12 July 2014

Tanzania: International Decision Contested in Tanesco Case

A DECISION requiring Tanzania Electric Supply Company (Tanesco) to sit with Standard Chartered Bank (Hong Kong) Limited (SCBH) to recalculate power tariffs paid to Independent Power Tanzania Limited (IPTL) cannot be enforced in Tanzania.

This was said on Friday at the High Court in Dar es Salaam by advocate Joseph Makandege, for IPTL and Pan African Power Solution Limited (PAP), in his rejoinder submission to support an application for injunction, pending hearing and determination of a main case for 5.3tr/- claims.

The decision issued by the International Centre for Settlement of Investment Disputes (ICSID) on February 12, this year, was in favour of the Bank, against the state owned electricity Supply Company.

In his submission to oppose the application, British lawyer Charles Morrison alleged that if the court would grant restraint orders it would breach the public international law obligation of Tanzania under Article 54 of the International Convention for Settlement of Investment Disputes, commonly known as Washington Convention.

However, in his rejoinder submission, Mr Makandege told Judge Fauz Twaib, who is hearing the matter that under Section 54 (3) of the Washington Convection, "execution of the award shall be governed by the laws concerning the execution of judgments in force in the State in whose territories such execution is sought."

The counsel explained, therefore, that Section 16 reads together with Section 3 of the Arbitration Act empowers the High Court to invalidate an award improperly procured, while Section 15 enables the court to remit such an award for reconsideration of the Arbitrators or umpire.

"Section 30 (1) (e) of Arbitration Act disallows enforcement in the country of awards that contravenes public policy or laws of Tanzania. Section 11 of Civil Procedure Code bars enforcement in Tanzania of award improperly procured in disregard of Tanzanian law," he said.

Undoubtedly, he submitted, Tanzania signed and ratified the Washington Convention in 1992, requiring each contracting state to recognise an award rendered pursuant to the Convention as binding and enforce the pecuniary obligations imposed by the award.

However, the advocate submitted, that the ICSID decision whose enforcement was sought to be restrained by the court is not an award envisaged under Section 54 (1) of the Convention and in terms of Section 30 (1 (d) of Arbitration Act, only final award are enforceable in the country.

Referring to Black's Law Dictionary, Mr Makandege defined the "award" as a final judgment or decision by an arbitrator or by a jury.

He told the court, therefore, that the impugned ICSID decision does not determine any pecuniary obligation of the parties thereto.

He reminded the court that the Tanzanian government is not seeking injunctive orders against the foreign decision, not even opposing its enforcement, but the parties challenging the same are IPTL and PAP, who are both corporate citizens of Tanzania.

According to him, neither the government of Tanzania nor Tanesco could restrain the two private companies from suing the Bank and another respondent, jointly or severally, in a competent court of law for redress on their rights allegedly infringed.

Another respondent in the matter is Tanzanian advocate Martha Kaveni Renju, who allegedly presents herself as an agent with the Bank and an administrator receiver of IPTL.

Another hearing is set for August 5. In the main case, the applicants are seeking for payments of 3,240,000,000 US dollars (about 5.3tr/-) from for allegedly fraud and for declaration orders that the Bank and Ms Renju are not a creditor and administrator receiver of IPTL, respectively.

It is alleged in the plaintive of the suit that the misrepresentations by SCBH and Ms Renju have caused abortion of transactions by the plaintiffs, notably its ambitious mission of stopping the power plant at Tegeta from using heavy fuel (HoF) and instead go for duo heavy fuel and gas.

"Wartsila, to mention but one, declined the conversion of the plant from HoF fired to duo HoF and gas-fired and its expansion from 100MW to 500MW, doubting whether the plaintiffs were the rightful entities to deal with it," reads one paragraph in the plaint of the suit.

As a result, the plaintiffs alleged, they have not undertaken the conversion and expansion to date, causing enormous business and financial losses. Under the Purchase Power Agreement (PPA), the plaintiffs were entitled to payment by Tanesco of 2.6 million US dollars monthly.

Such amount, according to the plaintiffs, is for supply of 100MW of electricity only and by expanding the plant generation capacity to 500MW, the amount payable would increase to 23m US dollars per month being capacity charges to which they would be entitled.


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