Navigating Arbitral Awards in Zambia: Insights from the Supreme Court's Judgment in Star Drilling and Exploration Limited v National Technologies Limited & Ors.

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By Godfrey Chuulu

August 12, 2025

What Happened?

On February 26, 2007, Star Drilling (the appellant) entered into a memorandum of understanding (MOU) with National Technologies (the 1st respondent) to produce clay, ceramic products, and coal briquettes on a commercial basis.

Along the way, disputes arose, leading to the termination of the MOU by the 1st respondent. This prompted the appellant to seek arbitration. The arbitral tribunal awarded the appellant USD 1,324,453.33 and GBP 9,600.00 against the 1st respondent.

After registering the arbitral award on January 27, 2022, the appellant attempted to execute it but faced difficulties, as the 1st respondent appeared to have no assets. A search revealed non-compliance with legal obligations at PACRA. Against this background, the appellant applied to the High Court to pierce the corporate veil of the 1st respondent, seeking to hold its shareholders and directors liable for the award, alleging fraudulent trading.

ü What was the High Court’s Position?

The High Court found that the corporate veil was being misused to evade obligations. Based on this finding, the court concluded that the appellant had exhausted all conventional remedies and permitted the piercing of the corporate veil. Consequently, this ruling implied that the shareholders and directors of the first respondent would be held personally liable.

ü The Court of Appeal

Dissatisfied with the judgment of the High Court, the respondents (2nd to 12th) joined the 1st respondent to appeal against the decision. They argued vigorously through their legal team that they should not be held liable, as they were not parties to the arbitration. The Court of Appeal ruled that the High Court lacked the jurisdiction to pierce the corporate veil, as this would alter the arbitral award. It emphasised that the arbitral award is final and binding only on the parties involved; therefore, no third party could be bound by an arbitral award to which they were not privy.

ü The Supreme Court

Aggrieved by the turn of events, the appellant sought redress by escalating the matter to the apex court and launched an appeal before the Supreme Court. The appellants advanced two grounds of appeal. Firstly, they argued that the Court of Appeal erred in ruling that the High Court's action exceeded its jurisdiction. Secondly, they contended that the Court of Appeal failed to recognise the High Court's jurisdiction to enforce the arbitral award, including the authority to pierce the corporate veil where justified.

1. What is the effect of an arbitral award, pre- and post-registration?

2. What is the extent of intervention in the arbitral process by the court which is allowed by the Act?

3. What means of execution can a party resort to in execution of an arbitral award?

These are the questions that the Supreme Court of Zambia agreed to address. A panel of three judges, comprising Musonda-DCJ, Wood and Mutuna, JJS sat to adjudicate upon the matter.

• The Effect of an Arbitral Award, Pre and Post Registration

In addressing the first question, particularly regarding the effect of an arbitral award pre-registration, the Supreme Court affirmed that an arbitral award is final and binding only on the parties involved, as cited in Section 20(1) of the Arbitration Act. The court emphasised that an arbitral award cannot bind or affect third parties.

On the other hand, concerning post-registration, the court interpreted Section 18(1) of the Act and Rule 15 of the Rules, holding that once an arbitral award is registered with a competent court, it becomes enforceable. The court further stated that registration serves as a seal of approval for enforcement purposes, thereby making the award enforceable against the parties involved.

• The Extent of Intervention in an Arbitral Award by the Court

The court clarified that its role is limited to supporting the enforcement of arbitral awards. The Supreme Court emphasised that while courts possess mechanisms for enforcement, they cannot modify the terms of the arbitral award or extend liability to parties not involved in the arbitration. Consequently, the court cannot interfere with the arbitral process beyond facilitating enforcement. The rationale behind this stance is that an arbitral award is final, binding, and enforceable only on the parties involved, not on any third parties, as noted by the court. Furthermore, the court reiterated that arbitration, as an alternative dispute resolution method, is not subject to interference by the court.

• Means of Executing Arbitral Awards

The Supreme Court concluded that the mechanisms for executing an arbitral award are strictly defined by the High Court Rules and do not include piercing the corporate veil as a means of enforcement. The appellant contended that if a writ of fieri facias is returned ‘‘nulla bona’’ (indicating no assets found), the court could extend its powers to include piercing the corporate veil. However, the Supreme Court referenced Rule 42 of the High Court Rules on execution, which does not provide for this action. Additionally, the court cited the White Book under Order 45 Rule 1, which clarifies the enforcement of money judgments, reinforcing that piercing the corporate veil is not recognised as a valid enforcement mechanism.

The court emphasised that piercing the corporate veil is a separate cause of action and should be pursued independently, rather than as a means to enforce an arbitral award.

What to Learn

Ø Arbitral awards are final and binding on the parties involved and cannot bind third parties that are not privy to the arbitration agreement.

Ø Once an arbitral award has been registered, it entails a seal of approval for enforcement, but does not change its binding nature.

Ø The court’s role is limited to enforcing arbitral awards through established legal mechanisms and does not extend to altering the terms of the award or adding new parties, as this would alter the finality of the arbitral award.

Ø Courts can only assist in the execution of arbitral awards but cannot interfere with the arbitral process itself.

Ø The High Court has limited jurisdiction when it comes to arbitral awards; it cannot adjudicate issues not addressed by the arbitrator.

Ø Proper legal procedures should be followed to ensure that issues are not overlooked due to procedural technicalities. In this case, the appellant's application to pierce the corporate veil was deemed misconceived as it was based on incorrect legal provisions and did not follow the proper procedural requirements for enforcement.

Ø The court clarified that piercing the corporate veil is a separate cause of action and not a mechanism for enforcing an arbitral award.

Case Citation: Star Drilling and Exploration Limited v National Technologies Limited and 11 Others (Appeal No. 07 2024) ZMSC 2025

Judgment Delivered on 21^st February 2025.

 

ABOUT THE AUTHOR

Godfrey Chuulu holds an LLB Degree from the University of Zambia.

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