Botswana reaches settlement in arbitration brought by Chinese firm
The dispute arose after the government terminated Sinohydro’s contract in July 2012 for ‘failing to complete the expansion of the airport within stipulated time frame and cost estimates’.
As a result of the delays, government retrieved P75 million in performance and retentions bonds from Sinohydro, leading to the Chinese company filing a case with the London-based International Chamber of Commerce (ICC).
Industry insiders told Mmegi Business that, following Sinohydro’s lawsuit, government slapped the company with a ‘heavier’ counter claim, including the P142 million tender awarded to Stefannuti Stocks Botswana to carry-out remedial and completion works at the airport.
“Government responded to Sinohydro’s claim with its own counter claim which included costs of the delays as well as the costs of awarding a new tender to finish the project. In the end, it didn’t make sense for Sinohydro to continue with the case and they had to withdraw and each party went their way and covered their own litigations costs,” said a person familiar with the case who declined to be named. Infrastructure and Housing Development Minister, Nonofo Molefhi said although he is legally constrained to divulge the outcome of Sinohydro’s P92 million lawsuit against government, the case has been settled and Botswana will not be paying anything to the Chinese company.
Molefhi told Parliament recently that the dispute, which was taken for arbitration in London, has now been settled but government was unable to divulge the result, as the settlement agreement was confidential.
“Regarding the specific details of the settlement agreement reached with Sinohydro, in accordance with the ICC arbitration rules, I am advised that the proceedings including any settlements reached are confidential. I can further confirm that there is in existence such a clause in the settlement agreement with Sinohydro which would preclude me from divulging the details of the settlement, beyond what is already in the public domain,” said Molefhi. However the minister confided, “No concessions by Botswana were made as a result of the settlement beyond payment of legal representation”. The cost of the litigation to government amounted to a total of P13.8 million.
The project, which included construction of a new terminal building and the expansion of the runway, was awarded in 2008 and was supposed to be completed by May 2010. However, it was still incomplete at the time of termination in July 2012.
The airport project was finally completed five years later in 2015, and P231 million above original budget. In its claim at the ICC, Sinohydro was demanding a declaration that the government of Botswana wrongfully terminated the contract.
The Chinese company, which has since divested itself from Botswana, was also claiming repayment of a P59 million-performance bond, together with refund of the balance of the money paid for retention guarantee amounting to P15.6 million.
The retention bond is funds that the employers retain as guarantee that the contractor carries out all the necessary work to correct structural work and other defects discovered after completion of a contract, even if full payment has been made to the contractor. Sinohydro was also seeking an award of the costs of arbitration of approximately P17 million.
The government through the Attorney General’s chambers outsourced the defence of Sinohydro’s claims to a London-based firm of construction claims specialists called White and Case, LLC.
Before exiting Botswana, Sinohydro was one of the biggest state-owned Chinese companies operating in the country. Apart from the airport, it had also won tenders to build other critical infrastructure such as roads and dams.
Sinohydro built the Kang/Hukuntsi road at a cost P545 million as well as the Francistown/Ramokgwebana road for P386 million. The company also built the Dikgatlhong and Lotsane dams.
By: BRIAN BENZA