Court orders Cuban company to pay 3bn/- for breach of contract

AN Arbitration Tribunal has ordered a Cuban Company, Labionfam S.A. to pay over 3bn/- to a Chinese Company, Yong Shun Construction Company Limited, for breach of contract involving construction of a Biolarvicides large Plant at Kibaha in Coast Region.

The Tribunal led by retired High Court Judge, Thomas Mihayo, ruled that the termination of the contract in question by the Cuban Company on May 22, last year, was unlawful and invalid, holding that the Labionfam S.A had breached some of terms of the contract in course of execution of the deal.

"The law required proper and solid grounds for termination of construction contracts and that apart, the laid down procedures must be followed. Otherwise, the termination will be invalidated," Judge Mihayo, who adjudicated the dispute as sole arbitrator ruled.

He directed the Cuban firm (Respondent) to pay the Chinese Company (Claimant) a sum of 2,987,116,635/- being loss of profit at 20 per cent rate, 350m/- as general damages and other payments of 304,692,399/- involving demobilization, repatriation costs for Chinese staff and costs of the claim.

Yong Shun Construction Company Limited, through its advocate Joseph Ngiloi, had claimed before the Tribunal that in September 2011, the respondent invited them to submit bids for construction of a Biolarvicides Plant Civil Engineering Works by way of a bidding process.

The list of contractors shortlisted by the respondent and a few of others proposed by the respondent's Consulting Engineer, Inter Consult, included the claimant. The company was subsequently invited by the respondent to submit its tender through a letter dated September 29, 2011.

On November 14, 2011, the respondent invited the claimant for contract negotiations and at the end the latter's bid was accepted at a contract sum of 14,935,583,175/20 and on November 23, 2011, the respondent issued a letter accepting the claimant's bid.

"Thereafter, the claimant was instructed to arrange for performance Guarantee and Advance payment guarantee bonds from a reputable bank and submit the same to the respondent," advocate Ngiloi from Makoa Law Chambers (Advocates) had told the Tribunal.

The construction contract between the parties was signed on December 23, 2011 and the notice of commencement of works was issued on December 21, 2011, directing that the beginning date of the contract would be on January 2, 2012.

In course of execution of the works, regular monthly site meetings were held and were attended by the parties' representatives and the Consultant and his team. During these meetings chaired by the Consultant, progress of works, timeliness, snags and other matters were discussed.

However, on May 22, last year, the respondent terminated the contract, alleging that the claimant had breached the given terms.

However, the claimant contested the termination and on June 18, last year, gave a notice of intention to commence the arbitration in question.

On August 21, last year, CRB Africa Legal, on behalf of Labionfam S.A. concurred to submit the dispute to arbitration and on August 5, this year, the National Construction Council appointed Judge Thomas Mihayo as a sole arbitrator to determine the matter.

Source: http://www.dailynews.co.tz/index.php/local-news/23799-court-orders-cuban-firm-to-pay-3bn-for-breach-of-contract