Lesotho - Dispute SettlementLesotho - Dispute Settlement

Legal System, Specialized Courts, Judicial Independence, Judgments of Foreign Courts

Lesotho’s independent judicial system is an effective means for enforcing property and contractual rights, and Lesotho has a written and consistently applied commercial law. The judicial system is, however, inefficient – courts are overburdened, and cases can take years to resolve. A Commercial Court was established in 2010 in an effort to improve the country’s capacity in resolving commercial cases. Foreign investors have equal treatment before the courts in disputes with national parties or the government. The SADC Protocol on Finance and Investment enables investors to refer a dispute with the State to international arbitration if domestic remedies have been exhausted. Lesotho is a signatory of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID) and also accepts ad hoc arbitration. Lesotho is a member of the International Center for the Settlement of Investment Disputes, and the Arbitration International Investment Disputes Act of 1974 commits Lesotho to accept binding international arbitration of investment disputes.

The legal system is a mixture of Roman-Dutch and English Common Law. The judicial system consists of the High Court, the Court of Appeal, subordinate courts, and the Judicial Service Commission (JSC). The High Court has unlimited original jurisdiction over civil and criminal matters, as well as appellate jurisdiction from subordinate courts. Subordinate courts, comprising resident magistrate's courts, judicial commissioner's courts, and central and local courts, administer statute laws, while chiefs administer customary and tribal laws. There is no trial by jury. Lesotho has accepted compulsory International Court of Justice jurisdiction with reservations.

Bankruptcy

The Companies Act is the principal commercial and bankruptcy law. According to the law, creditors, equity shareholders, and holders of other financial contracts of a bankrupt company have a right to nominate a person to be liquidator, and if the creditors and the shareholders nominate different persons, the person nominated by the creditors shall be the liquidator. All claims against a bankrupt company shall be proved at a meeting of creditors, equity shareholders, and the court or the liquidator may fix a time or times within which creditors of the company are to prove their claims. If the claim is rejected by the liquidator, the claimant may apply to the court by motion to set aside the rejection. Creditors who will act as witnesses are entitled to witness fees, to be paid out of the funds of the company, as they would be entitled to if they were witnesses in any civil proceedings. Creditors are paid first in a bankruptcy; equity shareholders and holders of other financial contracts then follow. According to the Labor Code, workers have the right to recover pay and benefits from local and foreign firms in bankruptcy before creditors, equity shareholders, and holder of other financial contracts, regardless of the provisions of any other law in Lesotho. Monetary judgments are usually made in the local currency. An amount of a claim based on a debt or liability denominated in a foreign currency shall be converted into Lesotho currency at the rate of exchange on the date of commencement of the liquidation.

The government has little history of investment disputes involving U.S. or other foreign investors or contractors in Lesotho. However, in the past two years, a foreign company managing the government fleet of vehicles had its contract abruptly terminated and a foreign firm with a contract to print identification documents had a contractual dispute with the government. Foreign investors have full and equal recourse to the Lesotho courts for commercial and labor disputes. Courts are regarded as fair and impartial in cases involving foreign investors.

International Arbitration

Lesotho readily accepts binding international arbitration of investment disputes. Lesotho has entered into a number of bilateral investment agreements that provide for international arbitration. For instance, under the Bilateral Investment Treaty with United Kingdom, an investor may take a dispute with the government to international arbitration. Lesotho does not have a bilateral investment treaty with the United States. The government has stated that Lesotho’s courts would readily accept and enforce foreign arbitral awards – there have been no such awards to date.

ICSID Convention and New York Convention

Lesotho is a member of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention) and the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards.

Duration of Dispute Resolution – Local Courts

Before the establishment of the Commercial Court, commercial cases used to languish for years due to the lack of specialized judges trained to deal with commercial disputes. Today, the Commercial Court has two specialized judges presiding over commercial cases. The Commercial Court has reduced the time to resolve a commercial dispute, and reduced the costs of such litigation. Incidents of government interference in commercial cases have not been reported.