Fifteen banks have been temporarily restrained by the Tanzania High Court from paying out on letters of credit (L/Cs) in a dispute over a tender to supply fuel under the country's petroleum bulk procurement system.

The banks are restrained from paying out on L/Cs in favour of Dubai-based Alchemist Trading Energy DMCC for its alleged failure to honour terms of contract between the company and the Petroleum Bulk Procurement Agency (PBPA).

Banks involved

The high court granted an order temporarily restraining Alchemist from receiving over US$13 million from international, regional and national banks.

The banks include ABSA (Mauritius), ABSA (Tanzania), Bank of Kigali (Rwanda), Citibank, Citibank (UAE), Eastern and Southern African Trade and Development Bank and I&M (Rwanda).

The other banks are ING, National Bank of Commerce (Tanzania), Natixis, NCBA (Tanzania), National Microfinance Bank (Tanzania), Rabobank (Singapore), Stanbic (Tanzania) and Standard Bank of South Africa.

Successful application

The court order responds to an application lodged by the state-owned PBPA and Tanzania's attorney general on behalf of oil marketing companies operating in the country.

Judge Leila Mgonya issued the temporary restraining order pending final determination of arbitration proceedings filed by the applicants before the International Court of Arbitration of the International Chamber of Commerce.

The judge ruled that counsel for the applicants demonstrated the need for the restraining order by arguing that Alchemist failed to deliver petroleum products to oil marketing companies in the execution of its tender.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.