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Avocats, autres représentants, expert(s), secrétaire du tribunal

Final Award

SECTION I: INTRODUCTION

1.
In this Section, the following background issues are addressed:

a. Definitions;

b. Referencing;

c. Parties and their legal representatives;

d. Arbitral Tribunal;

e. Arbitration Agreement, Applicable Law and Place of Arbitration;

f. Procedural history of the Arbitration;

g. Partial Award;

h. Fact witnesses;

i. Expert witnesses, their reports and joint statements;

j. Tanzanian law;

k. Parties’ list of issues.

Definitions

2.
In this Award, the following terms and expressions are used:

"Accepted Contract Amount" means the amount claimed in Clause 1.1.14 of the Contract.

"Addendum" means Addendum No. 1 (to the Contract) dated 15 March 2007.

"Arbitral Tribunal" or "Tribunal" means the tribunal appointed by the Parties as set out in this section.

"CCS" means the Claimant’s written closing submissions.

"Claimant" or "Konoike" means the Claimant in this arbitration as set out in paragraph 4 below.

"Contract" means the construction contract entered into between the Claimant and the Ministry of Works dated 21 March 2003.

"Contract price" has the meaning ascribed to it in the Contract.

"Contractor" has the meaning ascribed to it in the Contract.

"DoS" means the Deed of Settlement dated 15 March 2007.

"Employer" has the meaning ascribed to it in the Contract.

"Engineer" has the meaning ascribed to it in the Contract. The original Engineer, Roughton International was replaced by Black & Veatch.

"FIDIC" means Federation Internationale Des Ingenieurs-Conseils.

"GNT" means the Government Negotiating Team formed for the purpose of negotiating a settlement with Konoike in late 2006.

"GST" means the Government Special Team appointed by the Government to review the Project in November 2006.

"Government" means the Government of the United Republic of Tanzania.

"ICC" means the International Chamber of Commerce.

"ICC Court" means the ICC International Court of Arbitration.

"ICC Rules" means the 1998 ICC Rules of Arbitration.

"IPC" means Interim Payment Certificate.

"Japanese Yen" or "JYN" means the currency of Japan.

"Letter of Acceptance" means the letter sent by the Employer to the Claimant dated 14 March 2009 informing the Claimant that its Tender had been accepted [E2/228/230].

"MoID" means the Ministry of Infrastructure and Development of Tanzania.

"MoU" means the Memorandum of Understanding dated 30 January 2007.

"Outstanding Amount" means the sum of USD 10,602,746.36 which Konoike alleges was owed to it as Price Escalation on the Foreign Currency element of IPCs 7-16.

"Pre-Bid Meeting Minutes" means the minutes of the meeting held on 25 November 2002 in relation to the tender for the design and construction of the Dodoma-Manyoni and the Manyoni -Singida Roads [G1/1/1].

"Parties" means the Claimant and the Respondents together unless the context requires otherwise, and "Party" means each individually as the context requires.

"Price Escalation" has the meaning ascribed to it in the Contract.

"Project" means the design and construction of the Road by the Contractor under the Contract.

"RCS" means the Respondents’ written closing submissions.

"Regulations" means the Public Procurement (Goods, Works, non-Consultant Services and Disposal of Public Assets by Tender) Regulations 2005, GN No. 97.

"Respondents" means the Respondents in this arbitration as set out in paragraphs 6-9 below.

"Road" means the road from Dodoma to Manyoni.

"Schedule" means the Schedule of Costs and Percentages of Listed Elements in the Contract [E1/6/108].

"Section" means a section of the Road.

"Section 1" means Km 0 (Dodoma) to Km 63 (Uhelela) of the Road.

"Section 2" means Km 63 (Uhelela) to Km 84 (Chikuyu) of the Road.

"Section 3" means Km 84 (Chikuyu) to Km 110 (Muhalala) of the Road.

"Section 4" means Km 110 (Muhalala) to Km 127 (Manyoni) of the Road.

"Tanroads" means the Second Respondent, Tanzania National Roads Agency.

"Tanzanian Shillings" or "TZS" means the currency of the United Republic of Tanzania.

"Tanzania" means the United Republic of Tanzania.

"US Dollars" or "USD" means the currency of the United States of America.

"Works" has the meaning ascribed to it in the Contract.

Referencing

3.
The following referencing system is used:

a. Transcript citations: the citation [T1/1/1] refers to the transcript of the hearing on day 1, page 1, line 1.

b. Documents: identified by their electronic hearing bundle reference - [A1/1.1/1].

c. Expert reports: identified by the name of the expert, the number of the expert report and the paragraph number of the expert report.

d. Witness statements: identified by the name of the witness, the number of the witness statement and the paragraph number of the witness statement.

Parties and their legal representatives

4.
The Claimant is Konoike Construction Co. Limited, a limited liability company, incorporated under the laws of Japan, whose address and registered office is at 3-4-5, Umeda, Kita-ku, Osaka 530-8517, Japan.
5.
The Claimant is represented in this arbitration by:

Mr David Thomas QC
Ms Jane Lemon QC
Keating Chambers
15 Essex Street
London WC2R 3AA
Tel: +44 (0)20 7544 2600
Fax: +44 (0)20 7544 2700
Email: dthomas@keatingchambers.com
Email: jlemon@keatingchambers.com

Mr Simon Delves
Mr Ben Mellors
Ms Claire Miller
Mr Nicholas Smith
Beale and Company Solicitors LLP
Capital House
85 King William Street
London EC4N 7BL
Tel: +44 (0)20 7469 0400
Fax: +44 (0)20 7469 0401
Email: s.delves@beale-law.com
Email: b.mellors@beale-law.com
Email: c.miller@beale-law.com
Email: n.smith@beale-law.com

6.
The First Respondent is the Ministry of Works (Tanzania) whose address is PO Box 9423, Dar es Salaam, Tanzania. The First Respondent is a Ministry of the Government of the United Republic of Tanzania.
7.
The Second Respondent is the Tanzanian National Roads Agency ("Tanroads") whose office is at ZAIN House, F1 3 and 4, Corner Ali Hassan Mwinyi Road / Kawawa Road, Kinondoni, Dar es Salaam, Tanzania. Tanroads is an Executive Agency of the Government of the United Republic of Tanzania established pursuant to section 3(1) of the Executive Agencies Act, and operational since July 2000.
8.
The Third Respondent is the Ministry of Transport whose address is PO Box 9144, Dar es Salaam, Tanzania. The Third Respondent is a Ministry of the Government of the United Republic of Tanzania.
9.
The Fourth Respondent is the Attorney General of the United Republic of Tanzania whose address is PO Box 9050, Dar es Salaam, Tanzania. The Attorney General is the chief legal adviser to the Government Departments and Ministries of the United Republic of Tanzania.
10.
The Respondents are represented in this arbitration by:

Mr D Brian King
Mr Jonathan Gass
Mr Carlos Ramos-Mrosovsky
Mr Lee Rovinescu
Mr Francisco Franco Rodríguez
Ms Tessa Hayes
Mr Michael Xiao
Freshfields Bruckhaus Deringer US LLP
601 Lexington Avenue
31st Floor
New York, NY 10022
USA
Tel: +1 212 277 4020
Fax: +1 646 521 5620
Email: brian.king@freshfields.com
Email: jonathan.gass@freshfields.com
Email: carlos.ramos-mrosovsky@freshfields.com
Email: lee.rovinescu@freshfields.com
Email: francisco.francorodriguez@freshfields.com
Email: tessa.hayes@freshfields.com
Email: michael.xiao@freshfields.com

Ms Jane Davies Evans
Crown Office Chambers
2 Crown Office Row
London
EC4Y 7HJ
Tel: +44(0)20 7797 6221
Fax: +44(0)20 7797 8101
Email: davies_evans@crownofficechambers.com

Arbitral Tribunal

11.
The members of the Arbitral Tribunal are:

Mr John Bellhouse
13 Gray’s Inn Square
London WC1R 5JR
United Kingdom
Tel: +44(0)20 7067 1900
Email: john@jmhbellhouse.com

Mr Bellhouse’s appointment as President, on the joint nomination of the Parties, was confirmed by the Secretary-General of the ICC International Court of Arbitration pursuant to Article 13(2) of the ICC Rules (2012) on 26 February 2013.

Professor Douglas Jones AO
Level 15, 1 Bligh Street
Sydney, NSW 2000
Australia
Tel: +61 2 9353 4120
Fax: +61 2 8220 6700
Email: dougjones@dougjones.info

Professor Jones’ appointment, on the nomination of the Claimant, was confirmed by the Secretary-General of the ICC Court, pursuant to Article 13(2) of the ICC Rules (2012) on 10 January 2013.

Mr Graeme Christie
Simpson Grierson
601 Lexington Avenue
Private Bag 92518
1141 Auckland
New Zealand
Tel: +64 9 977 5088
Fax: +64 9 977 5028
Email: graeme.christie@simpsongrierson.com

Mr Christie’s appointment, on the joint nomination of the Respondents, was confirmed by the Secretary-General of the ICC Court, pursuant to Article 13(2) of the ICC Rules (2012), on 10 January 2013.

Arbitration Agreement, the Applicable Law and Place of Arbitration

12.
The agreement to arbitrate is set out in Sub-Clause 20.6 (Arbitration) of the General Conditions of the Contract dated 21 March 2003 signed by Konoike and the Ministry of Works which provides:

"Unless settled amicably, any dispute in respect of which the DAB's decision (if any) has not become final and binding shall be finally settled by international arbitration. Unless otherwise agreed by both Parties:

The dispute shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce,

The dispute shall be settled by three arbitrators appointed in accordance with these Rules, and

The arbitration shall be conducted in the language for communications defined in Sub-Clause 1.4 [Law and Language].

The arbitrator(s) shall have full power to open up, review and revise any certificate, determination, instruction, opinion or valuation of the Engineer, and any decision of the DAB, relevant to the dispute. Nothing shall disqualify the Engineer from being called as a witness and giving evidence before the arbitrator(s) on any matter whatsoever relevant to the dispute.

Neither Party shall be limited in the proceedings before the arbitrator(s) to the evidence or arguments previously put before the DAB to obtain its decision, or to the reasons for dissatisfaction given in its notice of dissatisfaction. Any decision of the DAB shall be admissible in evidence in the arbitration.

Arbitration may be commenced prior to or after completion of the Works. The obligations of the Parties, the Engineer and the DAB shall not be altered by reason of any arbitration being conducted during the progress of the Works."

13.
Sub-Clause 1.4 (Law and Language) of the General Conditions of the Contract provides that:

"The Contract shall be governed by the law of the country (or other jurisdictions) stated in the Appendix to Tender."

14.
The Appendix to Tender provides that the "Governing Law" is the "Law of the Republic of Tanzania."
15.
The Parties agreed, and at its session of 11 October 2012, the ICC Court fixed London, United Kingdom, as the place of arbitration.

Procedural history of the arbitration

16.
On 3 April 2012, the Claimant notified the Respondents of its intention to commence this arbitration.
17.
The Claimant submitted a Request for Arbitration dated 4 July 2012 (received by the ICC Secretariat on 5 July 2012).
18.
At its session of 11 October 2012, the ICC Court decided that this arbitration shall proceed between the Claimant and the Respondents, pursuant to Article 6(4) of the ICC Rules (2012).
19.
The Respondents submitted an Answer and Counterclaim dated 13 September 2012, and the Claimant submitted a Reply to the Answer and Counterclaim dated 24 October 2012.
20.
On 2 November 2012, the Claimant acknowledged that the MoID had ceased to exist as of 24 November 2010 and should be removed as a Respondent to this arbitration.
21.
The members of the Arbitral Tribunal were appointed on the dates set out in paragraph 11 above and the ICC Secretariat submitted the file in this arbitration to the Arbitral Tribunal on 26 February 2013.
22.
On 18 April 2013, a procedural meeting was held in London and a provisional procedural timetable was largely agreed.
23.
The Claimant submitted the Statement of Case and supporting evidence on 17 May 2013.
24.
Further to a hearing on 6 and 7 June 2013 in London, the Arbitral Tribunal issued Procedural Order No. 1 and the Procedural Timetable pursuant to Article 24.2 of the ICC Rules (2012).
25.
Further to the hearing on 6 and 7 June 2013, the Arbitral Tribunal issued Procedural Order No. 2 containing the Arbitral Tribunal’s decisions in respect of the Second and Third Respondents’ preliminary issues application dated 10 April 2013.
26.
The Terms of Reference were executed by the Claimant, the Respondents and Arbitral Tribunal on 7 June 2013. The Terms of Reference were approved by the 1CC Court on 11 July 2013.
27.
An Addendum to the Terms of Reference was executed by the Arbitral Tribunal on 19 July 2013.
28.
By email dated 6 December 2013, pursuant to Article 27 of the ICC Rules 2012, the Arbitral Tribunal declared the proceedings closed in relation to the Preliminary Issues 3, 6 and 8 to be decided in a Partial Award.
29.
The Respondents submitted the Defence and Counterclaims and supporting evidence on 22 February 2014.
30.
The Claimant submitted a Reply and Defence to Counterclaims on 13 June 2014.
31.
The Respondents submitted a Rejoinder on 12 September 2014.
32.
On 1 October 2014, the Tribunal directed the Parties to submit Powers of Attorney authorising their respective counsel to represent the Parties. The Claimant submitted a Power of Attorney in respect of Beale & Company LLP dated 10 April 2013; a Power of Attorney in respect of David Thomas QC and Jane Lemon QC dated 30 September 2014; and a Power of Attorney in respect of Ms Fatma Karume dated 30 October 2014. The Respondents submitted a Power of Attorney in respect of the Ministry of Transport granting a Power of Attorney to Freshfields Bruckhaus Deringer LLP and Freshfields Bruckhaus Deringer US LLP dated 11 April 2013; a Power of Attorney by Tanroads, the Ministry of Works and the Attorney General in favour of Freshfields Bruckhaus Deringer US LLP, Jane Davies Evans and Gabriel Pascale Malata dated 2 October 2014.
33.
On 7 October 2015, both Parties agreed in principle to the appointment of a Tribunal Secretary. Ms Marie-Claire O’Kane was subsequently appointed.
34.
The Tribunal issued a draft Procedural Order No. 3 on 21 October 2014 for review by the Parties. The Tribunal then issued a revised draft Procedural Order No 3 on 29 October 2014 and an amended appendix 2 on 31 October 2014. Procedural Order No 3 was not formally issued, having been superseded by the hearing.
35.
By emails dated 5, 11 and 12 January 2015 the President issued directions for the hearings held on 20 and 21 January 2015.
36.
The Parties’ submitted written Closing Submissions on 16 January 2015.
37.
Evidential hearings were held from 24 November 2014 to 8 December 2014; 8 and 9 January 2015; and 20 and 21 January 2015.
38.
The ICC Court extended the time for the issue of the Final Award on a number of occasions and finally on 26 October 2015 to 29 January 2016.
39.
Pursuant to a Confidentiality Agreement dated 13 May 2015, between the Arbitral Tribunal and the Parties’ quantum experts, Ms Joanne Prior for the Claimant and Mr David Kyte for the Respondents, the Parties agreed to the quantum experts assisting the Arbitral Tribunal with the calculation of the quantum arising from the Arbitral Tribunal’s decisions.
40.
The Chairman of the Arbitral Tribunal met twice and had one telephone conference with the quantum experts who calculated the quantum resulting from the Arbitral Tribunal’s decisions.
41.
The calculation of the quantum was finalised on 6 November 2015, following which the Arbitral Tribunal requested submission by the Parties of their respective costs submissions which had already been exchanged between the Parties.
42.
By email dated1 February 2016, the Arbitral Tribunal, pursuant to Article 27 of the ICC Rules, declared the proceedings closed.

Partial Award

43.
During the hearing on 6 and 7 June 2013, the Arbitral Tribunal heard submissions from the Parties on which, if any, further preliminary issues would be considered at the hearing on 18 and 19 July 2013. By a letter dated 3 June 2013, the Respondents had proposed that 11 issues be addressed on a preliminary basis. At the conclusion of day 1 of the hearing, and having carefully considered the Parties' submissions, the Arbitral Tribunal indicated that it was not prepared to consider on a preliminary basis proposed issues 1, 2. 4, 7, 9, 10 or 11. The Arbitral Tribunal decided that the proposed preliminary issues 4, 7, 9, 10 and 11 were not possible to consider in the absence of relevant factual and/or expert evidence and/or would not, if decided as preliminary issues, significantly reduce the cost of the arbitration. If necessary, those issues would be addressed in the Final Award.
44.
The Arbitral Tribunal indicated that it would consider Preliminary Issue No. 3, Preliminary Issue No. 5, Preliminary Issue No. 6 and Preliminary Issue No. 8. The precise and agreed formulation of these preliminary issues was communicated by the Claimant following the hearing on 6 and 7 June 2013 and recorded in the directions contained in Procedural Order No. 1.
45.
By email dated 4 July 2013, the Respondents’ counsel confirmed the Parties’ agreement that Preliminary Issue No. 5 no longer required determination. The Partial Award therefore only considered Preliminary Issue No. 3, Preliminary Issue No. 6 and Preliminary Issue No. 8.
46.
Preliminary Issue No. 3 was: "Are the MoU and the DoS stand alone contracts? If not, are claims made under the terms of the MoU / DoS subject to the notice, particularisation and dispute resolution provisions of the Contract?"
47.
Preliminary Issue No. 6 was: "Is compliance with the contract notification provisions of the Contract a pre-condition to the pursuit of a claim for an extension of time and/or additional payment under the Contract?"
48.
Preliminary Issue No. 8 was: "What principles apply in relation to the use of currencies under the Contract? Does the Contract c
49.
onstrain the currency of payment for claims under the Contract or for claims for damages for breach of the Contract?"
50.
The Arbitral Tribunal decided that:

a. In relation to Preliminary Issues No. 3:

• In respect of the items referred to in paragraphs 3.0, 4.0, 5.0, 6.0, 8.0 and 9.10 of the MoU, the MoU is not a "stand alone" document and any claims under the terms of the MoU in respect of the matters set out in such paragraphs are subject to the notice, particularisation and dispute resolution provisions of the Contract.

• Clause 2 of the MoU and paragraphs 1, 2 and 3 of the DoS are not "stand alone" agreements and any claims made pursuant to Clause 2 of the MoU and/or paragraphs 1, 2 and 3 of the DoS are subject to the notice, particularisation and disputes resolution provisions of the Contract.

b. In relation to Preliminary Issue No. 6: compliance with the contractual notification provisions of Sub-Clause 20.1 of the Contract is a precondition to the pursuit of a claim for an extension of time or additional payment under the Contract.

c. In relation to Preliminary Issue No. 8:

• Any sums due under the terms of the Contract are payable in either US Dollars or Tanzanian Shillings.

d. The Arbitral Tribunal declined to decide as a Preliminary Issue whether the Contract constrains the currency of payment in respect of a claim for damages for breach of the Contract.

The Fact Witnesses

51.
The Claimant’s witnesses of fact are:

a. Tetsuo Sakamoto who was the Project Manager for the Dodoma-Manyoni Road Project at Konoike. Mr Sakamoto filed five witness statements dated 17 May 2013, 13 June 2014, 8 October 2014, 10 December 2014, 18 December 2014.

b. Takashi Yamashita who is the General Manager of the Kenya Office at Konoike. Mr Yamashita filed three witness statements dated 15 May 2013, 11 June 2014, and 26 November 2014.

c. Hajime Nagaishi who is the Operating Officer of the International Division at Konoike. Mr Nagaishi filed two witness statements dated 14 May 2013 and 13 June 2014.

d. Jeffrey McCormick who was a consultant for Konoike in relation to the Dodoma-Manyoni Road Project, Mr McCormick filed two witness statements dated 13 May 2013 and 10 June 2014.

e. Yasutaka Mizobata who was an Operations Officer of the Corporate Planning Department and the International Operation of Konoike. Mr Mizobata filed one witness statement dated 8 May 2013.

f. Akihiko Koizumi who is Section Manager of the Administration Department for the International Division of Konoike. Mr Koizumi filed one witness statement dated 8 May 2013.

g. Nobuo Okada who was a manager in the Business Department of the International Division of Konoike, Mr Okada filed one witness statement dated 12 June 2014.

52.
The Respondents’ witnesses of fact are:

a. Jotham Ntensibe who was Highway Engineer and subsequently Resident Engineer for the Dodoma-Manyoni Road Project. Mr Ntensibe filed three witness statements dated 2 December 2013, 12 September 2014 and 19 December 2014.

b. Sirilius Matupa who was Principal State Attorney in the Attorney General’s Chambers. Mr Matupa filed one witness statement dated 5 December 2013.

