisdictions that wish to be seen as arbitration-friendly are aligning their international arbitration statutes with UNCITRAL.
Lesotho has not done so. The 1980 Act contains no equivalent of the Model Law’s provisions on:
- Definition and form of an international arbitration agreement (Article 7);
- Competence of the tribunal to rule on its own jurisdiction (Article 16, the Kompetenz-Kompetenz principle);
- Tribunal-ordered interim measures (Articles 17 to 17J);
- Determination of the rules of procedure and the place of arbitration (Articles 19 and 20);
- Setting aside of awards on the limited grounds in Article 34; and
- Recognition and enforcement of awards under Articles 35 and 36, which mirror the New York Convention.
These omissions have real consequences. When parties select Lesotho as a seat of arbitration, they encounter a statute that is silent on most of the questions that international counsel expect a modern arbitration law to answer. Unsurprisingly, sophisticated parties contracting with the Government of Lesotho or with Lesotho-based entities routinely choose foreign seats. The contract underlying the Lesotho Highlands Development Authority v Impregilo arbitration, for example, expressly provided that the dispute would be settled in accordance with the Arbitration Act 1996 (UK) “in lieu of the Arbitration Act No. 12 of 1980 of Lesotho,” with London as the seat. Lesotho’s most significant infrastructure dispute was, in other words, contracted out of Lesotho’s own arbitration law.
Why Reform Matters
Investor Confidence and the Cost of Capital
Lesotho competes for foreign direct investment with regional peers, Botswana, Namibia, Zambia and South Africa. Each of those jurisdictions has either modernised its arbitration framework or is in the process of doing so. International investors and their lenders price legal risk into their investment decisions. A jurisdiction whose arbitration legislation is more than four decades old, whose Convention obligations are not fully domesticated, and whose courts apply a patchwork of common law principles to enforcement applications, is a more expensive jurisdiction in which to do business, even if its courts are, in fact, willing to enforce awards. Predictability is what international counsel and risk officers look for, and predictability requires legislation.
The Lesotho Highlands Experience
The Lesotho Highlands Water Project, the country’s largest infrastructure investment, has produced a steady stream of international arbitral disputes, Impregilo, Swissbourgh Diamond Mines, and the more recent Frazer Solar litigation. Each of these has been arbitrated under foreign rules, in foreign seats, applying foreign procedural law. Lesotho’s courts have only encountered these disputes at the recognition-and-enforcement stage, or as a respondent State in investor-State proceedings abroad. A modern domestic international arbitration regime would not change every aspect of this dynamic, but it would ensure that, where Lesotho is the contractually designated seat or the place of enforcement, the Lesotho courts apply a coherent, internationally recognisable framework rather than the 1980 Act by analogy.
Regional Integration
Lesotho is a member of the Southern African Development Community (SADC), the Common Monetary Area, and the African Continental Free Trade Area. Each of these frameworks anticipates dispute resolution through arbitration. The SADC Finance and Investment Protocol, under which the Swissbourgh arbitration was commenced, expressly contemplates investor-State arbitration. The AfCFTA Protocol on Investment, currently being finalised, will include arbitration mechanisms. Lesotho’s participation in this regional architecture is undermined by the absence of a modern domestic statute that gives effect to international arbitral processes.
What Should Be Done: A Reform Agenda
In our view, Lesotho should pursue a focused, three-pillar legislative reform programme.
Pillar One: Enact a Standalone International Arbitration Act
Lesotho should follow the South African and Mauritian approach of enacting a separate International Arbitration Act, leaving the Arbitration Act 1980 in place (subject to its own modernisation) to govern domestic arbitration. The new Act should:
Incorporate the UNCITRAL Model Law (2006 revision) as a Schedule, giving it the force of law in Lesotho. This is the approach taken in section 6 of the South African International Arbitration Act 2017 and is the cleanest method of legislative implementation.
Define “international” arbitration by reference to the Model Law’s Article 1(3) criteria: parties with places of business in different States, or a place of arbitration, performance or closest connection outside Lesotho.
Designate a supervisory court. the High Court of Lesotho, sitting in its commercial division if and when one is established, as the competent court for the assistance and supervision functions referred to in Article 6 of the Model Law.
Provide for the recognition and enforcement of foreign arbitral awards in terms that mirror Articles 35 and 36 of the Model Law and Articles III to V of the New York Convention. This single provision would close the New York Convention implementation gap.
Confirm the principle of minimal curial intervention by adopting Article 5 of the Model Law verbatim: in matters governed by the Act, no court shall intervene except where so provided.
Provide for confidentiality in international arbitral proceedings, subject to limited exceptions for enforcement, set-aside and disclosure required by law. The 2017 South African Act and the Mauritian 2008 Act provide useful templates.
Pillar Two: Modernise the Arbitration Act 1980 for Domestic Arbitration
The 1980 Act would benefit from targeted modernisation even after a separate international Act is enacted. Useful amendments would include explicit recognition of the doctrine of separability of the arbitration agreement; codification of Kompetenz-Kompetenz; provision for tribunal-ordered interim measures; restriction of the High Court’s “good cause” power to set aside arbitration agreements (currently in section 4) to align with the international standard of sanctity of arbitration agreements; and modernisation of the grounds for setting aside an award along the lines of Article 34 of the Model Law.
Pillar Three: Institutional and Capacity Reforms
Legislation alone is not enough. Lesotho should consider three further measures.
First, Lesotho should consider establishing or affiliating with an arbitral institution. There is no domestic arbitral institution in Lesotho; parties contractually default to the Arbitration Foundation of Southern Africa (AFSA) or the ICC. Affiliation with AFSA’s regional infrastructure, or the establishment of a Lesotho chapter of the Chartered Institute of Arbitrators (CIArb), would provide institutional capacity at relatively low cost.
Second, judicial training is essential. The success of any new International Arbitration Act will depend on judges who understand the Model Law, the New York Convention and the doctrine of minimal intervention. Specialist training programmes, in collaboration with the Judicial Institute for Africa or similar bodies, should accompany the legislative reform.
Third, the legal profession itself needs to build international arbitration capacity. Continuing professional development programmes, accredited arbitrator training (CIArb Pathways, for example), and active participation in regional arbitration networks would all contribute to a domestic profession capable of supporting international arbitration in and from Lesotho.
Conclusion
Lesotho is a New York Convention State that has not enacted the New York Convention. It is a SADC and AfCFTA participant whose arbitration legislation predates the modern arbitration era. It is a jurisdiction whose largest contracts are routinely contracted out of its own arbitration law. None of these is a tenable long-term position.
The path forward is well-trodden. South Africa, Mauritius, Rwanda, Kenya, Nigeria and a growing number of African States have shown that adopting the UNCITRAL Model Law in a standalone international arbitration statute is achievable, affordable and reputationally significant. For Lesotho, the case for reform is not abstract, it is grounded in the daily reality that international parties contracting with Lesotho counterparties already arbitrate, just elsewhere. A modern International Arbitration Act, supported by domestic-law modernisation, judicial training and institutional capacity-building, would bring those arbitrations home, give the Lesotho courts a coherent supervisory role, and align Lesotho with the legal infrastructure that international commerce now expects.
Forty-six years after the Arbitration Act 1980 was enacted, the case for an International Arbitration Act for Lesotho is overwhelming. The question is no longer whether to legislate, but when.