Case Note on Tononoka Steels Limited v. Eastern and Southern Africa Trade and Development Bank

Abstract

CIVIL APPEAL No. 255 of 1998 (Judgment delivered on 13 August 1999). Court of Appeal, Kenya: Coram: Kwach JA, Tunoi and Lakha JJA. The plaintiff, a limited liability company, sued the defendant Eastern and Southern African Trade and Development Bank,1 a body corporate established by Chapter 9 of the Treaty for the Establishment of the Preferential Trade Area for Eastern and Soumern African States.2 On 1 December 1994, the plaintiff secured a term loan agreement (‘the loan agreement’) in a sum of US$675,000 for implementation of the plaintiff's proposed establishment of a steel manufacturing plant. On 4 December 1996, the defendant provided to the plaintiff an import credit facility3 for an aggregate amount not exceeding US$1,000,000. The loan and facility agreements were secured by a charge on the plaintiff's land, a first debenture on all movable assets, a guarantee issued by the First American Bank and personal guarantees by all the Directors. Clause 16.12 referred any dispute to arbitration under the auspices of the International Chamber of Commerce4 sitting in London. Clause 16.10 stipulated that the loan agreement was to be construed in accordance with the laws of England. Sometime in December 1997 the defendant repudiated the facility agreement. On 26 February 1998, the plaintiff filed a suit in the Kenyan High Court against the defendant claiming damages for breach of contract, an injunction order restraining the Bank from appointing a receiver or exercising other options available under the contract, and costs. On the same day the plaintiff filed an application for an interlocutory injunction. The defendant entered appearance under protest. The defence was founded on the plea of immunity enjoyed under the Privileges and Immunities (Eastern and Southern African Trade Development Bank) Order,5 made pursuant to the Privileges and Immunities Act.6 A further …