Tanzania:Court of Appeal Overturns High Court Ruling in Landmark Non-Performing

By Adonis Byemelwa

The Court of Appeal has overturned a ruling issued by the High Court's Commercial Division in one of the most notable cases involving non-performing loans, between State Oil Company and Equity Bank.

The High Court, under Judge Magoiga, had previously ruled in favor of State Oil, which had borrowed $18 million (over Sh45 billion) and subsequently refused to repay the loan, opting instead to take the matter to court.

Led by a panel of three judges—Rehema Mkuye, Abraham Mwampashi, and Zainab Muruke—the Court of Appeal identified several procedural flaws in the Commercial Division's handling of the case. State Oil Company had sought a court order to avoid repaying the 45 billion Tanzanian shillings it borrowed from Lamar of Dubai, a loan that was guaranteed by Equity Bank.

In their judgment, a copy of which has been obtained by this newspaper, the judges stated that they exercised their legal authority to nullify the judgment and the entire proceedings of the case. They directed that it be heard anew in the High Court's Commercial Division.

The ruling highlighted significant errors, the most prominent being the failure to involve an essential party in the case, Equity Bank of Kenya.

"The loan amount of USD 18,640,000.00 was provided by LAMAR to SOT (State Oil Tanzania) through an escrow account opened by EBK (Equity Bank Kenya) in its name. Subsequently, EBK settled all of SOT's debts to EBT and other banks.

EBK also paid itself a commission of USD 372,800.00, USD 750,000.00 to NISK for advisory and brokerage services, and USD 74,560.00 to the Kenyan government as excise duty, leaving a remaining balance of USD 736,899.74 for SOT," reads part of the judgment.

This case underscores the importance of the rule of law in Tanzania, highlighting how adherence to legal procedures and the involvement of all relevant parties are critical to ensuring justice.

The rule of law is fundamental to maintaining public confidence in the judicial system and the fair administration of justice. It ensures that laws are applied consistently and fairly, protecting the rights and obligations of all parties involved.

In Tanzania, the rule of law is enshrined in the constitution and is pivotal to the country's legal framework. The judiciary is tasked with upholding the law without bias, ensuring that every citizen and entity, regardless of their status, is subject to the same legal standards.

This case exemplifies the judiciary's role in rectifying procedural errors and safeguarding the integrity of the legal process.

The Court of Appeal's decision to nullify the previous ruling and order a retrial is a testament to the checks and balances within the Tanzanian legal system.

 It demonstrates the appellate system's function in correcting lower court errors, thereby reinforcing the rule of law. This ensures that justice is not only done but seen to be done, maintaining the legitimacy and credibility of the judicial system. Tanzania continues to develop, and the enforcement of the rule of law remains a cornerstone of its governance.

The judiciary's independence and its ability to impartially adjudicate disputes are essential to fostering a stable and predictable legal environment, which is crucial for economic growth and the protection of individual rights.

The outcome of this retrial will be closely watched, as it will further illustrate the judiciary's commitment to upholding the rule of law and ensuring that justice prevails in all matters brought before it.