TZ-Konoike in negotiations

THE government of Tanzania is at an advanced stage of negotiations with Konoike Construction Company Limited to solve amicably the disputes on  repayments related to  the construction of the Dodoma-Manyoni Road.

Speaking with the ‘Daily News’ yesterday, the Attorney General,  Professor Adelardus Kilagi, disclosed that the pending negotiations will come to an end soon and the agreed terms would be signed.

The AG was reacting to a recent decision given by the United States District Court for the District of Columbia recently, to recognise an Award given by the International Chamber of Commerce’s International Court of Arbitration (ICC) on payments of about 64 million US dollars to Konoike.

He pointed out that the government was aware of the ICC Award in favour of the Japanese Company given in 2016 following a dispute on  a contract between the Tanzania National Roads Agency (TanRoads) and Konoike Company.

Prof, Kilagi recalled that some years back, Konoike Company entered into a contract with TanRoads for upgrading some miles  on a stretch between Dodoma and Manyoni.

Thereafter, a dispute arose culminating in the termination of the contract. He said that Konoike filed arbitration proceedings before the ICC demanding some damages. In 2016, the ICC issued its award in favour of the company.

According to the AG, the government took some steps, including paying some amount of money to the company. In the meantime, he said, the Tanzania Revenue Authority (TRA) deducted some amount paid as tax. He said it was the deductions that led to the ongoing negotiations.

Prof Kilagi  also pointed out that before commencement of the negotiations, Konoike Company filed some cases in different countries, notably in United States, United Kingdom, Abu Dhabi and in Tanzania for recognition of the ICC Award.

“So what the American Court has done is not new; it is just to recognise what was decided by the ICC,” the AG said, adding that the decision by the American Court to recognise the ICC Award has just come as the negotiations between the government and Konoike Company were at an advanced stage.

“The negotiations will be completed anytime and agreement for the negotiations will be signed. Thereafter, we will inform the courts where these cases have been filed on the agreements that will be signed by the parties to solve the dispute amicably,” he noted.

In the decision given on March 6, 2019, Judge Richard Leon of the United States District Court for the District of Columbia confirmed the ICC Award for payments to Konoike Company of 20,714,401,234/=, USD 38,964,296 and JPY 324,734,551.

He ordered the defendants in the matter, then Ministry of Works, the TanRoads, the ex-Ministry of Transport and the Attorney General to indemnify the company in respect of any final amount of Value Added Tax (VAT), after all appeals under the Tanzanian legal system have been exhausted.

In this course of action, the Tanzanian Revenue Authority (TRA) seeks to recover tax on sums awarded in the underlying arbitration in excess of any VAT which the plaintiff company has so far paid in respect of the project or the contract, as defined in the Final Award.

The court further ordered the defendants to indemnify Konoike in respect of any interest, fines, penalties and, or other charges that may be imposed on  the plaintiff in relation to VAT on the project or contract, provided that any such charges do not arise in whole or part from any fault on Company’s part.

It was also ordered that the defendants shall pay to the plaintiff its costs of 677,864/82; USD 141,425.12; JPY 16,446,083.30; and GBP 7,435,908.79 and additional ICC costs in the amount of USD 534,220.00. However, the court denied Konoike’s request for attorney's fees and costs incurred in this civil action.



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