A 30-year-old brawl in the kingdom in the sky

A land of mountains aptly referred to as a “kingdom in the sky”, Lesotho is the only country in the world which has all its land lying at altitudes in excess of 1,500m above sea-level; it is a land of heights and extremes.

22 Jun 2022 10 min read Article

At a glance

  • Lesotho is a country known for its high altitude and extreme landscapes.
  • The Burmilla Trust case involves a complex and convoluted history of disputes over mining leases and water projects between Lesotho, South Africa, and the claimants.
  • The case highlights the need for cohesive and efficient international and regional dispute resolution forums in addressing complex cross-border disputes.

These extremes formed the basis of the Supreme Court of Appeal of South Africa’s recent judgment in Trustees for the time being of the Burmilla Trust and Another v President of the RSA and Another (64/2021) [2022] ZASCA 22; [2022] 2 All SA 412 (SCA) (1 March 2022). This is the latest chapter in a saga that has intrigued the regional and international investment community for over 30 years, capturing the imagination and attention of courts in Lesotho, South Africa and Singapore and making its way through arbitral proceedings in Lesotho, Singapore and Mauritius. While the facts of this matter provide for interesting reading, it is the interaction between the different dispute resolution forums that deems this case worthy of assessment. This case and its convoluted history, the facts of which are outlined in part below, demonstrate the increasing need for cohesive and efficient international and regional dispute resolution forums.


Lesotho has abundant water resources that exceed its internal requirements. In 1986, it embarked on the Lesotho Highlands Water Project, a large-scale commercial joint venture with South Africa, which entailed the diversion of water from the Orange Senqu River in Lesotho to South Africa. In exchange, Lesotho would receive royalties for the water and would also be able to generate hydroelectricity. During 1988, construction operations by the Lesotho Highlands Development Authority (Authority), a Lesotho statutory body established pursuant to the treaty with South Africa, began in the Rampai area of Lesotho.

In 1987, following the project’s initiation, Swissborourgh Diamond Mines (Pty) Limited submitted applications for prospecting and mining leases in five regions in Lesotho: Matsoku, Motete, Orange, Patiseng/Khubelu and Rampai. While these applications were approved in 1988, the water project continued, and it soon became clear that the area approved for mining would largely be submerged as a result of the project. Swissborough thus held mining leases in regions where mining would soon become impossible. To avoid compensating Swissborough for effectively expropriating the leased land, the Government of Lesotho attempted to revoke the leases.

Round 1: The Courts of Lesotho

In 1991, aggrieved by the purported cancellation of the mining leases, Swissborough and its related entities commenced court proceedings in Lesotho to interdict the cancellation. They were successful in obtaining an interim interdict from the High Court of Lesotho requiring the cessation of the water project in the Rampai area. Faced with the consequences of having granted competing rights to Swissborough and the Authority as well as a potential breach of certain treaty obligations, Lesotho took several steps which its courts found to be unlawful. Two of these steps are relevant when assessing this case’s progression through the various legal systems.

Firstly, the Commissioner of Mines (Commissioner) cancelled Swissborough’s mining leases. The High Court of Lesotho, however, set aside (on an interim basis) this cancellation and issued an interim interdict preventing the continuation of the dam’s construction.

Secondly, the Commissioner issued an order purporting to revoke Swissborough’s mining leases. The High Court of Lesotho annulled the revocation and granted an order interdicting the Authority from interfering with Swissborough’s rights. Lesotho’s Court of Appeal affirmed this decision in January 1995.

The Rampai lease

Faced with the revocation order, Swissborough regarded Lesotho’s denial of the validity of the leases as a repudiation of contract, which repudiation they subsequently accepted, thereby ending any contractual relationship between the parties. The claimants did not, however, cancel the Rampai lease and in 1993 they instituted action for damages amounting to R930 million as well as an additional claim of R15 million in respect of physical damage to plant and equipment. These claims were, in the period between 1994 and 1996, ceded to the Burmilla Trust.

