Tanzania to pay security over ICC award - News - Arbitration News, Features and Revie...

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Tanzania to pay security over ICC award

SEBASTIAN PERRY MONDAY, 01 AUGUST 2011

The High Court in London has agreed to adjourn enforcement proceedings against Tanzanian state power utility Tanesco until November - but only if it provides US$5 million in security.

Costa Rican entity Dowans Holdings and a Tanzanian affiliate are seeking to enforce an ICC award worth more than US$65 million, issued last year by a tribunal seated in Dar es Salaam. Tanesco asked the English court to adjourn the proceedings pending the outcome of a set-aside action in the Tanzanian courts. The ICC case arose after Tanzania cancelled Dowans' contract to build a temporary gas-turbine power plant in Dar es Salaam, alleging that government officials had improperly influenced the bidding process. The affair continues to be a source of political controversy in Tanzania, having prompted the resignation of prime minister Edward Lowassa and two other ministers in 2008. The set-aside proceedings in Dar es Salaam have also seen third-party petitions from parliamentarians, environmental groups and a journalist, all protesting against the award's recognition. In his ruling on 27 July, Mr Justice Burton said Tanesco's prospects of setting aside the award in Tanzania were not "fanciful", even though it faced "substantial hurdles". But he concluded there was a "real risk" that any Tanzanian state assets in Europe that could be subject to attachment might be removed during the five-month adjournment period. The judge was asked to consider the meaning of a "binding" award under the English Arbitration Act 1996 and the New York Convention. Tanesco argued that the pending petitions to set the award aside in the jurisdiction of the arbitral seat meant that the award was "not yet binding" and that recognition should therefore be refused in the UK. Antony White QC of Matrix Chambers, representing Tanesco, argued that the existence of an "impediment" to enforcement in Tanzania meant the award is "inchoate" and not "ripe" or "ready" to be enforced elsewhere. Burton J rejected this reasoning, noting that it would "offend against" the New York Convention's deliberate removal of the need for a "double exequatur" at the court of the seat and the court of enforcement. He endorsed the "autonomous interpretation" of the term "binding" espoused by Dutch arbitrator Albert Jan van den Berg in his 1981 commentary on the convention. The judge also observed that the parties had already submitted to the ICC rules, which provide that awards are "binding upon" both sides. The judge said that even if he had concluded that the award was not binding because of the Tanzanian petitions, he would still have discretion under section 103(2) of the 1996 Act to enforce it anyway. He added that the Court of Appeal and Supreme Court rulings in Dallah v Pakistan had made it clear that the English courts retain discretion to enforce an award even where it has been set aside in the home jurisdiction, though they should exercise that discretion "sparingly". In assessing Dowans' prospects of success in having the award recognised in Tanzania, the English court also had to consider English case law from the early 20th century relating to arbitration. Although enacted in 2002, Tanzania's Arbitration Act is modelled on the former English Arbitration Act of 1950, which means that precedents of the English courts under the old system still apply. In deciding on Tanesco's challenge to the award, the Tanzanian court will apply the pre-1996 test of whether there is "error on the face of the award". Dowans argued that the ICC award in the present case is not susceptible to such a challenge because the Tanzanian court must follow the 1933 decision of the House of Lords in F R Absalom v Great Western (London) Garden Village Society. That case established an exception to the "error on

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Tanzania to pay security over ICC award - News - Arbitration News, Features and Revie...

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the face" test where the arbitrators have been asked to resolve specific points of law. Tanesco denied that Dowans could benefit from that exception in the present case. Burton J said it was not for him to resolve this issue and left it for the Tanzanian courts to decide. Counsel to Tanesco, Gautam Bhattacharyya of Reed Smith in London, says the case "raised a number of important legal issues" and that both sides "were successful on some of their arguments before the court." Stephenson Harwood partner Kamal Shah, counsel to Dowans, says it is "a well-reasoned judgment" with which his client is pleased. "It puts immediate pressure on Tanesco to provide security as matters presently stand." Tanzania originally awarded the power plant contract in 2006 to a US company, Richmond Development Corporation, when the country was in the grip of a drought-triggered energy crisis. Richmond reassigned its contract to Dowans a few months later, but a parliamentary committee subsequently found that Richmond's original contract had been awarded illegally. Tanesco terminated the contract with Dowans and went to the courts to block the company's attempt to sell gas turbines it had acquired from Richmond to third parties. Richmond and Dowans brought separate ICC claims against Tanesco in 2008. In November the tribunal hearing Dowans's case - consisting of US arbitrator Gerald Aksen, Uganda's Swithin Munyantwali and Sir Jonathan Parker of Serle Court in London - held Tanesco liable for breach of contract and unpaid capacity charges, and ordered it to pay damages and interest, along with a contribution to Dowans's legal costs. Meanwhile a different tribunal hearing Richmond's case rejected a claim against Tanesco for repudiatory breach of contract on the ground that the company had assigned all its contract rights to Dowans, but partially upheld a defamation claim. Dowans Holdings SA (Costa Rica) and Dowans Tanzania Limited (Dowans) v Tanzania Electric Supply Company (Tanesco) In the High Court of Justice Mr Justice Burton Counsel to Dowans Holdings and Dowans Tanzania Ricky Diwan and David Davies of Essex Court Chambers in London Stephenson Harwood Partner Kamal Shah and associate Leonie Parkin in London Counsel to Tanzania Electric Supply Co Antony White QC of Matrix Chambers in London Reed Smith Partner Gautam Bhattacharyya and associate George Hoare in London In the ICC arbitration Tribunal Gerald Aksen (US) (chair) Swithin Munyantwali (Uganda) Sir Jonathan Parker (UK) Counsel to Dowans Holdings and Dowans Tanzania Roderick Cordara QC and Ricky Diwan of Essex Court Chambers in London Africa Legal Network John Miles Counsel to Tanesco Antony White QC of Matrix Chambers in London Reed Smith LLP Partner Gautam Bhattacharyya in London Rex Attorneys Partners Eve Hawa Sinare and Alex Nguluma in Dar es Salaam

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