Q&A – 3 October 2016

ICSID trying to colonialize Tanzania

A new era of colonialization has begun by the supreme powers in Tanzania with this new ICSID award against Tanesco. Do we need to comply with such international awards? Can we challenge it? How much should we as Tanzanians be worried about this award? Can we refuse to pay?
CC, Dar

Despite having a long list of other outstanding questions which have come prior to the above questions which we have consolidated, our team decided to take this up as it is a burning issue in the media.

To begin with ICSID stands for the International Centre for Settlement of International Disputes. It is one of the five organizations of the World Bank Group, along with the International Bank for Reconstruction and Development (IBRD), the International Development Association (IDA), the International Finance Corporation (IFC), and the Multilateral Investment Guarantee Agency (MIGA).

The award against Tanesco is as a result of an International Bank having opened arbitration proceedings at ICSID. These proceedings started some years ago and have now been concluded with the decision, called an award, being made against Tanesco to the tune of nearly USD 150M. The arbitration was conducted by three arbitrators, one appointed by each of the parties and the third arbitrator appointed by the two appointed arbitrators. Although we have not seen the award, it seems that all the three arbitrators, including the one appointed by Tanesco, ruled in favour of the international bank. This is a standard dispute resolution mechanism and you cannot under any circumstances call it a new era of colonialization.

You must remember that as part of the global community we do not live in isolation and are a member state of the ICSID. An award of a Tribunal is binding on all parties to the proceeding and each party must comply with it pursuant to its terms.  If a party fails to comply with the award, the other party can seek to have the pecuniary obligations recognized and enforced in the courts of any ICSID Member State as though it were a final judgment of that State’s courts. In short, unless the award is challenged with the limited challenge options we discuss below, Tanesco will have no choice but to pay up such funds, which answers your second question on whether we need to comply with it or not. As Tanzanians, considering that this is an exorbitant amount, we should indeed be worried if our challenge fails, as party to the ICSID convention we will be obligated to pay.

Your question on challenging the award is very interesting. The answer is yes but the grounds of challenge are quite limited and the chances of succeeding on challenge depend on the grounds raised for such a challenge. The media reports state that all three, including the Tanesco’s own appointed arbitrator, ruled against Tanesco, hence to change this decision is not by any standards easy, however not impossible.

The following post award remedies are available:

Supplementary Decision or Rectification – If a party believes that the Tribunal has omitted to decide a question in the award, it may request a supplementary decision by the same Tribunal. A party may also request a decision to rectify a clerical, arithmetical or similar error. This must be applied for within 45 days of the award and doesn’t entail a hearing again but rather written submissions by both the parties. We believe for Tanesco this likely will not apply.

Interpretation – If there is a dispute between the parties as to the scope or meaning of the Tribunal’s award, either party may request interpretation of the award. There is no time limit for such filing and we believe that this is not what Tanesco will be intending to do.

Revision – A party can apply for revision of the award if it discovers a new fact that could decisively affect that award. The new fact must have been unknown to the Tribunal and the applicant when the award was rendered and the applicant’s ignorance of the fact cannot be due to negligence. This revision application must be made within 90 days after the discovery of the relevant new fact but within three years after the award was rendered. This revision entails the arbitrators reconvening, and the parties filing written submissions followed by oral presentation. This is very likely an area that Tanesco will be exploring based on its lawyers reading of the award. Tanesco will also likely make an application for stay of enforcement of the award pending the arbitrators revision decision, which may take another 12 to 18 months depending on the basis of the revision. Again, we have not seen the award and are unable to comment on the merits or demerits of the revision. What we can however say is that the statistics available online on revision disclose that more revisions fail then succeed as it is the same arbitrator panel that meets to merely reconsider matters that form part of the revision grounds. However each case has its own strengths and weaknesses and without having read the award it is hard to generalize or comment on the chances of succeeding.

Annulment – this is an exceptional recourse to safeguard against the violation of fundamental legal principles relating to the process. A party may apply for full or partial annulment of an award on the basis that the Tribunal was not properly constituted, it went beyond its powers and was corrupted, did not follow rules of procedure or the award does not state proper reasons.

Finally, you must remember that the ICSID award is binding on all partner states and failure to pay amounts under such awards can lead to serious downgrading of the country’s credit risk rating in addition to driving away international investors. Very few countries have ever defaulted, although we are aware that some South American country’s actually withdrew from the ICSID.