AL govt put finance adviser, BB governor in legal trouble

The immediate past Awami League government’s failure to settle an international arbitration claim has left Bangladesh in a legal tangle in the US, leading to a surprise judicial order against two top officials of the interim government during their official visit to Washington last week.
The judicial order for Finance Adviser Salehuddin Ahmed and Bangladesh Bank Governor Ahsan H Mansur to appear before a US court to testify has since been recalled following an appeal by the Bangladesh government.
The issue goes back to the first tenure of the Awami League government led by Sheikh Hasina. The dispute with Smith Cogeneration, a US power company, involves a $1.5 million performance bond that was forfeited by the Bangladesh Power Development Board (PDB) two decades ago.
In 1999, the PDB forfeited the bond money after cancelling the contract with the company for setting up a 100MW barge-mounted power plant in Haripur, Narayanganj.
PDB officials justified the move. They said Smith Cogeneration, which was awarded the job on October 14, 1997, failed to start the construction work within the scheduled commercial operation date (COD).
The company had sought a revision of the deadline, but the PDB rejected the plea, cancelled the deal and forfeited the bond money.
“All the procedures were followed during the cancellation process,” incumbent PDB Chairman Md Rezaul Karim told The Daily Star yesterday.
Smith Cogeneration failed to meet the deadline, he said, adding, “Even, no instruments or materials were found at the construction site at the time. There were no activities, which was why the deal was cancelled.”
He said he came to know about the long saga only this month after taking office.
THE ARBITRATION
On March 1, 1999, Smith filed a lawsuit at the International Court of Arbitration under International Chamber of Commerce (ICC) against the PDB and the government of Bangladesh. It claimed $35.02 million from Bangladesh in damages.
The court, located in the UK, gave its verdict on October 30, 2003, after several hearings between 2002 and 2003. No representatives from Bangladesh attended the court proceedings.
The verdict said, “Smith has established a claim against the PDB for lost profits, lost development costs and lost fees in the sum of $10.42 million. The Tribunal orders that the PDB shall pay costs of the arbitration assessed by the ICC at $6.2 lakh and the sum of $5.2 lakh toward the legal costs and disbursements incurred by Smith.”
The court also slapped a 4 percent interest until the payment was completed.
Since then, Smith Cogeneration tried multiple times to get the money in vain, leading to the current amount of $31.9 million including interest.
The company also went to multiple courts in the US as well as the Court of Session in Scotland’s Edinburgh to recognise and enforce the UK verdict.
Latest on October 16, it wrote to the PDB, asking the finance adviser and the BB governor by name to appear before a US court to testify on October 23.
The court on Thursday issued “bench warrants for the arrest” for the two officials, who were on an official visit there to attend annual meetings of the International Monetary Fund and the World Bank Group.
The warrants were subsequently stayed.
Asked about latest letter, the PDB chief said, “Upon receiving the notice from Smith Cogeneration, we have appointed lawyers in the US but they could not prepare the documents before the hearing of October 23.”
He said both the PDB and the previous Bangladesh governments decided to skip the court proceedings on instructions of their legal counsels.
“The process of cancellation [of deal] was followed properly. But our attorneys advised us at the time that we don’t attend the arbitration court,” he said.
The Daily Star has also seen a Smith Cogeneration letter dated November 7 last year to Nasrul Hamid, former state minister for power, energy and mineral resources, and Habibur Rahman, former power secretary.
The company had demanded $20.1 million in that letter.
“Smith Cogeneration has and continues to sustain severe damage as a result of this dispute. In addition to the recourse available to us under the Unconditional Guarantee, please be advised that it is our understanding that under US law a court will find no legal distinction between the PDB and the GoB for purposes of enforcing the UK Judgment,” the letter said.
Nasrul Hamid has gone into hiding since the fall of the Hasina government on August 5.
Habibur Rahman was in office till October 6, when he went on post-retirement leave. His phone was found switched off.
Harold E Patricoff, a lawyer for Smith Cogeneration, did not respond to our email.