TRC, Turkish firm in dispute over locomotives, coaches

Dar es Salaam. A contentious tussle over the procurement of used and refurbished railway machinery has erupted between Tanzania Railways Corporation (TRC) and Eurowagon Demiryolu Ticaret ve Limited (EW).

The dispute centres on the acquisition of two electric locomotives and 30 passenger coaches crucial for the testing and commissioning of the Standard Gauge Railway (SGR) project in Tanzania.

Documents obtained by The Citizen reveal a tense standoff between the two entities, with both sides expressing concerns and issuing ultimatums.

Eurowagon Demiryolu Ticaret ve Ltd., in a legal letter from ADG Legal, its representative, warned of potential actions if an agreement is not reached by the end of January 2024.

“We will be forced to evaluate other offers regarding the train coaches if an agreement cannot be reached,” the letter stated. TRC senior officials could not be reached for fresh views on the matter on Tuesday as the mobile phone of the Chief Executive Officer, Mr Masanja Kadogosa, could not go through.

But in response dated 13th November, 2023, TRC acting Director General Amina Lumuli acknowledged receipt and conveyed the impracticability of opening a Letter of Credit (LC) at the current stage of discussion.

Also known as credit letter, the LC is a letter from a bank guaranteeing that a buyer’s payment to a seller will be received on time and for the correct amount.

Due to the nature of international dealings, including factors such as distance, differing laws in each country, and difficulty in knowing each party personally, the use of letters of credit has become a very important aspect of international trade.

The response by TRC reads: “Please be informed that after careful study of the reviewed minutes, TRC noted the same imposes, among other conditions, to open a Letter of Credit (LC) to satisfy your claim. It is impracticable at this stage of discussion for TRC to open the LC to satisfy your Claim which is the subject matter of the discussion and parties to the discussion are yet to reach a consensus”.

However, TRC requested that Eurowagon Demiryolu Ticaret ve Ltd to reconsider communication with Deutsche Bhan (DB) to release the 17 coaches still under DB’s custody.

TRC proposed that the release of the coaches would facilitate refurbishment while discussions on amicable resolutions were ongoing.

“The associated parking fees, if any due to DB, may be discussed separately should you agree to honour our request,” Ms Lumuli stated.

The documents also revealed that both parties held meetings on November 12 to address pending issues arising from the contract. The aim was to maintain good relations and mutual interests between Turkey (the SGR contractor) and Tanzania.

The dispute revolves around a contract signed on October 1, 2020, between TRC and Eurowagon Demiryolu Ticaret ve Ltd for the purchase of 30 second-hand passenger train coaches and two electric locomotives, totalling 26.6 million euros.

Despite an initial advance payment by TRC, the situation took a turn when, in February 2022, says Eurowagon Demiryolu Ticaret ve Ltd, TRC terminated the contract after the locomotives and train coaches had been purchased and logistical arrangements made.

The legal letter claims that Eurowagon Demiryolu Ticaret ve Ltd fulfilled 50 percent of the contracted work within a year, despite challenges posed by the Covid-19 pandemic.

However, the contracted company claims that TRC’s termination of the contract in February 2022 has led to ongoing negotiations and an escalation of damages incurred by Eurowagon Demiryolu Ticaret ve Ltd.

The legal document states, “No concrete result has been achieved, and the damage caused to my client by TRC is increasing day by day.” It further warns that if an agreement is not reached by the end of January 2024, Eurowagon Demiryolu Ticaret ve Ltd will have no choice but to evaluate other offers for the train coaches.

The document also emphasises Eurowagon Demiryolu Ticaret ve Ltd’s willingness to support TRC in the repair, overhaul, and transportation processes of the coaches remaining in Germany if a resolution is reached and the agreed-upon compensation is paid.

Despite efforts to find the TRC to explain the nature of the issue by phone, which proved futile, this newspaper managed to get the documents of the TRC’s response to Eurowagon Demiryolu Ticaret ve Ltd.