Top officials mum on Tanesco ruling

Dar es Salaam. Government officials have remained mum over a recent decision by the International Centre for Settlement of Investment Disputes (ICSID) ad hoc committee to uphold a $148.4 million (about Sh336 billion) award won by Standard Chartered Bank Hong Kong against Tanzania Electric Supply Company (Tanesco).

On August 2, 2018 the court – acting under President Claus von Wobeser – rejected the grounds submitted by Tanesco seeking annulment of the award.

The decision, which was conveyed to the parties on August 22, 2018, upheld an initial decision requiring Tanesco to pay the Hong Kong arm of Standard Chartered Bank a staggering $148.4 million owed under a power purchase agreement.

Attempts to get the views of the Attorney General (AG) on the matter – and the next course of action by the government – drew a blank. Instead, the AG, Dr Adelardus Kilangi, directed The Citizen to the Solicitor General, Dr Clement Mashamba.

Likewise, Dr Mashamba said it was the AG who has the mandate to issue an official statement on such matters.

“We report to the AG... It’s the AG’s job to talk to you people,” Dr Mashamba responded.

The Office of the Solicitor General was created under Government Notice No. 48 of 2018 to oversee civil litigation and arbitration proceedings.

Tanesco communications manager Leila Muhaji told The Citizen that all questions regarding the case will be responded to “at the right time.”

A High Court advocate, Mr John Seka, said he foresaw the recent ruling coming.

Associating Tanesco’s defeat at ICSID with the hyper-opaque nature of contracts that the government enters into with the private sector, Mr Seka said “when things are done in the dark, it’s difficult to know exactly what was agreed upon.”

Asked what happens next, Mr Seka said that, in the short run, the government should pay the award as directed by ICSID. But, in the long run, it needs “to appreciate the significance of transparency” in its dealings with foreign entities.

But Mr Zitto Kabwe, the Member of Parliament for Kigoma Urban, says the government does not have to pay the money because it has no contractual obligations whatsoever with the Standard Chartered Bank (Hong Kong) Limited. Mr Kabwe argues that the legal wrangles were supposed to be between SCB HK and IPTL and not with the government.

“I said it in 2016 and I say it again, the government does not have to pay the billions awarded to Standard Chartered Hong Kong,” Mr Kabwe told The Citizen yesterday.

He added: “The main issue here is deed of indemnity that Harbinder Singh Seth signed before taking escrow money. Why is the government hesitating to invoke this indemnity?”

Seth is the owner of PAP, a firm that has majority shareholding in IPTL.

In 2016 Mr Kabwe had said that it was PAP that was supposed to pay Standard Chartered HK. Mr Kabwe was the chairman of the Public Accounts Committee in 2014 when the issue of the illegal withdraw of funds from the Tegeta Escrow account landed in Parliament.

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.

The 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.