A year-long court saga between the Ethiopian Roads Administration and Abay Bank S.C. ended with the judges at the Federal High Court ordering the bank to pay 306 million birr.
The bank became liable for two advance payment guarantees it gave to the Roads Admin for road construction projects that the Administration (then Authority) and Tekle Berhan Ambaye Construction Plc signed in 2017.
Divided into two contracts, the first from Abomsa – Aseko – Dibu River, and the second from Dibu River–Bedeyi–Cheleleka, the deals were signed between the parties to construct the road at a total project value of over 1.7 billion birr.
The first road project covers 60.9 km and it was planned to be completed within 1,095 days. The contractor and employer agreed on 991.7 million birr on August 25, 2017, with construction agreed to begin on November 8, 2017.
According to the appeal by the plaintiff, the Roads Admin, advance payment of 20 percent, valued at 176.8 million birr, was paid to the contractor, for which the defendant Abay Bank provided an unconditional advance payment guarantee to the payment.
The second road project covers 44.4 km and was scheduled to be completed within 1,095 days. The total project cost of 725.6 million birr was agreed for this project on the same day as the first contract. The bank provided an unconditional advance payment guarantee for the 20 percent advance payment, valued at 129.1 million birr, which was paid for mobilization and the start of the project.
Following repeated warnings and notices, the administration terminated both contracts in October 2020 as a result of delays in project progress.
Facility works should have been completed in five months since the beginning of the project for the first contract, but they were not even completed in 23 months, the administration stated during a court hearing.
By the time the contract was terminated, the contract period for the first one was over, but only 19 percent progress had been made on the project, according to the same source.
Citing the agreement, the court order stated that the contractor had to build offices, a laboratory, and residences in 120 days since the start of the project for the second contract. By the time the second contract was completed, project progressed only 32 percent when it should have been completed at least to 98 percent in the period of 1,079 days.
The administration, in an attempt to get the paid advance payments back, took the case to court on October 6, 2021, for the first contract, and on August 26, 2021, for the second contract.
The defendant then brought up reasons with the court as to why it should not make the requested payment. The plaintiff cannot make a request for payment since 19 percent of the first project and 32.8 percent of the second project have been completed, the defendant asserted.
After hearing both sides, the court passed a verdict on November 4, 2022, ordering the bank to pay 306 million birr with nine percent interest to be calculated since October 2, 2018.