The International Centre for Settlement of Investment Disputes (ICSID) ordered Tanzania’s Government to pay Standard Chartered Bank Hong Kong $185.4 million (KSh19 billion) for breach of contract. According to the ruling, a Tanzania power producer violated an agreement by failing to avail security for a loan with the bank.
“In the Tribunal’s view, these are discriminatory actions which materially and adversely affected the enjoyment of the rights and interests of SCB HK and IPTL and were thereby in breach of Article 16.1 of the Implementation Agreement,” the tribunal stated.
In 1995, IPTL signed a contract with Tanesco to supply 100MW through a plant on the outskirt of Daresalaam. Consequently, the company raised money from various creditors, which it sought to pay using proceeds from the sale of electricity. Later, Standard Charted Bank of Hong Kong acquired the loan.
Standard chartered filed the case with the ICSID in 2015, seeking a settlement of $ 352.2 million.
Not Our Debt, Says Government of Tanzania
The government of Tanzania denied responsibility, citing that it was not willing to pay the damages. A Reuters article quoted the government spokesperson denying the government’s liability in the case.
“Neither the government nor (state power company) TANESCO, have a legal liability in these cases,” Tanzania government spokesman Hassan Abbasi said.
Additionally, the Country’s attorney general explained that the government only plays a supervisory role in the repayment of the loan.
“When the award says that the Tanzanian government should pay Standard Chartered Bank, it meant the government should supervise IPTL to make the payment,” Adelardus Kilangi told Reuters.
Therefore, IPTL and not the Government has to pay the settlement.