Tanzania (Hansard, 23 January 2002)

§ Dr. Vincent Cable (Twickenham)

I welcome the opportunity to hold this debate, not least because it allows me to address you correctly for the first time, Mr. Deputy Speaker.

Normally, I use Adjournment debates to deal with policy questions, and I regret in some ways having to raise a personal case today. However, the case is so extreme and frustrating, and has been going on for so long, that I feel that it can be addressed only in an Adjournment debate. It involves a dispute between one of my constituents, Mr. Patel, and the Tanzanian Government that has been going on for almost 20 years. It has involved Ministers in this Government, and their Conservative predecessors, for five years.

I shall recount the story in a few moments, but the essential point is that Mr. Patel supplied thread to a Tanzanian factory as part of a Government project in 1982. He was owed about £100,000 on the transaction. The Tanzanian authorities never disputed that the claim was entirely legitimate, but the money was never paid. To this day, my constituent has not received a penny for that deal.

Even before today, at least three Ministers have been involved. There have been innumerable diplomatic notes and meetings with Ministers, but we have found no way forward. I want to bring the matter to the slightly higher level offered by this Adjournment debate for three reasons.

First, we seemed 18 months ago to have reached the point where all the details had been agreed. The Tanzanian Government had at last accepted the principle that they should pay Mr. Patel some interest payments on his outstanding claim. Mr. Patel had accepted the terms, the cut-off period and the rate of interest. I have the correspondence, which went through the high commission in Dar es Salaam, setting out the details. All the preliminaries had been conducted and, 15 months ago, agreement was reached in principle to resolve the problem finally. However, nothing happened and the drift continues.

Secondly, the conditions of Mr. Patel's life have deteriorated over the years. No one has ever said as much in print, but I suspect that there is a feeling in Tanzania that a rich Asian business man is pursuing interest on loans that a poor developing country cannot pay. However, Mr. Patel is not a rich man. Twenty years ago, he used his house as collateral for a loan to finance the deal, and he has struggled for the past two decades. His wife has gone out to work and he has changed his job in order to meet the interest payments on the loans. Eighteen months ago, he finally had to give up. His wife was made redundant and his house was repossessed. He is now homeless and living with his daughter.

Thirdly, although Mr. Patel's fortunes have waned, those of Tanzania to a degree have waxed. The country has received debt relief, with the support of the International Monetary Fund and the other international institutions. Although still a very low-income country, it is now considered to have rather sounder economic conditions, and is committed to a liberalisation programme.

295WH The British Government evidently felt that Tanzania was sufficiently solvent to enable them to promote the sale of air traffic control equipment to it. I do not want to reopen what was a major controversy but, if the press is to be believed, even the Prime Minister got involved in promoting the deal. My simple reaction is that if Tanzania can afford to meet its obligations to British Aerospace it can certainly afford to meet its obligations to Mr. Patel, who is no less British. Moreover, if Tanzania is moving into a new era in which it attracts foreign investment and deals on a proper commercial basis with investors and creditors, it must resolve its outstanding claims.

I realise that, for the Foreign Office, such matters can take a long time. I have no criticism of the Foreign Office, which I think has handled the matter very well. I am not out to bash the Foreign Office, as I realise that resolution of such matters can be protracted. In the 1970s, I was a first secretary in the Foreign Office, and I remember repeated visits from the Peruvian bond holders who had been expropriated in a nationalisation in Peru some 40 years earlier. They kept coming back to the Foreign Office, and we remained unable to get them any money. However, I hope that there will be a happier outcome in the case of Mr. Patel.

I have set the scene, so I shall now take the Minister through the sequence of events, as the file is rather fat and some of the details are important.

The problem originated in early 1980, when a shoe project was supported by the World bank. It was not some dodgy little project: it was high profile, with World bank sponsorship. Mr. Patel's company, Pillarcliffe, was commissioned—by the World bank and after proper tendering procedures—to supply thread to the Morogoro shoe factory.

