Tanzania to pay security over ICC award

[Ragamuffin]

Tanzania to pay security over ICC award​

SEBASTIAN PERRYMONDAY, 01 AUGUST 2011
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The High Court in London has agreed to adjourn enforcement proceedings against Tanzanian state power utilityTanesco until November - but only if it provides US$5 million in security.Costa Rican entity Dowans Holdings and a Tanzanian affiliate are seeking to enforce an ICC award worth morethan US$65 million, issued last year by a tribunal seated in Dar es Salaam. Tanesco asked the English court toadjourn the proceedings pending the outcome of a set-aside action in the Tanzanian courts.The ICC case arose after Tanzania cancelled Dowans' contract to build a temporary gas-turbine power plant inDar es Salaam, alleging that government officials had improperly influenced the bidding process. The affaircontinues to be a source of political controversy in Tanzania, having prompted the resignation of prime ministerEdward Lowassa and two other ministers in 2008. The set-aside proceedings in Dar es Salaam have also seenthird-party petitions from parliamentarians, environmental groups and a journalist, all protesting against theaward's recognition.In his ruling on 27 July,

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Mr Justice Burton said Tanesco's prospects of setting aside the award in Tanzania werenot "fanciful", even though it faced "substantial hurdles". But he concluded there was a "real risk" that anyTanzanian state assets in Europe that could be subject to attachment might be removed during the five-monthadjournment period.The judge was asked to consider the meaning of a "binding" award under the English Arbitration Act 1996 andthe New York Convention. Tanesco argued that the pending petitions to set the award aside in the jurisdiction ofthe arbitral seat meant that the award was "not yet binding" and that recognition should therefore be refused inthe UK.

Antony White QC of Matrix Chambers, representing Tanesco, argued that the existence of an"impediment" to enforcement in Tanzania meant the award is "inchoate" and not "ripe" or "ready" to be enforcedelsewhere.Burton J rejected this reasoning, noting that it would "offend against" the New York Convention's deliberateremoval of the need for a "double exequatur" at the court of the seat and the court of enforcement. He endorsedthe "autonomous interpretation" of the term "binding" espoused by Dutch arbitrator Albert Jan van den Berg inhis 1981 commentary on the convention. T

he judge also observed that the parties had already submitted to theICC rules, which provide that awards are "binding upon" both sides.The judge said that even if he had concluded that the award was not binding because of the Tanzanian petitions,he would still have discretion under section 103(2) of the 1996 Act to enforce it anyway. He added that the Courtof Appeal and Supreme Court rulings in Dallah v Pakistan had made it clear that the English courts retain discretion to enforce an award even where it has been set aside in the home jurisdiction, though they shouldexercise that discretion "sparingly".

In assessing Dowans' prospects of success in having the award recognised in Tanzania, the English court alsohad to consider English case law from the early 20th century relating to arbitration. Although enacted in 2002,Tanzania's Arbitration Act is modelled on the former English Arbitration Act of 1950, which means that precedentsof the English courts under the old system still apply.In deciding on Tanesco's challenge to the award, the Tanzanian court will apply the pre-1996 test of whetherthere is "error on the face of the award". Dowans argued that the ICC award in the present case is not susceptibleto such a challenge because the Tanzanian court must follow the 1933 decision of the House of Lords in F RAbsalom v Great Western (London) Garden Village Society That case established an exception to the "error on
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the face" test where the arbitrators have been asked to resolve specific points of law. Tanesco denied thatDowans could benefit from that exception in the present case. Burton J said it was not for him to resolve thisissue and left it for the Tanzanian courts to decide.Counsel to Tanesco,

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Gautam Bhattacharyya of Reed Smith in London, says the case "raised a number ofimportant legal issues" and that both sides "were successful on some of their arguments before the court."Stephenson Harwood partner Kamal Shah, counsel to Dowans, says it is "a well-reasoned judgment" with whichhis client is pleased. "It puts immediate pressure on Tanesco to provide security as matters presently stand."Tanzania originally awarded the power plant contract in 2006 to a US company, Richmond DevelopmentCorporation, when the country was in the grip of a drought-triggered energy crisis. Richmond reassigned itscontract to Dowans a few months later, but a parliamentary committee subsequently found that Richmond'soriginal contract had been awarded illegally.

Tanesco terminated the contract with Dowans and went to the courtsto block the company's attempt to sell gas turbines it had acquired from Richmond to third parties.Richmond and Dowans brought separate ICC claims against Tanesco in 2008. In November the tribunal hearingDowans's case - consisting of US arbitrator Gerald Aksen, Uganda's Swithin Munyantwali and Sir JonathanParker of Serle Court in London - held Tanesco liable for breach of contract and unpaid capacity charges, andordered it to pay damages and interest, along with a contribution to Dowans's legal costs. Meanwhile a differenttribunal hearing Richmond's case rejected a claim against Tanesco for repudiatory breach of contract on theground that the company had assigned all its contract rights to Dowans, but partially upheld a defamation claim.

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Dowans Holdings SA (Costa Rica) and Dowans Tanzania Limited (Dowans) v Tanzania Electric Supply Company(Tanesco)In the High Court of Justice​

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Mr Justice Burton​

Counsel to Dowans Holdings and Dowans Tanzania​

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Ricky Diwan and David Davies of Essex Court Chambers in London​

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Stephenson HarwoodPartner Kamal Shah and associate Leonie Parkin in LondonCounsel to Tanzania Electric Supply Co​

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Antony White QC of Matrix Chambers in London​

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Reed SmithPartner Gautam Bhattacharyya and associate George Hoare in London​

In the ICC arbitration​

Tribunal​

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Gerald Aksen (US) (chair)​

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Swithin Munyantwali (Uganda)​

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Sir Jonathan Parker (UK)​

Counsel to Dowans Holdings and Dowans Tanzania​

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Roderick Cordara QC and Ricky Diwan of Essex Court Chambers in London​

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Africa Legal NetworkJohn MilesCounsel to Tanesco​

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Antony White QC of Matrix Chambers in London​

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Reed Smith LLPPartner Gautam Bhattacharyya in London​

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Rex AttorneysPartners Eve Hawa Sinare and Alex Nguluma in Dar es Salaam​

 

[Kamende]

Another mischievous huddle

 

[Mbopo]

This is the same case in which a member of CCM's National Executive Committee and an MP provided an expert opinion that was intended to afflict misery to the very Government he is serving. And then the elites fiercely defend Chenge with all what he is doing!

 

[ubun2]

Tanzanians should be outraged at this! Where is this money going to come from??? The BOT??? & who are the persons that will eventually benefit from this???-this money will have to come from the taxpayers own pockets or the donor aid money. Such a shame!!!