Search for:

Does a foreign arbitral award “cease to exist” when a compromise of the award is made an order of the Court at the seat of arbitration? In Government of the United Republic of Tanzania v Hermanus Philippus Steyn (28994/2019) [2019] ZAGPJHC 312 (4 September 2019); 2019 JDR 1690 (GJ), a Judge of the Johannesburg High Court in South Africa held exactly that.

In short, the South African Court, on appeal, set aside a prior South African order for the enforcement of a Tanzanian-seated foreign arbitral award. This was on the ground that the award “ceased to exist” according to the wording of a compromise of the award – and which compromise was made an order of the Tanzanian Court. The Court’s reasoning was that the Tanzanian order specifically did not provide for the revival of the arbitration award on breach of the compromise. The compromise did not have a clawback provision to the original arbitral award. The Court held that, instead, the party seeking to enforce the foreign arbitral award only had a Tanzanian court order documenting the compromise (and no longer a “foreign arbitral award”). Thus, the Court held that South African courts lack jurisdiction to attach the Tanzanian government property to confirm or found jurisdiction over the foreign government based on a foreign court order. There are no arrangements for the recognition of foreign court decisions involving two foreigners under South African law, but only foreign arbitral awards under South Africa’s accession to the New York Convention.

The Parties enter into a Settlement / Compromise of the Award

The facts in the matter are that during July 2010, a certain Mr Steyn, a Namibian national, obtained an arbitration award against the Tanzanian government. In May 2011, this award was declared a decree by the High Court of Tanzania and became enforceable (the 2011 Tanzanian Enforcement Decision).

During July 2012, the parties concluded a settlement agreement agreeing that the Tanzanian government would pay Mr Steyn a reduced sum of US$ 30 million. The settlement agreement was made an order of the Tanzanian courts (the Consent Order). During 2018, the Tanzanian government applied to the Tanzanian High Court for a review of the 2011 Tanzanian Enforcement Decision on the basis that the arbitration award was “fraught with errors” and should be reconsidered. The application was struck from the roll, with the court finding that the arbitration ruling was “non-existent as it was overtaken by events”.

In 2019, Mr Steyn approached the South African High Court and obtained an order attaching a Tanzanian government aircraft in order to confirm, alternatively to found, jurisdiction in South Africa in order to seek the recognition and enforcement of the original arbitration award. This is the procedure parties are required to follow in terms of the South African International Arbitration Act, 15 of 2017 (the IA Act) which incorporates UNCITRAL Model Law on International Commercial Arbitration. i.e. proceedings for the recognition and enforcement of a foreign arbitral award under the IA Act will not be competent without an order to confirm or found jurisdiction over a foreigner in South Africa.

In this case, the Tanzanian Government sought the reconsideration and setting aside of the South African attachment order on the basis that, inter alia, there was no foreign arbitration award capable of recognition and enforcement under the IA Act.

Mr Steyn then submitted that clause 6 of the settlement agreement, which provided for the “immediate enforcement of the Consent Order”, entitled him to enforce the arbitration award in the event of the Tanzanian government’s breach of the settlement agreement. However, the Tanzanian government argued that, following the Consent Order, the arbitration award ceased to exist, given that the Consent Order was granted after the award was made an order of court.

The Court agreed with this submission and found that the literal and plain interpretation of clause 6 of the settlement agreement was that, once there was a breach of the terms of the settlement agreement, Mr Steyn would be entitled to immediately enforce the Consent Order and not the settlement agreement or arbitration award. This is because, once a settlement agreement is filed in court for the compromise of an award, it means that the award that existed before the settlement agreement is abandoned and is no longer binding on the parties. Consequently, according to the judge, the arbitration award essentially “ceased to exist” in May 2011. As a result, the Court found that Mr Steyn did not have an arbitration award that required recognition and enforcement and held that the Court did not have jurisdiction to attach the aircraft to found jurisdiction on the basis of an order of a foreign court. As the IA Act does not provide for the enforcement of foreign court orders, only foreign arbitral awards, the South African courts were precluded from enforcing the court order. The 2019 attachment order of the South African High Court was thus set aside, with Mr Steyn ordered to pay the costs of the application.

The Court followed a narrow, formalistic approach

Judge Twala’s finding, in concurrence with the Tanzanian Court, that the arbitration award “ceased to exist” when the award was made an order of court in terms of the settlement agreement entered into by the parties has been criticized. Section 3 of the IA Act provides that one of its objects is to “facilitate the recognition and enforcement of certain arbitration agreements and arbitral awards”. This is given effect to in section 16, which dictates that “foreign arbitral award must be recognised and enforced in [South Africa] as required by the [New York Convention]” and that “a foreign arbitral award is binding between the parties to that foreign arbitral award, and may be relied upon by those parties by way of defence, set-off or otherwise in any legal proceedings”.

The judgment fails to clarify why South Africa’s obligations under the IA Act vis-à-vis the arbitral award, should not be fulfilled. The Consent Order and settlement agreement are granted under Tanzanian law and should not, under South Africa’s obligation under the Convention, affect the enforceability of the original arbitral award under the New York Convention.

This is relevant as, once a court is satisfied that it is dealing with a “foreign arbitral award”, it must give effect to Article I and III of the New York Convention during proceedings for the recognition and enforcement of the award. Further, Article V of the New York Convention lists very limited grounds on which the recognition and enforcement of the award may be refused. Ground (e) (or perhaps (d)), where the award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made, would have been a possible ground raised by Tanzania in these circumstances.

The court made this finding largely on the basis that clause 6 of the settlement agreement made express provision for the “enforcement of the Consent Order”, and not the arbitration award. Settlement agreements should be clear and concise in all respects in order to avoid any uncertainty regarding their application and enforcement, and parties should be clear upfront on the remedies and recourse available to them in the event of a default. This finding, however, may be overturned or distinguished in later cases.


Rebecca Browning is a member of the Dispute Resolution team in the Johannesburg office of Baker McKenzie where she focuses on commercial litigation for a diverse range of clients and industries in South Africa. Her practice covers cross-border litigation, international arbitration, high-profile construction and engineering disputes, as well as regulation in the IT, telecommunications and banking industries. She has also assisted in lending transactions, equity listing requirements, securitization schemes and company law in the Firm's Banking & Finance practice. She has an interest in the use of technology in litigation, such as the e-discovery platforms in relatively complex construction and engineering disputes. Rebecca Browning can be reached at and +27 11 911 4342.