Radar | Oct 23,2021
After a seven-year court battle, the Ethiopian Roads Authority received 55 million Br in compensation from United Insurance, which gave a performance guarantee bond to Tibeb Construction. The local construction firm failed to carry out a road project it was awarded in 2009.
United was a guarantor for both an advance payment, which the Authority extended to the contractors, and the completion of what was provided in the contract. The insurer shelled out the value on January 5, 2021, and Meseret Bezabih, CEO of United, handed over the cheque to Kassaye Tsige, the Authority's financial division director. The payment is one of the highest claims ever paid by an Ethiopian insurance company.
The claim payment was settled following a drawn-out court battle. In February 2009, Tibeb was awarded a contract to build a 47Km road that stretches from Sanja to Kerekera in the North Gonder Zone of Amhara Regional State for 546.9 million Br within a three-year period. After Tibeb failed to carry out the project within the prescribed period, the Authority had allotted the company an extra six months to finalise it.
At the end of the extension period, Tibeb had only managed to finish a little over half of the road project. As a result, the Authority terminated the contract in February 2013. The Authority has since awarded the contract to the China Railway Engineering Group at the cost of 786.8 million Br. It then took the case to court by filing a suit against United.
In its suit, the Authority claimed 139.2 million Br from United, 84.5 million Br of which was to cover the remaining balance on an advance payment the contractor received and 54.7 million Br was pledged by the guarantor as a performance bond.
Before oral litigation took place, the two parties stated that they were managing negotiations to solve the problem amicably. A Certified Payment Order (CPO) was presented by United demonstrating that it had issued a payment order of 52.6 million Br for the Authority in conformance with the advance payment bond extended to the contractor. However, the litigator did not withdraw its charges.
The Court then adjourned the case, hoping that the parties involved could come to an amicable agreement through negotiations. The case was temporarily closed until they could come up with a resolution of the arbitration tribunal.
An arbitral tribunal under the Addis Abeba Chamber of Commerce & Sectoral Association presided over the case with the Authority and Tibeb as litigating parties, and United was relieved from the proceeding. Three years ago, the tribunal ruled in favour of the Authority, stating that the contract termination was legitimate.
Even though the core disputing point, i.e. the contact termination issue, was resolved at the tribunal, the Authority took the case to the Federal Supreme Court to appeal on the arbitration's ruling regarding some issues. The Cassation Bench ruled in the Authority's favour, and the case was exhausted last May.
There were also issues in receiving the copy of the judgement from the tribunal, and the contractor was supposed to pay half of the judgment fees, while the Authority is exempted by law from the payment. Since the construction firm was almost nonexistent, the Authority settled Tibeb's payment after the executives of the Authority decided on the settlement of the fee, which was a little over one million Birr.
The Authority delayed the case up until now due to repeated extensions for negotiations and other legal appointments and matters were finally wrapped up, according to Samson Wondimu, public relations director at the Authority.
United made the payment after the Authority reinstated the case at the Federal High Court claiming compensation. The Court then sent a summons to the insurance firm two weeks ago.
After receiving the court notice, United went through the Authority's documents and got advice from the firm's legal department, according to Meseret Bezabih, CEO of United, which paid 240.6 million Br in claims in the past fiscal year.
"The document from the arbitration tribunal show that the contractor has defaulted on the project," she said, "so jumping into a court process will have no outcome other than incurring us additional expenses."
PUBLISHED ON Jan 09,2021 [ VOL 21 , NO 1080]
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