In this months edition of East Africa Politics & Security, our experts revisit the ongoing battle between Standard Chartered Bank Hong Kong (SCBHK) and TANESCO that was originally raise in the East Africa Politics & Security 20 September edition, and brought forward on the blog

SCBHK has gone to the Commercial Division of the High Court to seek an injunction against the state-owned Tanzania Electric Supply Company Limited (TANESCO) making further payments to Independent Power Tanzania Limited (IPTL) for power generation. The case is a critical bellwether of Tanzania’s attitude to foreign investors, and international arbitration mechanisms, with there being a real risk that the International Centre for the Settlement of Investment Disputes (ICSID) decision may be ignored.

This move follows the ICSID’s September ruling to determine that TANESCO should pay US$148 million to SCBHK in recognition that it is the rightful holder of IPTL’s debt, and is indeed the effective owner of the company. SCBHK bought the debt, at a discount, in 2005 from Danaharta, a Malaysian Bank.

SCBHK has called for TANESCO’s payments to IPTL to be re-directed to the Court to be held in escrow until the issue is resolved. This comes in the wake of the bank registering the ICSID decision at the High Court, which embeds it as a decision recognised by the High Court of Tanzania. In a counter claim, TANESCO has petitioned the High Court to have the decision’s registration suspended pending its appeal of the ICSID ruling.

In 2014, ICSID originally ruled that SCBHK was the rightful owner of IPTL’s debts, that IPTL was in default and thereby entitled to the company’s power purchase payments. The High Court of Tanzania granted an injunction preventing the enforcement of that decision in 2014. As the case had not fully been concluded at the time – no award had been made – Tanzania was not technically in breach of its ICSID commitments. But if the High Court was to ultimately reject the ruling, Tanzania would certainly be in breach.

In an opinion issued in 2014, law firm Norton Rose Fulbright raised the intriguing possibility that in such a case, China could take a case against Tanzania on behalf of SCBHK for breaking the ICSID Convention.