Expert witnesses, their reports and joint statements

53.
The Claimant’s expert witnesses and reports are as follows:

a. David Richards submitted:

• First report in relation to delay issues dated 1 May 2013 [D1/1.1/1];

• Side report on delay issues dated 25 October 2014 [D5/5.1/1];

• Second report in relation to prolongation and disruption issues dated 9 May 2013 [D1/1.2/1];

• Side report on disruption issues dated 31 October 2014 [D5/5.2/1];

• Side report on prolongation and disruption valuation dated 16 November 2014 [D5/5.3/1];

• Revised side report on prolongation and disruption valuation dated 19 December 2014 [D6/15/1];

• Third report concerning pre-Addendum disruption issues dated 17 April 2014 [D1/1.3/1];

b. Tim Tapper submitted a report on quantum dated 20 June 2013 [D2/2.1/1]. Mr Tapper was replaced by Ms Joanne Prior as the Claimant’s quantum expert,

c. Joanne Prior submitted:

• First report on quantum dated 17 April 2014 [D2/2.3/1];

• First side report on quantum dated 13 November 2014 [D5/5.4/1];

• Third side report on quantum dated 24 December 2014 [D6/2/1].

d. Nigel Penfold submitted:

• Report on technical defects dated 12 June 2014 [D4/4.1/1];

• Side report on technical defects dated 13 November 2014 [D5/5.5/1].

54.
The Respondents’ expert witnesses and reports are as follows:

a. Wendy MacLaughlin submitted:

• Report on delay and disruption dated 28 February 2014 [D2/2.2.1/1];

• Side report on delay dated 24 October 2014 [D5/5.6/1];

• Side report on disruption dated 30 October 2014 [D5/5.7/1].

b. David Kyte submitted:

• First side report on quantum dated 19 November 2014 [D5/5.8/1];

• Second side report on quantum dated 22 December 2014 [D6/14/1].

c. Christian Busch submitted:

• Report on technical defects dated 29 September 2014 [D4A/1/1];

• Side report on technical defects dated 12 November 2014 [D5/5.9/1].

55.
The experts submitted the following joint reports:

a. Joint report on delay by David Richards and Wendy MacLaughlin dated 10 October 2014 [D3/3.1/1];

b. Joint report on disruption by David Richards and Wendy MacLaughlin dated 11 October 2014 [D3/3.2/1];

c. List of Agreed Issues on quantum by Joanne Prior and David Kyte dated 17 October 2014 [D3/3.3/1];

d. Joint statement on quantum issues by Joanne Prior and David Kyte dated 17 December 2014 [D6/1/1];

e. Schedule of Agreement and Disagreement concerning prolongation and disruption valuation issues by David Richards and David Kyte dated 7 November 2014 [D3/3.4/1];

f. Further joint report concerning prolongation and disruption valuation issues by David Richards and David Kyte dated 22 December 2014 [D6/16/1];

g. Joint report on technical defects by Nigel Penfold and Christian Busch dated 4 November 2014 [D4/4.2/1].

Tanzanian law

56.
As set out above, the governing law of the Contract is the law of the Republic of Tanzania.
57.
The key provisions of the law of Tanzania relied upon by the Parties include the following:

a. Law of Contract Act, sections 20(1), 21, 23, 59, 60, 73, 73(2);

b. Evidence Act, section 115;

c. Public Procurement Act 2004, section 87;

d. Judicature and Application of Laws Act, section 2(3);

e. Public Procurement (Goods, Works, Non-Consultant Services and Disposal of Public Assets by Tender) Regulations 2005, sections 2(1), 23(1), 44, 118(3), 123(3).

Parties’ List of Issues

58.
The Respondents provided a list of issues to the Tribunal, upon which the Claimant has commented, stating whether the issue as framed is agreed or not agreed and providing an alternative issue where it is not agreed ("the List of Issues").
59.
The Tribunal has had regard to this List of Issues and the corresponding comments, in addition to the Claimant’s list of issues provided at Appendix A to the CCS.

SECTION II: THE BACKGROUND TO THE DISPUTES

Introduction

1.
In considering the various heads of claim, it is important to put into context the history of dispute between the Parties regarding payment for the Contract Works.
2.
In this Section, the Tribunal summarises the key events and claims in relation to:

a. Tender;

b. Initial problems and commencement of First Suspension;

c. Negotiations;

d. Re-mobilisation;

e. Second Suspension;

f. Third Suspension;

g. Termination;

h. Events subsequent to termination.

3.
This Section is not intended to set out an exhaustive list of events.

Tender

4.
On 15 November 2002, the Tanzanian Ministry of Works invited tenders for the design and construction of the upgrade of the Dodoma-Manyoni Road ("the Road") (E1/1/1]. The Tender Documents were contained in two Volumes. Volume 1 comprised Sections I-V and Volume 2 comprised Sections VI and VII [E1/2/11]. Section V of Volume 1 contained amendments to the standard FIDIC yellow book form of contract [El/5/75]. Section III of Volume 1 contained a Schedule of Cost and Percentage of Listed Elements which stated a sum of TZS 1.5 billion as the Provisional Sum to cover Price Escalation [E1/3/41]. The Contractor was also to designate the currencies and proportions in which it wanted the Contract Amount to be paid [E1/3/40].
5.
A mandatory pre-bid meeting took place in Dar es Salaam at the Ministry of Works on 25 November 2002 [G1/1/1]. The meeting dealt with both the Dodoma-Manyoni Road and the Manyoni-Singida project. By paragraph 18.4 of Section II of the Tender, "any modification of the bidding documents...that may become necessary as a result of the pre-bid meeting shall be made by the Employer exclusively through the issue of an Addendum pursuant to Clause 11 and not through the minutes of the pre-bid meeting; however, such an Addendum may be prepared and transmitted together with the above Minutes." [G1/2/19]
6.
The Minutes of the Pre-Bid Meeting state at Q16:

"Q Does sub-clause 13.8 of the Conditions of Particular Application mean that there will be no adjustment for change in Price in respect of the foreign currency element of the contract amount?

A That is correct" [G1/1/6]

7.
On 15 January 2003, the Claimant sent its submission letter in respect of the Road, enclosing the relevant bid documents [E2/4/248] including Form of Tender [E2/4/249] and the Appendix to Tender including Schedule of Costs with Contingency amounts to cover Price Escalation [E2/5/255]. The Minutes of the Pre-Bid Meeting were attached to the Contractor’s Proposals [E1/11/220].
8.
On 7 February 2003, the Ministry of Works issued a Letter of Intent to the Claimant confirming that its tender had been successful subject to the Claimant answering certain queries [E2/3/232]. On 14 March 2003, the Employer sent its Letter of Acceptance to the Claimant [E2/2/228] which stated the contract sum of TZS 63,887,999,940.80 payable in TZS 15,599,521,051.20 and USD 48,883,365.00. The Form of Agreement was signed on 21 March 2003 [E2/1/224].
9.
The Contract was an amended form of the F1D1C Yellow Book design and build contract ("the Contract"). The Employer was the Ministry of Works and Roughton International was named as the Engineer [E2/2/228].
10.
The Contract provided for the Lump Sum Contract Price of TZS 63,887,999,940.80 (inclusive of VAT) payable in the following proportions: 24.4% in TZS (15,899,521,051.20) and 75.6% in USD (48,883,365.00). [E2/1/224]. A breakdown of this figure was provided by the Claimant in the completed version of the Schedule of Cost and Percentage of Listed Elements [E2/5/259]. The Commencement Date for the Contract was 1 April 2003, and the Time for Completion was 29 September 2006. The rate of exchange was TZS 987.8305 to USD 1.00 [E2/1/225]. The Accepted Contract Amount was defined at Sub-Clause 1.1.4.1 as "the amount accepted in the Letter of Acceptance for the execution and completion of the Works and the remedying of any defects." [E3/1/606]. The Letter of Acceptance referred to a contract sum of TZS 63,887,999,940.80 payable in the local and foreign currency proportions set out above [E2/2/228].

Initial Problems and Commencement of First Suspension

Variations

11.
In April 2003, the design work commenced in addition to some preliminary work on site. In 2003 and 2004, the Employer instructed a number of variations to the design of the Road, predominantly in relation to the vertical and horizontal alignment [G1/25/119]. The Claimant contends that the effect of these changes was to almost double the quantity of earthworks under the Contract. The Engineer also instructed changes to the design of the C1 and C2 sub-base in respect of the thickness of the layers and cement content
12.
The Claimant’s detailed design was not completed and approved until December 2004, 15 months later than planned [G1/16/55] [G1/18/57] [G1/19/58]. Commencement and progress of bulk earthworks was accordingly delayed.
13.
By December 2005, the Claimant had submitted claims for extensions of time and additional payment of TZS 13,157,710,069 and USD 16,568,911.98 arising from the variations [G1/16/55] [G1/18/57]. This was followed by a claim in March 2006 for additional payment of TZS 918,783,689 and USD 4,485,246.81 for Variations to CI/C2.

Price Escalation on foreign currency and delayed payment of IPC 15

14.
By its application for payment of IPC 12 of 16 December 2005, the Claimant submitted an application for payment of Price Escalation due on IPCs 7-11 [G1/26/159]. By letter of 9 March 2006, the Engineer wrote to the Claimant calculating Price Escalation on the amount payable in local currency namely, TZS only [G1/40/177]. The Claimant responded on 9 March 2005 stating that it did not agree that Price Escalation was due only on the Tanzanian shilling element [G1/41/179].
15.
On 23 March 2006, the Claimant gave the Employer notice of its intention to refer the Price Escalation dispute to the DAB [G1/42/180].
16.
Throughout this period, the Claimant continued to apply for Price Escalation on amounts payable in both the local and foreign currency amounts in its applications for IPCs 14 and 15 on 10 April and 3 June 2006 respectively. The Engineer amended those applications to allow for Price Escalation on the amount payable in local currency only [G1/45/185] [G1/47/190].
17.
By its decision of 5 July 2006, the DAB decided that Price Escalation was payable only on the local currency element [G1/52/207]. On 10 July 2006, the Claimant gave the Employer notice of dissatisfaction and required an attempt at amicable settlement pursuant to Sub-Clause 20.5 [G1/52/237].
18.
The Claimant wrote to the Engineer on 14 July 2006 giving notice that it was funding the Project by means of credit supplied from Japan in the amount of TZS 33.8 billion [G1/54/238]. On 26 July 2006, the Claimant requested meetings with the MoID and Prime Minister to appeal for urgent, high-level intervention [G1/56/241].
19.
The Claimant wrote to the MoID on 3 August 2006 noting that IPC 15 should have been paid in full by 1 August 2009. As at the date of the Claimant’s letter, USD 1,278,530.00 remained outstanding [G1/60/309].
20.
The Cabinet informed the Claimant on 7 August 2006 that the Government could not afford to pay Price Escalation as requested and refused to intervene [G1/63/313].
21.
On 14 August 2006 the Claimant served a Sub-Clause 16.1 notice of suspension following the non-payment of IPC 15 [G1/66/318].
22.
On 31 August 2006, Roughton wrote to the Claimant noting that the Claimant had threatened to suspend from 5 September 2006, but that it had observed on site that the Claimant’s progress has substantially dropped prior to this date. Roughton stated that it was concerned that the Claimant’s reduction in progress was not contractually justified.
23.
On 5 September 2006, the Claimant wrote to the Employer recording its entitlement to suspend and giving notice under Sub-Clause 20.1 [G1/72/375]. The Claimant chose to slow down its works rather than suspend completely ("the First Suspension").
24.
On 8 September 2006, the Claimant received a payment of USD 1,252,808.69 which cleared much of the underpaid amount on IPC 15, leaving a deficit of USD 25,721.98 [G1/73/376].
25.
The Minutes of the Site Progress Meeting No 39 on 14 September 2006 note that the Claimant confirmed that IPC 15 had been paid on 8 September 2006 [G1/84/394].
26.
IPC 16 was certified on 20 October 2006 in the sum of TZS 919,364,404.18 and USD 2,379,355.87 [G1/86/412]. Payments were received of TZS 919,364,408.20 on 8 November 2006, USD 1,458,399.75 on 10 November 2006 and USD 948,633.10 on 22 December 2008 [H1/1.55/36]. This amounted to an overpayment of IPC 16 by USD 27,721.98 [G3/183/1165].
27.
The Claimant and the Engineer allocated the totality of these payments to IPC 16 as recorded in the Claimant and the Engineer’s respective Monthly Progress Reports to the Employer [H1/1.55/36] [H2/1.48/20]. Following payment of IPC 16, the deficit on IPC 15 was recorded as reduced to USD 18,922.50.

Negotiations

28.
On 18 October 2006, the Claimant made a request for arbitration in respect of the Price Escalation dispute [G1/85/396]. On 27 October 2006, the Claimant gave the Employer notice of its intention to refer to a DAB the variations dispute resulting from the Engineer’s instructions on the Contractor’s proposed design given during the design review process [G1/87/414].
29.
On 2 November 2006, there was a meeting between Dr Konoike and the President of Tanzania [G1/89/485] followed by a meeting at ministerial level [G1/90/486].
30.
On 10 November 2006, the MoID informed Roughton that a team of seven officials ("the GST") appointed by the Government to review the Project would visit on 12 November 2006 [G1/92/494]. Discussions were held during this visit [G1/93/495] in a meeting chaired by Mr Matupa.
31.
This was followed by another meeting on 28 November 2006 [G1/97/509] in which the possibility of agreeing an amicable settlement was canvassed by the MoID. The Claimant was requested to suspend its arbitration in respect of Price Escalation but refused to do so [G1/97/509].
32.
On 11 December 2006, Mr Chambo (the Deputy Permanent Secretary of the MoID) informed the Claimant that a negotiating team ("GNT") had been set up for the purpose of reaching an amicable settlement [G1/100/515]. On 14 December 2006, the Claimant submitted its paper entitled "Minimum Position for Negotiations - Without Prejudice" [G2/101/517]. Mr Mrema was initially part of the Claimant’s team prior to joining Tanroads at 11 June 2007. The Claimant’s position paper summarised the problems that the Claimant had encountered on the Project, including allegations concerning the Employer and the Engineer’s alleged lack of understanding of the concepts of design and build and lump sum contracts, such that they mistakenly concluded that they could instruct any changes of additional works they liked without having to pay for them. The Claimant also complained that the Employer failed to recognise its entitlement to Price Escalation on the foreign currency element of the contract sum whilst paying some other contractors for such sums.
33.
The paper also set out the Claimant’s minimum position for a negotiated settlement which included:

a. An extension of time of 36 months if the administration of the Contract on the Employer’s side remained the same, or 24 months if it was changed together with time-related costs with a minimum total of TZS 9.9 billion.

b. Payment of Price Escalation on the full contract amount.

c. Variations to the work to be paid in full.

d. Additional design costs of TZS 1,813,008,129.

e. TZS 14.6 billion for disruption caused by loss of productivity. [G2/102/525]

34.
Negotiations took place during a series of meetings in December 2006 and January 2007. The negotiating process and the resulting Minutes of Meeting, Memorandum of Understanding and Addendum are discussed in the next Section III but summarised below.
35.
The First Meeting was held on 19 December 2006, and it was agreed that the first item to be discussed would be Price Escalation [G2/102/645].
36.
This was dealt with at the Second Meeting on 20 December 2006 [G2/104/667].
37.
The Third Meeting took place on 21 and 27 December 2006 [G2/105/677]. During this meeting, the Parties went through in detail the 13 Variation claims put forward by the Claimant.
38.
Meetings resumed with the Fourth Meeting on 3 January 2007 [G2/107/724], during which it was agreed that the ICC arbitration on Price Escalation would be suspended pending the outcome of the negotiations.
39.
The Fifth, Sixth and Seventh Meetings took place on 4, 5 and 8 January respectively. [G2/107/726] [G2/107/728]
40.
The Eighth Meeting took place on 9 January 2007, during which:

a. The Claimant offered to reduce its disruption claim to TZS 10 billion whereas the Employer put forward a figure of TZS 5 billion [G2/107/730].

b. The Claimant offered to accept a 24 month extension of time whereas the Employer offered 19 months with a possible further 5 months [G2/107/730].

c. It was agreed that the Claimant would put forward a proposal for sectional completion at paragraph 25.6 [G2/107/729].

d. The Employer agreed to expedite the payment of Price Escalation because it was a matter that could be dealt with as part of the existing Contract without the need to modify it by Addendum [G2/107/729].

41.
The Ninth and final meeting took place on 10 January 2007 [G2/107/730]. It was agreed at paragraph 27.4 that payment of Price Escalation would be made on IPCs 7-16 upon which Price Escalation on the local currency portion had already been certified and paid [G2/107/731] ("the Outstanding Amount").
42.
On 15 January 2007, the Claimant submitted its application for IPC 17 which included the Outstanding Amount [G2/110/766]. This was rejected by Roughton by a letter of the same date [G2/111/770] requesting that the IPC be resubmitted without the "disputed escalation". The Claimant did so on 17 January 2007 [G2/112/771].
43.
The Memorandum of Understanding was signed on 30 January 2007 [G2/118/811].
44.
On 3 February 2007, there was a meeting between the MoID and the Claimant [G2/122/855]. The Claimant stated that, in order to remobilise works and equipment, it required the Employer to at least effect payment of Price Escalation while waiting for completion of arrangements for the payment of the remaining claims as agreed in the MoU. The Minister confirmed that an addendum would be prepared and ratified by the Attorney General’s office, passed through Ministerial Tender Board and once agreed and signed by both Parties, the addendum would become effective.
45.
The Claimant wrote to the Employer on 6 February 2007 [G2/123/860] and 19 February 2007 [G2/124/861] requesting payment of the Outstanding Amount.
46.
On 5 March 2007, Roughton was informed about the agreement in relation to Price Escalation [G2/126/909]. On 19 March 2007, Roughton certified payment of the Outstanding Amount in IPC 18 [G2/132/958].
47.
The Addendum (incorporating the MoU and Minutes of Meeting) was signed on 14 March 2007 [G2/130/915]. The following day, the Parties executed a Deed of Settlement [G2/131/955] in order to conclude the arbitration that the Claimant had commenced in respect of Price Escalation.

Re-mobilisation

48.
On 18 and 19 March 2007, the Employer paid TZS 719,219,158.41 and USD 1,540,721,154 respectively in respect of IPC 17, leaving a deficit of USD 20,768.37 on 29 March 2007 [G3/183/1165].
49.
As a result of this payment, the Claimant resumed some work but did not fully remobilise.
50.
On 1 May 2007, the Claimant attended a meeting with Mr Chambo at which it was told that the MoID was not sure how much could be paid from the remaining budget but that it was planned to pay as much as possible against the certified amount. [G2/139/973] At this time, Black & Veatch replaced Roughton as Engineer under the Contract [G2/155/1000].
51.
Actual earthworks resumed on 2 May 2007. The Outstanding Amount was then paid in four instalments between 25 May and 23 July 2007 [G2/153/997] [G2/161/1081] [G2/168/1070] [G3/183/1200].
52.
On 14 September 2007 the Claimant submitted its claim for an extension of time and additional costs arising from the First Suspension (Claim 6) [G3/200/1239]. A draft Determination was issued on 8 November 2007 awarding the Claimant a 42 day extension of time for completion, 15 days extension for Section 3 and additional payment of TZS 520,543,451.04 [G3/232/1336].
53.
Black & Veatch then wrote to the Employer on 27 February 2008 seeking approval of this determination [G3/318/1510] but by letter dated 10 March 2008, approval was refused by Tanroads on the basis that the determination was "unwarranted and appears mischievous" [G3/324/1558]. On 18 June 2008, Black & Veatch wrote to the Claimant advising that the Engineer determined that by virtue of clause 3.5 it was prohibited from implementing its determination [G4/407/1772].

Second Suspension

IPC 19

54.
On 20 April 2007, the Claimant submitted its application for IPC 19, which included the payments in respect of Pre-Addendum Disruption, prolongation and Additional Design (totalling TZS 21,721,102,945) [G2/135/967] The Engineer stated on 11 May 2007 that he was unable to certify them because of a lack of understanding of the background to the Addendum [G2/145/985]. The Claimant served a Sub-Clause 16.1 notice in respect of the failure to certify IPC 19 on 21 May 2007 [G2/150/992].
55.
IPC 19 was resubmitted on 16 June 2007 [G2/156/1006]. It was certified by Black & Veatch on 26 June 2007 [G2/160/1016] and due for payment on 21 August 2007. The Claimant gave a Sub-Clause 16.1 notice in respect of the resubmitted IPC 19 on 22 August 2007 [G3/189/1217] on the basis that a sum of USD 13,482 million remained outstanding at this point. A further payment was made on 6 September 2007 [G3/193/1221], leaving USD 2.4 million remaining outstanding.
56.
On 20 September 2007 the Engineer wrote to the Claimant asking for substantiation of the Pre-Addendum Disruption which formed part of IPC 19 [G3/203/1247]. The Claimant responded stating that, under the terms of the Addendum, the Parties had agreed that Pre-Addendum Disruption had been adequately substantiated [G3/204/1248]. By a letter dated 1 November 2007, the Engineer stated that substantiation was required, failing which provisional payment made in respect of Pre-Addendum Disruption would be deducted from future payments [G3/227/1328].
57.
On 2 November 2007, the Claimant received USD 2.2 million towards IPC 19 together with payment of the outstanding sums due on IPCs 1-18 [G3/231/1334].
58.
The remaining amount on IPC 19 of USD 182,000 was paid on 29 May 2008 [G4/393/1715].

