IPTL backs Tanesco move in row over Sh323bn award

Dar es Salaam. Independent Power Tanzania Limited (ITPL) said yesterday it supports the decision by Tanzania Electric Supply Company (Tanesco) to seek annulment of a recent ruling by an international arbiter which ordered Tanesco to pay $148.4 million (about Sh323 billion) to Standard Chartered Bank – Hong Kong (SCB-HK).

Despite winning a power tariff case with IPTL, Tanesco has indicated that it will seek annulment of the award by the International Centre for Settlement of Investment Disputes (ICSID).

The state-owned utility said last week that through its lawyers, R.K. Rweyongeza and Advocates, it would file the appeal within the 90-day time frame provided by the World Bank-affiliated ICSID on the grounds the award is contrary to an initial declaration made by the tribunal in 2014.

On November 10, 2014, Colin Johnson of Grant Thornton UK LLP signed on behalf of SCB-HK an expert report in ICSID Case Number ARB/10/20, which also confirmed that all the monies in the Tegeta escrow account belonged to IPTL and that Tanesco owed IPTL more money.

Tanesco managing director Felchesmi Mramba was quoted last week saying the company had reason to believe that in hearing and determining the case, ICSID overstepped its jurisdiction.

IPTL secretary and chief counsel Joseph Makandege said in Dar es Salaam yesterday that the firm – which was on the centre of the case filed by SCB-HK against Tanesco at the ICSID – fully supported Tanesco and cited three reasons for the position.

“We support Tanesco in this. SCB-HK is not our creditor and so they have no legal obligation to speak on our behalf as is the case in this ruling,” he said.

Flanked by IPTL director of operations Parthiban Chandrasakaran, plant manager Naresh Kumar and personal assistant to IPTL/PAP executive chairman Rajiv Bhesania, Mr Makandege said SCB-HK did not have the legal mandate to benefit from the $180 million that was withdrawn from the Escrow account.

“From the award, we get the impression that SCB-HK believed they had the right to benefit from the money and that it should have been paid to them, but that would not happen since they (SCB-HK) were not part of the reason for which Tanesco and ITPL decided to set up an escrow account,” he said.

Mr Makandege added that upon acquiring the assets of IPTL, the new management under Pan Africa Power Solutions Limited (PAP) had sought to clear all outstanding debts for IPTL, but SCB-HK did not show up.

“We still stand by our position that the money in the escrow account was withdrawn legally…it did not belong to the government and neither did it belong to SCB-HK. In fact, ICSID said this categorically in its 2014 expert report. It is unfortunate that they now say the money was withdrawn dubiously.”

With PAP acquiring 70 per cent of shares for Mechmar Corporation of Malaysia before buying out Dar es Salaam-based VIP Engineering to own the company by 100 per cent, IPTL became a locally-owned entity, said Mr Makandege, adding that this meant that its matters could always be handled within the jurisdiction of Tanzania’s courts.

“That was why on April 3, 2014 we initiated a case at the High Court in Tanzania, requesting it to prohibit SCB-HK from involving itself in the affairs of IPTL since they (SCB-HK) are not creditors and being a local company, the power firm’s legal issues must be handled locally and the court ruled in our favour….For them to rush to a foreign court was in complete disregard of the local legal system.”

Mr Makandege said IPTL had also requested for a compensation of $3.24 billion for the “loss that it suffered during the time that SCB-HK has been peddling into its affairs”.

“This case is not yet decided, but SCB-HK has been attending every time that it comes up for mention so there was no reason for them to disregard Tanzania’s legal system and rush to foreign ones.”

According to international law, ICSID was not allowed to make a ruling that disregarded the existing legal system in a member country, Mr Makandege said.

Tanesco believes that the award, which favours SCBHK, contained serious errors in law in respect of both jurisdiction and tariffs payable to IPTL.

“The Tribunal (ICSID) has manifestly exceeded its powers, there has been a serious departure from a fundamental rule of procedure and the award has failed to state the reasons on which it is based,” the seasoned advocate said.

He pointed out that Taensco had 120 days from the date of the award within which to submit the application for annulment before the same Tribunal.

The ICSID issued its award on September 12, this year. This means that the deadline for submission of the application would be January 9, next year.

Mr Richard Rweyongeza of R.K. Rweyongeza and Advocates, pointed out that the sooner this was done the better as SCBHK was likely to move fast for enforcement of the award, which could result in other legal battle and costs.

“The possibility exists to request a stay of enforcement with the application for annulment, whereupon enforcement shall be stayed provisionally until the committee rules on such request,” he said.