Lesotho Faces Euro 50 Million Damages Award for Renewable Energy Project Breach

  • An independent South African arbitrator ruled Lesotho breached contract in 2018 and has awarded €50 million to Frazer Solar. 
  • The Government of Lesotho has neither engaged in legal process nor paid damages owing. 
  • The US action against assets owned by Lesotho forms part of a worldwide enforcement strategy.

Lawyers acting for Frazer Solar GmbH (‘FSG’), a solar energy developer, have begun a worldwide enforcement action against assets held by the Kingdom of Lesotho. Enforcement follows a full and final arbitration ruling in South Africa against the Kingdom of Lesotho, which awarded €50 million in damages to FSG.

In 2019, FSG was forced to take legal action against the Government of Lesotho (‘GoL’) following a series of contractual breaches, and in 2020 was awarded substantial damages by an independent South African arbitrator. To date, GoL has neither engaged with the legal process nor provided FSG with any explanation of the contractual breaches.

Enforcement activity has now commenced in the United States District Court for the District of Columbia as part of a global enforcement strategy which will seize assets held by the Kingdom of Lesotho and obtain payment of the amounts due.

In 2018, following extensive dialogue with the Office of the Prime Minister of Lesotho, FSG signed a binding agreement with GoL to provide up to 40,000 solar water heating systems, 20MW of solar photovoltaic capacity, 1 million LED lights and 350,000 solar lanterns nationwide. The project was financed by the German government and would have formed the first phase in a wider program developed by FSG to support Lesotho’s energy transformation by turning the country into a net exporter of electricity, while improving electricity security and increasing government revenues.

In October 2018, the project’s progress stalled when GOL’s Ministry of Finance refused to finalise and execute the project’s financial agreements. Following this breach, FSG commenced arbitration proceedings in South Africa. No explanation for this refusal has been provided to FSG by the GOL, but the resulting legal action concluded that a competing project had been prioritised.

Commenting on enforcement activity, global counsel for FSG, Mr. Hussein Haeri, Partner and Co-Head of International Arbitration, Withers LLP, said:

‘The Government of Lesotho was given an outstanding opportunity to transform access to clean, renewable energy and to eradicate the use of damaging, polluting alternatives nationwide. Instead, it prevented the project from proceeding, contravened its legal obligations and left Frazer Solar with no alternative than to bring legal proceedings.’

Author: Bryan Groenendaal

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