What lessons from EADB’s legal drama in Dar?

On the last day of August 2005, a Tanzanian arbitrator awarded a Tanzanian transport company known as Blueline Enterprises Ltd damages in the sum of $61,386,853 against the East African Development Bank.

The basis of the company’s claim included alleged delay by the bank in disbursing the loan and insuring the imported vehicles on one hand and alleged loss occasioned by the appointment by the Bank of a receiver and manager in November 1995 pursuant to the loan agreements on the other hand.

The award was registered in the High Court of Tanzania as a judgment of the court, thereby triggering a protracted legal battle between the Bank and the transport company that is about to reach its climax.

The decade-long legal dispute between the Bank and Blueline will come to a controversial end this Monday, March 8, when the Court of Appeal in Dar es Salaam will hear an appeal by the Bank against the ruling delivered by Justice Shangwa of the Tanzania High Court on May 12, 2009.

In the ruling, the judge held that while the Bank’s “property and other assets” are immune from attachment under Article 45 of the Treaty & Charter of the Bank as amended by Tanzania’s Finance Act No. 13 of 2005, money in a bank account in the name of the Bank does not comprise such property or asset and that money was “incapable of being immunised.”

Accordingly, the judge charged monies in a bank account in the name of the Bank with repayment of Blueline’s award that now stands at $104 million.

Among other issues, the Bank argues in its appeal that the High Court decision is contrary to law and violates well-established rules of international law.

As The EastAfrican in its issue of July 20-26, 2009 reported, the very survival of the Bank hangs in the balance depending on how the Court of Appeal decides the appeal, because, “EADB may not have assets of its own worth $100 million” and already “Rwanda, Kenya, Uganda and Tanzania have said that they will not be shelling out their taxpayers’ money to pay a private businessman.”

The outcome of the Bank’s appeal will have short and long term effects on the litigants themselves, the business community and probably diplomatic relations among the partner states of the East African Community.

To Blueline, the failure of the appeal could result in incredible wealth given that it first moved to court in December, 1995 to resist appointment of a receiver and manager by the Bank over non-payment of $13,754,962 but at the end of the legal process it would be leaving the halls of justice $104 million richer.

For the Bank, losing the appeal is likely to bring its operations to a crashing halt, with many development projects financed by the Bank collapsing, not to mention the loss of jobs in the Bank itself and among the investors it finances.

What if the Bank’s appeal succeeds?

To Blueline, the success of the Bank’s appeal will delay its efforts to recover the damages awarded to it on August 31, 2005 by A.T.H. Wakyusa, a Tanzanian architect who was appointed as arbitrator by the High Court, because so far the endeavours of the Bank to challenge the award have been futile, and the allowing of its appeal could well amount to no more than a temporary reprieve, depending on the outcome of another appeal currently awaiting judgment.

This other appeal originates from a ruling delivered by Justice R. Sheikh on March 26, 2009 in which an application by the Bank seeking the High Court to extend the limitation period for the filing of an application to set aside the arbitration award in favour of Blueline was struck out.

Appeals