Upon the request of Tanzania Electric Supply Company Limited (TANESCO or “Respondent”), an electricity supply company designated as an agency of the Republic of Tanzania pursuant to Article 25(1) of the ICSID Convention, on 22 August 2018, an ICSID ad hoc committee issued a decision on annulment of an arbitral award dated 12 September 2016. The dispute was settled in favour of the investor, the Hong Kong subsidiary of Standard Chartered Bank incorporated in the United Kingdom (“Claimant”). TANESCO requested annulment on three grounds listed in Article 52 of the ICSID Convention, which are the arbitral tribunal’s excessive use of power, its serious departure from a fundamental procedural rule and its failure to state the reasons for its ruling. TANESCO grounded its request particularly on the fact that the arbitral tribunal which had issued the above-mentioned award (“the Tribunal”) was the first ICSID tribunal to reconsider a previous decision on jurisdiction and liability. TANESCO held that the decision on jurisdiction and liability was res judicata and its reconsideration was not justified under the ICSID Convention.
The events at the root of the dispute go back to 1995 and concern a power purchase agreement between TANESCO and Independent Power Tanzania Limited (IPTL). A dispute arose three years later and an ICSID arbitral tribunal ruled that IPTL incurred injudicious costs and that the tariffs must be recalculated. Following this first award, TANESCO refused payments and deposited the disputed payments in an escrow account while IPTL restructured its debt.
Claimant acquired IPTL’s loan in 2005. In 2010, following IPTL’s default, Claimant brought its claim against TANESCO before ICSID. Respondent countered that, in the absence of a security assignment duly registered in the national trade register, the acquisition of IPTL’S debt by Claimant was invalid under Tanzanian law. On 12 February 2014, the Tribunal rendered a decision on jurisdiction and liability and ruled that the assignment was valid but did not order TANESCO to pay the claimed sums to Claimant instead of IPTL.
Claimant filed a request for reconsideration of the Tribunal’s decision and more precisely for reconsideration of its lack of jurisdiction to make an award for payment in favor of Claimant. Claimant alleged that TANESCO misled the Tribunal with a “fraudulent misrepresentation” of its position and by cancelling the release of funds from the escrow account (established to hold disputed payments) in order to pay other Tanzanian parties.
In its award rendered on September 12, 2016, the Tribunal reconsidered its previous decision on jurisdiction and liability and ordered TANESCO to pay to SCB HK the amount of US$ 148.4 million (plus interest).
As a preliminary matter, the ad hoc committee addresses the issue of reconsideration and agrees with the Tribunal on its findings. As the ad hoc committee recalls, the Tribunal has stated that the ICSID Convention does not explicitly address the issue of reconsideration of a decision and that Articles 51 and 52 of the ICSID Convention apply to the reconsideration of an award. The Tribunal has concluded that it took its previous decision while not knowing the existence of relevant material facts deliberately withheld by TANESCO and that the reconsideration of its decision was justified. The ad hoc committee adds that when reconsidering its decision, the Tribunal has relied on Article 41 of the ICSID Convention providing for the competence-competence principle, and on Article 44 of the ICSID Convention. It decides that the Tribunal has had power to reconsider its decision.
In a second phase, the ad hoc committee rejects the three grounds of annulment invoked by TANESCO. The ad hoc committee first analyzes the allegations of the manifest exceeding of powers by the Tribunal. It concludes that by exercising jurisdiction under Article 25(1) of the ICSID Convention, the Tribunal has not manifestly exceeded its power. Similarly, the ad hoc committee also finds that the Tribunal has applied Tanzanian law when required and has not exceeded its power when reconsidering its decision on jurisdiction and liability. Thereafter, the ad hoc committee rejects the allegation of serious departure from a fundamental procedural rule due to a failure to allow the Parties to make submissions regarding the issue of reconsideration or by reversing the burden of proof. Finally, and after recalling the standard of the “failure to state reasons” ground, the ad hoc committee rejects this third ground of annulment.