IPC 20

59.
The Claimant applied for IPC 20 on 28 April 2007, which included payment for the varied pre-Addendum works carried out between 2003 and 2006 subject to measurement under the Addendum [G2/136/968]. The application was returned by Black & Veatch on 4 July 2007 on the grounds that the re-measure would need to be carried out jointly [G2/166/1026].
60.
The Engineer suggested to the Claimant at Technical Meeting 3 on 6 August 2007 that it should submit its application and claim an on-account payment for increased quantities based pro rata on the completed length of the road. A supplemental application for payment on a remeasurement basis could then be submitted once that remeasurement had been undertaken [G2/177/1089]. The Claimant re-submitted IPC 20 on 16 August 2007 in accordance with this suggestion [G3/182/1108].
61.
The revised IPC 20 was certified on 7 September 2007 [G3/196/1226]. The Employer refused to pay this and returned it to the Engineer on 9 October 2007 [G3/214/1277]. On 17 October 2007, the Engineer wrote to the Claimant attaching the MoID’s letter and asking for the application to be re-submitted based on actual work done and associated escalation costs only [G3/218/1284].
62.
The Claimant gave notice under Sub-Clause 16.1 in respect of IPC 20 by its letter of 6 November 2007 [G3/230/1333].
63.
Meanwhile:

a. IPC 21 was certified on 15 December 2007 [G3/266/1407]. This was paid in full by two payments on 16 and 22 January 2008 [H1/1.13/70].

b. IPC 22 was certified on 15 January 2008 [G3/285/1437]. This IPC was cleared by three payments on 18, 20 and 26 February 2008 [G3/312/1497] [G3/316/1507] [H2/1.56/57].

64.
By January 2008, there was approximately USD 128,000 outstanding in respect of IPC 19 [M1/1.13/70] and TZS 6 billion and USD 19 million outstanding on IPC 20 [H2/1.55/26].
65.
The Claimant wrote to Tanroads on 23 January 2008 requesting a top-level meeting regarding its financial problems. It stated that construction work would be suspended unless payment was made immediately [G3/291/1452].

IPC 20A, IPC 23

66.
A meeting took place between Tanroads, the Engineer and the Claimant on 12 February 2008 [G3/302/1475]. It was agreed that the Claimant would re-submit IPC 20 as IPC 20A excluding the re-measured works. These works would then be submitted in later IPCs once the re-measurement process had been undertaken.
67.
IPC 20A was re-submitted by the Claimant on 15 February 2008 [G3/307/1489] and certified by the Engineer on 19 February 2008 [G3/310/1493].
68.
IPC 23 was submitted on 23 February 2008.
69.
The Claimant wrote to Tanroads on 26 March 2008 chasing payment of IPC 20A and reiterating that the Works would be suspended again if payment was not made. The Claimant also pointed out that the Sub-Clause 16.1 notice given on 6 November 2007 was still valid in respect of IPC 20 [G3/330/1569].
70.
On 15 April 2008, Dr Konoike wrote to the President of Tanzania explaining the position and seeking assistance [G3/347/1594].
71.
On 16 April 2008, the Claimant submitted a suspension notice for non-payment of IPC 20A without prejudice to its primary position that the notice previously given on 6 November 2007 in respect of IPC 20 applied [G3/349/1597].
72.
On 19 April 2008, the Claimant suspended the earthwork and pavement works for a second time [G3/353/1609] and structure and ancillary works on 29 April 2008 [G3/357/1614].
73.
A Sub-Clause 16.1 notice was submitted on 21 April 2008 in respect of IPC 23 [G3/356/1613].
74.
By the end of April 2008 a further payment of TZS 8 billion was received by cheque referenced to IPCs 20A and 23 [G3/362/1623]. The Claimant confirmed in its letter dated 1 May 2008 its understanding that this payment covered the local currency portions of IPC 20A, 23 and partially paid the foreign currency element of IPC 20A. Approximately USD 22.5 million remained outstanding on IPCs 19, 20A and 23. The Claimant requested that the Engineer inform it of any misunderstanding in this regard [G3/362/1622].
75.
By letter dated 1 May 2008, the Claimant gave notice pursuant to Sub-Clause 20.1 of its claim for an extension of time and costs pursuant to Sub-Clauses 8.4 and 20.1 resulting from delayed payment of IPC 20 [G3/361/1621]. A Sub-Clause 20.1 notice was issued in respect of IPC 23 on 24 May 2008.
76.
On 5 May 2008, Tanroads wrote in response to the suspension of the Works stating that because of the above payments the Claimant was advised to proceed with the Works as planned [G3/366/1628].
77.
On 15 May 2008, the President of Tanzania’s office wrote to the Claimant expressing concern regarding the financial difficulties it faced and expressed a commitment to pay a further USD 10 million in June 2008 with any remaining sums in July 2008. The Clamant was requested to proceed with the works as scheduled to enable timely completion of the Project [G3/373/1638].
78.
A high-level meeting took place on 23 May 2008 in Tokyo between the Permanent Secretary Chambo and Dr Konoike. The former agreed that a payment schedule would be prepared and submitted to Dr Konoike. It was acknowledged by Mr Chambo that it was no longer feasible to expect the Project to be completed by 29 September 2008 and the Parties would need to agree an extension of time [G3/387/1702].
79.
Mr Chambo sent the Claimant a payment schedule on 7 June 2008 showing the proposed dates for payment [G4/397/1731]. On 16 June 2008, Dr Konoike asked for confirmation that the Respondents would not fail to execute payments due after IPC 23, which were not included on the schedule [G4/402/1750]. The Deputy Permanent Secretary responded assuring Dr Konoike that the Government would pay IPC 24 in July 2008 [G4/403/1751].
80.
Payment of USD 9 million was made on 19 June 2008 in accordance with the agreed schedule [G3/380/1694]. The Claimant recommenced the Works on 21 June 2008 [G4/404/1752] with full remobilisation on 12 July 2008. No further payment of USD 10.5 million was in fact made in July, contrary to the payment schedule provided by Mr Chambo on 7 June 2008. On 16 September 2008, IPC 20A was paid in full. IPC 23 was eventually paid in full on 22 September 2008.

Third Suspension

81.
IPC 24 was certified on 16 May 2008. A Sub-Clause 16.1 notice was given in respect of IPC 24 on 5 August 2008 [G4/430/1836].
82.
The Claimant applied for IPC 25 on 17 July 2008 [G4/424/1820] which was certified by the Engineer on 18 August 2008. This certificate included sums due for re-measured works carried out between April and June 2008.
83.
On 25 August 2008, the Claimant informed Tanroads that its financial position had become critical and it could not continue the Works further and would be suspending on 27 August 2008 [G4/443/1859].
84.
On 2 September 2008, the Respondents made payment of the local currency portion of IPC 24 [G4/447/1865].
85.
On 16 September 2008, the Respondents made a further payment of USD 10 million covering the outstanding foreign currency portion of IPC 20A and part of the foreign currency element of IPC 23.
86.
On 19 September 2008, the Claimant submitted its application for IPC 26 in the sum of TZS 2,426,600,697.00 and USD 8,009,220,37 for work done during July and August together with Price Escalation [G4/460/1917].
87.
On 20 September 2008, the Claimant submitted a consolidated claim for an extension of time and additional payment by reason of the First Suspension (Claim 6), the cement shortage (Claim 7), the cholera outbreak (Claim 8) and the Second Suspension (Claim 13) [G4/463/1927].
88.
On 22 September 2008, the Claimant received a further payment of USD 4 million [G4/464/1930]. This was the final payment received on the Project.
89.
The Claimant issued a notice under Sub-Clause 16.1 in respect of IPC 25 on 15 October 2008 [G4/498/2005].
90.
On 25 October 2008, Mr Lear of Black & Veatch wrote to the Claimant informing it that the Employer had advised that it was not satisfied with the various explanations for the previous certifications and accordingly they required the reversal of these payments until such time as the latter had been resolved. Amounts would be deducted from IPC 26 which did not meet the minimum amount required for certification. [G4/515/2052]. On the same day, Mr Ntensibe wrote to Mr Mrema stating that Black & Veatch did not agree with Tanroads’ position on the issue [H2/1.65/89].
91.
On 1 November 2008, the Claimant gave notice of entitlement to suspend for the non-certification of IPC 26, stating that Sub-Clause 14.6 did not permit the Employer to instruct or require the Engineer to adjust or deduct on the ground of dissatisfaction with any payment of any amount certified [G4/525/2072].
92.
On 3 November 2008, the Claimant gave notice that it would be suspending works from 6 November 2008 by reason of the Employer’s failure to pay IPCs 24 and 25 [G4/527/2084] which it confirmed by letter of 6 November 2008 [G4/535/2097].
93.
The Engineer wrote to the Claimant on 5 November 2008 confirming that he remained constrained by the Employer’s instructions [G4/531/2089].
94.
The minutes of the Site Progress Meeting on 13 November 2008 record that the Claimant stated that even if all certified amounts for IPC 24 and 25 were paid, it would not resume working [A2/19/6].
95.
The Claimant gave notice of Claim 22 in respect of the Third Suspension on 14 and 17 November 2008 [G4/546/2116] [G4/548/2121].
96.
On 24 November 2008, the Claimant submitted its application for IPC 27 for works carried out in September and October 2008 together with Price Escalation [G4/554/2131]. This was never certified by the Engineer.

Termination

97.
On 2 December 2008, the Claimant issued a notice of entitlement to terminate [G4/559/2142]. In response, Mr Chambo wrote to the Claimant on 4 December 2008 calling a meeting for the following day to discuss the situation [G4/560/2145]. This meeting took place on 5 December 2008 [G4/561/2146]. The Claimant was asked to confirm whether it would recommence the Works if IPCs 24 and 25 were paid but not IPC 26. The Claimant replied that the position would not change and the suspension would continue.
98.
On 12 December 2008, the Claimant wrote to Mr Chambo stating that it was open to the possibility of participating in amicable settlement negotiations [G4/567/2156]. Mr Chambo responded on 15 December 2008 agreeing to convene a meeting to resolve the differences which had arisen including payment of IPCs 24, 25 and 26 on 22 December 2008 [G4/570/2163].
99.
On 15 December 2008, Tanroads convened an Emergency Meeting at which they approved the procurement of a contractor to complete the remaining works and recommended that the Claimant’s subcontractor, Estim, carry out this work [G4/579/2183].
100.
In another letter of 15 December 2008, Tanroads outlined its position that the Claimant had given it no choice but to complete the works by other means and was required after the elapse of 14 days to proceed as per Sub-Clause 16.3 to cease further work, hand over plant and materials for which it had received payment and remove all their goods from site [G4/571/2164].
101.
Tanroads wrote to the Claimant on 16 December 2008 stating that the notice of termination would take effect from today’s date in accordance with Sub- Clause 16.2 [G4/577/2180].
102.
The Claimant wrote on 16 December 2008 clarifying that the notice of 2 December 2008 did not mean that the Contract was automatically terminated at the end of the 14 day period [G4/578/2182]. Tanroads reiterated on the same date that the notice was a notice of termination [G4/579/2183].
103.
The Engineer wrote to the Claimant on 16 December 2008 giving notice that the 14 day notice of entitlement to terminate had ended that day and asking whether the Claimant now intended to terminate the Contract [G4/580/2185]. He also wrote to Mr Mrema of Tanroads stating that Tanroads’ planned retendering of the Contract would be tantamount to repudiation of the Contract which would place Tanroads in a very vulnerable contractual position [S3/1.1].
104.
On 17 December 2008, the Claimant wrote in response to Tanroads’ two letters of 16 December 2008 stating that the notice was a notice of entitlement to terminate and it considered that Tanroads taking final steps to appoint an alternative contractor amounted to a repudiation of the Contract. [G4/583/2189]
105.
On 20 December 2008, Black & Veatch wrote to the Claimant setting out the sums that would have been due under IPC 27 and the deductions that had been made and confirming that, as a result, IPC 27 did not meet the minimum amount required for certification [G4/591/2213].
106.
Three days of meetings took place on 22, 23 and 24 December 2008 chaired by Mr Chambo [G4/592/2215] [G4/593/2219] [G4/594/2226]. It was agreed that there would be another meeting sometime in January 2009 [G4/594/2229]
107.
On 5 January 2009, Tanroads wrote to the Claimant stating that it should be vacating the site so as to allow Tanroads to pave the way for the new contractor by the end of January [G4/601/2246].
108.
Dr Konoike visited Tanzania in late February 2009 and, at a number of meetings with Mr Chambo of MoID held on 19 and 21 February 2009, advised that the Claimant would resume work if outstanding payments for IPCs 24-27 were made [G4/633/2298] [G4/634/2301].
109.
By letter dated 5 March 2009, Tanroads wrote to the Claimant advising that it had entered into a replacement contract with Estim on 27 February 2009 and requesting the Claimant to leave the site immediately [G5/640/2310].
110.
The Claimant wrote to Tanroads on 11 March 2009 stating that Tanroads’ actions amount to a repudiatory breach and the Claimant gave notice of its election to terminate the Contract under Sub-Clause 16.2 with immediate effect [G5/645/2325].

Events subsequent to termination

111.
The Claimant transferred the majority of its demobilised plant and equipment to the Zuzu storage yard near Dodoma. Thereafter, during April, May and June 2009, the Claimant sold this plant and equipment, predominantly to Highlands Estates and Estim.
112.
On 26 June 2009, the Claimant submitted its application/claim for final payment following termination [G5/669/2451].
113.
On 10 February 2010, the Claimant received a response from Mr Ntensibe of Black and Veach assessing the amounts due under Bills 1-6 and Variations. He did not deal with the termination claims, on the basis that this issue was under dispute [G5/717/2607].

Summary of Claims

114.
As a result of the above, the Claimant asserts that at the date of termination, it had completed 92% of the Works (approximately 110km of the Road) but had been paid only 71% of the agreed Adjusted Contract Price which took no account of its claims.
115.
Consequently, in outline, the Claimant now seeks:

a. The balance of payments due to it for work it has completed, including:

• The sums agreed in the Addendum for pre-Addendum disruption, additional design costs and price escalation;

• Various disputed bill items and variations.

b. Delay and disruption claims arising from the First, Second and Third Suspensions as outlined above (in addition to further claims during this period resulting from (i) national cement shortage; (ii) emergency repair works; (iii) a cholera outbreak; (iv) waterlogged ground; (v) exceptional rainfall).

c. Claims arising from wrongful termination of the Contract, including:

• Costs of maintaining the Performance Security;

• Losses arising from currency devaluation;

• Loss of opportunity to undertake three further contracts as a consequence of financial difficulties suffered by the Claimant caused by the Respondents’ breaches of contract;

• VAT;

• Financing charges and interest;

• Costs of DAB proceedings, amicable settlement and the arbitration itself.

116.
The Respondents contend that the Claimant’s claims should be dismissed in their entirety and seek:

a. That the Tribunal open up, review and revise IPCs 15 to 25 to exclude sums that were not due to the Claimant pursuant to the Contract.

b. Recovery of sums allegedly overpaid to the Claimant in relation to IPCs 15 to 25, together with pre- and post-award compound interest at an appropriate rate.

c. A declaration that the Claimant failed to complete the Works by the time for Completion.

d. A declaration that Tanroads terminated the Contract on or about 15 December 2008 and did so validly.

e. Liquidated damages for delay in the sum of 10% of the Accepted Contract Amount,

f. Costs of repairing the allegedly defective works.

g. Costs of the DAB referrals and amicable settlement discussions.

117.
Against this background the Arbitral Tribunal now considers the various claims arising between the Parties, commencing with the issues arising from the Addendum dated 14 March 2007.

SECTION III: THE ADDENDUM CLAIMS

Factual background

Context to negotiations

1.
The context in which the negotiations between the Parties arose is set out in the Section II. Some of the events referred to in Section II are repeated in this Section but in greater detail.
2.
On 14 July 2006, the Claimant wrote to the Engineer stating that its cash flow had reached critical level [G1/54/238]. The Claimant then wrote to the MoID on 26 July 2006 requesting co-operation in order to reach a practical solution [G1/56/241].
3.
At a meeting on 7 August 2006 between the MoID and the Claimant, the latter was informed that the Government of Tanzania could not afford to pay Price Escalation as requested [G1/63/313].
4.
On 14 August 2006, the Claimant served a suspension notice on the basis of the Employer’s non-payment of IPC 15 [G1/72/375]. It contends that it was therefore entitled either to suspend or go slow from 5 September 2006 pursuant to Sub-Clause 16.1 of the Contract. At paragraph 44 of their closing submissions, the Respondents maintain that the Claimant had in fact already slowed down the Works two weeks before giving this notice [S4/1/23]. In any event, the receipt of USD 1,252,808.69 (99% of IPC 15) on 8 September 2006 should have put an end to the slowdown.
5.
The Respondents contend that the continued slow-down of the Works, notwithstanding the receipt of substantial payments, was a tool to pressurise the Government to yield to the Claimant’s demand for Price Escalation. At paragraph 2.29 of its closing submissions, the Claimant rejects this allegation and contends that at no stage during the course of the Works was it suggested to the Claimant by the Engineer or the Employer that its suspension was invalid [S3/1/21].

Initial discussions

6.
On 2 November 2006, Dr Konoike met with the President of Tanzania in Tokyo to discuss the Claimant’s financial situation [G1/89/485]. This was followed by a meeting on 5 November 2006, between the Claimant and the Engineer, the Employer, the MoID and the Chairman of the Parliamentary Infrastructure Committee [G1/90/486].
7.
On 10 November 2006, the Claimant was informed that a team of seven officials had been appointed by the Government to review the Project - the Government Special Team ("GST"). A meeting took place with the GST on 12 November 2006, chaired by Mr Matupa [G1/93/495].
8.
On 13 November 2011, Mr Matupa sent the Claimant a list of questions [G1/94/497]. In response, the Claimant submitted a file of further information to Mr Matupa, including the DAB decision [G1/95/502] and a report on the problems it had encountered [G1/96/503].
9.
A further meeting took place on 28 November 2006 [G1/97/509], chaired by Mr Chambo (the Deputy Permanent Secretary of the MoID). It was recorded that the MoID had decided to look into agreeing an amicable settlement. The Claimant was requested to suspend its arbitration in respect of Price Escalation, but it refused to do so.
10.
On 11 December 2006, Mr Chambo informed the Claimant that a negotiating team had been set up for the purpose of reaching an amicable settlement - the Government Negotiating Team ("GNT"). The Claimant was invited to present all its claims to the GNT as a basis for negotiations within two days [G1/100/515].
11.
In response, the Claimant prepared a report entitled "The Contractor’s Minimum Position for Negotiations - Without Prejudice" [G2/101/517].

GNT negotiations

12.
Negotiations took place at a series of meetings in December 2006 and January 2007. The meetings were attended by a number of representatives from the Claimant, with Mr McCormick acting as a consultant. The GNT was composed of a range of professionals whose positions are confirmed by Mr McCormick [C4/1/6]:

a. Mr Chambo - Deputy Permanent Secretary of the MoID;

b. Mr Matupa - from legal department in the Attorney General’s office;

c. Mr Feleshi - from legal department in the Attorney General’s office;

d. Mr Kasuwi - engineer from the Ministry of Finance;

e. Mr Rubibira - Contract specialist from MoW;

f. Mr Macha - engineer with Cowi;

g. Mr Mndowla - from consultancy firm PWC.

13.
The First Meeting took place on 19 December 2006 [G2/102/645]. Price Escalation was the first issue discussed. It was noted at paragraph 5.14 as an agreed fact that "Procedure for including the minutes for pre-bid meeting was not properly followed."
14.
On the evening of 19 December 2006, Mr Feleshi sent an email to the GNT, copied to Mr Nyamubi of the Claimant, attaching a document setting out the GNT’s position on the items in dispute. At paragraph 3.0, it noted that "The Employer in principal agrees that the escalation clause applies to the whole contract amount." [G2/103/652]
15.
The Second Meeting took place on 20 December 2006, during which the issue of Price Escalation was agreed between the Parties. Paragraphs 4.1.1 and 4.1.2 of the Minutes record:

"4.1.1 ISSUES OF ESCALATION OF PRICE

The following issue was agreed by the parties.

Whether the pre-bid meetings were properly incorporated into the contract

Arguments for issue determination

The parties agreed that since the clear wording of clause 13.8 allows escalation of price on the whole contract sum and the pre bid meeting was not effectively incorporated in the contract, the price escalation clause should apply to the whole contract sum payable both in local and foreign currency.

The Employer in principal agrees that the escalation clause applies to the whole contract amount.

4.1.2 Price escalation

The parties agreed that price escalation clause should apply to the whole contract sum in accordance with article 13.8 of the Conditions of the particular application.