The project went ahead, Mr. Patel supplied the necessary equipment, but the money was not paid. The initial reasons for that were complicated, and had a lot to do with inefficiency in the World bank. Mr. Patel was never properly reimbursed, and for three years was involved in an argument about whether the money should, or could, be paid. However, the matter was clarified finally in 1988, when the principal secretary in the Tanzanian Ministry of Finance and Economic Development accepted in writing that the business transaction was entirely legitimate and that Tanzania had an obligation to pay the money. I have the relevant letters here.

Nothing happened. Three or four years later, the Morogoro shoe factory folded, as did a lot of other publicly sponsored industries in Tanzania. That was the Ujamaa era of protected import substitution in the country. The industry became unviable and collapsed. The Tanzanian Government accepted that they had to take responsibility for what remained, and decided to settle relations with creditors, who included Mr. Patel. The Foreign Office is in possession of letters to that effect. The Tanzanian Government, effectively, nationalised their liabilities and undertook to pay them.

The letter confirming that undertaking dates back to 1994, but still nothing was paid. In the mid-1990s, Mr. Patel had not been paid the £100,000, and the accumulating interest on that sum, which he was owed. He estimated the interest owing to him at £375,000.

296WH Lest anyone think that Mr. Patel was some sort of usurer, I must stress that he was paying interest on the UK loan with which he had financed the transaction. Those interest payments were a lot higher than the interest that he would extract, as a creditor, from Tanzania.

Mr. Patel became extremely frustrated. He went to his local MP, my predecessor, Toby Jessel. Jessel wrote a strong and effective letter to the Foreign Office, which then took up the matter with Baroness Chalker. She met Tanzanian Ministers, who wrote letters to the Tanzanian Government, and for a while it seemed that something was going to happen.

In 1996, however, a very strange but important episode took place. Although it represents a slight detour, it helps to explain how we have got to where we are. Thirteen years after the original deal, the Tanzanian Government finally agreed that they must pay Mr. Patel his £100,000. They duly paid the cheque—unfortunately, to the wrong Mr. Patel. My constituent is Mr. M. R. Patel, but the cheque was made out to Mr. Chantilal Patel, the chairman of a Tanzanian company called Globe Mercantile.

I generally subscribe to what might be called the cock-up theory of history, and people may say that the fact that there are so many people called Mr. Patel means that such a mistake is easily understood. However, this was no mistake: this was a case for which the conspiracy theory of history is valid.

When documents were produced, it emerged that an elaborate fraud had been perpetrated. A letter was unearthed from an address in Twickenham—a false address that was nothing to do with Mr. M. R. Patel—that purported to authorise the payment of money from the Tanzanian Government to the fraudulent company, Globe Mercantile, which was owned by Mr. Chantilal Patel. The cheque was paid fraudulently.

Fortunately, Mr. M. R. Patel realised what had happened. He alerted the British high commission, who informed the Tanzanian Ministry of Finance and Economic Development and suggested that the simple way of dealing with the matter was to freeze the account of Globe Mercantile, which was in a Tanzanian state bank. For very odd reasons, the Tanzanian Government never took action, which has led to the suspicion that rather more was involved than the fraudulent Mr. Patel. None the less, the money was never paid to my Mr. Patel. It remained in Tanzania and probably at some point disappeared into a bank account overseas.

The importance of that episode was that Mr. Patel effectively lost his claim on the principal because the Tanzanians, to this day, have never accepted that that money was diverted. Mr. Patel has more or less written off that money. He has been told that if he wants the money he must pursue a legal action in Tanzania against the phoney company. He lacks the resources to do so, so he has accepted that, effectively, he has lost the principal.

That was where I came in, as the new Member of Parliament in 1997. Mr. Patel had lost £100,000 as a result of a fraud, but he still had the possibility of obtaining some payment from the Tanzanian Government in respect of the accumulated interest. We continued to pursue that claim through the Minister's 297WH two predecessors, who were very effective, but we ran into an impasse. Tanzania had serious debt problems and a lack of foreign exchange. It pleaded that it could not afford to pay, even though it realised that Mr. Patel was in distress.

