Govt Pays Firm N$80 000 Interest Per Day

THE government is being kept hostage at a cost of more than N$80 000 a day because of a legal dispute between two construction companies involved in the upgrading of Walvis Bay Airport a few years ago.

The situation, in which the government has become trapped due to an interdict that was first granted in the Windhoek High Court in April last year, is now benefiting a Spanish construction company, Ingenieriacutea y Economiacutea del Transporte (Ineco), at the expense of Namibian taxpayers at a rate of N$81 274 a day while a court order prevents the government from paying the debt that it owes to Ineco.

Due to interest on the debt, which is mounting at a prohibitive annual rate of 20 percent, the government’s indebtedness to Ineco grows by N$81 274 each day, or more than N$2,4 million a month and N$29,6 million each year.

On Friday, lawyers representing the Minister of Works and Transport asked Judge Shafimana Ueitele in the Windhoek High Court to vary the court order that confirmed the interdict that has landed the government in the current predicament. If the court order is varied as requested, the government would be able to pay the money owed to Ineco to the Deputy Sheriff of the High Court for the Windhoek district while pending litigation between Ineco and a Namibian company, Namibia Construction, continues.

If the court allows the government to pay the money to the Deputy Sheriff, who should then hold the funds in an interest-bearing account under his control on behalf of Ineco, the government would be released from an interest rate trap that has already cost the country’s taxpayers tens of millions of dollars.

However, Ineco opposed the application to have the court order varied. Senior counsel Raymond Heathcote, who represented the Spanish company, argued on Friday that the law simply does not allow such a variation of the court’s order to be made. He argued that once an appeal has been noted against a court order, a court cannot change that order.

In the case before the court, Ineco has appealed to the Supreme Court against the order that landed the government in the current situation, Heathcote said.

Senior counsel Geoff Budlender, who represented the minister, charged that Ineco was staging “a cynical charade” that is costing the government more than N$81 000 each day as a result of debt that it wants to pay, but is prevented from paying.

Namibia Construction applied for the interdict against Ineco and the Minister of Works and Transport in April last year.

In terms of the interdict, the government was prohibited from paying any money due to Ineco in terms of an arbitration award that was made France at the end of July 2012. Ineco’s claim against the government in terms of the arbitration award was also attached to establish the High Court’s jurisdiction over the Spanish company, which does not have any other assets in Namibia.

Ineco was part of a consortium of three Spanish companies which was awarded the contract to rehabilitate and upgrade infrastructure at Walvis Bay Airport in 2002.

Ineco appointed Namibia Construction as a subcontractor on the project in mid-2006.

Namibia Construction is claiming that Ineco still owes it N$48,28 million, value-added tax excluded (N$55,5 million with VAT included), for work done by the company.

Ineco and Namibia Construction and Ineco and the government became locked in dual disputes as a result of the airport upgrading project. The dispute between the government and Ineco ended up in arbitration, in which an arbitration panel made an award of more than 6,56 million euro in favour of Ineco.

The panel also ordered the government to pay interest at an annual rate of 20% to Ineco on the amount not yet paid in terms of the arbitration award. Some of that interest was ordered to be calculated from December 2009, while some was to be calculated from August 2011.

By February last year, when Ineco addressed a letter to the government to request payment, the company claimed that the government was already owing it 11,8 million (the equivalent of about N$139 million at the time the interdict was first granted), which included accrued interest on the initial debt.

Budlender argued that it is commercially expedient for Ineco not to receive payment of the debt from the government, because it is continuing to earn interest at a prohibitive annual rate of 20% at a time that interest rates paid by Spanish banks range from only 0,25 to 0,85% per annum.

Heathcote argued, though, that there was no omission in the previous order granted by the court. With no omission, the court cannot now vary the order either, he argued.

Judge Ueitele reserved his judgement after hearing the arguments.

Source : The Namibian