4.3 Disruption claims

The contractor undertook to provide a cost build-up for the claim of 14,635,397,232 relating to the descriptions causing loss of productivity." [G2/104/671]

16.
The Claimant stated at paragraph 4.5.0 that "work cannot recommence until some payment is received." The Respondents contend that during the negotiations, on a daily basis, the Claimant told the GNT that it would not remobilize unless it received Price Escalation on foreign-currency payments or other substantial sums.
17.
The Minutes for the First and Second Meetings were signed on 22 December 2006.
18.
The Third Meeting took place on 21 and 27 December 2006, dealing with the 13 Variation claims [G2/105/677].
19.
The Fourth Meeting took place on 3 January 2007, during which the Parties agreed to suspend the ICC arbitration on Price Escalation pending the outcome of the negotiations [G2/107/724].
20.
The Fifth Meeting took place on 4 January 2007 and the Sixth Meeting on 5 January 2007, at which the Claimant confirmed that it would discontinue the arbitration upon "The Employer’s decision to pay for Adjustments for Changes in Costs in accordance with Clause 13.8 in both Contract currency components." [G2/107/727].
21.
Negotiations continued at the Seventh Meeting on 8 January 2006 [G2/107/728]. The Eighth Meeting took place on 9 January 2007 [G2/107/729]. By this point:

a. The Claimant had offered to reduce its disruption claim to TZS 10 billion.

b. The Claimant offered to accept a 24 month extension of time. The Employer offered 19 months with a possible further 5 months.

c. It was agreed that the Claimant would put forward a proposal for sectional completion.

d. The Employer agreed to expedite the payment of Price Escalation because it was a matter that could be dealt with as part of the existing Contract, without the need to modify it by Addendum.

e. The Employer undertook to make sure that the Resident Engineer would be changed and to supervise closely the next Engineer.

22.
Further agreements were reached at the Ninth (and final) Meeting on 10 January 2007 [G2/107/730]. Paragraph 27.0 records the following:

"27.1 The Contractor maintained the claim of Tshs.76,228,583,586.00 in accordance with the submitted Bills of Quantities for the Final Approved Design (B2), being a revised Contract Lump Sum amount and Tshs.12 bln for disruption claims. However, he invited the Employer to give another offer for consideration.

27.2 The Employer urged the Contractor to be consistent because already on 9th Jan 2006 [sic] the Contractor had agreed to reduce his disruption claim from Tshs 14.64 billion to Tshs. 10.0 billion.

27.3 Eventually it was agreed that the disruption costs be Tshs.10.0 billion and the Contractor was inclined to discount the balance of the claim. The final agreed Contract Lump Sum amount now will be Tshs. 86.2 bln. It was agreed that the disruption had been adequately substantiated.

27.4 The Contractor maintained the request for an extension to the Time for Completion of 24 months and early payments of Adjustments for Changes in Costs to enable them to continue with the work. In response the Employer informed the Contractor that a balance of Adjustments for Changes in Costs in foreign currency can be paid now on those certificates upon which Adjustments for Changes in Costs for local component has already been certified and paid.

27.5 The Contractor has 64 Km to complete after finishing 63 Km. It was agreed that the time needed is 24 months to finish the Works.

27.6 The Parties settled with the sum of Tshs. 86,228,583,586.00 as an adjusted Contract Price which excludes amounts for Adjustments for Changes in Costs VAT and all Provisional Sums and Contingencies."

Memorandum of Understanding / Addendum/Deed of Settlement

23.
Following the Ninth Meeting, a Memorandum of Understanding dated 30 January 2007 ("the MoU") was prepared [G2/118/811]. The MoU provided at paragraph 10.1.1 that those areas that required amendment of the Contract would be implemented in accordance with the mandatory procedure of the Public Procurement Act No 21 of 2004 and Regulations GN 97 of 2005. These areas are contained in paragraphs 3.0, 4.0, 5.0, 6.0, 8.0 and 9.0. Paragraph 10.1.2 stated that the areas which do not need amendment of the Contract will be implemented immediately by the Employer, by following administrative arrangements within the Government.
24.
Pursuant to paragraph 11.0, the minutes of the nine meetings formed part of that agreement ("the MoU Minutes"). The minutes of the Third Meeting and the consolidated minutes of the Fourth to Ninth meetings were dated 30 January 2007 but in fact signed the following day, 31 January 2007, according to the evidence of Mr McCormick [C4/1/20]. This is also apparent from the email chain between the Parties at the time [G2/119/829] referred to below.
25.
Subsequently, a meeting took place at Dodoma on 3 February 2007 between the Claimant and the MoID. The Record of Discussions (prepared by the Claimant originally in Japanese) notes that during this meeting, the Minister of Infrastructure Development (A.J. Change) explained that an addendum would be prepared and ratified by the Attorney General’s office, passed through the Ministerial Tender Board and once agreed and signed by both Parties, the Addendum would become effective [G2/122/855].
26.
On 14 March 2007, the Parties entered into the Addendum ("the Addendum") [E5/2/1308] which provided for, amongst other things, an Adjusted Contract Price of TZS 86,228,583,586.99 excluding VAT and a Provisional Sum to cover for Price Escalation. The MoU and MoU Minutes were appended to the Addendum at Appendix 1.
27.
On the following day, 15 March 2007, the Parties executed the deed of settlement ("the DoS") [G2/131/955].

Claims Arising from the Addendum

Outline of claims

28.
The Claimant contends that the Respondents are in breach of their obligations under the Addendum by seeking to deduct sums which had previously been certified and paid to the Claimant in respect of (i) Price Escalation, (ii) pre-Addendum disruption costs and (iii) Additional Design costs:

a. In respect of Price Escalation, the Claimant was paid a total of TZS 7,545,094,949.00 (TZS 9,054,113,934 including VAT) and USD 23,060,819.64 (USD 27,672,983.57 including VAT) up to and including IPC 24. The Respondents are now seeking to reclaim all Price Escalation paid to the Claimant on the foreign currency element and all Price Escalation in excess of TZS 1.5 billion paid on local currency.

b. Regarding pre-Addendum disruption costs, the Claimant received TZS 10 billion through IPC 19 on 29 May 2008, in addition to Price Escalation on that sum. The Respondents subsequently sought to reclaim this payment in September 2008, instructing the Engineer to deduct the sums certified from IPC 26 and IPC 27.

c. The Claimant also received TZS 1,813,008,129.00 for Additional Design costs in IPC 19, which the Respondents have sought to reclaim.

29.
The Respondents allege that they are entitled to deduct such amounts as the Claimant in fact had no right to the sums paid. They say that adjustments should be made to the IPCs accordingly, as set out in the Respondents’ Summary of Revised IPCs at Appendix C to the Defence and Counterclaims.
30.
The Tribunal must therefore determine the extent of the Claimant’s entitlement to payment for:

a. Price Escalation;

b. Pre-Addendum disruption costs;

c. Additional Design costs.

31.
The Tribunal’s analysis of whether the Addendum is a binding and enforceable agreement and of each of the three claims is set out below.

Price Escalation

The Parties’ Principal Submissions

32.
The summaries of the Parties’ cases set out in this Section and elsewhere in the Award are not intended to be exhaustive.
33.
The Claimant contends that the correct position in relation to its entitlement to Price Escalation is the following:

a. Under the original Contract, Price Escalation was payable on the whole of the Accepted Contract Amount after expiry of the first 18 months of the Contract, payable in Tanzanian Shillings. A provisional sum of TZS 1.5 billion was allowed in respect of Price Escalation but there was no cap on the amount that might ultimately be payable.

b. The effect of the Addendum was that Price Escalation on the US Dollar element of the Accepted Contract Amount was itself payable in US Dollars. The Respondents’ arguments as to the invalidity of the Addendum cannot succeed.

34.
The Respondents deny that this is the correct interpretation of the original Contract or the Addendum. They contend that:

a. On the true construction of the original Contract, Price Escalation was due only on the local currency, capped at TZS 1.5 billion. This is evident from:

• The pre-bid meeting minutes;

• Schedule of Costs and Percentages of Listed Elements;

• Contractual provisions on Contingencies.

b. The Addendum was not effective in modifying the provisions on Price Escalation, as such agreement was void or unenforceable. In any event, the TZS 1.5 billion cap was left intact.

c. In the alternative, even if Price Escalation was due on the US Dollars position, it was not payable in US Dollars, but in Tanzanian Shillings.

35.
The Parties’ principal submissions are summarised below on the issues of:

a. Entitlement to Price Escalation under the original Contract;

b. The effect of the Addendum;

c. Entitlement to payment of Price Escalation in dollars following the Addendum.

Entitlement to Price Escalation under the Original Contract

36.
The Claimant avers that there are no words in Sub-Clause 13.8 or any of the other relevant provisions limiting Price Escalation to the local currency. Consequently, the Price Escalation formula in Sub-Clause 13.8 is applicable to the whole of the Accepted Contract Amount. The Claimant relies in particular on the provisions set out below:

a. Sub-Clause 13.8:

"...the lump sum Accepted Contract Amount shall be adjusted for rises or falls in the cost of labour, goods and other inputs to the Works, by the addition or deduction of the amounts determined by the formulae prescribed in this Sub-Clause." [E2/6/273]

b. Clause 1.1.4 of the General Conditions:

" 'Accepted Contract Amount’ means the amount accepted in the Letter of Acceptance for the execution and completion of the Works and the remedying of any defects." [E3/1/605]

c. The Letter of Acceptance:

"The contract sum will be Tsh 63,887,999,940.80 (i.e. Sixty three billion eight hundred eighty seven million nine hundred ninety nine thousand nine hundred forty and cents eighty) only payable in the following proportions: Tshs 15,599,521,051.20 (i.e. fifteen billion five hundred ninety nine million five hundred twenty one thousand fifty one and cents twenty) and USD 48,883,365.00 (i.e. forty eight million eight hundred eighty three thousands three hundred sixty five) only, equivalent to Tsh 48,288,278,889.60 (i.e. forty eight billion two hundred eighty eight million four hundred seventy eight thousand eight hundred eighty nine and cents sixty) at the rate of exchange of 1 USD to Tshs 987.8305." [E2/2/228]

d. Sub-Clause 13.8(b):

"...the sums payable by the Employer to the Contractor shall - in the event of change in the NCC index - be subjected to increase or decrease in accordance with application of the Formula." [E2/6/274]

e. Sub-Clause 13.8(c):

"The value of net work done, certified by the Engineer, in any monthly Interim or Final Certificate as payable by the Employer to the Contractor before deduction of any Retention Money shall be increased or decreased by an amount of ‘F’ Tanzanian Shillings where the value of ‘F’ shall be determined as follows:

F = (lc- lo) x Pc

lo

Wherein:

(i) lc indicates the value of the NCC Index on the day, which falls thirty days before the date of Interim or Final Valuation

(ii) lo indicates the value of the NCC Index on the day, which falls thirty days before the Tender submission date.

(iii) Pc indicates the "effective value" of the work done under the certificate concerned (being the value of that part of the work which is subject to such increase or decrease) and is as defined hereinafter."

f. Sub-Clause 13.8(d):

"The effective value (Pc) or work done which is to be subjected to increase or decrease shall be the difference between:

(i) the amount which, in the opinion of the Engineer, is due to the Contractor under Section 14 [Contract Price and Payment] (before deduction of retention money and before deducting sums previously paid on account) less:

any amount for payment or repayment of any advance payment

any amount for materials on site

any amounts for nominated sub-contractors (if any)

any amounts for any other items based on actual cost or current prices

any sums for increases or decreases in the Accepted Contract Amount as paid under this Sub-Clause and

(ii) the amount calculated in accordance with Sub-Clause 13.8(c)(i) above and included in the last preceded Interim Certificate issued by the Engineer in accordance with Section 14 [Contract Price and Payment] hereof." [E2/6/275]

g. Sub-Clause 14.1(a)

"The Contract Price shall be the lump sum Accepted Contract Amount and be subject to adjustments in accordance with the Contract."

Relevance of Pre-Bid Meeting Minutes

37.
The Respondents dispute the Claimant’s interpretation of the original Contract. They contend that the Pre-Bid Meeting Minutes demonstrate that Price Escalation would not be available on foreign currency amounts, as evidenced by Question 16:

"Q 16 Does sub-clause 13.8 of the Conditions of Particular Application mean that there will be no adjustment for change in Price in respect of the foreign currency element of the contract amount?

A 16 That is correct." [G4/574/2175]

38.
The Claimant consciously included the Pre-Bid Meeting Minutes in its Contractor’s Proposal, which formed part of the Contract. It had no legitimate expectation of Price Escalation on foreign currency and has failed to produce any witnesses who were involved in the bidding process to say otherwise. Answer 16 simply confirmed that the bidding documents in their current form meant that there would be no Price-Escalation on foreign currency. Consequently, an Addendum was not necessary as no modification was required.
39.
The Claimant denies that the Pre-Bid Meeting Minutes negate an entitlement to Price Escalation on foreign currency:

a. Paragraph 18.4 of the Instructions to Bidders stated that any modification to the Contract through the Pre-Bid Meeting must be made by the issue of an addendum. No such addendum was issued by the Respondents in respect of Sub-Clause 13.8.

b. Alternatively, the Pre-Bid Meeting Minutes are inconsistent with Sub-Clauses 13.8 and 14.1 which take priority under Sub-Clause 1.5 of the Conditions of Contract [E2/6/267].

c. In any event, there can be no doubt of the entitlement to Price Escalation on amounts payable in foreign currency after the agreements of January to March 2007.

Schedule of Costs and Percentages of Listed Elements

40.
The Respondents contend that the Schedule of Costs and Percentages of Listed Elements in the Contract [E5/4/1327] also demonstrates that Price Escalation was not payable on foreign currency. In the cell marked "Provisional Sum to cover price escalation", the amount of TZS 1.5 billion was inserted in the Tanzanian Shilling column. The Claimant filled in "0.00" in the corresponding Foreign Currency column. The Instructions to Bidders stated that:

"Elements against which no percentage/amount has been entered by the Tenderer shall not be the subject of any payment calculation but shall be deemed to be included elsewhere in the Lump Sum Amount." [E1/2/15]

41.
Furthermore:

a. In contrast to the Tanzanian Shillings column, the foreign currency columns for Total Cost of Works and Total Lump Sum Bid Price were the same — at approximately USD 40.7 million — since no amount was included for Price Escalation.

b. The Total Foreign Currency Requirements for the Project stated a figure of USD 40.7 — the same as the Total Cost of Works without Price Escalation.

42.
In response, the Claimant avers that it could not include any sums for Price Escalation in the foreign currency column because under the formula in Sub-Clause 13.8(c) any allowance for Price Escalation was at the time of the contract to be paid in Tanzanian Shillings. Therefore any allowance for Price Escalation in the Schedule could only be in Tanzanian Shillings and the Claimant was recording that no Price Escalation was payable in the foreign currency. That later changed with the agreements of January and March 2007.

Contingencies and Cap on Price Escalation

43.
The Respondents submit that all Price Escalation under the Contract was to be paid from a contingency amount that the Contractor itself included in its bid, capped at TZS 1.5 billion, as evidenced by the Schedule of Costs and Percentages of Listed Elements. The Respondents aver that such a cap is reflected in the terms of the Contract, including the following:

a. Sub-Clause 13.5:

"The Contingencies shall only be used, in whole or in part, in accordance with the Engineer's instruction and the Contract Price shall be adjusted accordingly. The total sum paid to the Contractor shall include only such amounts from the Contingencies element of the Price as the Engineer shall have instructed."[E2/6/273]

b. Sub-Clause 13.8;

"The costs of complying with the requirements of this sub-clause shall be met from the Contingencies element of the Contract Price." [E2/6/275]

c. Sub-Clause 14.4:

"The Contingencies element of the Schedule does not enter into this valuation of the Work and shall be used or not used entirely as the Employer may see fit, but primarily for meeting the costs of the implementation of sub-clause 13.8; Adjustments for Changes in cost." [E2/6/277]

44.
The Instructions to Bidders required tenderers to submit a Sub-Clause 14.4 Schedule as part of their bid; while warning that where no amount was entered, that element would "be deemed to be included elsewhere in the Lump Sum amount." [E1/2/15]
45.
Therefore, even if the Claimant could succeed in its argument that Price Escalation is payable on foreign currency amounts in principle, in practice, it makes no difference. The TZS 1.5 billion contingency amount was exhausted by the Price Escalation paid to the Contractor on local currency amounts alone, as of IPC 15, issued on 6 June 2006.
46.
The Claimant denies that the provisions relied upon by the Respondents support their position as alleged [S3/1/74]. The reality is that amendments have been introduced to the standard form of contract at Sub-Clauses 13.5, 13.8 and 14.4 which are neither internally consistent nor consistent with the absence of any Contingencies. However, they do not contain any words of limitation on the amount payable and should be read subject to the main purpose of Sub-Clause 13.8. Further, they should be construed strictly or alternatively contra proferentem.
47.
In any event, the Claimant contends that a cap on Price Escalation does not make commercial sense. The Respondents could have instructed numerous Variations to the Contract, increasing the contract price and without any corresponding obligation to pay the Claimant for Price Escalation in respect of the same.
48.
The Respondents deny that the existence of a cap is commercially nonsensical. The uncertainty of the amount payable under a Price Escalation formula is precisely why a cap is appropriate for a developing country financing a major project.

The Effect of the Addendum

49.
The Respondents deny that the Price Escalation provisions of the Addendum are effective. Four principal submissions are made:

a. The Addendum was not submitted to a tender board for approval, contrary to Section 44 of the Tanzanian Public Procurement (Goods, Works, Non-Consultant Services and Disposal of Public Assets by Tender) Regulations 2005 ("the Regulations").

b. The agreement on Price Escalation produced an unreasonable windfall for the Claimant, in breach of Section 23(1) of the Regulations.

c. The agreement was void for mutual mistake of fact under section 20(1) of the Law of Contract Act.

d. The original TZS 1.5 billion cap was left unamended by the Addendum in any event.

Tender Board approval

50.
The Respondents rely on Section 44 of the Regulations:

"Any variations to the value of a procurement or disposal contract shall be reviewed and approved by the appropriate tender board." [F3/3.8/49]:

51.
The Respondents contend that in purporting to provide for Price Escalation on the foreign currency, the Addendum varied the Contract’s value as:

a. Price Escalation was not payable on the foreign currency under the original Contract;

b. Even if the original Contract had provided for Price Escalation on the foreign currency, on the Claimant’s case, the Addendum still purportedly increased the value of the Contract by:

• Removing the TZS 1.5 billion cap on Price Escalation;

• Providing for payment of Price Escalation on US Dollars in US Dollars.

52.
No review or approval of the Addendum was sought or obtained. The fact that members of the GNT had authority, even senior authority, in public contracting or public procurement in other contexts does not change the fact that none of them purported to act as a tender board, or had authority to do so. Even if the GNT or its process had the objective characteristics of a Tender Board within the meaning of the Regulations, this is irrelevant.
53.
The requirement for Tender Board approval is not a mere technicality. The policy behind Section 44 is to prevent government officials from conveying valuable contractual entitlements outside the designated process. It cannot be circumvented by arguing that the Addendum was simply "interpreting" the original Contract - the question of whether or not the value of a contract has been varied is objective.
54.
In response to the Respondents’ Tender Board arguments, the Claimant contends that:

a. This is not a pleaded point, having been raised by the Respondents for the first time during opening submissions [T14/30/10-13].

b. Approval is not needed in any event. Section 44 does not apply as Price Escalation was payable on foreign currency in the original Contract and consequently there was no change to the value of the Contract by the Addendum. Nor does the change in relation to Price Escalation being paid in dollars change the value of the Contract.

c. Even if Section 44 did apply, the best evidence is that approval was in fact given, even though the MoU itself indicates that it was not needed. Reliance is placed on the record of discussions held in Dodoma on 3 February 2007 [G2/122/856] and the letter from Mr Chambo of 13 March 2007 [G2/129/914].

d. In the event that approval was not given by the Tender Board, the Respondents are estopped from denying that it was given. The Claimant states that it relied on what it was told about approval having been given and on the Addendum being a good and lawful agreement.

55.
The Respondents accepted that the onus is on them to show that the approval had not been granted [T15/69/25 - T15/70/4]. They contend that the documentary evidence relied on by the Claimant is unclear. The documents simply suggest what was intended to happen, not what actually happened [T15/65/14-19]. Furthermore, the mantra that runs through the actual documents - the Deed of Settlement and the Addendum - is that the modification to Price Escalation is not actually a change and did not need to go to the tender board [T15/67/1-6].
56.
The Respondents submit that the Claimant cannot derive assistance from the doctrine of estoppel. Estoppel cannot breathe life into an otherwise unlawful public contract. Reliance is placed on the cases of Maritime Electric Co v General Dairies Ltd [1937] AC 610, 620, Rhyl Urban District Council v Rhyl Amusements Ltd [1959] 1 W.L.R. 465, Southend-on-Sea Corporation v Hodgson (Wickford) Ltd [1962] Q.B. 416, and Churchill Fisheries Export Pty Lid v Director General of Conservation [1990] VR 968.
57.
The Respondents acknowledge that Mr Matupa’s evidence was that the GNT had intended the Contractor to be paid Price Escalation on the entire contract price, including the foreign currency element [T5/170/21-24]. It is denied that this is of any relevance, in light of the legal position. Regardless of the GNT’s desire to agree to Price Escalation on the foreign currency, they could not do so without Tender Board approval.
58.
By letter dated 2 September 2015, the Respondents submitted recently discovered minutes of a Tender Board meeting on 21 February 2007, dated 13 April 2007. The Respondents submitted that the Minutes were consistent with the Respondents’ closing submissions on 21 January 2015 [T15/67/23 - T15/68/4]. By letter dated 8 September 2015, the Claimant did not object to the submission of the minutes and submits that the Minutes make clear that Tender Board approval was given to the Addendum before it was signed by the Parties.

