Tanzania: High Court Puts On Hold Guarantees Payment Until Arbitration

THE High Court Commercial Division has put on hold an advance payment guarantee worth 1.2bn/- and a bank performance guarantee worth 409.9m/- pending arbitration proceedings.

The arbitration at the Tanzania Institute of Arbitrators (TIArb) involves Bharya Engineering & Contracting Company Limited (BECCO) against Arab Contractors Tanzania Ltd and Elsewedy Electric Tanzania Ltd which operate under joint venture Company as JVACEE.

In his ruling, Judge Deo Nangela of the High Court Commercial Division ruled in favor of BECCO which sought interim orders pending determination of the dispute by arbitration proceedings at the TIArb. The BECCO has filed a case before the arbitrators seeking for settlement of subcontract agreement dispute with JVACEE.

Whereas the BECCO was represented by advocate Norbert Mlwale, the JVACEE was represented by advocate Esther Peter at the High Court Commercial Division. JVACEE had subcontracted BECCO to construct a 77-kilometer road from Kibiti to the construction site of the Julius Nyerere Hydropower Project (JNHP).

However, the two parties have since November 2020 entered into a pay dispute after the JVACEE claimed that the work was underperformed, thus wanting payment of guarantees from the Stanbic Bank Tanzania. With that regard, BECCO decided to seek a court injunction to stop the bank from paying JVACEE earlier deposited advance payment guarantee worth 1.2bn/- and bank performance guarantee worth 409.9m/- until their subcontract dispute is resolved at the High Court Commercial Division.

However, BECCO later on shifted the issue of subcontract dispute to the TIArb while remaining insistent that the issue of guarantees continue being under the High Court.

“Having heard the parties and since they are now engaged in arbitration proceedings, I will definitely agree with Mr Mlwale that a stay of the consolidated application with an order to maintain status quo will do justice to the parties.

“I hold so because, as correctly argued by Mr Mlwale, whereas the subcontract agreement is between the Applicant (BECCO) and the 1st and 2nd respondents (JVACEE), the guarantees are between trio parties, namely the Applicant, the Bank and the Respondents,” Judge Nangela stated.

He said while the arbitrator will be dealing with the applicant and the 1st and 2nd respondents, the 3rd respondent (the bank) will be left out as he is not privy to the arbitration.


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