Court dismisses Eskom’s appeal in Framatome arbitration, confirms R1 billion payout

Power utility Eskom argues that a Supreme Court of Appeal judgement has become conflated with an arbitration process and that there are two, separate, matters ongoing at the same time and that the ruling was handed down after it paid the debt. 

This follows a matter recently heard in the Western Cape High Court during which Eskom challenged what was a rather messy process of arbitration, which led to an order from the arbitrator that Eskom owed Framatome money for breaching a contract. 

Framatome had been hired to install steam generators at Koeberg nuclear power station.

In an October 2021 matter before the Supreme Court of Appeal, Framatome was successful in an appeal to set aside a high court ruling stating that Eskom was in breach of a contract and had to pay out billions in damages for cancelling a deal during which Framatome was set to install steam generators at Koeberg nuclear power station.

This was followed by an appeal in the Western Cape High Court during which Eskom argued that the “adjudicator did not decide the first respondent’s [Framatome’s] monetary claim within the time period for issuing a decision”.

Eskom also claimed that the adjudicator could not amend the contract “by unliterally extending the timeframe within which he was to issue his decision beyond the four-week period agreed upon by the parties” during the process of mediation, the ruling said.

This is in addition to Eskom’s argument that the adjudicator ruled that Framatome’s quotation in terms of the amounts for storage of its equipment while it waited for the maintenance process to start was not reliable as “instructed that contracted amounts should be used rather than estimates or actual costs”.

The adjudicator determined that Framatome should be compensated for the postponement of the commencement of the maintenance and the subsequent cancellation of the contract.

In the ruling, the judge stated that “there is no basis to set aside the decisions of the adjudicator which are valid and binding. In terms of the parties’ contract Eskom was obliged to comply therewith. The bringing of this application and the pending arbitration does not relieve Eskom from complying with its contractual obligations.”

The judge added that Eskom’s appeal “is dismissed with costs including the costs attendant upon the employment of two counsel,” while also ruling that Eskom should pay Framatome around R1 billion.

Eskom is currently reviewing the judgment to determine the appropriate next steps. “Eskom is following the proper legal channels to resolve these matters responsibly, and we remain committed to transparency and accountability throughout,” Eskom said.

The power utility, however, said that there is still an ongoing arbitration process, and the decision should handed down “in the last quarter of Eskom’s financial year”. Eskom's financial year ends on March 31.

In confirming a dispute, the power utility this was “being addressed through the agreed resolution process. In accordance with the contract, disputes are first referred to adjudication and, if not resolved, to arbitration."

It added that there were separate legal processes. “To clarify, no new payments are currently due, and all actions taken by Eskom have been in line with the applicable legal and contractual procedures,” it said in a statement.

Although Eskom disagreed with the adjudicator’s decisions, the company complied with the requirement to implement the outcome and made payments in the interim. All payments had been made by March 2024 as part of standard contract processes and not as penalties or fines,” it said.

The court delivered its judgement a year late, it noted.

“Most importantly, despite these disputes, the core technical work, replacing the steam generators on Koeberg Unit 2, has been completed. This is a major milestone that contributes to the safe and extended operation of the power station, helping to ensure energy security for the country,” Eskom said.

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