Unreasonable Windfall

59.
The Respondents contend that even if the Claimant can overcome the arguments on procedural validity of the Addendum, the purported agreement in respect of Price Escalation is unlawful or contrary to public policy and consequently unenforceable under Tanzanian Law.
60.
The Respondents rely upon Section 23(1) of the Regulations:

"23 Price adjustment

In the event of inflation, a price adjustment formula shall apply in order to arrive at a reasonable price."

61.
Applying Price Escalation to the foreign currency element would create a windfall for the Claimant which could not be a "reasonable price" for the following reasons;

a. Applying a TZS inflation index to US dollars could not be a reasonable adjustment. Inflation in Tanzania has consistently exceeded that in the United States. The fact that the Claimant was making dollar-denominated purchases in Tanzania is irrelevant.

b. The available evidence suggests that during the relevant period, dollar prices in Tanzania remained relatively stable. In contrast, the NCC index on which the Price Escalation formula was based increased in 2007 at an annual rate of 31 %.

c. To the extent that the foreign currency amount relates to costs that the Contractor actually incurred in Japan, Price Escalation would be inappropriate. The Japanese Yen was static or deflationary during the relevant period.

62.
In response, the Claimant contends that:

a. The Regulations do not apply. Reliance is placed on section 2(1):

"2(1) Subject to sub-regulation (2), these Regulations shall apply to all procurement of goods, works and non-consultant services undertaken by a procuring entity except where the context provide otherwise in which case the provisions of the Act shall prevail." [F3/3.8/7]

b. In this case the context is the Contract. Provided that it does not contravene the provisions of the Act referred to, the Public Procurement Act 2004, the Regulations will not apply.

c. If the Regulations do apply, then on the proper construction of Regulation 23, the effect is to require the Parties to apply a price adjustment formula so as to arrive at a reasonable price. Thus if they apply a price adjustment formula then Regulation 23 deems the price arrived at by its application to be reasonable.

d. Even if the Regulations required the result of the application of the formula to be reasonable, there was compliance because it was reasonable. The Price Escalation formula in fact takes account of only 50% of the increase in the prices of the basket of construction materials on which it is founded.

63.
Even if contrary to the above there is a breach of the Regulations, this does not necessarily entail that the price adjustment formula is void. Reliance is placed on section 23(1) of the Law of Contracts Act (Tanzania):

"23(1) The consideration or object of an agreement if lawful, unless -

(a) it is forbidden by law;

(b) is of such a nature that, if permitted, it would defeat the provisions of any law;

(c) is fraudulent;

(d) involves or implies injury to the person or property of another; or

(e) the court regards it as immoral or opposed to public policy." [F1/1.3/15]

64.
The burden lies on the Respondents to show that one of the above criteria is met and they have failed to do so. In particular, the Claimant contends that the Respondents have failed to show that the Price Escalation formula was forbidden by law. The Claimant relies on Gherulal Parekh v Mahadeodas (1959) Supl. 2S.C.R.406.
65.
The Respondents submit in return that the context of the Contract cannot displace the Regulation pursuant to Regulation 2(1). Regulation 2(1) merely confirms the basic principle of administrative law that the regulations must yield if, in a particular instance, they are incompatible with the statute they implement - not the Contract they regulate.
66.
The Respondents assert that the Claimant’s contention that the Price Escalation formula compensated it for only 50% of actual cost increases is neither relevant nor factually accurate.

Mistake

67.
The Respondents contend that the agreement on Price Escalation was premised on a mutual mistake of fact and is consequently void. The Law of Contract Act (Tanzania) provides that:

"20(1) Where both the parties to an agreement are under a mistake as to a matter of fact essential to the agreement, the agreement is void.

(2) An erroneous opinion as to the value of the thing which forms the subject matter of the agreement is not deemed a mistake as to a matter of fact.

21) A contract is not voidable because it was caused by a mistake as to any law in force in Tanzania; but a mistake as to a law not in force in Tanzania has the same effect as a mistake of fact."

68.
The Respondents aver that:

a. The Minutes of the First Meeting on 19 December 2006 note as an agreed fact that "Procedure for including the minutes for pre-bid meeting was not properly followed." [G2/102/650].

b. The Claimant and the GNT expressly premised the Price Escalation provision of the Addendum on this mistaken agreed fact: "Since...the pre bid meeting was not effectively incorporated into the contract, the price escalation clause should apply to the whole contract sum payable both in local and foreign currency." [G2/104/667].

69.
Mr Matupa confirmed that this was the GNT’s belief at the time as its members had not considered the legal points that had been taken in the DAB proceedings [T5/163/8 - T5/168/21]. Mr McCormick confirmed that the Claimant had also believed that the Pre-Bid Meeting Minutes had not been incorporated into the Contract [T4/31/5-12].
70.
The Respondents aver that a mistake about the terms of a contract is one of fact. Reliance is placed on Pollock & Mulla, Indian Contracts & Specific Relief Acts (13th ed) (Vol 1), p629 [F4/4.18/4] and Kleinwort Benson Ltd v Lincoln City Council [1999] 2 AC 349 [F4/4.13/1]. An agreement premised on a mutual mistake of fact is void under section 20(1) of the Tanzania Law of Contract Act 1961.
71.
The Respondents contend that notwithstanding Mr Matupa’s evidence that the GNT had decided to concede Price Escalation regardless of the fine contractual position, the agreed statement of facts is nonetheless demonstrative of reliance upon the mistake as to what was contained in the Contract in relation to Price Escalation [T14/214/22 - T14/215/3].
72.
The Claimant’s position on mistake is that:

a. There was no mistake as:

• The minutes of the negotiation meetings were accurate. The procedure at paragraph 18.4 of the Instructions to Bidders was not followed.

• The award of the DAB was based on the fact that the minutes of the Pre-Bid Meeting were included in the Claimant’s tender and in the Contract. The members of the GNT would have been aware of that.

b. Even if there was a mistake, it was a mistake of law not fact, pursuant to section 21 of the Law of Contract Act (Tanzania) read in conjunction with Section 2(3) of the Judicature and Application of Law Act.

c. The requirements of section 20(1) are not satisfied, as the purported mistake did not go to the very basis of the Contract or involve a fact essential to the agreement. Both Parties should have known the true state of affairs in any event. The Claimant relies on Pollock and Mulla "The Indian Contract Act" pages 455-475 [F2/2.28/13] and Sheikh Brothers Ltd v Arnold Julius Ochsner and Another [1957] AC 136 [F2/2.3/1].

d. Any mistake was irrelevant as the Particular Conditions take precedence over the Contractor’s Proposal under the order of priority provisions found in the Form of Agreement and at Sub-Clause 1.5 of the General Conditions.

e. In any event, Price Escalation was payable on foreign currency elements under the terms of the original Contract. If the Price Escalation agreement contained in the Addendum is void for mistake of law, this is ultimately irrelevant.

TZS 1.5 billion cap

73.
The Respondents aver that the 1.5 billion cap in the original Contract was not amended by the Addendum. The cap had in fact already been exhausted by payments of Price Escalation on TZS amounts. The Addendum left all of the Contract’s original terms undisturbed unless specifically stated otherwise.
74.
Additionally, eliminating the cap would have varied the value of the Contract by billions of Tanzanian Shillings and therefore would have required review and approval by a Tender Board.
75.
The Claimant contends that even if the original Contract did contain a cap it is plain from the express terms of the subsequent agreements that there was none following agreement of the MoU, Addendum and Deed of Settlement.
76.
Furthermore, the Claimant submits that:

a. There is no reference to a cap in any of the Minutes;

b. As at IPC No 16 on 20 October 2006, the Respondents had already paid TZS 1,629,788,350 for Price Escalation, in excess of the purported cap;

c. Mr Matupa confirmed that the government was committed to pay Price Escalation without any cap [T5/171/24].

77.
Alternatively, the Respondents have waived their right to rely upon any cap argument or are estopped from advancing the same. If there was a cap originally, the Respondents, by their conduct, assured the Claimant that they would not enforce it, and the Claimant acted on that to its detriment. Reliance is placed on the case of Edwin Simon Mamuya v Adam Jonas Mbala [1983] TLR 410.

Entitlement to payment of Price Escalation in Dollars following the Addendum

78.
The Respondents contend in the alternative that even if Price Escalation is payable on dollars, it is not also payable in dollars. The Claimant must therefore reimburse the Respondents for the overpayments it received in this respect, amounting to TZS 8,370,108,867.
79.
Payment in dollars would have been a clear change from the original Contract, and thus required approval from the Tender Board. Furthermore, if the negotiators had agreed to change the currency in which Price Escalation was to be paid, they would have done so expressly and such would have been evident in the Minutes. Additionally, adding another uplift in the form of a non-market exchange rate on top of the application of a TZS index to US dollar amounts would make the Price Escalation formula even more unreasonable.
80.
The Claimant relies on the following provisions in support of its entitlement to Price Escalation payable in dollars:

a. Paragraph 2.2 of the MoU:

"The Parties have agreed to interpret the said Clause 13.8 in such a manner that allows the Contractor to be paid for the changes in cost on the full Accepted Contract Amount (or such other amount amended in accordance with the Contract) and in currencies both, Tanzanian as well as Foreign."

b. The Addendum provided at paragraph 1.0(i):

"Sub-Clause 13.8 of the Particular Application shall be correctly interpreted i.e. Price Escalation shall be paid on the whole of the works covered by the Adjusted Contract Price in both Tanzanian Shillings and US Dollars. Price Escalation in accordance with Sub-Clause 13.8, will be paid on all works carried out until the final Time for Completion."

c. The Deed of Settlement dated 15 March 2007:

"The Parties have agreed to interpret the said Clause 13.8 in such a manner that allows the Contractor to be paid for the changes in cost on the full Accepted Contract Amount or such other amount as may be arrived at after amendment of Contract and in currencies both, Tanzanian as well as Foreign."

81.
The Claimant asserts that there can be no doubt about the effect of these provisions - Price Escalation was to be paid on dollars and in dollars. The Claimant denies that the payment of Price Escalation in dollars as opposed to Tanzanian Shillings would have caused any extra windfall. Because the contractual rate is used to get both from the initial dollars to Tanzanian Shillings in order to apply the formula, and then applied again to bring it back to dollars, there is no additional gain from the conversion. An additional gain would only arise if at the beginning of the process the dollars were converted into Tanzanian Shillings at the prevailing rate rather than the contractual rate. This is not what happened.

Analysis and Conclusions of the Tribunal on Price Escalation

Was the Addendum Approved by the Tender Board?

82.
The facts are that Mr Chambo (the Deputy Permanent Secretary of the MoID) for the Respondents proposed negotiations between the GNT and the Claimant and requested the Claimant to present all its claims as the basis for negotiations [G1/100/515]. The Claimant submitted a report entitled "the Contractor's minimum position for negotiations-without-prejudice" [G2/101/51 7] which served as the basis for the subsequent discussions.
83.
The GNT included the persons who held the positions set out above.
84.
It is clear from the positions of the members of the GNT that the GNT was composed of senior members of relevant government departments, some or all of whom would or should have been aware of the Respondents’ procurement requirements. Mr Chambo as Deputy Secretary of MoID, in particular must have been aware of such requirements as can be seen from the Record of Discussions [G2/122/855] described in Section II.
85.
The negotiating process involved a series of nine meetings in respect of which Minutes were signed by both Parties. These Minutes were incorporated in the MoU which was dated 30 January 2007. Although the Minutes of the third meeting and the consolidated Minutes of the fourth to ninth meetings are dated 29 January 2007, Mr McCormick, a consultant at the time to the Claimant and who was involved in the negotiations gave evidence that these Minutes were in fact signed on 31 January 2007 [C4/1/20]. The Tribunal accepts Mr McCormick's evidence on this point.
86.
On 14 March 2007, the Parties entered into the Addendum. The MoU and the MoU Minutes were attached to the Addendum. On 15 March 2007, the Parties executed the Deed of Settlement.
87.
The Respondents, acting in accordance with the terms of the Addendum, caused sums to be certified and paid to the Claimant in respect of Price Escalation, pre-Addendum disruption and Additional Design costs. The Respondents now seek to recover such sums.
88.
The Respondents, having negotiated and executed the MoU, Addendum and Deed of Settlement and having made such payments pursuant to the Addendum, now adopt the relatively unattractive position that the Addendum was not submitted to a Tender Board for approval contrary to section 44 of the Tanzanian Public Procurement (Goods, Works, Non-Consultant Services and Disposal of Public Assets of Tender) Regulations 2005. The Claimant submits that this position is not pleaded, having first been raised by the Respondents during their opening submissions [T14/30/1013].
89.
The Respondents contend that as the Addendum varied the value of the Contract (e.g. by way of Price Escalation) it should have been reviewed and approved by the appropriate Tender Board and it was not.
90.
The Respondents accept that the burden is on the Respondents to demonstrate that the approval had not been granted [T15/69/25-T15/70/4]. In the Tribunal’s view, the Respondents have failed to discharge this burden for the following reasons:

a. A meeting took place between the Claimant and the MoID on 3 February 2007 - that is, after the signature of the MoU and prior to the execution of the Addendum. The Record of Discussions of this meeting (prepared by the Claimant) records that the Minister for the MoID explained that an Addendum would be prepared, ratified by the Attorney General’s office and passed through the ministerial Tender Board. Once agreed and signed by both Parties, the Addendum would become effective [G2/122/855]. The Addendum was signed on 14 March 2007. and the Respondents acted upon it.

b. It is now clear from the Minutes of the Tender Board meeting on 21 February 2007 (submitted by the Respondents by letter dated 2 September 2015) that the Tender Board did consider and approve the Addendum. The Arbitral Tribunal does not consider that the Respondents’ submission that it is "not clear whether the Board was presented with (or purported to approve) the second "Addendum No 1" dealing with price escalation..." carries any weight. It is clear from paragraph 5.3 of the Minutes that the Tender Board discussed each of the "5 main categories" of claims including Price Escalation, and agreed them.

c. The MoU provided at paragraph 10.1.1 that those areas that require amendment of the Contract would be implemented in accordance with the mandatory procedure of the Public Procurement Act Number 21 of 2004 and Regulations GN 97 of 2005. Paragraph 10.1.2 of the MoU stated that the areas which did not need amendment of the Contract would be implemented immediately by the Employer. It is clear from the MoU that the Respondents and the GNT on its behalf were aware of and addressed the need for compliance with the Regulations.

d. In his letter of 13 March 2007 [G2/129/914], Mr Chambo stated that the settlement of certain of the claims was a change to the Contract and this required compliance with the procedure under the Procurement Act. Mr Chambo further stated: "An Addendum for that purpose has already been cleared by the Attorney General and the other procurement machinery has been complied with. You may wish to sign the Agreement as finally approved". The Addendum was signed the following day.

e. Mr Matupa, who was a member of the GNT, gave evidence in relation to Price Escalation that the GNT intended the Contractor to be paid price escalation on the entire contract price [T5/170/21-24].

f. The Respondents did not provide any documentary or witness evidence that demonstrated that approval had not been given to the Addendum by the relevant Tender Board to displace the evidence suggesting that the relevant approval had been given. On the contrary, the documentary evidence, in particular the letter of 13 March 2007 from Mr Chambo [G2/129/914], confirms that the necessary approval was given. Mr Chambo was the Deputy Permanent Secretary of MoID and had been closely involved in the negotiations leading to the Addendum. The Claimant was entitled to rely upon Mr Chambo’s letter.

91.
Accordingly, the Tribunal finds that the Respondents have failed to demonstrate that approval of the Addendum by a Tender Board was not granted. It follows, and the Tribunal so finds, that pursuant to paragraph 1.0(i) of the Addendum (and also stated in the Deed of Settlement) the Claimant is entitled to be paid Price Escalation in US Dollars on the foreign currency element of the Adjusted Contract Price from the date of the Addendum.
92.
The Tribunal will now consider the other issues in relation to Price Escalation. Before dealing with the issues relating to Price Escalation under the Addendum, the Tribunal addresses how Price Escalation is addressed under the original Contract.

Does the original Contract limit the application of Price Escalation to local currency only (prior to the Addendum)?

93.
In summary the Claimant’s position is that Price Escalation was payable in Tanzanian Shillings on the whole of the Accepted Contract Amount after the first 18 months of the Contract, whereas the Respondents contend that Price Escalation was due only on the local currency portion of the Accepted Contract Amount and that in addition the amount of Price Escalation was capped at TZS 1.5 billion. The Claimant disputes the application of such a cap. The Tribunal addresses the issue of the cap below.
94.
Pursuant to Sub-Clause 14.1(a), the Contract Price is defined as the lump sum Accepted Contract Amount and is subject to adjustments in accordance with the Contract. The term "Accepted Contract Amount" is defined in Clause 1.1.14 as being the amount accepted in the Letter of Acceptance for the execution and completion of the Works and the remedying of any defects.
95.
The Letter of Acceptance defines the contract sum in Tanzanian shillings payable in specified proportions of Tanzanian shillings and US dollars. The relevant part of the Letter of Acceptance is set out above [E2/6/274].
96.
The Contract provides at Clause 13.8 that the Accepted Contract Amount is to be adjusted for the rises and falls in certain costs and that price escalation shall be calculated in accordance with a specified formula. This formula provides that the "sums payable by the Employer to the Contractor" shall be increased or decreased "by an amount of ‘F’ Tanzanian Shillings" in accordance with the application of the formula in the event of change in the NCC Index (see Sub-Clauses 13.8(b) and (c)).
97.
In the Tribunal’s view, it is clear from the foregoing that the original Contract provided for Price Escalation to apply (after the first 18 months of the Contract) to the whole of the Accepted Contract Amount including the proportion payable in US Dollars, but that the amount of Price Escalation on both currencies is payable in Tanzanian Shillings.

The Pre-Bid Meeting Minutes

98.
The Respondents contend that the Pre-Bid Meeting Minutes demonstrate that Price Escalation was not applicable to the foreign currency portion of the Accepted Contract Amount and that these minutes were included by the Claimant in their Tender. The Minutes set out question and answer 16 which interprets Sub-Clause 13.8 as meaning that there will be no adjustment for change in price in respect of the foreign currency element of the Accepted Contract Amount.
99.
The Claimant submits and the Tribunal agrees that in accordance with paragraph 18.4 of the Instructions to Bidders any modification to the Contract arising through the Pre-Bid Meeting is to be made by the issue of an addendum. No such addendum was issued by the Respondent or the Engineer and the incorporation of the Pre-Bid Minutes in the Claimant’s tender is insufficient to amend the Contract. In any event the answer to question 16 in the Pre-Bid Minutes interprets Sub-Clause 13.8 as meaning that there will be no adjustment for change in price in respect of the foreign currency element of the Accepted Contract Amount and the Tribunal does not agree with this interpretation of Sub-Clause 13.8.
100.
Secondly the Pre-Bid Minutes if applicable are inconsistent with Sub-Clauses 13.8 and 14.1 of the Contract which take priority under Sub-Clause 1.5 of the Contract.

The effect of the Schedule of Costs and Percentages of Listed Elements in the Contract

101.
The Schedule is as follows:
102.
The Respondents rely upon the Schedule for two contentions: first, that the sum of TZS 1.5 billion was inserted in the Tanzanian Shilling column with zero in the corresponding foreign currency column under the heading "Provisional Sum to cover price escalation". Second, that the amount of TZS 1.5 billion was a contingency from which all price escalation under the Contract was to be paid and that it operated as a cap.
103.
In relation to the first contention, the sum of TZS 1.5 billion was inserted by the Respondents and then incorporated by the Claimant in its Tender. Notwithstanding the Respondents’ reliance on the Instructions to Bidders in relation to the lack of a percentage or amount being entered, the Tribunal agrees with the Claimant’s contention that at the time of the original Contract it could not include any sums for Price Escalation in the foreign currency column of the Schedule because under the formula in Sub-Clause 13.8(c) any price escalation on the foreign currency portion was at the time of the Contract to be paid in Tanzanian shillings.
104.
The Claimant was simply recording that no Price Escalation was payable in foreign currency under the original Contract which is entirely consistent with the terms of the Contract as the Tribunal has found.
105.
In relation to the second contention that the sum of TZS 1.5 billion operates as a cap on the amount of Price Escalation that can be paid under the Contract, the Respondents rely upon Sub-Clauses 13.5, 13.8 and 14.4.
106.
In the Tribunal’s view, the provisions upon which the Respondents rely primarily set out the basis on which the contingencies elements are to be utilised and do not limit in any way the amount that may be payable for Price Escalation on the Accepted Contract Amount. In any event, the column in which the sum of TZS 1.5 billion was inserted by the Respondents is entitled "Provisional Sum to cover price escalation". A provisional sum is exactly that. It is a sum that may increase or decrease in accordance with the Contract and, in this case, as a consequence of the application of the formula set out in Sub-Clause 13.8. In circumstances where Price Escalation is to be calculated in accordance with a formula which in turn reflects an index based on future changes in various elements of cost, it is obvious that at the time of the Tender the amount of Price Escalation could only be provisionally estimated. Such a provisional sum cannot be and does not operate as a cap on the amount of Price Escalation which may or may not become due depending on the operation of the contract formula.
107.
Accordingly the Tribunal finds that:

a. Under the original Contract, after the expiry of the first 18 months of the contract period, the Claimant is entitled to payment of Price Escalation in Tanzanian shillings on both the local currency and the foreign currency elements of the Accepted Contract Amount.

b. The Pre-Bid Minutes do not alter this finding.

c. The fact that the Claimant did not insert a figure in the foreign currency column of the Schedule does not alter this finding.

d. The figure of TZS 1.5 billion inserted in the Schedule is a provisional sum and does not operate as a cap on the amount of Price Escalation payable under the original Contract in Tanzanian shillings on both the local and foreign currency elements of the Accepted Contract Amount.

