Sh336bn award verdict against Tanesco upheld

Dar es Salaam. The International Centre for Settlement of Investment Disputes (ICSID) ad hoc committee has upheld a $148.4 million award won by Standard Chartered Bank Hong Kong against Tanzania Electricity Supply Company (Tanesco). vIn its decision, the court, under President Claus von Wobeser, rejected several grounds submitted by Tanesco seeking an annulment of the award.

The decision, a copy of which The Citizen has, upheld an initial decision in which Tanesco must now pay the Hong Kong arm of Standard Chartered Bank a staggering $148.4 million (about Sh336 billion on the prevailing Bank of Tanzania exchange rate) owed under a power agreement.

Both Tanesco managing director, Dr Tito Mwinuka, and the spokesperson for the Attorney General’s Officer, Ms Maura Mwingira, said they were unaware of the decision yesterday.

According to the ICSID committee, the decision dated August 2, 2018 was reached after members unanimously decided that the application for annulment of the award, rendered on September 12, 2016 by Tanesco had to be dismissed in its entirety.

Members of the ICSID ad hoc committee include president Claus von Wobeser, Dr Christoph Schreuer, Ms Bertha Cooper-Rousseau and Secretary Ms Aurélia Antonietti while the assistant to the president of the ad hoc committee is Ms Montserrat Manzano.

The committee also decided that Tanesco shall bear the entire costs of the proceedings, including fees and expenses of the members of the committee while each party shall bear its own legal costs.

The annulment proceeding was in respect of ICSID case number ARB/10/20 brought by Tanesco against Standard Chartered Bank (Hong Kong) Limited (“SCB HK”), seeking the annulment of the award dated September 12, 2016.

Tanesco’s application for annulment is dated January 6, 2017 while the committee’s decision on Tanesco’s request for a continued stay of enforcement of the award is dated April 12, 2017.

Hearing on annulment took place in London on November 27 and 28, 2017 and Tanesco’s costs submissions was dated February 20, 2018.

The application for annulment also contained a request, under Article 52(5) of the ICSID Convention and Rule 54(2) of the ICSID Rules of Procedure for Arbitration Proceedings (“ICSID Arbitration Rules” or the “Arbitration Rules”), for a stay of enforcement of the award until the application for annulment is decided.

Tanesco explained in its submission that the grounds for annulment enumerated in Article 52 of the ICSID Convention clearly define the limits of the remedy of annulment.

This case originates from a dispute arising out of a Power Purchase Agreement dated May 26, 1995 (the “PPA”), entered into by Tanzania Electric Supply Company Limited (“Tanesco”) and Independent Power Tanzania Limited (“IPTL”).

The claimant in the “Arbitration Proceeding” was Standard Chartered Bank (Hong Kong) Limited (“SCB HK”), a company organised under the laws of Hong Kong, a subsidiary of Standard Chartered Bank (“SCB”), which is incorporated in the United Kingdom.

The Respondent in the arbitration was Tanesco (and together with SCB HK the “Parties”), an entity wholly owned by the United Republic of Tanzania .

(“Tanzania” or the “GoT”) and designated as an agency of Tanzania pursuant to Article 25(1) of the ICSID Convention.

Tanesco legal team included Mr Richard Rweyongeza of R.K. Rweyongeza &Co Advocate, Mr Beredy Maregesi of Crax Law Partners and Mr David Hesse, Ms Devika Khanna, Mr Thomas Roberts and Ms Nefeli Lamrou of UK based Clyde & Co.

The case concerned money allegedly owed by Tanesco under a power purchase agreement with Independent Power Tanzania (IPTL). Standard Chartered subsequently acquired IPTL’s debts and its rights under the agreement, and brought the arbitration under the contract’s ICSID clause to recover the payments.

In its ruling Ronald McRae, president of Tribunal, August 31, 2016 orders that Tanesco pay to SCB HK the amount of $ 148.4 million with simple interest at three months LIBOR plus 4 per cent from September 30, 2015 until the date of this award. LIBOR is a benchmark rate that some of the world’s leading banks charge each other for short-term loans.

Interest shall continue at the same rate until full payment is received.