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Legal loophole in PPA gave Dowans victory in ICC's ruling |
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Written by The Citizen
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Wednesday, 12 January 2011 |
 Dar es Salaam. Flaws shroud the country’s laws governing procurement, according to details of the judgement by the International Chamber of Commerce (ICC) on the case that was jointly filed by Dowans Holding SA (DHSA) and Dowans Tanzania Limited (DTL) versus Tanesco, The Citizen can revealThe decision passed by ICC ordering Tanesco to compensate DHSA and DTL has also exposed shortcomings in the competence of public entities with regard to contract negotiations.
At the ICC, Tanesco heavily relied on Section 31 (1) and (2) of the Public Procurement Act (PPA) that prohibits public bodies from awarding any contract without approval of an appropriate tender board. It also makes it illegal for any person to sign a contract with any public body without prior approval of the tender board.
When terminating its emergence power generation contract with Dowans in 2008 Tanesco advanced, among other reasons, the breach of PPA because the state-owned power utility’s tender board did not approve the award of the power production deal to REDEVCO.
Tanesco entreated ICC to dismiss the case because contravention of Sections 31 (1) and (2) of the PPA rendered the contract automatically invalid from the outset.
But in addressing the submission by Tanesco, the ICC noted that there was nothing in the provisions of the PPA to suggest that contravention of Section 31 on a procurement contract automatically renders it void.
“In our judgment it is impossible to spell out of wording of Subsection (1) and (2) of that Section (Section 31) an express prohibition of contracts awarded or signed in contravention of those subsections such as will render such contracts automatically invalid from the beginning,” said the ICC arbitrators.
In their view, prohibitions in Section 31 are directed against a public body that awards a contract which has not been approved by the appropriate tender board and against a firm or person.
“The mischief against which the subsections are directed has nothing to do with the terms of the contract itself; still less with the performance of the contract,” the ICC said.
“We can find nothing in the public policy objectives of the PPA 2004 to support the implication that a contract entered in contravention of Section 31 is automatically void from the beginning, regardless of its terms and regardless of whether the continued performance of the contract might be of public benefit,” said the arbitrators.
They went on: “The implication of such a draconian, disproportional and one-size-fits-all consequence of a contravention of Section 31 would, in our judgment, require a very strong statutory context, and the public policy objective of the PPA 2004 do not begin to provide such a context.”
Since Section 87 makes it an offence for a public body to award, or for the supplier to sign, a contract which has not been approved by the appropriate tender board, the arbitrators adduced that to them it seemed to suggest that parliament considered that was a sufficient sanction for a contravention of Section 31 (1) or (2).
The crucial thing about Subsections (1) and (2) of Section 31, the ICC pointed out, was that they were silent about the performance of the contract.
“On the contrary, they are focused exclusively on the awarding or the signing of the contract.”
By the fact that Tanesco accepted that performance of the agreement by DHSA/DTL was entirely satisfactory, the Chamber observed that as one of a number of extraordinary features of this case.
“In our judgment, therefore, there is not sufficient context for the implication into the PPA 2004 of a prohibition against contracts entered in contravention of section 31, rendering such contracts automatically void from the beginning. We find that the POA, when signed, was a valid and enforceable contract,” they observed.
The misrepresentation issue
Tanesco claimed before the chamber that its consent to the assignment of POA from REDEVCO and DHSA was procured by false representation by Dowans. These included a letter in which DHSA and RDEVCO requested Tanesco’s consent to assign the REDEVCO agreement to DHSA.
The ICC arbitrators, however, rejected the argument observing that it was based on the evidence that all the representations were proved to be factual.
They asserted that representations presented in the dossier of December 8, 2006 were statements of fact, and were true.
“The tribunal therefore concludes that the statements in the letter of 8 December 2006 were true, and therefore the claimant cannot be held to have misrepresented any information in that communication.
“The tribunal accordingly finds that the letters dated 8 December 2006 and 18 December and the accompanying documentation did not misrepresent the true position as alleged by Tanesco,” the arbitrators concluded.
If there was misrepresentation, the ICC explained that Tanesco would have had no difficulty in discovering the true position through the exercise of “ordinary diligence” and, accordingly, the existence of such misrepresentation did not render the consent voidable under Tanzanian law.
Although DTLT first claimant asserts that it is incorporated in Costa Rica, in some documents, including the change of parties agreement attached to the request for arbitration, it indicates to be a company incorporated under the laws of the United Arab Emirates.
At the hearing of the dispute, Tanesco sought disclosure of documents and information showing the true place of incorporation, location, business and standing of the first claimant.
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Last Updated ( Wednesday, 12 January 2011 )
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