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#MondayBlues: NetOne Loses USD $6million in UK Arbitration Case

While the focus lately has been on suspended NetOne CEO and the already resigned board members, the state owned mobile network has been slapped with a massive US$6, 764, 632. 00 with interests, for contract violation which must be a bigger headache and point of focus for the remaining board members.

Formula Telecom Solutions Limited (“FTS”) an Israel based company which was contracted by NetOne has won a UK court arbitration over contract violation which they entered and was illegally terminated by NetOne.

FTS was signed to provide convergent billing, charging, customer care and policy control software solutions to NetOne and their contract was illegally terminated, with sources close to the development alleging that this was done only to pave way for ZTE to take over the contract.

Though NetOne vehemently denied the narrative, sources close to developments confirmed to TechnoMag that ZTE was meant to take over this deal and there was strong drive that arm-twisted the then CEO Mr Brian Mutandiro to cancel the contract unilaterally and award it to ZTE.

Mr Mutandiro however said that ZTE had obvious technological advantage and is still a market leader compared to the other contenders at the time and now.

NetOne argued that they could not maintain the contract as it was charging them in USD, however FTS still offered them the local currency option, which NetOne could still not abide to stating ethical issues around the repatriation matrix.

Part of the ruling reads:

If the Agreement had been performed, FTS would have earned an additional US$4, 392, 000 (i. e. US$6, 100, 000 x 18% x 4 years). 252. However, due to the fact that FTS did not provide any maintenance and support services to NetOne, FTS saved the expenditure it would have incurred in providing such services.

On the evidence before me, the saving amounts to US$550, 141 per annum, and US$2, 200, 564 in total. 253. Accordingly, the compensation to which FTS is entitled by way of damages for the loss it has sustained by reason of being denied the opportunity to provide the maintenance and support services is US 2 191 436 (i. e. US$4, 392, 000 – US$2, 200, 564 US$2, 191, 436).

FTS alleges that, in repudiatory breach of the Agreement, NetOne has failed to perform any of its obligations under the Agreement, including NetOne’s obligation to pay money to FTS.

FTS has accordingly purported to terminate the Agreement. (2) NetOne initially alleged that the Agreement was null and void because it was signed in the absence ofZimbabwean Procurement Regulatory authority.

NetOne now alleges, in summary, that the Agreement never came into existence because conditions precedent were not complied with and because the Agreement was unlawful under Zimbabwean law.

In the alternative, NetOne contends

(i) that the Agreement is unenforceable because the place for performance is the Republic of Zimbabwe and performance would involve NetOne acting in violation of Zimbabwean law and

(ii) that NetOne is excused from performing its contractual obligations under the Agreement by reason of force majeure.

NetOne’s contention is that it was not in repudiatory breach of the Agreement because its failure to perform was caused by an act of force majeure within the meaning of clause 20. 8 of the Agreement.

NetOne tacitly accepts that, if the defence of force majeure fails, NetOne acted in repudiatory breach of the Agreement. Thus, the only real issue between the parties is whether the defence offeree majeure has merit.

The agreement allowed the two to have an international arbitrator in case of any disagreement.

The validity, performance, construction and effect of this Agreement shall be governed and constructed exclusively in accordance with the laws of the United Kingdom. 19. 2.

Any dispute arising between the parties in connection with this Agreement, including interpretation, performance breach of, or termination, shall be settled in the first instance between the parties.

If amicable settlement cannot be reached within 15 business days, the matter in dispute shall be resolved exclusively Page 2 of 107 by arbitration pursuant to the arbitration rules of the London Courts of International Arbitration (LCIA), by a sole arbitrator (“Arbitrator”).

The sole Arbitrator shall be appointed by agreement between the parties. In the event that the parties fail to agree on the appointment of the sole Arbitrator within fifteen (15) days after a request to appoint an Arbitrator is given by either party to the other, then the Arbitrator shall be selected and appointed at the request of either party by the LCIA in the UK.

The arbitration shall be conducted in English and shall take place in London UK. The Arbitrator shall have the right to assess the costs incurred by either party, against the losing party or in such manner as he deems just. That award rendered by such Arbitrator shall be final and binding, except appeal, and may be enforced by any court of competent jurisdiction.”

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