Air Tanzania plane impounded in the Netherlands

By Osoro Nyawangah, MWANZA Tanzania

A government owned Air Tanzania Company Limited plane has been impounded in the Netherlands after a Swedish firm won a $165 million award against Tanzania due to revoked land title in the Bagamoyo sugar project.

A Swedish investor that won the award against Tanzania has persuaded a Dutch court to uphold the attachment of an aircraft owned by the east African state, even though ICSID has stayed enforcement pending annulment proceedings.

On 8 November, a preliminary relief judge in the District Court of Limburg refused to lift the attachment granted in favour of Swedish entity EcoDevelopment in Europe.

Tanzania argued the attachment was unlawful because it was obtained a day after the state had applied to ICSID to annul EcoDevelopment’s award. But the judge reasoned that ICSID’s provisional stay of enforcement of the award only took effect on the date that the institution registered the state’s annulment request.

The Swedish company is using Houthoff in the Dutch courts and Mannheimer Swartling in the ICSID proceedings. Tanzania has turned to Buren Legal for the attachment proceedings but has not appointed external counsel in the arbitration or annulment proceedings.

EcoDevelopment, which is owned by 18 Swedish citizens and business leaders, brought its ICSID claim in 2017 under the Sweden-Tanzania bilateral investment treaty.

The dispute concerned abandoned plans to develop a sugar cane project in Bagamoyo on the eastern coast of Tanzania. The project was intended to produce sugar for export as well as ethanol for use in generating electricity.

But the project encountered opposition from local activists on behalf of 1,300 farmers still using the land. The investor also blamed the government for failing to introduce a new sugar industry regulation and provide land free from incumbrance. A new government under President John Magufuli revoked the title to the land in 2016.

In April this year, an ICSID tribunal chaired by the UK’s Sir Christopher Greenwood KC and including Stanimir Alexandrov and Funke Adekoya SAN issued an award in EcoDevelopment’s favour and ordered Tanzania to pay nearly US$165 million.  

On 16 June, a day after ICSID received Tanzania’s application to annul the award, EcoDevelopment obtained leave from the District Court of The Hague to pursue enforcement; and an ex parte ruling from the provisional relief judge in Limburg permitting the plane seizure.

The Airbus A220 plane, operated by the state’s flag carrier Air Tanzania, had already been grounded at Maastricht Aachen Airport since January this year, reportedly because of engine problems.

ICSID eventually registered the annulment request on 21 June and notified the parties of the provisional stay of enforcement.

An ICSID ad hoc committee chaired by ex-Milbank partner Michael Nolan and including Carole Malinvaud of Gide Loyrette Nouel and Kenya’s former attorney general Githu Muigai issued a decision in September continuing the stay of enforcement.

Tanzania meanwhile applied to the Limburg court to lift the attachment and prohibit EcoDevelopment from seeking any further attachment based on the ICSID award while the annulment proceedings are pending.

The state argued that the effect of the automatic stay granted by ICSID was that the award was not provisionally enforceable and that the attachment was thus granted unlawfully. It contended that the Dutch courts were bound to recognise the ICSID stay decision as binding.

Tanzania also argued that the attachment had affected its interests in a disproportionately serious way and that as a national government it had sufficient assets within and outside its territory to ensure the award would be paid.

But in this month’s decision, Judge KJH Hoofs said it was not clear from the ICSID Convention when the provisional stay commences. While Christoph Schreuer’s well-known commentary on the convention suggests it takes effect from the date of an annulment application, the judge said ICSID case law suggested it took effect upon the date of its registration by ICSID. The judge therefore concluded that the attachment was lawful.

The judge also said the ad hoc committee’s decision to continue the stay did not affect the attachment, and that Dutch law applied to the execution of the award. She said she could only lift an enforcement order if the executing party had no reasonable interest in using their power of enforcement, which Tanzania had not demonstrated.

She also declined to prohibit further attachments, observing that EcoDevelopment had already stated that it would not sell the aircraft or take further enforcement measures while the annulment proceeding was ongoing.

Earlier this month, the ad hoc committee rejected an unusual attempt by EcoDevelopment to have Tanzania’s annulment request thrown out under ICSID rule 41(5), which allows for expedited dismissal of claims that are manifestly without legal merit. The mechanism is more commonly used in ICSID arbitrations but was invoked by Panama last year in a failed bid to knock out an annulment request by Dominion Minerals.   

On Wednesday, the government dispelled fears of the possible attachment of an ATCL plane by a Dutch court, with the Attorney General saying everything was under control.

Dr Eliezer Feleshi confirmed to this paper that a Swedish firm that won a $165 million award against Tanzania had persuaded the court to uphold the attachment of the aircraft despite the International Centre for Settlement of Investment Disputes (ICSID) having issued a stay of execution, pending annulment proceedings.

"It’s true that they went to court in the Netherlands after we had successfully appealed to the ICSID for a stay of execution. Everything is under control.” He said.

Dr Feleshi added that the government had already appealed against the Dutch court’s decision, but declined to offer further  details. 

In 2019, authorities in South Africa impounded an Air Tanzania Airbus A220 at Johannesburg Oliver Tambo International Airport following a case filed by a retired farmer, Hermanus Phillipus Steyn, who seek payment of $33m (£28.8m) it owes in compensation. - Africa