During 1995, Lesotho and the Authority conceded that the cancellation of the mining leases by the Commissioner had been invalid, however the Authority proceeded to lodge a counter-application seeking a declaration that the Rampai lease had been void ab initio. This, it argued, was because the required formalities had not been followed. The court consequently set the cancellation aside and referred the validity issue to oral evidence. This led to a 58-day trial in which the Rampai lease was determined to be void ab initio. The claimant’s appeal to Lesotho’s Court of Appeal was dismissed in 2000 for the following reasons:

  • according to Lesotho’s customary law, all land belongs to the Basotho Nation and this principle is entrenched in the Lesotho Constitution; and
  • following the promulgation of the Lesotho Mining Rights Act of 1967 (under which the mineral leases were granted) any granting of rights in relation to land requires the consent of the relevant chiefs. The evidence presented had established that no consent had been sought or granted and the Rampai lease was accordingly determined to be void.

Round 2: Diplomatic Protection and the Courts of South Africa

Between 2000 and 2007, the claimants requested the Government of South Africa to exercise diplomatic protection for their investments in Lesotho. The South African Government, however, declined to do so, resulting in an unsuccessful challenge in the South African courts, concluding in the Supreme Court of Appeal in 2007.

Round 3: Before the SADC Tribunal

Undeterred, and pursuant to Article 15 of the South African Development Community’s (SADC) Tribunal Protocol, the claimants commenced proceedings in 2009 against Lesotho before the SADC Tribunal where they sought damages arising from the alleged expropriation of the mining leases. The claimants also claimed damages arising from Lesotho’s alleged violations of Articles 4(c) and 6 of the SADC Treaty.

Unfortunately for the claimants, the SADC Summit dissolved the existing SADC Tribunal in 2012 and negotiated a new protocol limiting the tribunal’s authority in the adjudication of inter-state disputes. This resulted in the suspension of all claims pending before the SADC Tribunal. The claimants were thus left without a forum to pursue their claim and in 2015, the SADC Summit approved a proposal that “each member state of the SADC may decide on an alternative forum for the resolution of a SADC Tribunal pending case of which that member state has been named a respondent”. Lesotho, however, failed to take steps to establish any such alterative forum.

Round 4: Permanent Court of Arbitration in Singapore

Undiscouraged, in 2012 the claimants took their fight to the Permanent Court of Arbitration (PCA) seated in Singapore under Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL) pursuant to Article 28 of Annex 1 to SADC’s Protocol on Finance and Investment (Investment Protocol). In 2016, by a majority of three to one, the PCA found that it had authority to hear and determine the claims. On the merits, the majority found that:

  • Lesotho breached Articles 14 and 15 of the Investment Protocol by unilaterally withdrawing its consent to the SADC Tribunal;
  • Lesotho breached Article 6(1) of Annex 1 by failing to accord fair and equitable treatment to the claimants and their investment;
  • Lesotho breached Article 27 of Annex 1 by failing to protect the claimants’ right of access to the SADC Tribunal, which was a judicial tribunal competent under Lesotho’s laws, to redress the grievances in relation to matters concerning the admitted investment; and
  • Lesotho breached Articles 4(c) and 6(1) of the SADC Treaty by failing to uphold the rule of law.

The PCA ordered that a new tribunal be established to determine the claims that were before the SADC Tribunal. The new tribunal was to be seated in Mauritius (unless the parties agreed on another seat) and would comprise of three independent arbitrators who were nationals of SADC member states. The new tribunal would have the same authority that the SADC Tribunal had in 2009 when the dispute was lodged. The arbitration would be administered by the PCA (unless the parties agreed otherwise) under the UNCITRAL Arbitration Rules, save that the tribunal was also to take into account the SADC Tribunal Protocol and the applicable rules.

