Zimbabwe: “Rbz assets cannot be seized”
The Reserve Bank of Zimbabwe breathed a sigh of relief after the High Court ruled that central bank assets could not be seized in a lawsuit for more than $ 26 million in unsettled debt with a London-based grain and fertilizer exporter, Holbud Limited.
RBZ’s assets had been seized following an order from the same court that entered an arbitration award in HC 3207/19. The bank then went to the High Court, among other measures, to stay the execution of the judgment granted under HC 3207/20, but got over, the ruling that this writ was null and void in the first place.
In its application, the RBZ sought an order declaring that its property was subject to the provisions of the State Responsibilities Act and therefore could not be seized.
The Reserve Bank also argued that the amount claimed by Holbud under the arbitration award registered in the High Court was also the subject of the Reserve Bank Act No. 2 of 2015 (Assumption of Debt ) and was therefore not subject to subsequent execution.
The state’s issuance of treasury bills to Holbud had satisfied its demand as assumed by the state under the law, and therefore the summons issued by the High Court in the arbitration award in 2019 was null and void and should be rescinded.
After hearing arguments from lawyers for both parties, Judge Webster Chinamora ruled in favor of RBZ, endorsing its legal position that its assets were protected by law and that it had never waived those rights in its relations with Holbud.
The judge was satisfied that the bank had shown sufficient interest to make the present request to declare the assets of the Reserve Bank of Zimbabwe subject to the protection afforded by the State Liabilities Act.
In addition, the court ruled that the bank which was represented by its lawyer, Mr Addington Chinake, had succeeded in establishing that the consequential remedy of voiding the writ of execution attaching to his property was justified.
Under the State Liabilities Act as read with the Reserve Bank of Zimbabwe Act, RBZ assets cannot be subject to an enforceable title, which means that no one can put them up for sale for settle a debt.
Holbud sought to argue that RBZ had waived its right to this state liability law protection, so Judge Chinamora had to determine whether this waiver had been proven.
The tribunal was referred to specific clauses as being the basis of the request for waiver of the protection provided by the law on state responsibilities. But on examining the clauses in question, Judge Chinamora found nothing there to support a waiver request.
He found that Holbud’s commitment to deposit funds into RBZ’s offshore accounts did not amount to an express or implied waiver of the rights granted to the bank by law.
“Even the commitment to pay the debt using the export proceeds or other resources of the plaintiff (RBZ) does not amount to a waiver,” Judge Chinamora said. “Still less is the clause which allows the respective parties to apply to the High Court for a specific execution or other remedy.”
The court noted that the clauses invoked by Holbud did not mention any waiver of protection. The law placed the onus on Holbud for demonstrating that the Reserve Bank had knowingly surrendered its right, whether expressly or through conduct clearly inconsistent with the intention to enforce it.
“But Holbud had failed to demonstrate that there was such a waiver of rendering the provisions of the State Responsibility Act inapplicable.
Judge Chinamora stated that in light of the legal situation, it could not be argued with conviction that the RBZ had deliberately waived all rights and benefits deriving from the protection derived from the State Responsibilities Act and that Holbud could therefore not enforce execution on the assets of the Reserve Bank. Zimbabwe relying on a waiver.
Judge Chinamora also ruled that the registration of the arbitration award ended the argument that such an award was not a debt covered by RBZ (Debt Assumption).
Justice Chinamora was of the opinion that the resolution of the dispute still revolved around the provisions of the State Responsibilities Act.
“I don’t need to mention, but I will do so for the sake of clarity, that what is prohibited by the State Liabilities Act is the execution or seizure of State property.” Since Holbud had not demonstrated that the collateral was not considered Crown property, there was no reason to exclude it from the provisions of the State Liabilities Act.
“Since I have come to this conclusion, I will not comment on whether or not the government issuance of treasury bills met (Holbud’s) demand.
The ruling meant that there was no need to stay enforcement of the attachment order since no one could enforce enforcement on a property using a writ of nullity.
The legal dispute revolves around payment issues at Holbud. Holbud claimed to have received two T-bills totaling US $ 40,246,217, maturing March 25, 2017 and February 24, 2017, with the proceeds of the T-bills to be paid to Holbud’s bankers in the UK .
As a paying agent for the Zimbabwean authorities, the RBZ faced some challenges when it came to repatriating the proceeds of overdue invoices to Holbud’s offshore accounts, as instructed.
RBZ and Holbud then entered into an agreement whereby Holbud would make available to RBZ a portion of the proceeds of the treasury bills amounting to US $ 26 million. RBZ would in turn use the funds to lend to eligible entities under a financing facility before and after exports provided that half of the export earnings are credited to the RBZ’s designated nostro account for payment. of its obligations to Holbud.
The RBZ agreed to settle the debt by making four installments of $ 6,500,000 between January and September 2018, but did not fulfill its contractual obligations, which led to the referral to an arbitrator.
Retired judge Judge George Smith was chosen as arbitrator and ruled in favor of the London-based company, ordering the RBZ to settle the debt. The award was successfully registered with the High Court and the company then obtained the writ of seizure of the assets of RBZ, which has now been declared null and void.