NetOne in trouble over unlawful deal went wrong, to appear before a London Court

Spread This News

By Mary Taruvinga

NETONE Cellular is now seeking High Court’s intervention after an unlawful deal between the company and Formula Telecom Solutions (FTS) Limited , an Israel company which produces billing and call centre equipment for telecommunication services, went sour.

The mobile telecommunications company has approached the High Court seeking a favour as it is set to appear before a London court in two weeks after parties failed to agree on an out of court settlement.

Through its lawyer, Nobert Muhlolo, NetOne says it has no means to attend the hearing and fears an arbitration award will be made in favour of FTS.

“The arbitration  hearing is scheduled for 23rd and 24th October in London. Applicant does not have the means to attend that hearing, and given the previous awards made by the sole arbitrator, there is a very real fear that an arbitration will be made in favour of FTS against NetOne,” said Muhlolo in his founding affidavit.

“Such an award would not be enforceable in Zimbabwe due to the unlawfulness of the agreement, but the applicant (NetOne) would be forced to extend large sums of money defending FTS claims and attempts to enforce an award.

“Applicant has sought an out of court resolution of the dispute but this has failed,” he added.

According to Muhlolo, NetOne and FTS entered into an unlawful agreement in December 2016 as approvals were not obtained from the exchange control authorities and the procurement regulatory authorities.

FTS then declared a dispute and instituted arbitration proceedings in the London Court of International Arbitration as provided for in the lawful agreement.

According to the application, the sole arbitrator has already made findings against NetOne.

In terms of Article 9 (C) and (D) of the United Nations Commission on International Trade Law (UNCITRAL) Model Law, Muhlolo said the High Court is empowered to grant an interdict or any other interim order to ensure that any award which may be made in arbitral proceedings is rendered ineffectual.

The lawyer said the situation has far reaching implications hence the need for the case to be heard urgently.

“The application has been brought on an urgent basis because it would not be possible to serve either FTS in Israel or its legal practitioners in London in the limited available time before the arbitration hearing,” he said.

Sealing up his founding affidavit, Muhlolo said the London Court of International Arbitration is not competent to make a declaration on the laws of Zimbabwe, the reason why NetOne approached the High Court.

NetOne chief executive, Lazarous Muchenje said according to the agreement, NetOne was required to seek permission of the procurement authority to enter into the service contract.

He said  NetOne was introduced to FTS by TelOne, its sister company which FTS had provided a billing solution.

NetOne has two billing systems, one for prepaid customers and another for post-paid customers.

According to Muchenje FTS made a proposal in terms of which it would converge the two platforms.

“The proposal made by FTS led to an agreement of which NetOne bound itself to pay the project price in foreign currency to FTS which is an entity incorporated outside Zimbabwe,” he said.

“In terms of the Exchange Control Regulations, an agreement to pay for goods or services to a foreign entity is unlawful unless exchange control approval has been obtained in advance of entering into the agreement.”

He said NetOne failed to secure exchange control authority to make payment to FTS outside Zimbabwe prior to signing the procurement contract as required the law.

“In signing the erstwhile contract, NetOne incurred an obligation to make payment outside Zimbabwe, in breach of the Exchange Control Regulations. That made the contract illegal,” Muchenje explained.

The case is pending.