Tanzania loses appeal, now Tanesco to pay $148m

Saturday September 1 2018

Tanesco building

The Tanzania Electric Supply Company (Tanesco) headquarters, Dar es Salaam. PHOTO | NMG 

By ALLAN OLINGO
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Tanzanian will fork out $148.4 million after it lost an appeal against a settlement made in favour of Standard Chartered Bank for a breach of power contract by its energy utility, Tanzania Electric Supply Company (Tanesco).

Washington-based International Centre for Settlement of Investment Disputes made the order in a case that began in 2001 concerning a purchase agreement in May 1995 between Tanesco and Independent Power Tanzania Ltd, whose rights were later taken over by Standard Chartered four years ago.

The agreement required IPTL to supply Tanesco with 100MW before the company was placed in liquidation in December 2008 following ownership disputes between its shareholders.

Tanesco, in its appeal, maintained that it paid IPTL for the power supplied, while Standard Chartered argued that it should have been paid instead.

The power firm will now be required to pay the bank interest at three-month London interbank offered rate plus four per cent from September 30, 2015 until the date of the award. Interest is expected to accrue until the entire payment is received by the bank.

The court, presided over by Claus von Wobeser, rejected several grounds submitted by Tanesco seeking an annulment of the award, upholding a 2016 decision by Ronald McRae, president of the tribunal, which ordered that Tanesco pay the bank $148.4 million.

The hearing on the annulment took place in London in November 2017, and Tanesco submitted its costs in February 2018. Documents show that the utility firm has already paid more than $600,000 for the tribunal costs, with the latest payment of $200,000 made in June this year.

In March 2017, another firm, US-based Symbion Power took to the International Court of Arbitration in Paris seeking $561 million settlement for breach of contract, after efforts to resolve the dispute about the validity of the 15-year power purchase agreement for more than a year failed. The case is still ongoing.

For the Tanesco case, Tanzania will also pay more than $5.3 million in legal costs, including $4.7 million for its team of lawyers and a further $600,000 as cost for the committee seating.

The legal team comprised two Tanzanian law firms R.K. Rweyongeza & Co Advocate, and Crax Law Partners. London-based Clyde & Co was also part of the legal team.

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