17 January 2017

Tanzania: Advocate - Tanesco Has No Right to Pay Bank

The Tanzania Electric Supply Company (TANESCO) has raised two grounds of objections, which seek to dismiss application for enforcement of award by International Centre for Settlement of Investment Disputes (ICSID) of over 300billion payments to Standard Chartered Bank (Hong Kong) Limited (SCBHK).

Through its advocate Richard Rweyongeza, TANESCO states that the High Court of Tanzania, where the application by the SCBHK has been launched, has not been properly moved to enforce the award in question of 148.4million US Dollars dated September 16, 2016.

It is stated that the application contravenes the provision of Article 54 (3) of the Convention on the Settlement of Investment Disputes between states and nationals of other states that came into force on October 14, 1966.

TANESCO further states that the application contravenes the provision of the Arbitration Act governing the mode of bringing applications under the Act and recognition as well as the enforcement of foreign awards under the law.

In its application, the Bank seeks for, among others, orders to preserve property in relation to the ICSID award by ordering capacity charge payments by TANESCO to Independent Power Tanzania Limited (IPTL) should be paid into court.

Advocate Gaspar Nyika, for the Bank, has maintained an affidavit to support the application, stating that the ICSID had confirmed that his client is a statutory assignee of IPTL's rights under the Power Purchase Agreement (PPA) and is the legal owner of the rights arising from the Agreement.

He stated that the Tribunal had declared that the amounts paid by TANESCO to the Escrow Account did not discharge its obligations to the Bank under the PPA and thus could not be used to reduce the amount that it owes SCBHK.

The advocate stated that the ICSID had also declared that the payments made to IPTL or Pan Africa Power Solutions (PAP) Tanzania Limited since August 2013 did not discharge TANESCO's obligations to the bank under the PPA and could not therefore, be used to reduce the amount that it owes the bank.

In his counter affidavit filed by TANESCO's Chief Counsel and Company Secretary Isdor Nkindi stated that the declaration by ICSID could not be acted upon until the period of annulment had expired and following the outcome of the application for annulment, the award has been recognised and enforced by the High Court of Tanzania.

Late last year, TANESCO declared that it would seek the annulment of the award issued to ICSID in favour of SCBHK for containing serious errors of law in respect of both jurisdiction and tariffs payable IPTL.

Advocate Rweyongeza was quoted as saying that the Tribunal (ICSID) manifestly exceeded its powers, as there has been a serious departure from a fundamental rule of procedure and because the award had failed to state the reasons on which it is based.

Expounding further on the matter, the seasoned advocate explained that the award by the Tribunal was defective, alleging that SCBHK was not an investor within the Tanzanian laws, notably the Tanzania Investment Centre Act.

He explained that in the jurisdiction and liability decision issued in February 2014, the Tribunal had said that Internal Rate Return (IRR) over power tariffs could not be 22.3 percent but could not be zero.

On that basis, he said, it had directed the parties to sit together and recalculate the tariffs. "Surprisingly, in this award, the Tribunal has used the rate which it had disputed before. We think this is wrong.

For that matter we expected the rate could be below, which has not been the case here," the advocate had said.

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