OUT-LAW ANALYSIS 8 min. read
The Kingdom of Lesotho was challenging enforcement of an arbitral award made after a failed solar project. Photo: Getty Images
10 Jun 2026, 11:42 am
A recent ruling by the Supreme Court of Appeal of South Africa (SCA) has highlighted the importance of acting within the strict time limits for set‑aside relief after arbitration by relying on the UNCITRAL Model Law on International Commercial Arbitration, which has been incorporated into South African domestic law and given force of law by the International Arbitration Act 15 of 2017.
On 22 May the SCA delivered its judgement in a case between the Kingdom of Lesotho and Frazer Solar GmbH and others. The Kingdom of Lesotho (KOL) had sought to overturn an arbitration award and enforcement order granted against it by the Johannesburg High Court over a failed solar energy project. The court was required to consider whether KOL was entitled to a recission of an enforcement order granted by default and further the operation and constitutional validity of the three month time bar in Article 34(3) of the Model Law, as domesticated in South Africa’s IA Act, to challenge an arbitral award.
The matter concerned an application by the KOL, a sovereign state, to appeal an earlier decision by the Johannesburg High Court, which had dismissed the KOL’s application to set aside an arbitral award granted against it and to rescind an earlier judgment that made the arbitral award an order of court.
The dispute arose from a supply agreement concluded to supply renewable energy products in the Kingdom of Lesotho. The project was valued between €50 million and €100 million and was to be undertaken by German firm Frazer Solar GmbH (FSG) with financing from KfW‑IPEX Bank GmbH. The agreement contained an arbitration agreement with the seat of the arbitration being Johannesburg in South Africa. The agreement failed to materialise, with the KOL ultimately being alleged to have defaulted on its obligations.
Following this breakdown, FSG initiated arbitration proceedings in Johannesburg. The arbitration proceeded in the absence of the KOL and resulted in an award in favour of FSG. FSG then successfully applied to the Johannesburg High Court to enforce the arbitral award, and after obtaining the enforcement order, tried to execute against it in South Africa.
This enforcement application was unopposed, as the KOL failed to enter an appearance to defend the proceedings, resulting in the enforcement application being granted by default against KOL. Upon becoming aware of the order, however, the KOL approached the High Court seeking firstly a rescission of the enforcement order and secondly the setting aside of the arbitral award. The Johannesburg High Court dismissed KOL application but granted leave to appeal to the SCA.
The SCA upheld the appeal against the Johannesburg High Court’s dismissal of the rescission application and ordered that the enforcement order be rescinded accepting that there was a reasonable explanation for the failure to appear. However, more importantly the SCA dismissed the appeal against the refusal to set aside the arbitral award.
The first issue before the court was whether the KOL had established a case for rescission of the default judgment. In addressing this question, the court applied both South African common law principles and relevant procedural rules. Under the common law, an applicant seeking rescission of a court order taken by default must demonstrate “good cause,” which requires a reasonable explanation for the default, bona fide conduct in bringing the application and the existence of a bona fide defence with prospects of success. The SCA found that the KOL had satisfied these requirements and accepted the KOL’s explanations for why it had not defended the proceedings.
The second issue concerned the KOL’s attempt to set aside the arbitral award itself. In the SCA, KOL relied on Article 34(2)(a)(i) of the Model Law, which permits a court to set aside an arbitral award where the party can demonstrate that either a party to the arbitration agreement lacked capacity or the arbitration agreement is not valid under the law of the state. The KOL argued that the underlying agreement, including the arbitration clause, was invalid because various statutory requirements had not been met and the relevant minister who had signed the contract lacked authority to bind the state in concluding the underlying contract with FSG.
However, a significant obstacle to this claim was the time limitation contained in Article 34(3) of the Model Law. This provision, incorporated into South African law through the IA Act, establishes a strict three month period within which an application can be brought to set aside an arbitral award.
Article 34(3) provides that an application for setting aside of an arbitral award may not be made after three months have elapsed from the date on which the party making that application had received the award or, if a request had been made under Article 33, from the date on which that request had been disposed of by the arbitral tribunal.
The IA Act, however, goes further by introducing an important qualification to this three month time bar in Article 34(3), providing that the time bar will not apply where the party seeking the setting-aside of an arbitral award can prove that “he or she did not know and could not, within that period, by exercising reasonable care, have acquired knowledge by virtue of which an award is liable to be set aside under paragraph (5)(b) of this article…”, in which case the three month period begins to run only from the date on which such knowledge could reasonably have been acquired.
This qualification is directly linked to the public policy grounds for the setting-aside of an award, being if the making of the award was induced or affected by fraud or corruption as set out in Article 34(5)(b). In such a case the three month time period in which to set aside an award will begin to run from the date on which knowledge of the award could have been acquired through reasonable care.
The time period for the setting aside of an award under Article 34(3) is peremptory: the provision provides that an application to challenge the arbitration award “may not” be brought after the expiry of this period. The SCA endorsed this interpretation as it accords with the internationally accepted interpretation of the provision in other Model Law jurisdictions, including, Singapore, New Zealand, Canada, Australia, India, Zimbabwe and Kenya, where the prescribed time limit is generally treated as strict and capable of barring recourse once it has expired.