Does the Price Escalation agreement in the Addendum result in an Unreasonable Windfall?

108.
The Respondents contend that even if their contention that the agreement in relation to Price Escalation in the Addendum was not approved by the Tender Board is rejected (as it has been by the Tribunal), this agreement is in breach of section 23(1) of the Regulations which provides in relation to price adjustment "in the event of inflation a price adjustment formula shall apply in order to arrive at a reasonable price."
109.
The Parties’ respective contentions are summarised above.
110.
The Parties agreed a specific price adjustment formula in the Contract, which, as the Tribunal has found, applies to the local and foreign currency elements of the Accepted Contract Amount but with the price escalation on those elements payable in Tanzanian shillings. The Tribunal has found that under the Addendum Price Escalation on the foreign currency element of the Adjusted Contract Price is payable in US Dollars.
111.
In the Tribunal’s experience, it is not uncommon for a formula reflecting an index based on costs in one country to be applied to costs that might be incurred in another country. The organisation responsible for the index - the National Construction Council - confirmed that this was the practice in Tanzania [G1/55/240].
112.
The original Contract was approved under the relevant procurement Regulations and the Tribunal has found that the Respondents have failed to demonstrate that the Addendum was not so approved. Section 23(1) of the Regulations simply provides that where there is inflation a price adjustment formula is to apply in order to arrive at a reasonable price. At the time of the original Contract, and also at the time of the Addendum, this issue would have been addressed by the relevant procurement authorities, and the Respondents have failed to demonstrate that at these respective times there was any suggestion that the application of the formula in this case would result in an unreasonable price. In the Tribunal’s view, the purpose of section 23(1) is to ensure that where there is inflation there is the application of a price adjustment formula to achieve a reasonable price, since, if there was no such formula, the price would be unreasonable because of the lack of any adjustment.
113.
In any event, having agreed a price adjustment formula with the relevant approvals under the Regulations, the Respondents are bound by that agreement and the result of the formula, when that result is the consequence of the application of an agreed Tanzanian index applicable to projects in Tanzania. In the Tribunal’s view, this is the sensible commercial approach to be adopted.
114.
In view of this conclusion, it is not necessary to address other issues raised by the Parties, including the Law of Contract Act and the contention that the price escalation formula compensates for only fifty percent of the actual cost increases.
115.
Accordingly, the Tribunal finds that the agreement in respect of Price Escalation in the Addendum does not result in an unreasonable windfall to the Claimant.

Is the agreement in respect of Price Escalation in the Addendum void for Mistake?

116.
The Parties’ respective submissions on this issue are set out above in this Section III.
117.
The Respondents rely upon the Minutes of the second negotiation meeting on 20 December 2006 [G2/104/667] to contend that the Price Escalation provision of the Addendum was premised on a mistaken agreed fact that the procedure for including the minutes of a pre-bid meeting was not properly followed. In fact, the Minute at paragraph 4.1.1 states:

"ISSUES OF ESCALATION OF PRICE

The following issue was agreed by the parties

Whether the pre-bid meetings were properly incorporated into the contract

Arguments for issue determination

(i) The parties agreed that since the clear wording of clause 13.8 allows escalation of price on the whole contract sum and the pre bid meeting was not effectively incorporated in the contract, the price escalation clause should apply to the whole contract sum payable both in local and foreign currency.

(ii) The Employer in principal agrees that the escalation clause applies to the whole contract amount."

118.
It is clear from the Minutes that the primary reason for agreeing that price escalation in both currencies is payable was "...the clear wording of clause 13.8 allows escalation of price on the whole contract sum...".
119.
The Minute states "the Employer in principal [sic] agrees that the escalation clause applies to the whole contract amount."
120.
The Parties were correct in believing that the Pre-Bid Minutes were not correctly incorporated into the Contract. There was no addendum as required by paragraph 18.4 of the Instructions to Bidders, and in any event Sub-Clauses 13.8 and 14.1 take priority pursuant to Sub-Clause 1.5 of the Contract.
121.
It follows that the Respondents’ submission that the Addendum was entered into based upon a mutual mistake of fact is misconceived. There was no mistake. The Pre-Bid Minutes were not properly incorporated into the Contract, and the Minutes of the second negotiation meeting reflect this.
122.
Secondly, the Pre-Bid Minutes express a view as to the meaning of Sub-Clause 13.8 and whether Price Escalation is payable on the foreign currency element of the Accepted Contract Amount. The Minutes of the second negotiating meeting make clear that the Parties took the view that Sub-Clause 13.8 allowed price escalation on the whole contract sum and there was no mistake about the terms of the Contract.
123.
As the Tribunal finds that the Addendum is not void on the basis of mutual mistake of fact the Tribunal concludes that it is not necessary to consider any of the other submissions of the Parties on the issue of mistake.
124.
Accordingly, pursuant to the Addendum, the Claimant is entitled to the sum of TZS 3,825,541,246.28 and USD 9,167,298.07 for Price Escalation.

Pre-Addendum Disruption Costs

The Parties’ Principal Submissions

125.
The Respondents contend that they are entitled to claw back sums paid to the Claimant in respect of Pre-Addendum Disruption costs, due to the Claimant’s failure to provide substantiation. The Claimant contends that a liquidated sum was agreed, and that substantiation was deemed to be adequately provided. Furthermore, Price Escalation is payable on the sums due.
126.
The Claimant contends that the natural reading of the Addendum and attached MoU and Minutes is that TZS 10 billion was an agreed liquidated sum of money that was to be paid. Substantiation was deemed to be adequately provided. The Claimant relies on the following:

a. The Parties agreed in the Addendum that the contract price would be revised to the "Adjusted Contract Price" of TZS 86,228,583,586 which was expressly recited to include "Disruption and Loss of Productivity." The figure of TZS 10 billion was included in the amended Schedule of Costs and Percentages of Listed Elements which applied following the Addendum at Appendix 2 [G2/130/935].

b. The Minutes of the meetings demonstrate that the Parties reached an agreement on a compromise lump sum, in particular:

• Paragraph 4.3 of the Minutes of the Second Meeting held on 20 December 2006 [G2/104/667].

• Paragraph 14 of the Minutes of the Sixth Meeting on 5 January 2007 [G2/107/726].

• Paragraph 26 of the Minutes of the Eighth Meeting on 9 January 2007.

• Paragraph 27 of the Minutes of the Ninth meeting on 10 January 2007 [G2/107/730].

c. Paragraph 27 of the Minutes of the Ninth Meeting on 10 January 2007 record that:

"Eventually it was agreed that the disruption costs be Tshs 10.0 billion and the Contractor was inclined to discount the balance of the claim. The final agreed Contract Lump Sum amount now will be Tshs 86.2 bln. It was agreed that the disruption had been adequately substantiated."

d. Clause 1 (iv) of the Addendum states that:

"The Addendum provides extra costs required to successfully complete the project...The extra costs are the result of the negotiations held between the Employer and the Contractor on pertinent contract terms and are agreed. The agreed negotiated items are, namely:

(iv) Costs due to Disruption and Loss of Productivity amounting to Tshs 10,000,000,000.00."

127.
To the extent that there is any conflict between the MoU suggesting that substantiation was to be provided and the minutes of the Ninth Meeting suggesting that it had already been given, the latter prevail as they are later in time and in effect answer the MoU wording.
128.
Alternatively, paragraph 27 of the Minutes of the Ninth meeting was expressly incorporated at paragraph 11 of the MoU and so when read together any requirement for substantiation was agreed as fulfilled.
129.
Further, the B2 bills are attached to the MoU as well as the Addendum, The B2 bills show a total of TZS 76 billion plus TZS 10 billion added for disruption, making a total of 86 billion, which is the amount of the new adjusted contract sum [T14/4 6/416].
130.
The Claimant points out that Mr Richards has carried out an assessment of the approximate valuation of pre-Addendum disruption based on the methods and rates used for post-Addendum disruption. As such, substantiation has in fact been provided. The delay in providing this is irrelevant. During the negotiations, it would have taken considerable time and cost to undertake such an exercise in circumstances where the Claimant was in severe financial difficulties as a result of the Respondents’ failure to pay sums due to it.
131.
The Claimant denies that the Minutes record that disruption was limited to Claims 1, 2, 8, 12 and 13. The Claimant claimed the additional payment in relation to all matters set out in its Minimum Position for Negotiations Paper [G2/101/517].
132.
The Claimant also contends that it was entitled to be paid Price Escalation on the pre-Addendum disruption costs:

a. Under Clause l.0(i) of the Addendum, Price Escalation was payable on the entirety of the Adjusted Contract Price. The Adjusted Contract Price was defined at page 1 of the Addendum and included the sum of TZS 10 billion for Disruption.

b. This was clearly the intention of the Parties as evidenced by the fact that the Engineer in fact certified such sums in IPC 20A which was paid by the Respondents.

c. Furthermore, pre-Addendum Disruption was in fact calculated by reference to a comparison between planned and actual productivity as can be seen from the Contractor’s Minimum Position for Negotiation Paper dated 14 December 2006 prepared for the Addendum Negotiations [G2/101/157-644]. Consequently, there can be no objection to seeking Price Escalation on this sum.

133.
The Respondents rely on:

a. Paragraph 5 of the MoU:

"The parties have agreed that any disruption that has sustained the Contractor loss of productivity shall be compensated upon reasonable and fair substantiation of related costs." [G2/118/811]

b. The Minutes of the Second Negotiation Meeting:

"The Contractor undertook to provide a cost buildup for the claim...relating to the descriptions [sic] causing loss of productivity." [G2/104/671]

c. Mr McCormick’s evidence, which is accepted by the Tribunal, is that the GNT had made the request for substantiation and the Claimant had given such an undertaking [T3/149/3-8].

134.
The Respondents reject the suggestion that the GNT included the substantiation requirement in the MoU simply to save face, or that the timing of the signing of the Minutes of the Fourth to Ninth negotiation meetings one day after the MoU has any relevance.
135.
The Respondents also reject the purported subsequent substantiation of pre-Addendum disruption contained in Mr Richards’ report on the basis that:

a. It was provided seven years after the event, rather than at the correct time.

b. Mr Richards has not investigated the cause of the discrepancy between the Claimant’s actual productivity and the measured mile on the erroneous assumption that liability was accepted by the GNT during the Addendum negotiations. In fact, only Claims 1, 8, 12 and 13 were acknowledged to have caused disruption.

136.
The Respondents further deny that Price Escalation is payable on any amount claimed for Pre-Addendum disruption:

a. The Contract’s Price Escalation formula at Sub-Clause 13.8 explicitly precludes Price Escalation on any amount that is quantified by reference to actual cost.

b. The Claimant cannot be entitled to a Price Escalation adjustment on a liquidated sum, which it has presented as a negotiated bargain between the Parties for payment of a sum certain. The Respondents submit that the Claimant cannot have it both ways. The amount is either liquidated, as the Claimant alleges, or it is not. The amount cannot be liquidated only to the extent that it benefits the Claimant (i.e. no substantiation required) but not where it does not (i.e. Price Escalation still owed).

Analysis and Conclusions of the Tribunal on Pre-Addendum disruption costs

137.
The Parties’ respective submissions are set out above.
138.
In support of the contention that the pre-Addendum disruption costs require substantiation by the Claimant, the Respondents rely upon paragraph 5 of the MoU [G2/118/811], the Minutes of the second negotiating meeting [G2/104/621] and Mr McCormick’s evidence [T3/149/3-8].
139.
However it is necessary to construe these provisions (and evidence) in the context of the full terms of the Minutes, MoU and Addendum, and the timing of the execution of each document is also relevant.
140.
The Minutes and MoU are annexed to the Addendum and form part of it.
141.
The Minutes of the second meeting (held on 20 December 2002) were signed on 20 December 2006; the minutes of the sixth meeting on 5 January 2007; the minutes of the eighth meeting on 9 January 2007.
142.
The MoU was signed on 30 January 2007.
143.
The Minutes of the fourth to ninth meeting were dated 30 January 2007 but in fact signed on 31 January 2007 after the date of the MoU. Apart from Mr McCormick’s evidence on this point [C4/1/20] in the Tribunal’s view it is clear from the email chain between the Parties at the time [G2/119/2013; G2/119/829] that the minutes were not signed until 31 January 2007.
144.
The Addendum was signed on 14 March 2007.
145.
The negotiations on the Pre-Addendum Disruption Costs claim progressed as follows:

a. At the second meeting, the Claimant agreed to provide a cost build up for the disruption claim (paragraph 4.3).

b. At the sixth meeting, the Parties agreed to continue to scrutinise the claims including the disruption claims (paragraph 14).

c. At the eighth meeting, the Claimant offered to reduce the disruption claim from TZS 14 billion to TZS 10 billion to result in a total claim of TZS 86.2 billion (paragraph 26). The Respondents asked the Claimant to reconsider an offer of TZS 5 billion.

d. The MoU provided at paragraph 5:

"5. 0 DISRUPTION CA USING LOSS OF PROD UCTIVITY

5.1 The Parties have agreed that any disruption that has sustained the Contractor loss of productivity shall be compensated upon reasonable and fair substantiation of related costs."

e. At the ninth meeting on 10 January 2007 [G2/119/837] the Parties agreed:

"27.3 Eventually it was agreed that the disruption costs be Tshs 10.0 billion and the Contractor was inclined to discount the balance of the claim. The final agreed Contract Lump Sum amount now will be Tshs. 68.2 bln. It was agreed that the disruption had been adequately substantiated.

27.6 The Parties settled with the sum of Tshs. 86,228,585,586.00 as an adjusted Contract Price, which excludes amounts for Adjustments for Changes in Costs, VAT, and all Provisional Sums and Contingencies."

f. Clause l(iv) of the Addendum provides:

"INTRODUCTION

The Addendum provides extra costs required to successfully complete the project for THE DESIGN AND CONSTRUCTION OF THE DODOMA-MANYONI ROAD. The extra costs are the result of the negotiations held between the Employer and the Contractor on pertinent contract items are agreed. The agreed negotiated items are, namely:

(iv) Costs due to Disruption and Loss of Productivity amounting to Tshs. 10,000,000,000.00..."

146.
In the Tribunal’s view, it is clear from the documents referred to above that the negotiations regarding the pre-Addendum disruption started with a requirement for substantiation but that a settlement was reached at TZS 10 billion as recorded in the Addendum which was signed after the MoU. Clause l(iv) of the Addendum, which was the final approved document concluding the negotiations, prevails over paragraph 5 of the MoU. This is supported by the fact that the Minutes of the ninth meeting were signed on 31 January 2007, after the date of the MoU.
147.
The wording of Clause l(iv) of the Addendum makes clear that this was an agreed liquidated figure of TZS 10 billion for costs due to Disruption and Loss of Productivity (see Section III (paragraph 14.5(f)).
148.
This figure was included in the Adjusted Contract Price of TZS 86,228,583,586 in the Addendum and in the amended Schedule of Costs and Percentages of Listed Elements at Appendix 2 [G2/130/935].
149.
Accordingly, the Tribunal finds that the Parties agreed a liquidated sum of TZS 10 billion in respect of the Pre-Addendum Disruption costs and that no further substantiation is required. This was paid to the Claimant in IPC 19 and was not subsequently deducted.
150.
The Tribunal also notes that the Respondents’ Engineer (Mr Ntensibe) wrote on 25 October 2008 to Tanroads making clear that the Addendum as the record of the final agreement between the Parties made no mention of a requirement for substantiation and that the Employer’s instruction to deduct the disruption costs may not be justified.

Is the Claimant entitled to Price Escalation on the amount of pre Addendum Disruption?

151.
The first page of the Addendum at clause (i) defines the Adjusted Contract Price as including the additional costs payable to the Claimant for the settled claims including "Disruption and Loss of Productivity". Addendum No. 1 [E5/2/1313] to the Addendum (also headed "Addendum No 1") provides at Clause l.oi) that Sub-Clause 13.8 "shall be correctly interpreted i.e. Price Escalation shall be paid on the whole of the works covered by the Adjusted Contract Price in both Tanzanian Shillings and US Dollars."
152.
Accordingly, the Tribunal finds that pursuant to the Addendum the Claimant is entitled to be paid Price Escalation on the pre-Addendum disruption as it was included in the Adjusted Contract Price upon which the Claimant is entitled to be paid Price Escalation.
153.
It is also noteworthy that the Engineer certified payment of price escalation on the pre-Addendum disruption costs in IPC 20A which was paid by the Respondents at the time.
154.
Accordingly, the Claimant is entitled to TZS 593,370,920 and USD 5,630,448.83 for Price Escalation on Pre-Addendum disruption.

Additional Design Costs

The Parties’ Principal Submissions

155.
The Respondents contend that they are entitled to claw back sums paid for Additional Design Costs as the Claimant has failed to provide substantiation. The Claimant contends that a liquidated sum was agreed in the Addendum and the Respondents are simply seeking to renege on this agreement.
156.
The Claimant contends that:

a. The Parties agreed in the Addendum that the contract price would be revised to the Adjusted Contract Price of TZS 86,228,583,586.00. This was expressly stated to include Additional Designs.

b. By the express wording of Clause 1 of the Addendum, "costs due to Additional Designs amounting to Tshs 1,813,008,129.00" were agreed.

c. The amount due for variations at Clause 1 (ii) of the Addendum was expressly described as an estimate whereas the figure for Additional Design was not.

d. Appendix 2 to the Addendum shows Design of the Works as a line item in the breakdown of the Adjusted Contract Price.

157.
The Claimant contends that although Mr McCormick’s evidence was that the Claimant initially agreed to provide more detail in relation to the Additional Design Costs, the position changed as with Pre-Addendum Disruption such that the Parties ultimately agreed to a liquidated sum [C4/1/26-27]. It is inconceivable that IPC 19 would have been certified and paid without substantiation having been provided if such had been agreed.
158.
Whether the Additional Design took 18 or 21 months is irrelevant as the Claimant’s proposal, which was accepted by the Respondents, was limited to doubling the original allowance for 6 months of design costs. This effectively compensated the Claimant for approximately 12 months’ design costs which are still substantially less than 18 months. In any event, the design did take 21 months to complete.
159.
Contrary to what the Respondents allege, the Claimant states that there is in fact a note on the record of the additional design figure, because it is included in the B2 bills, attached to the MoU and the Addendum [T14/47/3-13].
160.
As is the case with pre-Addendum Disruption, the Respondents contend that the effect of the Addendum was that the Parties agreed to provisionally set aside TZS 1,813,008,129.00 for payment to the Claimant, on the condition that the Claimant substantiate its claimed costs. The Engineer certified payment for the additional design costs on an interim basis, on the understanding that substantiation would be forthcoming.
161.
It was agreed that the Claimant would be entitled to compensation for its purported design costs only if it could be shown that such costs were incurred as a result of the instructions given by the Employer or the Engineer. The express wording of Clause 4 of the MoU states that:

"The Parties agreed that the design work was part of the Contractor's obligations. Accordingly, if at all the Contractor has incurred any additional costs as a result of any extra designs, these costs shall be borne by the Contractor. However, if any extra design(s) is or was in any way due to the instruction(s) or additional requirement(s) of the Employer and/or the Engineer, then the cost(s) of executing such designs shall be borne by the Employer." [E5/3/1323]

162.
The minutes of the Second Meeting record: "The Contractor undertook to prepare a realistic proposal explaining the increase in costs." [G2/104/667]
163.
The Respondents contend that it is significant that the final draft of the MoU that was ultimately executed originated from the Claimant, not the Employer.
164.
The formulation of the Claimant’s proposed amount for Additional Designs - the "double up" method - is arbitrary and emphasises why it should not be considered to have been understood as a liquidated sum. Reliance is placed on Mr McCormick’s evidence on Day 3 [T3/199/21 - T4/200/4].
165.
The Claimant does not claim Price Escalation on the Additional Design costs as recorded in the Claimant’s comments at item 3 of the Respondents’ list of issues. Mr Sakamoto also confirmed that he did not consider Price Escalation should be applied to the Additional Design costs [C1/2/3].

