Tanzania “anti-ICSID” injunction

Global Publication October 2014

An injunction by the High Court of Tanzania may have breached the ICSID Convention. If it has done so, an action by China, another signatory, may result and there may be adverse effects on inbound investment in Tanzania. We review the case and examine whether any breach occurred.

In April 2014 the High Court of Tanzania granted an injunction preventing the enforcement of an ICSID decision, leading commentators to declare Tanzania in breach of the ICSID Convention, which it signed in 1992.

The ICSID decision concerned a power purchase agreement (PPA) between Independent Power Tanzania Limited (IPTL) and the state-owned electricity supply company Tanesco. Standard Chartered Bank (Hong Kong) Limited (SCBHK) successfully claimed that IPTL had assigned its rights under the power purchase agreement to SCBHK as security for a loan, and that because IPTL was in default, SCBHK was entitled to PPA payments due from Tanesco. The ICSID decision related both to jurisdiction and merits, although in the latter case it made no decision as to quantum and costs.

After the ICSID decision, IPTL, together with its parent, alleged that SCBHK had falsely misrepresented itself as a creditor and Tanesco successfully applied for an injunction from the Tanzanian High Court ordering parties to refrain from ‘enforcing, complying with or operationalising’ the ICSID decision pending the outcome of the misrepresentation case.

Declarations of Tanzania’s breach may be premature for two reasons. First, the provisional nature of the ICSID decision suggests that the tribunal has only issued an interim decision, distinguishable from an ‘award’ as defined under the Convention. While an award is directly binding and enforceable on signatories, nothing in the Convention gives interim decisions the same effect. Second, even if the ICSID decision is taken to constitute an award, Article 54 of the Convention seems to distinguish between ‘non-pecuniary’ and ‘pecuniary’ obligations imposed by that award. Because the ICSID decision did not impose obligations relating to monetary matters, arguably no enforcement obligations yet accrue to Tanzania.

China, as a signatory to the Convention, could bring an action at the International Court of Justice on behalf of Hong Kong if it is unable to negotiate a solution with Tanzania.

If it is decided that Tanzania has breached the Convention, adverse effects on investment into Tanzania will follow. Tanzanian reports have framed the ICSID decision as a foreign imposition on local policy and populace, echoing concerns emanating from South Africa and Indonesia.

Recent publications

Subscribe and stay up to date with the latest legal news, information and events...