9 January 2013

Zimbabwe: Reserve Bank Wins Zimdollar-Forex Court Appeal

THE Supreme Court has ruled that the Reserve Bank of Zimbabwe is not obliged to pay United States dollars to 36 companies selected to benefit from the foreign currency auction system in 2005 because there were no formal and binding agreements between the parties.

Several companies, including Cafca (Private) Limited, were selected to benefit from the foreign currency auction system whereby they would deposit Zimdollars with the central bank and get the equivalent in foreign currency depending on the prevailing auction rates.

RBZ agreed to assist the manufacturers to get the then scarce foreign currency to import inputs for their businesses.

The firms benefited from the special system, but at a later stage RBZ failed to surrender the required foreign currency due to the unavailability of the scarce currencies.

RBZ announced it was terminating the special contract due to the foreign currency shortages and offered the 36 companies refunds in Zimdollars.

Cafca (Private) Limited sued RBZ at the High Court and obtained an order to be paid US$750 000 as the equivalent of the Zimdollars it tendered.

The firm, which manufactures and supplies an exclusive range of cables for the transmission of communication and distribution of energy, was selected to get preferential treatment to access foreign currency to purchase imported inputs to sustain its business.

Cafca argued that it did not get the foreign currency prompting it to file a claim at the High Court.

The High Court ordered RBZ to pay the US$750 000, a decision the central bank contested at the Supreme Court.

But the Supreme Court recently quashed the High Court decision and saved the central bank from paying Cafca.

Deputy Chief Justice Luke Malaba dismissed the US$750 000 claim by Cafca on the basis that there was no formal and binding contract between the two parties.

The judgment included other companies that were in the same situation.

Justices Vernanda Ziyambi and Yunus Omerjee agreed with the decision.

"The court finds that when Dr (Gideon) Gono put in place the special arrangement, there was no intention to create a binding contract to avail foreign currency to the respondent and the other companies on the special list.

"It is to be noted that there was no formal contract between the parties.

"The facility was put in place at the time because of the acute shortage of foreign currency. It is highly unlikely that given the state of affairs, Dr Gono would seek to bind the appellant (RBZ) to avail foreign currency to the respondent upon payment of the local currency when the volumes of inflows of foreign currency were unpredictable.

"It is not without significance that 35 other companies on the special list subsequently accepted refunds of Zimbabwe dollars deposited with the appellant in August 2005. This fact is consistent with the position that the allocation of foreign currency was conditional upon its availability at any time," ruled Justice Malaba.

The agreement to accord the 36 companies preferential treatment in the disbursement of foreign currency, according to the Supreme Court, did not create a binding and enforceable contract between the parties.

In 2005, Cafca and 35 other companies approached RBZ seeking assistance to access foreign currency and Dr Gono made an arrangement to help the 36 firms.

The firms would get some foreign currency on a weekly basis after depositing local currency with the central bank. The arrangement went on well until August 2005 when the bank faced challenges in providing the required foreign currency leading to the termination of the facility.

Copyright © 2013 The Herald. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.

AllAfrica publishes around 2,000 reports a day from more than 130 news organizations and over 200 other institutions and individuals, representing a diversity of positions on every topic. We publish news and views ranging from vigorous opponents of governments to government publications and spokespersons. Publishers named above each report are responsible for their own content, which AllAfrica does not have the legal right to edit or correct.

Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica. To address comments or complaints, please Contact us.