Tanzania has failed to shake off the ghost surrounding its dispute with Independent Power Tanzania Ltd (IPTL) — this time around a bank has taken the country’s electricity supplier to an international court for arbitration.

The Standard Chartered Bank (Hong Kong) which is said to have financed the controversy-ridden deal has decided to take Tanzania Electric Supply Company (Tanesco) to the International Centre for Settlement of Investment Disputes (ICSID).

According to a source at Tanesco, “They (Bank) want Tanesco to pay service charges which they claim haven’t been paid to IPTL (the bank’s borrower), for the latter to service the loan from Standard Chartered Bank-Hong Kong.”

However, a government source told The EastAfrican that it (the government) was aware of the case.
“They (Standard Chartered Bank-Hong Kong) have a very weak case, if at all there is one, against us and we are sure of winning like we did the last time they took us for arbitration,” said the source.

One of the three members of the arbitration tribunal examining the dispute between Tanesco and IPTL has had to resign following pressure from Tanzania.

Charles Brower, who was also part of the original three-man bench that heard the first arbitration in 1998, was recently forced to withdraw form the Tanesco case.

According to the International Centre for Settlement of Investment Disputes, there are two cases from Tanzania involving Standard Chartered Bank against the United Republic of Tanzania (ICSID Case No. ARB /10/12) and one pitting Standard Chartered Bank (Hong Kong) against Tanzania Electric supply Company (ICSID Case No.ARB/10/20).

In the first case, which was registered on June 11, the tribunal was constituted on September 27 and the case involves a power purchase agreement (PPA).

The tribunal for this case is made up of William W. Park as president, with two arbitrators Burton Legum and Michael C. Pryles.

The second case pits Standard Chartered Bank (Hong Kong) against the United Republic of Tanzania and also involves a power purchase agreement. The case was registered on October 1 and the tribunal is yet to be constituted.

The controversy over the IPTL project goes back to 1998 when the independent power producer and Tanesco first appeared before the ICSID.

This will be the second arbitration for Tanesco and it is raising fears that the firm may have to wind up if it fails to honour its creditors.

In 2001, Tanesco was required to pay IPTL $32 million as accumulated capacity charge payment which it alleged had been due since deemed commercial operation of the facility on September 1998.

This arbitration arises out of a power purchase agreement dated “as of’ 26 May 1995 between Tanesco and IPTL, whereby IPTL agreed to design, construct, own, operate and maintain an electricity generating facility with a nominal net capacity of 100 megawatts to operate the facility and deliver electricity generated thereby to Tanesco for an initial period of 20 years, subject to extension.

On October 18, 1999 the tribunal convened to hear both parties’ applications for provisional measures. In the meantime, on July 8, 1999, the order of the High Court of Tanzania had been stayed by the Court of Appeal of Tanzania, pending determination of the appeal thereof, and the parties then requested the tribunal to defer consideration of Tanesco’s request for provisional measures directed at the Tanzanian court proceedings.