The court held that this wording constitutes an absolute prohibition on instituting a setting‑aside application outside the prescribed time limit, reflecting a clear legislative intention to promote finality and certainty in arbitration.
As the court said: “The phrase ‘may not’ expresses a total and peremptory prohibition against the bringing of an application to set aside an award in terms of article 34(3) outside of the three month period on grounds other than fraud or corruption. The use of the negative adverb ‘not’ qualifies the modal verb ‘may’ and the effect is to express a strong prohibition.”
While South Africa’s formulation of Article 34(3) provides a narrow exception where a party can demonstrate that it did not know, and could not reasonably have known of the award as a result of fraud or corruption affecting the award within the three‑month period, this exception did not avail the KOL as the KOL relied on Article 34(2)(a)(i) and it brought its application outside the prescribed period.
The KOL conceded that it had brought its application outside of this three month period but argued that the court had an overriding discretion to allow the challenge and should adopt a flexible approach and allow condonation. The KOL argued, among other things, for an interpretation that would allow late filing on good cause shown and relied on comparative foreign approaches. The KOL also argued that a strict time bar would be contrary to rights enshrined in Section 34 of the South African Constitution, being the right to access to courts.
In addressing the constitutional challenge, the SCA measured Section 34 (Right to access to Courts) against the Section 36 (Limitation of Rights), under the South African Constitution and held that because the IA Act and the Model Law do not compel parties to submit a dispute for arbitration but merely recognize their right to elect to do so, once parties have chosen arbitration, they accept all the structures of the IA Act and the Model Law in exchange for the advantages of an expedited and cost-effective resolution of their dispute.
In the present context the SCA observed that the right of access to courts is better served by interpreting article 34(3) as having a strict time bar because, international arbitrations afford a party the same election to have its disputes adjudicated by an arbitral tribunal as it would in domestic arbitrations, and that allowing condonation would undermine the principle of finality in arbitration and create uncertainty by leaving awards open to indefinite challenge.
Accordingly, the SCA found that it lacked the authority to entertain the KOL’s application to set aside the award, given the lateness of the challenge to the award. The court aligned itself with comparative international jurisprudence, including the Singaporean decision in ABC Co v XYZ Co Ltd, which held that Article 34 provides the exclusive basis for challenging arbitral awards and does not permit any extension of time.
Building on this reasoning, the SCA concluded that Article 34(3), properly interpreted, creates a rigid and peremptory time bar. This interpretation is supported not only by the language of the provision, but also by the underlying purpose of the Model Law, which includes ensuring finality, promoting expedition in dispute resolution, upholding the principle of pacta sunt servanda, respecting party autonomy and maintaining uniformity across jurisdictions.
The SCA stated: “The reading in of an open-ended discretion for courts to extend the time limit will defeat the main purpose and objects of international arbitration, namely expedition, predictability and finality. If such an uncertain and cumbersome international arbitration dispensation is introduced, it would be difficult to conceive of any reason why parties would choose to submit their disputes for arbitration in South Africa.”
This decision reaffirms and entrenches South Africa’s commitment to the principles underpinning international arbitration, particularly finality and legal certainty. By strictly enforcing the time limits contained in Article 34(3) as domesticated in South Africa, the SCA emphasised the importance of strict procedural compliance in arbitration proceedings.
At the same time, the judgment demonstrates that South African courts retain flexibility in relation to their own processes. The willingness of the court to rescind the enforcement order reflects a commitment to fairness, especially where a party has been deprived of the opportunity to be heard due to procedural irregularities. The court found that KOL had shown good cause for rescission, including a reasonable explanation for default and a bona fide defence with prospects of success in resisting enforcement.
The judgment also highlights an important practical point - a party that is time‑barred from seeking to set aside an award under Article 34 may nevertheless still seek to resist recognition/enforcement of that award under Article 36 of the Model Law, depending on the available facts.
The judgment stands as a warning to parties who engage in arbitration. A failure to participate in proceedings or to act within prescribed time limits cannot easily be remedied after the fact. This underscores the importance of due diligence and proper administrative functioning in the conduct of international disputes.
The judgment in the KOL v FSG case represents an important development in South African law in relation to international arbitration. It confirms the strict application of the Model Law’s procedural framework while simultaneously recognising the need for fairness in court processes.
The judgement is clear affirmation of South Africa’s standing as an arbitration‑friendly jurisdiction, particularly in its approach to recognising and enforcing international arbitration agreements and arbitral awards in a manner consistent with established international norms. In this context, the judgment reinforces the role of the IA Act in creating a reliable and enforcement-focused framework for cross-border dispute resolution. Ultimately, the effective recognition and enforcement of arbitral awards serve not only the interest of the parties but also broader commercial objectives, including strengthening investor confidence and supporting South Africa’s attractiveness as a seat of arbitration.
Co-written by Tamia Matukane and Katlego Mbonambi of Pinsent Masons
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