Writing in the GUARDIAN (August 16th) Xan Rice describes how the three British senior managers of City Water were forcibly escorted out of Tanzania on June 1st 2005 to mark the end of City Water’s involvement in water supply in Dar-es-Salaam but also the beginning of a long legal dispute between BiWater plc (which led the consortium) and the Tanzanian Government (See previous issues of TA – Editor related stories )
He asserts that the original bid was a “rock-bottom” price, and that City Water began to run into problems immediately after it took over from DAWASA, starting its 10 year contract on Aug 1st 2003. Having failed to meet revenue collection targets, City Water tried to renegotiate its contract, and in July 2004 stopped paying its monthly fee to DAWASA for the lease of piping and other infrastructure. Several reports criticise the performance of City Water, including an unpublished report from the World Bank which stated “The primary assumption on the part of almost all involved, particularly on the donor side, was that it would be very hard, if not impossible, for the private operator to perform worse than DAWASA. But that is what happened.”
With the public mood worsening, the government decided to cancel the contract on May 13th 2005. However, rather than giving notice to City Water, the then water minister Edward Lowassa took the dramatic step of announcing the decision at a televised press conference and then deporting the three expatriate managers. City Water claim that the decision was politically motivated and that the termination was illegal, and were able to obtain an injunction in the British High Court to prevent the contract being terminated pending arbitration.
Within weeks, City Water lodged a case at the International Centre for Settlement of Investment Disputes, a little known affiliate of the World Bank. The firm is claiming between $20m-$25m for actions amounting to expropriation of assets and revenue in Dar-es-Salaam. The hearing in The Hague started in April 2007 and has attracted significant international interest, with many drawing attention to the secrecy of the proceedings (the tribunal is closed to the public) and the cost to the Tanzanian government being forced to defend itself let alone if the BiWater case is successful.
Since City Water’s contract was ended, revenue collection for water in Dar-es-Salaam in 2006 increased by 40% to around TSh 17bn (£6.8 million).
UPDATE – as of January 2008 the ICSID case is still ongoing though a verdict is expected soon. A separate case brought by City Water in the British Courts was dismissed on 11th January. The London tribunal found in favour of the Tanzanian Government, citing World Bank evidence that services had deteriorated under City Water, and awarded damages to DAWASA of more than £3 million plus costs. The Tanzanian Ministry of Water commented “The Ministry is pleased that an independent, international tribunal has recognised that City Water has performed poorly and that DAWASA was entitled to terminate City Water’s contract.”