BY BUSINESS REPORTER
THE fate of East African Development Bank now hangs in a balance following revelations that the bank’s properties might be auctioned off to pay a staggering $137 million (Sh12.3 billion) debt.
The bank is challenging an order by the Tanzania’s High Court issued on November 8 last year in favour of Dar-es-salaam-based transport company, Blueline Limited, for attachment and padlocking of the premises belonging to the Bank.
The East African Community Council of Ministers meeting in Bujumbura has recommended that the matter be discussed at today’s (Tuesday) Heads of State summit as they seek a way to bail out the bank.
"You are aware that all the EAC partner States are shareholders of this bank. That is why the Heads of State will consider a progress report on the EADP/Bluelines Enterprises litigation with a view of finding a lasting solution to the matter," Musa Sirma, chairperson of the EAC Council of Ministers, and who is also Kenya’s EAC Minister said.
The case started in 1990, when EADB lent $4.2m to Blueline, to purchase trucks, trailers and communication equipment for its businesses in Tanzania, Malawi, Zambia and Burundi.
Under the deal, Blueline was to repay the loan in 36 months, starting January 1992.
However, it defaulted and in November 1995, the bank placed the company under receivership.
But Blueline got an injunction from the high court of Tanzania, stopping the bank’s receiver from taking over its business. The court also referred the dispute for arbitration.
In 2002, Tanzania’s former Chief Justice, the late Francis Nyalali, ruled in favour of the bank. He dismissed Blueline claims for damages on the grounds that the bank did not breach any contract and ordered the firm to pay the $13.7m balance of the loan.
New arbitration
The bank’s initial victory was, however, overturned by the courts, which ordered new arbitration in 2003. The arbitrator ruled in favour of Blueline in 2005 saying the bank had acted prematurely in appointing the receiver and was liable to pay demurrage for breach of contract of $34.8m. The bank was then orders to pay Blueline $61.4m, plus interest of 14 per cent per annum, starting from the date of the award till its settlement.
"The act of imposing the court injunction restraining the receivership had resulted into the grounding up of the entire business of Blueline," read the ruling. The bank’s many attempts to have that ruling overturned have dragged for a decade, and have been dogged by legal technicalities. Its lawyers claim they have not had the opportunity to tell its side of the story.
But the order against the bank has caused serious concern among interested parties at the national and international levels, including the bank’s other stakeholders such as the African Development Bank (AfDB) and the PTA Bank.
"The bank’s operations are likely to be disrupted, while the fact the bank extended a loan to Blueline Enterprises and that Blueline Enterprises defaulted in meeting its obligations to the bank has remained unaddressed," the report reads in part.
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