Delayed response costs Tanzania $50 million in Konoike saga

Wednesday March 13 2019

 

By The Citizen Reporter @TheCitizenTz news@tz.nationmedia.com

Dar es Salaam. Tanzania is to pay a Japanese contractor, Konoike, Sh116 billion after a court in the United States confirmed a decision by the International Court of Arbitration (ICC) requiring Tanzania to settle outstanding payment on a road construction contract.

According to court documents seen by The Citizen, Konoike has been awarded by the court after Tanzanian attorneysfailed to timely respond to a petition in which Konoikesought confirmation of the award.

The deadline for Tanzania to respond to Konoike’s petition passed without response, prompting clerk of the United States District Court for the District of Columbia to declare Tanzania in default.

The development gave room for Konoike to seek for entry of a default judgment.

Defendants in the petition were the Ministry of Works, Tanzania National Road Agency (Tanroads), the Ministry of Transport and the Attorney General (AG), according to the court documents.

In deciding whether to set aside a default judgment, US Judge Richard Leon who presided over the matter considered whether (i) the default was willful, (ii) a set aside would prejudice plaintiff and (iii) the alleged defence was meritorious.

“I do not doubt Tanzania’s good faith in this regard, but a finding of bad faith is not a necessary predicate to the conclusion that a defendant acted ‘willfully.’” said the judge at the March 6 ruling.

The dispute arises from a contract Konoike entered into with the Tanzanian Ministry of Works in 2003 for the upgrade a 79-mile stretch of road between Dodoma and Manyoni.

After a series of delays and disputes, Konoike terminated the contract in 2008, having completed most of the anticipated work.

The contractor then initiated arbitration, seeking payments due under the contract, compensation for delays and disruption to the project, and costs arising from the contract’s termination.

Tanzania participated in the arbitration but ultimately lost. In 2016, the ICC awarded Konoike contract damages of Sh20.7 billion, $38.9 million (approx. Sh89. 4 billion) and Japanese Yen 324, 734, 551 (approx. Sh6.83 billion), all totaling Sh116. 93 billion.

In an effort to enforce the arbitral award, Konoike then petitioned the US court to confirm the award in September, 2017.

However, a three month deadline for Tanzania to respond to Konoike’s petition at the US court passed (in January 2018) without any response, allowing clerk of the court to declare Tanzania in default. In March, Konoike moved for entry of default judgment.

Tanzania participated in the case shortly after it was served with the motion for default judgment, and opposed the motion for default judgment, pleading with the court to set it aside.

Tanzania acknowledged that it was aware of the case but explained it did not immediately respond to Konoke’s petition because it believed in good faith that a prompt settlement would be possible.

Four top government officials in the ministries of Justice and Constitution Affairs and that of Foreign Relations declined to comment on the matter when contacted by The Citizen on Monday.

The Constitutional and Legal Affairs minister, Augustine Mahiga, was not ready to comment because he had not been handed over the new docket. “I have not been handed over this docket, it would be better if you ask the former minister or permanent secretary,” he said.

The permanent secretary in the ministry of Justice and Constitutional Affairs, Prof Sifuni Mchome, on the other hand, threw the ball to the solicitor general. “These are issues to do with the solicitor general and the AG,” he said.

Solicitor General, Dr Clement Mashamba, when reached for comment, said; “In all matters, particularly on foreign affairs, the spokesperson is always the minister. Our job is to represent the government and not do media engagement,” said Dr Mashamba.

The Attorney General, Adelardus Kilangi, on his part,told The Citizen; “Normally, the AG is not the government spokesperson. He deals with technical legal issues and advise the government accordingly, responsibilities are shared like that.” he told The Citizen on Monday.

However, the state-run newspaper, Daily News quoted him yesterday as saying that the government is currently engaged in negotiations with Konoike and the agreed terms will be signed soon.

“So, what the American court has done is not new; it is just to recognize what was decided by the ICC,” he was quoted by the Daily News as saying, adding that the decision has come as the negotiations between the government and Konoike were at an advanced stage.