The recently enacted pdf Zimbabwe Investment Development Agency (ZIDA) Act (1.98 MB)  [CHAPTER 14:37] guarantees local and foreign investors legal protection against discriminatory treatment, expropriation, transfer of funds restrictions, and denial of justice in criminal, civil or administrative proceedings, among others. If these rights are violated by the government of Zimbabwe, both local and foreign investors have recourse to dispute settlement as prescribed by section 38 of the ZIDA Act.

Investors (both domestic and foreign) would like to see various substantive protections in a dispute settlement clause, such as the jurisdiction of the forum in question, calculation of damages, effectiveness and execution of rulings, and the finality of decisions and remedies against the government found to be in breach.

Rules or arrangements on the resolution of investment disputes are often contained in national legislations, investment treaties and international trade agreements with investment provisions. Investment and trade agreements’ dispute resolution is oriented towards resolving disputes between foreign investors and host governments or between host and home governments. This is because investment treaty protections are tailored to protect foreign investors and investments.[1] Dispute settlement clause in national investment legislations can be applicable to both domestic and foreign investors unless expressly provided otherwise. This is the case of the Act.

Section 38 of the ZIDA prescribes that investment disputes falling within the scope of the Act shall be governed by arbitration as provided in the Arbitration Act, 1996 or any other international arbitration referred to by mutual agreement of the parties. The Arbitration Act provides for the arbitration of disputes by an arbitral tribunal (sole arbitrator or panel of arbitrators) or court of Zimbabwe. Arbitral awards thereof are final and binding between the parties. The ZIDA Act does not stipulate as to when the international arbitration referred to by mutual agreement of the parties will happen; i.e. whether before or after a dispute has been declared.

Section 38 (2)-(6) of the ZIDA Act allows foreign investors to submit their investment disputes to a dispute settlement mechanism under an investment treaty between Zimbabwe and their home country. A foreign investor is defined by the ZIDA Act as a foreign natural or juristic person making an investment in Zimbabwe. Foreign investment is defined by the ZIDA Act as a direct or indirect investment made by a foreign investor, other than any foreign portfolio investment (i.e. purchase of Zimbabwean stocks and bonds). Thus, disputes related to portfolio foreign investments fall outside the scope of the ZIDA Act.

To be able to submit disputes under bilateral investment treaties (BITs), foreign investments established prior to the ZIDA Act (before 6 February 2020) must be registered[2] (by foreign investors) with the Zimbabwe Investment Development Agency (the Agency) no later than 12 months after the entry into force of the Act. Foreign investments established after the ZIDA Act must be registered with the Agency no later than 90 days after the entry into force of the Act. Failure to register the investment within the specified period shall be deemed to have waived the protection of the investment treaty. Any dispute in relation thereto can only be settled by a domestic court or arbitration (section 38(5) of the ZIDA Act).

Zimbabwe has signed 10 BITs currently in force[3] which provide for investor-state dispute settlement (ISDS) through consultation, mediation or arbitration through domestic courts or international arbitral institutions like the International Centre for Settlement of Investment Disputes (ICSID) and the United Nations Commission on International Trade Law (UNCITRAL). These BITs also provide for inter-state dispute settlement.

Zimbabwe is also part of the Southern African Development Community (SADC) Finance and Investment Protocol (FIP) which provides for ISDS via domestic courts, judicial or administrative tribunals of the host state. Only foreign investors from the State Parties of the SADC FIP have recourse to this dispute settlement mechanism. That means that foreign investors in Zimbabwe originating from those State Parties may submit their disputes to a dispute settlement mechanism under SADC FIP, i.e. through the courts, or the judicial or administrative tribunals of Zimbabwe.

South Africa is part to the SADC FIP and has also concluded a BIT with Zimbabwe providing for ISDS international arbitration via UNCITRAL or ICSID forums. South African investors investing in Zimbabwe have recourse to dispute settlement under SADC FIP and South Africa-Zimbabwe BIT (2009).

However, foreign investors from countries not part to the SADC FIP or without BITs with Zimbabwe will only have recourse to dispute settlement under the Zimbabwean Arbitration Act or any other international arbitration they have mutually agreed with the government of Zimbabwe.

Zimbabwe does not have a good record when it comes to the settlement of investment disputes. The country has refused to enforce some arbitral awards. It is highly unlikely that potential investors contemplating an investment in Zimbabwe would do so in the country without a good record in enforcing investment arbitral awards. The government of Zimbabwe would need to guarantee investors that disputes will be effectively executed, and remedies granted when their rights are violated. Otherwise investors would rather go to jurisdictions where they are guaranteed effective execution of rulings, and remedies.

[1] Lesotho v Swissbourgh Diamond Mines (Pty) Ltd and Others (2017) SGHC 195 (14 August 2017) para. 333.

[2] Such registration entails notifying the Agency of the name, nationality and address of the foreign investors, date on which the investment concerned was made or began in Zimbabwe, and the BIT under which the investor was to claim protection.

[3] With Iran, Russia, Kuwait, Switzerland, Germany, Denmark, South Africa, Netherlands, Serbia and China. See https://investmentpolicy.unctad.org/international-investment-agreements/countries/233/zimbabwe.