The Commercial Court in Malawi’s capital Lilongwe has walked out of the mediation between the Government of Malawi and Secucom Holdings Limited over the latter’s K40 billion claims for breach of contract.
Malawi Government now risks losing property it owns abroad to pay off around $100 million (nearly K40 billion) for breach of the national identity card contract awarded to Secucom Holdings 12 years ago.
The claim includes interest that has accrued over the past 12 years.
The risk to the country’s foreign-based assets follows an order by Justice Ken Manda of the Commercial Court in Lilongwe on Monday stopping mediation between the Swiss firm and government that has been going on for the last two years.
Justice Manda’s ruling gives Secucom the option to take the matter to the International Court of Arbitration either in London or South Africa as per the contract agreement.
According to court records, secretary to the Treasury Randson Mwadiwa is the man at the centre of the latest decision after he failed to appear before Justice Manda on three occasions to discuss the terms of payment of $8 million which was agreed in July 2011 when Secucom agreed to waive all interest and drop its claim for damages for breach of contract.
Mwadiwa was first supposed to appear before the court to finalise the mediation and sign a binding agreement before the judge on April 10.
He failed to turn up so the lawyers and the judge pushed the date to April 26 2013. He again failed to turn up because he was said to be travelling to Washington DC for the IMF spring meetings.
Other government representatives and Secucom lawyer moved the meeting to May 6 this week.
But, again, even after both Secucom lawyers and Justice Manda had written Mwadiwa to appear, he never turned up.
On Thursday and Friday, Weekend Nation could not reach Mwadiwa. His office said he was out of the country.
Mwadiwa, according to Secucom lawyer Titus Mvalo, was key in endorsing the consent orders for payment of $8 million as proposed during a last settlement negotiation meeting between Secucom and government held at Ministry of Justice in Lilongwe on July 22 2011.
Attorney General Anthony Kamanga in March indicated that Treasury had advised them to renegotiate again, because government cannot afford to pay for the claim which, he said, is legitimised by promissory notes that government released to Secucom.
In an e-mail response on Wednesday, Secucom chairperson and chief executive officer Anatol Weinstein said following the decision by the Commercial Court in Lilongwe, he would take the case to the International Court of Arbitration.
“I now have no choice but to engage my lawyers in London and take the matter to the International Court of Arbitration because government has failed to pay us even after we waived all interests on Promissory Notes and agreed on $8 million which is far less than the $100 million in interest that we are owed,” said Weinstein.
“This case is straightforward because two court judgments are in our favour and we have pushed to settle this dispute amicably, but it seems some people in government don’t want us to be paid and allow us to continue with the contract which is still valid,” Weinstein said.
If effected, the $100 million—which is just over eight percent of the current K476 billion national budget and roughly two weeks of import cover—could potentially become the single biggest payout in the country’s history.
Mvalo confirmed in an interview on Tuesday that according to the contract signed between the two parties, they now have an option to take the matter to London or South Africa for arbitration.
“We now have two options: to either continue in a normal way with another judge in the Commercial Court or take the matter to an arbitration court in England or South Africa because the contract does provide that where the two parties fail to agree, one would be at liberty to take the matter to the arbitration court,” he said.
“If an award is made in our favour at the arbitration court, it’s possible to execute against Malawi property held outside the country say, for example, the Malawi consulate in London…” Mvalo said.
On December 7 1999, the Muluzi administration awarded Secucom a contract to develop and supply National Identity cards at a contract price of about $27 million—only to revoke it seven months later.
In the contract, the two parties agreed that the $27 million would be paid by eight Promissory Notes of about $3.3 million each, to be paid on presentation as they respectively matured for payment.
Government and Secucom agreed on a 0.2 percent penalty interest per day and a maximum of six percent per month to be charged each day on Promissory Notes that remained unpaid.
After 12 years of non-payment, the amount is running into well over $100 million based on the agreed penalty interests in the contract.
Secucom is still in possession of seven Promissory Notes of $3.3 million after one was encashed setting precedence to cash the others as demanded by law.
According to the letter that backed the issuing of the Notes signed by then secretary to Treasury Respicious Dzanjalimodzi on December 18, 1999, Notes No. 1 and 2 were freely negotiable without regard to the conditions which applied to the other Promissory Notes to assist Secucom raise working capital for the IDs project.