Analysis and Conclusions of the Tribunal on Additional Design Costs

166.
The position with regard to the Additional Design costs is similar to that relating to pre-Addendum disruption costs.
167.
Pursuant to Clause i of the Addendum the Adjusted Contract Price of TZS 86,228,583,586.00 is expressly stated to include TZS 34,238,583,581.00 "being the additional costs payable to the Contractor due to...Additional Designs..."
168.
Clause 1.0 of Addendum No. 1 [E5/2/1313] to the Addendum provides:

"The Addendum provides extra costs required to successfully complete the project for THE DESIGN AND CONSTRUCTION OF THE DODOMA -MANYONI ROAD. The extra costs are the result of negotiations held between the Employer and the Contractor on pertinent contract items and are agreed. The agreed negotiated items are, namely:

(iii) Costs due to Additional Designs amounting to Tsh 1,813,008,129.00;

..."

169.
Item 13.01 of the Bills for the Final Approved Designs in Appendix 3 to the Addendum includes a lump sum of TZS 1,813,008,129 for "Additional Design Costs".
170.
To the extent that there is any conflict between the MoU and the Minutes of Meetings, the Tribunal considers that the Addendum prevails and that its terms are clear.
171.
Accordingly, the Tribunal finds that the Claimant is entitled to recover TZS 1,813,008,129.00 for Additional Design costs without further substantiation of this figure. This sum was paid in IPC 19 and was not subsequently deducted.
172.
The Claimant does not claim Price Escalation on the Additional Design costs.

Extension of Time and Sectional Completion

173.
Although not an issue in dispute, this is a convenient place to record that in the Addendum [G2/118/815-816] the Parties agreed an extension of time of 24 months (231 days) from 30 September 2006 for completion of the work, and that Section 1 was completed by 30 November 2006 (Sub-Clause (viii) of the Addendum) [E5/2/1300].
174.
The Parties also agreed [G2/130/917] the following sectional completion dates:
Section 2 31 December 2007
Section 3 30 April 2008
Section 4 29 September 2008
175.
The completion date for Section 4 was also the date for completion of the contract works [CCS/4.1].
176.
Section 3 was taken over on 1 November 2008, 184 days late [G4/529/2086; S3/1/114].

SECTION IV: SUSPENSION CLAIMS

Overview of Claims

1.
The Claimant contends that as a result of the Employer’s failure to make payments, it was entitled to suspend the Works on three occasions:

a. September 2006 - mid 2007 ("the First Suspension");

b. April 2008 - June 2008 ("the Second Suspension");

c. November 2008 - March 2009 ("the Third Suspension").

2.
On the basis of the above, the Claimant submits that it is entitled to additional costs plus reasonable profit/damages and an extension of time. In the alternative, the Claimant seeks a declaration that time is at large and/or that the Employer is precluded from collecting liquidated damages.
3.
As an initial threshold issue, the Respondents submit that the Claimant is barred from bringing these claims due to its failure to comply with the notice and/or particularisation provisions contained in Sub-Clause 20.1.
4.
The Respondents further contend that in any event, the suspension claims fail on their substantive merits. Additionally, as the Claimant had no excuse for the critical delay to progress, the Employer is entitled to liquidated damages for late completion pursuant to Sub-Clause 8.7 [E3/1/632-633].
5.
In the Partial Award, the Tribunal decided in relation to Preliminary Issue No. 6 that compliance with the notice provisions of the first paragraph of Sub-Clause 20.1 of the Contract is a pre-condition to the pursuit of a claim for an extension of time or additional payment under the Contract [B2/2.1/29]. The Tribunal did not make findings on (i) what the contractual provisions require for the purpose of compliance; (ii) when the Claimant became aware or should have become aware of the relevant event or circumstance; (iii) whether Sub-Clause 20.1 applies to claims for damages for breach of contract; (iv) the application of the prevention principle. The Tribunal did not, in the Partial Award, decide whether any Contract notice provisions had or had not been complied with in respect of any relevant claim. This issue is addressed in this Section in relation to the Suspensions claims.
6.
In the following Sections, the Tribunal sets out the relevant contractual provisions, the factual background in relation to each suspension, a summary of the Parties’ principal submissions and its analysis and conclusions in relation to each Suspension.

Relevant Contractual Provisions

7.
The relevant contractual provisions are outlined below.
8.
Sub-Clause 16.1 - Contractor’s Entitlement to Suspend Work:

"Sub-Clause 16.1 - Contractor’s Entitlement to Suspend Work

If the Engineer fails to certify in accordance with Sub-Clause 14.6 [Issue of Interim Payment Certificates] or the Employer fails to comply with Sub-Clause 2.4 [Employer's Financial Arrangements] or Sub-Clause 14.7 [Payment], the Contractor may, after giving not less than 21 days’ notice to the Employer, suspend work (or reduce the rate of work) unless and until the Contractor has received the Payment Certificate, reasonable evidence or payment, as the case may be and as described in the notice.

The Contractor’s action shall not prejudice his entitlements to financing charges under Sub-Clause 14.8 [Delayed Payment] and to termination under Sub-Clause 16.2 [Termination by Contractor].

If the Contractor subsequently receives such Payment Certificate, evidence or payment (as described in the relevant Sub-Clause and in the above notice) before giving a notice of termination, the Contractor shall resume normal working as soon as is reasonably practicable.

If the Contractor suffers delay and/or incurs Cost as a result of suspending work (or reducing the rate of work) in accordance with this Sub-Clause, the Contractor shall give notice to the Engineer and shall be entitled subject to Sub-Clause 20.1 [Contractor’s Claims] to:

An extension of time for any such delay, if completion is or will be delayed, under Sub-Clause 8.4 [Extension of Time for Completion], and

Payment of any such Cost plus reasonable profit, which shall be included in the Contract Price." [E3/1/653]

9.
Sub-Clause 20.1 - Contractor’s Claims:

"If the Contractor considers himself to be entitled to any extension of the Time for Completion and/or any additional payment, under any Clause of these Conditions or otherwise in connection with the Contract, the Contractor shall give notice to the Engineer, describing the event or circumstance giving rise to the claim. The notice shall be given as soon as practicable, and not later than 28 days after the Contractor became aware, or should have become aware, of the event or circumstance.

If the Contractor fails to give notice of a claim within such period of 28 days, the Time for Completion shall not be extended, the Contractor shall not be entitled to additional payment, and the Employer shall be discharged from all liability in connection with the claim...

Within 42 days after the Contractor became aware (or should have become aware) of the event or circumstance giving rise to the claim, or within such other period as may be proposed by the Contractor and approved by the Engineer, the Contractor shall send to the Engineer a fully detailed claim which includes full supporting particulars of the basis of the claim and of the extension of time and/or additional payment claimed...

Each payment certificate shall include such amounts for any claim as have been reasonably substantiated as due under the relevant provision of the Contract...

...If the Contractor fails to comply with this or another Sub-Clause in relation to any claim, any extension of time and/or additional payment shall take account of the extent (if any) to which the failure has prevented or prejudiced proper investigation of the claim, unless the claim is excluded under the second paragraph of this Sub-Clause." [E3/1/684]

10.
Sub-Clause 1.3 - Communications:

"Wherever these Conditions provide for the giving or issuing of approvals, certificates consents, determinations, notices and requests, these communications shall be:

in writing and delivered by hand (against receipt), sent by mail or courier, or transmitted using any of the agreed systems of electronic transmission as stated in the Appendix to Tender; and

delivered, sent or transmitted to the address for the recipient’s communications as stated in the Appendix to Tender. However:

if the recipient gives notice of another address, communications shall thereafter be delivered accordingly; and

if the recipient has not stated otherwise when requesting an approval or consent, it may be sent to the address from which the request was issued.

Approvals, certificates, consents and determinations shall not be unreasonably withheld or delayed. When a certificate is issued to a Party, the certifier shall send a copy to the other Party. When a notice is issued to a Party, by the other Party or the Engineer, a copy shall be sent to the Engineer or the other Party, as the case may be."

11.
Paragraph 1230 of the Standard Specification:

"1230 RECORDING OF INFORMATION RELATING TO CLAIMS FOR

ADDITIONAL COMPENSATION OR EXTENSION OF TIME

Should any circumstances arise or order be given by the Engineer which the Contractor considers may fairly entitle him to additional compensation, or extension of time for completion of the Contract, then the Contractor shall at the earliest practicable opportunity inform the Engineer of these circumstances so that he may have the opportunity to investigate the circumstances and take such action as he considers desirable in order to reduce possible costs to the Employer. The Contractor shall at the same time inform the Engineer of his intention either to claim additional compensation or extension of time, or to reserve his right to claim at a later stage. The Contractor shall also state on which clause or clauses of the Conditions of Contract, the Special Specifications or other parts of the Contract Documents his claim is based.

In order that the extent and validity of such claims may be properly assessed when they are submitted at a later date, all circumstances relating to claims must be investigated, recorded and agreed upon as far as possible between the Contractor and the Engineer as and when they occur. For this purpose the Contractor shall furnish the Engineer from day to day with records, in a form approved by the Engineer, of all the facts and circumstances that the Contractor considers relevant and may wish to rely upon in support of his claims. The Engineer may in turn record such other facts and circumstances as he considers relevant and the Contractor shall for this purpose, supply him with all the information that he may require in this respect.

The Engineer and the Contractor shall, at the time of recording, indicate in writing and by signature, their agreement or disagreement as to the correctness of the information recorded. Additional compensation shall for the purposes of this Clause be taken to mean compensation over and above the payments at unit rates and prices bid or agreed upon for work ordered by the Engineer." [E4/2/949]

Factual Background to the Suspensions

12.
The First Suspension concerns the slow down from 5 September 2006 until mid-20071 as a result of the alleged late payment of IPC 15. The Claimant also contends that a second ground for suspension arose in 2007, due to the late payment of the Outstanding Amount (the sum of USD 10,602,746.36 allegedly owed to the Claimant as Price Escalation on the foreign currency component of IPCs 7-16).
13.
The key events are set out in further detail in the table below.

DATEEVENT
6 June 2006 IPC 15 issued.
27 June 2006 TZS portion of IPC 15 paid in full.
14 August 2006 Sub-Clause 16.1 notice served in respect of IPC 15 [G1/66/318].
5 September 2006 Claimant notified MoID that it was slowing down progress and gave notice under Sub-Clause 20.1 in respect of IPC 15 [G1/72/375]. The Claimant reduced the rate of working.
8 September 2006 USD 1,252 million paid to Claimant -leaving USD 25,000 unpaid on IPC 15.
10 November 2006 USD 1,458,399.75 paid to Claimant and allocated to IPC 16.
22 December 2006 USD 900,000 paid to Claimant: • USD 6,729 allocated to IPC 15, leaving USD 18,000 unpaid. • USD 20,000 allocated to clear small balances on IPCs 13 and 14.
10 January 2007 Ninth Meeting between GNT and the Claimant. Minutes record that Outstanding Amount would be paid "now".
15 January 2007 IPC 17 submitted but not certified.
17 January 2007 IPC 17 re-submitted minus Outstanding Amount [G2/112/771].
30 January 2007 MoU signed.
6 February 2007 Claimant letter to Respondents seeking payment of Outstanding Amount [G2/123/860].
19 February 2007 Claimant letter to Respondents again seeking payment of Outstanding Amount [G2/124/861].
16 March 2007 Deed of Settlement signed.
19 March 2007 Outstanding Amount certified in IPC 18 [G2/132/958].
10 April 2007 Limited remobilization begins [C1/1/21].
12 July 2007 Full payment of IPC 18 (Outstanding Amount) received and full remobilization.
4 August 2007 Sub-Clause 20.1 notice for Outstanding Amount.
2 November 2007 IPC 15 paid in full.

14.
The Second Suspension occurred during 19 April 2008 to 21 June 2008 due to the purported late payment of IPCs 19, 20, 20A and 23. The key events are set out in the table below:

DATEEVENT
16 June 2007 IPC 19 submitted.
26 June 2007 IPC 19 certified.
16 August 2007 IPC 20 submitted.
22 August 2007 Sub-Clause 16.1 notice given in relation to IPC 19 [G3/189/1217].
7 September 2007 Revised IPC 20 certified.
2 November 2007 USD 182,000 still outstanding on IPC 19.
6 November 2007 Sub-Clause 16.1 notice served in
respect of IPC 20 [G3/230/1333].
26 January 2008IPC 23 submitted.
12 February 2008 Meeting between Tanroads and Claimant - agreed to resubmit IPC 20 as IPC 20A [G3/302/1475].
15 February 2008 IPC 20A submitted.
19 February 2008 IPC 20A certified.
23 February 2008 IPC 23 submitted.
26 March 2008 Claimant wrote to Tanroads stating that its Sub-Clause 16.1 notice in respect of IPC20 applied to IPC20A [G3/330/1569].
16 April 2008 Sub-Clause 16.1 notice served in respect of IPC 20A [G3/349/1597].
18 April 2008 Claimant informs Respondents of Second Suspension [G3/353/1 609].
19 April 2008 Claimant commenced Second Suspension.
21 April 2008 Sub-Clause 16.1 notice served in respect of IPC 23 [G3/356/1613].
25 April 2008 Letter from Claimant to Tanroads stating that its financial situation has deteriorated and that it will be suspending the structure works and ancillary works from 29th April 2008 [G3/357/1614].
1 May 2008 Letter from Claimant to Tanroads giving notice of claim for extension of time and associated costs in relation to IPC 20 [G3/361/1621].
8 May 2008 Minutes of Progress Meeting 52 [A2/13/5].
9 May 2008 Letter from Claimant to Tanroads notifying suspension from 10th May 2008 [G3/367/1629].
14 May 2008 Letter from Claimant to Tanroads acknowledging payment of TZS 8 billion but stating that this amount is enough to pay sub-contractors and suppliers for services rendered in
March and April 2008 only, and not for resuming works in full capacity. Notes that the amount of outstanding payments for the IPCs, after the aforementioned part payment, is in excess of USD 22 million [G3/371/1636].
23 May 2008 High-level meeting at Konoike headquarters in Osaka, Japan [G3/387/1702].
24 May 2008 Sub-Clause 20.1 notice provided in respect of IPC 23 [G4/390/1711].
29 May 2008IPC 19 paid in full [G4/393/1715].
21 June 2008 Claimant resumed Works.
12 July 2008 Full remobilisation.
16 September 2008IPC 20A paid.
20 September 2008 Particularisation provided [G4/463/1927].
22 September 2008IPC 23 paid.

15.
The Third Suspension began on 6 November 2008 as a result of the alleged non-payment of IPCs 24 and 25 and continued up until termination (the date of which is disputed). The key events are set out below.

DATEEVENT
16 May 2008 IPC 24 certified.
5 August 2008 Sub-Clause 16.1 notice for IPC 24 [G4/430/1836].
18 August 2008 IPC 25 certified.
2 September 2008 Local currency element of IPC 24 paid (TZS 2,182,176,813) [G4/447/1865].
17 September 2008 Claimant letter to Tanroads stating entitlement to suspend works (G4/455/1906].
22 September 2008 USD 4 million paid, of which USD 3.49 million was allocated to IPC 24 [G4/464/1929].
15 October 2008 Claimant submitted a Sub-Clause 16.1 notice based on non-payment of IPC 25. In the same letter, the Claimant asserted that it "would be entitled to terminate the Contract 120 days after IPC 24 was due, on 11 July 2008 [G4/498/2005]. The Employer responded that it was reviewing the prior payments made under the Addendum and asked the Claimant to withdraw its intention to suspend the works [G4/523/2070].
3 November 2008 Claimant wrote to Tanroads stating that works would proceed at a reduced rate from that day forward, pursuant to the Sub-Clause 16.1 notice for IPC 24, and that suspension of the works for non-payment of IPC 25 would begin on 6 November 2008 [G4/527/2084].
6 November 2008 Claimant confirmed the Third Suspension [G4/534/2096].
2 December 2008 Claimant issued a "Notice of Entitlement to Terminate Pursuant to Sub-Clause 16.2" alleging various grounds including that payment for IPC 24 was 144 days late, the Engineer had not certified IPC 26 within the required time, as
well as that the Employer had refused to issue Taking Over Certificates and had interfered with the Engineer’s determination of claims [G4/559/2142].
15 December 2008 Tanroads informed the Claimant that the Contract was at an end and instructed the Claimant to vacate the Site,
11 March 2009 Claimant purportedly terminated the Contract [G5/645/2325].

Parties’ Principal Submissions

First Suspension

Overview

16.
As set out above, the Claimant submits that it was entitled to suspend and did so from 5 September 2006 on the basis of the delayed payment of IPC 15, which was not paid in full until 2 November 2007. It maintains that an additional ground for suspension arose in 2007 as a result of the non-payment of the Outstanding Amount.
17.
It is accepted by the Parties that a Sub-Clause 16.1 notice was given on 14 August 2006 [G1/66/318], and a Sub-Clause 20.1 notice on 5 September 2006 [G1/72/375]. It is also accepted that particularisation was provided on 14 September 2007. The Respondents however deny that the Claimant’s claim can succeed as (i) the Claimant was not substantively entitled to suspend on the basis of IPC 15 when it purported to do so; and (ii) no Sub-Clause 16.1 notice was given in respect of the Outstanding Amount, which is a condition precedent.

Claimant’s principal submissions

18.
The Claimant asserts that:

a. Sub-Clause 16.1 provides no restrictions on a Contractor’s right to suspend for non-payments. The Claimant was entitled to suspend even if the amount outstanding could be described as de minimis.

b. There is no foundation in law or fact for the Respondents’ argument that it should be treated as having allocated funds from the 10 November 2006 and 22 December 2006 payments to IPC 15 with the result that the right to suspend work ended. The Claimant relies on section 60 of the Tanzanian Law of Contracts Act [F2/2.29/22]. Even if the Claimant had allocated the sums paid in respect of IPC 16 as against IPC 15, sums would then have been outstanding on IPC 16, which would have entitled the Claimant to suspend Works. The Claimant expressly clarified that it had not recognised that the whole of IPC 15 had been paid [H2/1.40/82] [G1/90/486] [G2/104/671] [H1/1.55/1] [G2/113/772].

c. In any event, the claim relates to delayed remobilisation in April-August 2007 due to lack of funds. The Respondents had additionally failed to pay the Outstanding Amount in the sum of USD 10.6 million until 12 July 2007.

19.
The Claimant submits that even if is wrong on IPC 15, it was nevertheless entitled to continue the reduced rate of working by reason of the Employer’s failure to pay the Outstanding Amount, which was due following the meeting on 10 January 2007, alternatively when the MoU was signed on 31 January 2007, alternatively at the date of the Deed of Settlement on 14 March 2007, alternatively 14 May 2007, the due date of IPC 18. The Claimant was not required to follow the contractual payment mechanism again in respect of this sum. To the extent that a further certificate was required, it was for the Employer to inform the Engineer immediately of the agreement reached so the Engineer could effect certification.
20.
As to the notice provided in respect of the Outstanding Amount:

a. It was agreed as part of the Addendum by Minute 4.5.0 of the meeting on 20 December 2006 [G2/104/671] that work would not commence until some payment had been made. Given the contractual force of that agreement, further notices under Clauses 16 and 20 were not required.

b. Failure to pay the Outstanding Amount was a "delay, impediment or prevention" on the part of the Employer, entitling the Claimant to an extension of time pursuant to Sub-Clause 8.4(e). Entitlement under this clause does not require the service of a Sub-Clause 16.1 notice.

c. However if and insofar as necessary, notice was given under Sub-Clause 16.1 and 20.1 in respect of the non-payment of the Outstanding Amount by:

• Minute 4.5.0 of the above meeting on 20 December 2006, which was restated and agreed by inclusion in the MoU and the Addendum;

• Letter dated 6 February 2007 [G2/123/860];

• Letter dated 19 February 2007 [G2/124/861].

d. In the circumstances of Works already being subject to a reduced rate of working, notice that they would not be re-commenced until payment was made was sufficient description of the event or circumstances giving rise to an extension of time.

e. Notice provisions such as Sub-Clauses 16.1 and 20.1 are to be construed broadly - Obrascon Huarte Lain SA v Her Majesty’s Attorney General for Gibraltar [2014] EWHC 1028 (TCC).

f. The Respondents have waived their right and/or are estopped from relying upon any failure by the Claimant to comply with the notice provisions.

21.
If the Claimant was entitled to suspend or reduce the rate of working, it was entitled to do no work at all and consequently cannot be criticized for remobilizing slowly when it was not obliged to start remobilising at all until 12 July 2007. In any event, the Employer is estopped from withholding payments which have been approved (certified) by the Engineer acting as its agent. Regulation 123(3) creates no additional powers to those contained in the Contract.

Respondents’ Principal Submissions

22.
In respect of IPC 15, the Respondents contend that the Claimant:

a. Suspended prematurely before it had any entitlement to do so; and

b. Maintained its slowdown after it had received payment of all, or alternatively, all but a de minimis part of IPC 15.

