Dar es Salaam. The controversies regarding the power deal with Independent Power Tanzania Ltd (IPTL) has resurfaced after an international tribunal ordered the government to pay $185.4 million as compensation to Standard Chartered Bank of Hong Kong for breach of agreement.
The bank submitted a dispute to the International Centre for Settlement of Investment Disputes (ICSID) in 2015 against the government of Tanzania.
The tribunal stated in its decision published on Tuesday that the government breached agreement it signed with IPTL in 1995.
The pact restricted the government from expropriation and discrimination, among other conditions. The agreement was governed by the Tanzanian law but contains a clause for the ICSID arbitration.
However, in a quick rejoinder to the development, government spokesman Hassan Abbasi said Tanzanians had no reason to worry about the tribunal’s decision as the government did not borrow from the bank.
“Basically, the debt involves IPTL and Standard Chartered Bank Hong Kong and the government was joined to the dispute just as a matter of legal principles. Tanzania does not owe the bank but following the tribunal decision, we will follow the legal procedures to make sure that IPTL repays the money,” stated Dr Abbasi in a tweet yesterday.
In 1995, IPTL, which was owned by Malaysia’s Mechmar and Tanzanian VIP Engineering and Marketing Ltd, signed an agreement with Tanzania Electric Company Ltd (Tanesco) to provide 100 megawatts through a plant located at Tegeta on the outskirts of Dar es Salaam.
IPTL raised money from a consortium of creditors including Malaysian banks for the project and the company had to repay the loan using money it generated from sales of electricity. This debt was later acquired by Standard Chartered Bank Hong Kong.
The bank argued before the tribunal that Tanesco was obliged by the implementation agreement to provide security for the loan and if it failed the government would chip in.
The agreement restricted the government from expropriation and discrimination.
However, the release of the funds in 2013 from the Tegeta Escrow Account to Pan Africa Power Solutions Ltd (PAP) – a company which controlled IPTL – was seen as discriminatory.
“In the Tribunal’s view, these are discriminatory actions which materially and adversely affected the enjoyment of the rights and interests of SCB HK and IPTL and were thereby in breach of Article 16.1 of the Implementation Agreement,” the tribunal stated.
Transfer of funds from the Tegeta Escrow Account was investigated and some tycoons have been charged with economic crimes for their alleged involvement.
Mr Habinder Singh Seth of Pan Africa Power Solutions Tanzania and VIP Engineering’s James Rugemalila, who jointly ‘own’ the IPTL are accused of siphoning a whopping Sh306 billion from the Tegeta Escrow account at the central bank jointly opened by Tanzania Electric Supply Company (Tanesco) and IPTL pending a tussle over capacity charges between the two in local and international courts.
Part of the siphoned money was disbursed to politicians, government executives, judges and religious leaders.
The scandal prompted to resignation of former Attorney General (AG) Fredrick Werema and two ministers by then.