Banque Populaire du Rwanda (BPR) is locked in a Rwf 600 million lawsuit with Nyamasheke district, where the former is challenging the legal grounds on which lower courts based to give them a hefty fine.
The fine arises from a contractor who failed to deliver on a project for the district for which the former had a performance guarantee from the bank.
According to the file, the issues started in 2008 when BPR gave a performance guarantee worth Rwf19,935,235 to Hategeka Consult & TP, a company contracted to construct school facilities in Nyamasheke.
In addition, the bank also paid the company an advance payment of Rwf39,870,470 (20% of the value of the tender which was Rwf199,352,352).
However, the company did not honor the contract with the district, as it abandoned the unfinished work.
As a result, the district terminated the contract in 2010 and asked BPR to refund the money given to the Hategeka Consult & TP, but the bank was apparently not responsive.
Consequently, the district dragged BPR to courts in 2019, and here, the Commercial Court ordered the bank to not only refund the money, but also pay compensation for having delayed the refund.
The cumulative compensation came to Rwf639,923,932, since the court based its decision on article 78 of the 2007 Public Procurement Law which stipulates that in case the contract is not fully or well executed, the Bank or authorized financial institution shall be obliged to give to the procuring entity all the amount of the performance security upon claim by the latter within ten working days from the receipt of such a claim.
And in case of delays, “The Bank or authorized financial institution shall also be obliged to pay an additional interest of one percent (1%) for every day of payment delay.”
In this case, BPR was ordered to pay an additional interest charge of 1 percent accumulated for 3,330 days (approximately nine and a half years).
From the time that the judgment was issued, the two parties have tussled it out in different courts including the Commercial High Court and the Court of Appeal.
Now the case is before the Supreme Court, where BPR is challenging the laws that were used in awarding them the fines.
Addressing Supreme Court judges on Monday, September 12, Joseph Mugire, the Legal and Collateral Manager at BPR said the public procurement law used to penalize the bank contradicts article 146 of the law governing contracts which stipulates that:
“Damages for breach of contract may be provided for in the contract but at a reasonable amount based on the actual or potential loss in case of breach of contract or in case of difficulty in providing evidence of the loss.”
Here, he told the court that the fines slapped against the ban were “excessive.”
He requested court to refer to the constitution – in its Article 95 which sets in place the hierarchy of laws.
“In the hierarchy of laws, the Constitution reigns supreme over any other laws and it should be the one to be considered,” he said.
In his submissions to court, Fiate Cyubahiro, the lawyer representing Nyamasheke said article 78 of the 2007 Public Procurement Law does not contradict the constitution, and even if it was, the argument concerning it should be presented to court as a petition on its own, not as part of an ongoing case.
The Supreme Court will pronounce its judgment in regards to the case on the 7th of next month.