23.
It was only on 14 August 2006 that the Claimant gave notice of its alleged entitlement to slow down the Works. However, the slowdown in fact began on or before 1 August 2006 and in any event prior to the expiration of the 21 day notice period on 7 September 2006. Reliance is placed on the Engineer’s letter of 31 August 2006 [G1/69/324] and Mr Sakamoto’s evidence [T5/19/13] [T5/23/20-24]. Therefore even if the Claimant is correct that it was entitled to suspend on the basis of IPC 15, which is denied, the suspension was still in breach of contract, as the Claimant had already started slowing down the work before it had any arguable entitlement to do so [T14/128/24 - T14/129/4].
24.
In any event, the Claimant could not start nor continue a suspension after the Employer paid IPC 15 in full on 8 September 2006. The Claimant admitted this at the time [G1/84/394] and subsequently [G5/678/2478]. At this point, a de minimis amount remained outstanding. Thereafter, the Claimant held unallocated funds received from the Employer without crediting them against outstanding certified sums, contrary to section 59 of the Tanzanian Law of Contracts Act [F2/2.29/22].
25.
Nor was the Claimant entitled to suspend on the basis of the Outstanding Amount. The Claimant applied for payment of this in IPC 18, which was not due until 14 May 2007. The Claimant was' required to follow the contractual payment mechanisms. The Contract does not allow for payments to be made by the ad hoc mechanism now suggested by the Claimant. The Claimant acknowledged at the time that payment was to be processed under the contractual payment provisions by requesting payment in IPC 17 on 15 January 2007. The Engineer certified the Outstanding Amount in IPC 18 on 19 March 2007 and thus it was only due for payment on 14 May 2007.
26.
The Claimant did not issue a Sub-Clause 16.1 notice of entitlement to suspend on the basis of the Outstanding Amount, a condition precedent to any valid suspension. The purported notices relied upon as set out above cannot function as Sub-Clause 16.1 or 20.1 notices. They were written months before the Outstanding Amount was due, on 14 May 2007. Obrascon is not binding. Under Tanzania law, specifically Regulation 118(3), contractual notice provisions (both Sub-Clauses 16.1 and 20.1) must be construed strictly.
27.
Furthermore, no Sub-Clause 20.1 notice was issued. The letters relied on by the Claimant of 6 and 19 February 2007 cannot be considered as either Sub-Clause 16.1 or Sub-Clause 20.1 notices. The Claimant also failed to comply with the particularisation requirements.
28.
In any event, the claimed delay was not caused by late payment of IPC 15 or the Outstanding Amount. At the time, the Claimant’s subcontractor Estim was executing major works and was obliged to supply its own fuel. There is no evidence that the timing of the Claimant’s receipt of the Outstanding Amount affected Estim’s ability to advance the works. The Claimant did spend money and do work during this period but chose to progress non-critical works.
29.
Once the Claimant started to remobilise, it only started to remobilise slowly, causing delay. Under Tanzanian law (Regulation 123(3)) the Employer was released from its payment obligations until the Claimant had achieved full mobilisation and made good any delay caused due to the slow remobilisation.

Second Suspension

Overview

30.
The Second Suspension relates to the alleged late payment of IPCs 19, 20, 20A and 23. In outline, the Claimant avers that:

a. A Sub-Clause 16.1 notice was given in relation to IPC 19 on 22 August 2007 [G3/189/1217]. The Claimant was therefore entitled to suspend on this basis from 12 September 2007. However, the Claimant did not exercise this right immediately and kept working.

b. A Sub-Clause 16.1 notice was served in respect of IPC 20 on 6 November 2007 [G3/230/1333].

c. On 26 March 2008, the Claimant wrote to Tanroads asserting that its Sub-Clause 16.1 notice in respect of IPC 20 applied to IPC 20A [G3/330/1569].

d. A further Sub-Clause 16.1 notice in respect of IPC 20A was served on 16 April 2008 [G3/349/1597].

e. The Claimant eventually suspended on 19 April 2008.

f. A Sub-Clause 16.1 notice for IPC 23 was given on 21 April 2008 [G3/356/1613].

g. On 29 May 2008, IPC 19 was paid in full. [G4/393/1715]. However the Claimant’s entitlement to suspend continued as a result of the non-payment of IPCs 20, 20A and 23.

Respondents’ principal submissions

31.
The Respondents contend that:

a. The only IPCs of relevance to this suspension are IPCs 20A and 23. IPC 19 was paid in full and IPC 20 was withdrawn and so neither could found a Sub-Clause 16.1 suspension.

• By 2 November 2007, all but USD 182,000 had been paid on IPC 19.

• When the Contractor received payments totalling nearly USD 8 million on 16 January, 23 January 20 February and 26 February 2008, it allocated the entire sums to IPCs 21 and 22, although those were not due for weeks. The exercise of discretion under s 60 of the Law of Contracts Act must be used reasonably

• Therefore when the Claimant suspended on 19 April 2008, nearly eight months after its Sub-Clause 16.1 notice for IPC 19, any outstanding balance was de minimis and could not justify the suspension.

b. Furthermore, the Claimant never purported to suspend on the basis of IPC 19. The Claimant announced the Second Suspension by its letter of 18 April 2008 [G3/353/1609] referring only to IPC 20 and the Sub-Clause 16.1 notice given in respect of IPC 20. It did not invoke IPC 19 as a basis for the suspension. On 20 September 2008 when the Claimant submitted its particularised claim in respect of the Second Suspension [G4/463/1927] IPCs 20, 20A and 23 are listed but not IPC 19.

c. The Sub-Clause 16.1 notices upon which the Claimant relies in relation to IPC20A and IPC 23 were not effective until 21 days after they were given. Accordingly, the earliest the Claimant could have reduced the rate of progress or suspended the Works was 7 May 2008 (and 14 May 2008 for IPC 23). Any suspension prior to this time was in breach of contract.

d. The Sub-Clause 16.1 notice that was issued in respect of IPC 19 cannot be left open for 10 months as the Claimant alleges. Sub-Clause 16.1 notices cannot reasonably be construed to give a perpetual right to suspend.

e. Irrespective of the issues on Sub-Clause 16.1 notices, the claim must fail as no Sub-Clause 20.1 notice was given in respect of the Second Suspension within the required time. Additionally, particularisation of the claim was not given until 20 September 2008.

f. In any event, on a proper analysis of the balance of payments made, no monies were due to the Claimant during the period 19 April 2008 to 12 July 2008, as set out in the Respondents’ Schedule of Balance of Payments Against Revised IPCs at Appendix A to the SoDC.

g. As a matter of Tanzanian law, the Respondents were under no obligation to make payments to the Claimant due to its alleged failure to recover the delay to progress caused by its purported slow remobilisation of work following the previous suspension in 2007.

Claimant’s principal submissions

32.
The Claimant submits that:

a. Despite the part payments, a sum of USD 182,000 remained outstanding on IPC 19 until the 29 May 2008 and the Claimant was therefore entitled to suspend work on 19 April 2008. There is no de minimis restriction on the Claimant’s right to suspend under Sub-Clause 16.1.

b. The Respondents never questioned the Claimant’s reliance on its Sub-Clause 16.1 notice for IPC 20 in relation to IPC 20A or its right to suspend. By their conduct, the Respondents have waived their rights or are estopped from contending the contrary. The Respondents have not shown that there was any agreement made that there should be a further 56 days for the payment of IPC 20.

c. The Respondents’ reliance on the table in Appendix A is misplaced. Appendix D to the Reply records the actual, contemporaneous payment situation with regard to certified amounts, with allocation of sums received from the Respondents by the Claimant taking into account any intimation from the Respondents as to how the sums should be attributed.

d. The Claimant states that Sub-Clause 20.1 notices were given as set out in the table below:

IPC20.1 Notice
e. 1 19 n a n y e V • Letter dated 18 April 2008 [G3/357/1614] • Minutes of Progress Meeting 52 on 8 May 2008 [A2/13/5] • Letter dated 14 May 2008 [G3/371/1636] • Minutes of the meeting on 23 May 2008 [G3/387/1702] • Alternatively, the Sub-Clause 16.1 notice of 22 August 2007 [G3/189/1217] was also a notice under Sub-Clause 20.1
e 20 n t J t h e R e • Letter dated 1 May 2008 [G3/361/1621] • Minutes of Progress Meeting 52 on 8 May 2008 [A2/13/5-6] • Letter of 14 May 2008 [G3/371/1636] • Minutes of the meeting on 23 May 2008 [G3/387/1702] • Further or alternatively, the Sub-Clause 16.1 notice dated 6 November 2007 [G3/230/1333] was also a notice under Sub-Clause 20.1
s 20A P o n d e n • Letter of 1 May 2008 [G3/361/1621] • Letter of 9 May 2008 [G3/367/1629] • Alternatively, Sub-Clause 16.1 notice dated 6 November 2007 [G3/230/1333] was also a notice under Sub-Clause 20.1
t 23 • Letter of 24 May 2008 [G3/390/1711]

s cannot rely on any alleged failure to notify the claim under Sub-Clause 20.1 to their advantage by virtue of the prevention principle - Gaymark Investments Pty Ltd v Walter Construction Group Ltd [1999] NTSC 143 [F1/1.1/1]. Furthermore, the notice provisions do not apply to the Claimant’s claims for breach of contract.

f. The failure to particularise within the time limits prescribed by Sub-Clause 20.1 is not a condition precedent and therefore not fatal to the Claimant’s claim.

Third Suspension

Claimant’s principal submissions

33.
The Claimant contends that the Employer’s breach of its payment obligations in respect of IPCs 24 and 25 caused the Claimant to suspend the Works in accordance with Sub-Clause 16.1 between 6 November 2008 and 11 March 2009, ultimately forcing the Claimant to terminate on that date.
34.
IPC 24 was certified on 16 May 2008 in the amounts of TZS 2,182,176,813 and USD 6,209,459.41. Payment was due on 11 July 2008. It is accepted that on 5 August 2008, the Claimant submitted a Sub-Clause 16.1 notice, effective on 26 August 2008 [G4/430/1836].
35.
IPC 25 was certified on 18 August 2008 in the amounts of TZS 5,072,376,217.00 and USD 7,936,978.24. Payment was due on 13 October 2008.
36.
The Employer subsequently made the following payments:

a. 2 September 2008: local currency element of IPC 24 (TZS 2,182,176,813) [G4/447/1865];

b. 22 September 2008: USD 4 million, of which USD 3.49 million was allocated to IPC 24 [G4/464/1929].

37.
The Claimant avers that at this stage the following sums remained outstanding:

a. USD 2,719,809.57 on IPC 24;

b. The full amount on IPC 25.

38.
On 17 September 2008, the Claimant wrote to Tanroads affirming its entitlement to suspend the Works [G4/455/1906].
39.
It is accepted that on 15 October 2008, the Claimant submitted a Sub-Clause 16.1 notice based on non-payment of IPC 25. In the same letter, the Claimant asserted that it would be entitled to terminate the Contract 120 days after IPC 24 was due, on 11 July 2008 [G4/498/2005]. The Employer responded that it was reviewing the prior payments made under the Addendum and asked the Claimant to withdraw its intention to suspend the works [G4/523/2070].
40.
On 3 November 2008, the Claimant wrote to Tanroads stating that works would proceed at a reduced rate from that day forward, pursuant to the Sub-Clause 16.1 notice for IPC 24, and that suspension of the works for non-payment of IPC 25 would begin on 6 November 2008 [G4/527/2084]. The Claimant confirmed the suspension on 6 November 2008 [G4/534/2096].
41.
On 2 December 2008, the Claimant issued a "Notice of Entitlement to Termination Pursuant to Sub-Clause 16.2" alleging various grounds including that payment for IPC 24 was 144 days late, the Engineer had not certified IPC 26 within the required time, as well as that the Employer had refused to issue Taking Over Certificates and had interfered with the Engineer’s determination of claims [G4/559/2142]. The Claimant stayed on site until mid-March, at which point it alleges that it terminated the Contract on 11 March 2009 [G5/645/2325].

Respondents’ Principal Submissions

42.
The Respondents accept that the Claimant notified the suspension under Sub-Clause 16.1 and gave a Sub-Clause 20.1 notice for the additional time and money now sought. However, they contend that:

a. They are discharged from liability as a result of the Claimant’s failure to particularise the claim until submission of its Final Account on 26 June 2009 [A3/1.1/109].

b. In any event, no monies were due to the Claimant during the period of suspension from 6 November 2008 to 11 March 2009 due to the invalidity of prior amounts paid previously under the Addendum, as set out in the Respondents’ Schedule of Balance of Payments Against Revised IPCs at Appendix A. The Claimant had been substantially overpaid and therefore was not owed the monies covered by IPCs 24 and 25 and could not suspend. Under Sub-Clause 20.6, the Tribunal is entitled to open up, review and revise any IPC.

c. On 15 December 2008, Tanroads informed the Claimant that the Contract was at an end and instructed the Claimant to vacate the Site. That the Claimant decided to wait until 11 March 2009 until it commenced demobilizing is a matter for its own account, and cannot found an entitlement to additional time and money. Even if the Claimant is correct about anything else in relation to the final suspension, the maximum Extension of Time that could be sustained is 40 calendar days: 6 November 2008 to 15 December 2008 inclusive.

d. As set out above, the Employer was entitled to refuse to authorize further payments to the Contractor given that the Contractor had not yet recovered the unexcused delay to the schedule, nor remedied the other shortcomings notified to it pursuant to Regulation 123(3).

43.
The Claimant accepts that particularisation was provided on 26 June 2009 however failure to particularise within 42 days is not a bar to the Claimant’s right to claim. The only sanction for failure to particularise is that contained in the final paragraph of Sub-Clause 20.1, which states that if the Contractor fails to comply, any extension or additional payment will take account of the extent (if any) to which the failure has caused prejudice to the Employer. No prejudice has been demonstrated by the Respondents.
44.
Even if the Tribunal were to find that the sums certified in IPCs 24 and 25 were not in fact due to the Claimant, the fact remains that they were certified but not paid. This cannot defeat the Claimant's claim.

Analysis and Conclusions of the Tribunal

45.
The first issue which the Tribunal must consider is whether in respect of each suspension an appropriate notice was given by the Claimant under Sub-Clause 16.1.
46.
Although helpful in relation to the Claimant’s consequentially asserted rights to relief from liquidated damages and costs, an analysis of compliance with the notice provisions of Sub-Clause 20.1 does not assist in determining whether the notice requirements of Sub-Clause 16.1 have been satisfied (save perhaps insofar as it is alleged that notice is given under Sub-Clause 20.1 constituted valid notices under Sub-Clause 16.1).
47.
It is therefore necessary to extract from the Parties’ submissions their respective contentions in respect of compliance with Sub-Clause 16.1. It is helpful to do so in relation to each Suspension.

First Suspension

48.
On 14th August 2006 the Claimant gave a notice under Sub-Clause 16.1 [G1/66/318]. This notice related to IPC 15.
49.
Be that as it may, a very substantial portion of IPC 15 was in fact paid on 8 September 2006 [G1/74/377], leaving an amount of approximately only USD 25,000 unpaid - an insignificant percentage of the amount which was the subject of the notice.
50.
The Claimant seeks to justify the First Suspension by referring not just to the fact that an insignificant percentage of IPC 15 remained unpaid, but that the Outstanding Amount (the sum of USD 10,602,746.36 allegedly owed to the Claimant as Price Escalation on the foreign currency component of IPCs 7-16) which was allegedly due to be paid immediately following the MoU negotiations in early 2007 but was not in fact paid until 12 July 2007. The Claimant argues that its letters of 6 February 2007 [G2/123/860] and 19 February 2007 [G2/124/861] and the Minute recorded at paragraph 4.5.0 of the meeting on 20 December 2006 [G2/104/671] constitute notices under Sub-Clause 16.1 for the purpose of paying the amounts alleged to be immediately payable under the MoU.
51.
The Tribunal does not accept these submissions. A notice under Sub-Clause 16.1 needs in terms to warn the Employer that unless an amount specified is paid, rights to suspension and/or slowing down of work will be exercised by the Contractor. None of the material identified by the Claimant does this. Accordingly, the Tribunal has reached the view that the Outstanding Amount was not the subject of a Sub-Clause 16.1 notice.
52.
In the Tribunal’s view, in order for the First Suspension to be maintained after the payment of virtually all of the IPC 15 amount which was the subject of the 14 August 2006 notice, to ensure that the Respondents were aware that there was a small remaining sum still outstanding, it would have been necessary for a fresh (21 day) notice to have been given, setting out the amount then alleged to be unpaid and advising the Employer of its intention to suspend in accordance with Sub-Clause 16.1 if the amount specified is not paid within the period set out in the notice.
53.
The Tribunal is not persuaded that there is any right to slow down or suspend work under the Contract other than in reliance upon the right to be found in Sub-Clause 16.1.
54.
The Tribunal therefore finds that:

a. As set out in paragraph 52 above, the Claimant was not entitled to maintain its suspension on the basis of the Sub-Clause 16.1 notice given on 14 August 2006 following the payment made by the Respondents on S September 2006. In the absence of further notice it is not commercially sensible for a suspension notice to be able to continue when after such a payment, a de minimis sum remains outstanding.

b. There is thus no significant period of time during which the Claimant was entitled to suspend or slow down the work given that the 21 day period specified in its notice of 14 August 2006 was overtaken virtually immediately by the substantial payment of almost all of the amount the subject of the notice on 8 September 2006.

c. The suspension cannot be justified on the basis of the non-payment of the "Outstanding Amount" which was not the subject of a Sub-Clause 16.1 notice.

55.
Accordingly, the Tribunal finds that the Claimant was not entitled to slow down or suspend work for what is referred to as the First Suspension. It is thus unnecessary to consider the Respondents' arguments regarding the alleged non-compliance by the Claimant under Sub-Clause 20.1 in respect of periods of delay and costs relating to the First Suspension.

Second Suspension

56.
The Sub-Clause 16.1 notices relied upon by the Claimant to justify the Second Suspension were given on 22 August 2007 [G3/189/1217] for IPC 19, 6 November 2007 [G3/230/1333] for IPC 20 and 16 April 2008 [G3/349/1597] for IPC 20A; and 21 April 2008 in respect of IPC 23 [G3/356/1613]. The period of suspension or reduction in the rate of work commenced on 19 April 2008.
57.
In the Tribunal’s view a variety of issues arise in connection with this Second Suspension claim.
58.
The first is that the Tribunal does not consider that notice of intention to suspend under Sub-Clause 16.1 remains alive indefinitely. If not acted upon within a reasonable period of time, and assuming that the amount the subject of the notice remains outstanding, it is necessary in the Tribunal’s view for there to be a fresh notice enabling or alerting the Employer to the Contractor’s intention to suspend.
59.
The position here is more complicated because the notices given in 2007 were in respect of the non-payment of IPCs 19 and 20. The 16 April 2008 notice was given in relation to IPC 20A (which replaced IPC 20). The 21 April 2008 notice was given in respect of IPC 23.
60.
Thus although in the Sub-Clause 16.1 notice of 16 April 2008 [G3/349/1597] the Contractor placed reliance upon the Sub-Clause 16.1 notice of 6 November 2007, the position with respect to the Contractor’s assertion regarding rights arising from non-payment had changed in the period between 6 November 2007 and 16 April 2008.
61.
In the Tribunal’s view, the notices given in August and November 2007 cannot be relied upon by the Claimant to justify the suspension or slow down commencing on 19 April 2008, which is the subject of the Claim, as the periods between the dates of the notices and 19 April 2008 are beyond the reasonable period of time within which the suspension should commence in the absence of a further notice.
62.
Furthermore, it is obvious from the facts stated in paragraph 56 above that the suspension commenced before the notice of 21 April 2008 and within the notice period of 21 days required by clause Sub-Clause 16.1 following the notice of 16 April 2008. If this occurs, in the Tribunal’s view, the suspension does not then become valid once the notice period of 21 days has expired. The reason for this is that Sub-Clause 16.1 provides that the Contractor may suspend after giving not less than 21 days’ notice. By commencing suspension before the 21 day notice period has expired the Contractor is in breach of Contract (invalidating the suspension) and this is not rectified by the 21 day notice period subsequently expiring while the work is still suspended.
63.
The Tribunal is therefore of the view that compliance with the requirements of Sub-Clause 16.1 was not satisfied for the purposes of the Second Suspension or slow down.

Third Suspension

64.
The position in relation to the Third Suspension is different.
65.
So far as the giving of the period of notice required by Sub-Clause 16.1 is concerned, the Claimant took a different course of action to that taken in respect of the two previous claims for suspension or slow down of work:

a. A Sub-Clause 16.1 notice was given in respect of IPC 24 on 5 August 2008 [G4/430/1836].

b. The Claimant’s letter of 17 September 2008 [G4/455/1906] reactivates the notice of 5 August 2008 and expressly refers to Sub-Clause 16.1.

c. A Sub-Clause 16.1 notice is given in relation to IPC 25 on 15 October 2008 [G4/498/2005] which also reactivates the notices in respect of IPC 24 of 5 August 2008 and 17 September 2008.

d. By the letter of 3 November 2008 [G4/527/2084] further referring to and reactivating the notice of 5 August 2008, a suspension was advised commencing that day. This letter also referred to the separate notice that had been issued on 15 October 2008 in relation to IPC 25 indicating that when its due period had lapsed, a suspension based on that notice would begin on 6 November 2008.

66.
In these circumstances, the Tribunal need not be concerned about the expiry of long periods of time between notification under Sub-Clause 16.1 and the suspension or slow down of work. Thus from a formal notice requirement perspective, this claim complies with Sub-Clause 16.1.