Covid-19 | Mar 19,2020
Judges at the Federal High Court have ordered Berhan Bank to pay 86 million Br to the Ethiopian Roads Administration (ERA) a year after the court battle began. The Bank had issued an advance payment guarantee bond to Tekeleberhan Ambaye Construction Plc (TACON) for a road project in the Oromia Regional State.
The grade-one contractor, incorporated by Tekleberhan Ambaye as a major shareholder, won the contract for a 68Km road from Robe-Seru in July 2018. Berhan Bank issued the guarantee for 89.6 million Br the following February. The project had an estimated cost of 993 million Br and a three-year completion period. The ERA made two rounds of advance payments to the contractor for 46 million Br and 43 million Br in March and April 2019.
However, the Authority issued a pre-agreement contract termination to the contractor in June 2020, claiming the contractor had failed to meet the 30pc progress benchmark. Close to two percent of the project was completed, argued the ERA in the file its legal representatives submitted to the Court. The ERA took the case to the Federal High Court last year, alleging Berhan was not paying out the bond; it appealed to judges to order the Bank to compensate for its losses and other expenses incurred since September last year.
Lawyers representing the Bank argued their client had no obligation to pay out the total advance amount as the ERA approved the contractor's request for a second-round payment. They pleaded with judges that the amount should be reduced, factoring in progress in the construction, which they rejected to be 1.8pc. Defendant lawyers also demanded that the contractor's legal representatives be present in the hearings, a plea judges dismissed.
The plaintiff presented a 142-page document compiled by the project consultant outlining the project's status and assets owned by the contractor.
Judge Yenenesh Bahru ordered Berhan Bank to make the payment, deducting the value of the construction work completed and the assets of the contractor at the project site. The amount represents a small portion of the outstanding guarantees issued by Berhan, which stood at a little more than five billion Birr. It accounts for 23pc of the deposits mobilised and 29pc of the loans disbursed by the Bank by the end of last year.
"The Bank is a party to numerous legal actions brought by different organisations and individuals arising from its normal business operations," reads the Bank's latest annual performance report. "The maximum exposure of the Bank to these legal cases is 266.64 million Br."
Incorporated in 2009 with a paid-up capital of 154.7 million Br, Berhan netted 195 million Br in profits last fiscal year.
According to Girum Tariku, Berhan's corporate communications and marketing director, the Bank is complying with the Court's order and making the payment. He declined to comment on how much has been paid out thus far.
Samuel Kiflu, contract and claims team leader at the ERA, told Fortune the Bank still has other pending cases at the courts and remains barred from issuing advance guarantees for projects ERA contracts out. Berhan is among nine financial institutions the ERA has previously debarred from issuing guarantees, alleging that they failed to fulfil their obligations on time. The Authority recently lifted the ban on Tsehay Insurance after the insurer paid a settlement of 4.7 million Br for a guarantee bond it had issued to Akir Construction more than seven years ago.
The Authority's proscription policy is unfair, says Yonas Jarsa, a lawyer with seven years of experience who has previously served as a legal officer at the central bank. He argues that the Authority should review the issues case by case and employ other redressing methods such as arbitration.
“Arbitration could better address the issues as it would bridge knowledge gaps," said Yonas.
The ERA has previously taken cases to arbitration tribunals.
Three years ago, United Insurance appeared before an arbitral tribunal under the Addis Abeba Chamber of Commerce & Sectoral Associations over a performance guarantee bond the insurer had issued to Tibeb Construction in 2009. Even though the dispute's core issues were resolved at the tribunal, the Authority took the case to the Federal Supreme Court to appeal the arbitrator's ruling.
After a drawn-out court battle, judges ruled United pay 55 million Br in compensation last year.
PUBLISHED ON Jan 15,2022 [ VOL 22 , NO 1133]
Covid-19 | Mar 19,2020
Radar | Aug 14,2021
Fortune News | May 14,2022
Radar | Sep 19,2020
Radar | Jun 07,2020
Radar | Dec 10,2022
Fortune News | Mar 12,2022
Radar | Aug 21,2023
Viewpoints | Mar 26,2022
Fortune News | Oct 24,2020
Dec 24 , 2022
Biniam Mikru heads the department of cabinet affairs under Mayor Adanech Abiebie. But...
Jul 2 , 2022 . By RUTH TAYE
On a rainy afternoon last week, a coffee processing facility in the capital's Akaki-Qality District was abuzz with activ...
Nov 27 , 2021
Against my will, I have witnessed the most terrible defeat of reason and the most sa...
Nov 13 , 2021
Plans and reality do not always gel. They rarely do in a fast-moving world. Every act...
The average debt ratio in sub-Saharan Africa has almost doubled in just a decade - fr...
Leaders of the National Election Board are in a charm offensive mood, of a sort. Last week, they organised a rare tour for members of the me...
When the country's most senior diplomats and envoys return back to their posts after two-week debriefings, they leave behind a point or two...
Sep 30 , 2023
The recent gathering by the leadership - and the rank and file - of the Prosperity Pa...
Sep 23 , 2023
Ethiopia's contemporary political leaders and the policy wonks under their command ha...
Sep 16 , 2023
The Ethiopian economic narrative oscillates between pockets of resilience and signifi...
Sep 10 , 2023
Earlier this Ethiopian fiscal year, the heralding of a peace deal became synonymous w...
In a world where resilience and love are often tried and tested, Salem Getachew's (MD) luminous spirit stands as a testament to the enduring...
It is fascinating to witness the power of technology in bridging the gap between individuals. However, I can not help but wonder if the surg...
Or see contact page