Importantly, the dissenting party reasoned that the PCA Tribunal lacked jurisdiction to entertain the dispute. This was because the dispute, it was argued, should have been characterised as an expropriation dispute, which pre-dated the entry into force of the Investment Protocol, rather than a dispute involving the shuttering of the SADC Tribunal. It further reasoned that the claimants had not exhausted all local remedies as required by Article 28(1) of Annex 1 prior to commencing the arbitration. In particular, they had not pursued an aquilian action to seek compensation for economic loss caused by Lesotho’s participation in the shuttering of the SADC Tribunal.

Round 5: The Courts of Singapore

In 2016, Lesotho succeeded in an application to review and set aside the PCA’s award in Singapore’s High Court. The claimants’ appeal to Singapore’s Court of Appeal was unsuccessful. In essence, the Court of Appeal held that:

  • the dispute fell outside the scope of an arbitration clause and as such Article 34(2)(a)(iii) of the UNCITRAL Model Law allows the award to be set aside;
  • Lesotho was not bound to accept the jurisdiction of the PCA Tribunal and therefore the PCA Tribunal did not have jurisdiction over the claim; and
  • the claimants had not exhausted local remedies before bringing the arbitral claim as required.

The claimants had once again been stumped by the unclear and overlapping jurisdictions of the various international and regional dispute resolution forums. The results of this round appear to have deprived the claimants of their ability to be compensated for an unlawfully expropriated investment. The situation which unfolded at this stage is concerning as Lesotho participated in the process to shut down the SADC Tribunal, a process which resulted in the need to find a new dispute resolution forum. This arguably left the claimants without recourse. It does, however, seem that adherence to fundamental principles of international jurisdiction would not allow this.

Round 6: Back to the South African Courts

In what turned out to be a complication for the South African Government, the Law Society of South Africa and six other applicants, who were landowners in Zimbabwe, launched an application in the High Court, challenging the decision to suspend the operations of the SADC Tribunal insofar as that decision relates to the role of the South African President. The High Court readily declared the conduct of the President unconstitutional, and the matter went to the Constitutional Court on confirmation proceedings.

In a refreshingly disruptive judgment handed down in 2018, and one that can be described a revival of the SADC Tribunal by South African courts (at least in theory), the Constitutional Court held that in disbanding the SADC Tribunal and purporting to replace it with a weaker forum (an act which was in effect contrary to the provisions of the SADC Treaty) the SADC Summit had acted unlawfully and irrationally. Consequentially, the South African President’s participation in the decision-making processes as well as his decision to suspend the operations of the SADC Tribunal, together with his signature on the 2014 Protocol on the SADC Tribunal, were declared unconstitutional, unlawful and irrational. The court ordered the President to withdraw his signature from the 2014 Tribunal Protocol.

In 2019, the claimants issued summons against the President and the Government of South Africa in the High Court for payment of damages in the total sum of approximately R800 million plus interest and costs for its role in the drastic curtailment of jurisdiction and capacity of the SADC Tribunal, a curtailment which had deprived the claimants of a dispute resolution forum for decades. Taking a tactical point, however, the President and the Government of South Africa excepted to the claims, alleging that a cause of action had not been disclosed. The High Court upheld most of the grounds of exception, effectively extinguishing each of the claims.

Again unsatisfied with the outcome, the claimants approached South Africa’s Supreme Court of Appeal. By a majority of three to two, the court upheld the appeal in part and held that the exception should have been dismissed in respect of claim A, which was the value of the Rampai lease, and claim C, which was the costs of the SADC claim. The appeal was dismissed in respect of clam B being for moral damages and claims D and E for wasted subsequent legal costs.


The 30-year brawl ensuing in the kingdom in the sky provides a vivid illustration of the application of international investment law in practice and the consideration investors should make at each stage of a transaction. The jurisdictional abyss that the claimants had to navigate in order to, at the very least, enforce their right to access an efficient dispute resolution forum, is clear. As international trade increases, regional collaboration and the clear demarcation of jurisdictions for the efficient and just resolution of disputes are becoming all the more important. As Burmilla Trust was decided at an exception stage, we can rest assured that we have not seen the end of this saga. At the very least, the claimants’ tenacity and endurance up to now is to be admired.

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