Saturday, March 13, 2010

How Tanzanian Justice Fails to See the Wood for Trees

The East African Development Bank’s search for justice and self-preservation in the courtrooms of Tanzania has been as trivialised as it has been convoluted. Throughout the litigation, the courts have systematically focused on technicalities and blocked any attempt to interrogate the merits of the $61 million arbitral award that threatens the viability of the bank.

Between March 1990 and June 1992, the Bank provided a total of $2.2 million in loans to Blueline Enterprises Ltd, a Tanzanian transporter, for the purchase of to 10 heavy-duty trucks and other equipment. However, in November 1995, the Bank placed the company under receivership for non-payment. Following a successful arbitration process the Bank’s initial victory was overturned by the courts, which ordered new arbitration proceedings. The award, which some have termed “obscene,” stemmed from this latter process.

The EADB’s numerous attempts to have its day in court have been bogged down in legal minutiae. Not once has it had the opportunity to tell its side of the story. And as it stares bankruptcy in the face, what has been forgotten is that it was the Bank that actually lent money to Blueline, which with interest, would now amount to over $40 million. And since the Bank belongs to the governments of the EAC, it is their citizens who stand to lose this sum.

Below is a timeline of the case:

March 7, 1990: East African Development Bank advances a loan of approximately $1.86 million to Blueline Enterprises Ltd of Tanzania to purchase 10 heavy duty trucks and other equipment.

June 16, 1992: The EADB gives Blueline a supplemental loan of $340,000.

November 24, 1995: The Bank appoints Coopers and Lybrand (now PricewaterhouseCoopers) as Receiver and Manager of Blueline

December 4, 1995: Blueline procures an injunction from the High Court restraining the Bank from permitting its Receiver and Manager to “take over and run” Blueline’s business.

February 14, 2001: The Bank and Blueline file a Compromise Order appointing Hon. Francis L. Nyalali (the former Chief Justice of Tanzania) Sole Arbitrator and A. T. H. Mwakyusa as his substitute.

September 30, 2002: Hon. Mr Nyalali finds in favour of Bank and dismisses Blueline’s claim on the basis that it lacked legal merit. Hon. Nyalali dies shortly thereafter and Blueline files a petition challenging the award.

July 30, 2003: Mr Justice Luanda sets aside Hon. Mr Nyalali’s award and orders the Arbitration proceedings to commence afresh before Mr Mwakyusa.

The bank appeals on the grounds that Mr Mwakyusa could only have been appointed if Mr Nyalali had not acted as arbitrator.

November 21, 2003: The Court of Appeal of Tanzania strikes out the appeal because the Bank has failed to obtain Leave to Appeal.

To rectify the error, the Bank files an Application in the High Court seeking an extension of time to file a new Notice of Appeal and an extension of time to seek Leave to Appeal to the Court of Appeal .

July 9, 2004: Mr Justice Mihayo of the High Court refuses to grant the extensions of time.

Following commencement of arbitration before Mr Mwakyusa, the Bank applies afresh to the High Court for the removal of Mr Mwakyusa as the Sole Arbitrator and for the Arbitration proceedings to be stayed pending determination of its petition.

May 11, 2004: The Bank’s Application is dismissed by the Hon. Justice Massati because it has not annexed the Loan Agreement containing the Arbitration clause to the Application.

The Bank files a Notice of its intention to appeal to the Court of Appeal as well as an Application for Leave to Appeal. Simultaneously the Bank files an application to prevent the Arbitration proceedings from continuing pending the determination of its Appeal. The Court of Appeal strikes out the latter application on the ground that the order of the High Court was not capable of execution, and therefore a stay order relating to it could not be issued.

The Bank subsequently appealed to the Arbitrator to remove himself, but he declined to do so.
In light of the dismissal of the application for a stay order, the Bank abandons its intended Appeal against M. Justice Massati’s decision and as a result, Mr Mwakyusa, commences the Arbitration proceedings.

August 31, 2005: Mr Mwakyusa delivers his award awarding Blueline $61,386,853 in relation to Blueline’s claims against the Bank. No award is made in respect of the Bank’s claim for the outstanding loan.

The Bank files a Petition and Application in the High Court seeking to set aside the award; a declaration that Arbitration proceedings have failed and consequently the dispute should be determined by a Court of law; and a stay of execution of the arbitral award pending the final determination of the Bank’s petition.

Mr Justice Shangwa sustains Blueline’s objections that the Bank has omitted to annex a certified copy of the arbitral award even though the original was, at that time, before the High Court, and particularly, before the judge handling the matter, having been sent there directly by the arbitrator.

The Bank files a further Application to the High Court for extension of time in order to file another Petition to set aside the Arbitral award. However on the day fixed for the hearing of the said Application, the Bank withdraws the application upon advice of Counsel that the time limit has not lapsed after all. This advice is based on a previous decision made by the Court of Appeal that implies that the petition, being a “suit,” could be filed up to six years from the date of the award.

Immediately thereafter, the bank files a new petition in the High Court.

Blueline raise a preliminary objection that the petition is time-barred and should be struck out, relying on a 2002 Court of Appeal decision that a petition to set aside an award is an “application” (and not a “suit”) and was therefore still subject to the 60 days limitation.

June 22, 2007: Justice Mandia delivers his ruling noting that there are two conflicting decisions of the Court of Appeal on the matter. He, however, decides to rely upon the earlier decision, that a petition is an “application” and declares it time-barred.

July 5, 2007: EADB files a Notice of Appeal against the ruling of the Court together with an application for Leave to Appeal.

April 11, 2008: The Bank’s application for leave to appeal Justice Mandia’s decision is struck out with costs.

December 17, 2007: EADB files an application seeking an order from the court for extending the limitation period on the grounds that there is reasonable cause for the court to exercise its discretion.

March 26, 2009: Justice Sheikh of the High Court dismisses the Bank’s application because EADB had previously filed and withdrawn a similar application for the same order (for extension of time) without seeking liberty to reinstitute it.

May 12, 2009:Justice Shangwa dismisses the Bank’s application to vacate the garnishee order by way of which Blueline sought execution of the arbitral award declaring that the Bank’s immunity from attachment of its assets did not extend to its cash.

September 22, 2009: Leave is granted to appeal against Justice Shangwa’s ruling. Subsequently, Blueline consents to the grant of leave by the High Court for the appeal against the decision of Justice Sheikh.

March 8, 2010: A three-judge panel dismisses the Bank’s appeal on the grounds that since Justice Mandia had dismissed the petition previously brought by the Bank, it was not open to the Bank to go back before the same Court with an application for enlargement of time.

March 11, 2010: The hearing on the appeal against the decision by Justice Shangwa relating to the Bank’s immunity is adjourned after one of the judges recuses himself.

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