The problem drifted on until 2000, when there was a flurry of correspondence, in which the Tanzanian authorities accepted for the first time that they would, in principle, pay interest. They said that they would settle part of the claim through the interest payments. Mr. Patel initially suggested a 10 per cent. interest rate. He was actually paying much more to his bank in the United Kingdom, but he would have accepted 10 per cent. The Tanzanians said that that was too much. He then said that he would accept 7.5 per cent. for most of the amount and 5 per cent. for the rest. The Tanzanians said that that was too much. Mr. Patel finally settled, agreeing that the whole claim should be settled on the basis of a specific cut-off date and a 5 per cent. interest charge. That was accepted in correspondence in the middle of 2000.

What has happened since then? Nothing. That is why I have called the debate. Here was a claim long since outstanding. It was very convoluted, but at least there was some transparency and some agreement on the principles of a settlement, which had never been made.

I am asking the Minister to help us point the way forward. There has been a vast amount of correspondence; the file that I have with me contains only a small part of it. I am sure that the Foreign Office has an even bigger file. I am not sure that much more can be achieved by endlessly sending letters backwards and forwards. I believe that, probably, senior officials in the Tanzanian Ministry of Finance and Economic Development are genuinely trying to come to a conclusion on the problem. They seem to be honourable people, and Mr. Patel certainly is an honourable person. I am looking to the Foreign Office to find a way through the mess.

It may be that the sensible answer is that, the next time that a senior Tanzanian official from the Ministry of Finance and Economic Development or the Ministry of Foreign Affairs visits London, which I imagine that they do quite often, we should try to get round a table with them and agree a final payment solution, to resolve the problem finally. It does not reflect well on the Tanzanian authorities that the last 20 years of my constituent's life have been destroyed by this case. There is now a possibility of resolving it. I appeal publicly to the Minister to help us through the final stage of this very long and difficult case.

§ The Parliamentary Under-Secretary of State for Foreign and Commonwealth Affairs (Mr. Ben Bradshaw)

I thank the hon. Member for Twickenham (Dr. Cable) for proposing the subject for debate. I congratulate him on his interest in the case and on the hard work that he has done to represent his constituent. I also acknowledge the work put in by his predecessor, the former Member for Twickenham, Toby Jessel.

298WH We sympathise greatly with Mr. Patel's situation. It is an extremely sad story, as you have just heard, Mr. Deputy Speaker. We are aware of the financial difficulties that the delay in settling payment has caused the hon. Gentleman's constituent and the resulting anxiety for Mr. Patel and his family.

I am grateful for the hon. Gentleman's kind words about the efforts that the Foreign Office has made to settle the case. Officials from the Foreign Office and the British high commission in Dar es Salaam have been involved in Mr. Patel's case since 1993. They have regularly written and spoken to the Tanzanian Ministry of Finance and Economic Development about Mr. Patel's claim. They have also forwarded correspondence from Mr. Patel to the Ministry. Since 1993, the Foreign and Commonwealth Office has been in regular contact with Mr. Patel by letter, telephone and meetings. We have also been in correspondence with the hon. Gentleman and his predecessor about the claim, and a succession of Ministers has raised Mr. Patel's case with the Tanzanian high commissioner in London, the Tanzanian Minister of Finance and the Minister of Foreign Affairs.

As the hon. Gentleman is aware, in 1996 and 1997 the Tanzanian Government made two payments to settle the principal amount owed for the goods. However, as he said—he will forgive me if I cover some of the same ground, but I think it important to place on record the Government's view of events—the payments were made to a company in Dar es Salaam that had previously acted as Mr. Patel's agent. Mr. Patel still has not received any of that money.

In making those payments to a third party, the Tanzanian Government acted on what they believed to be instructions from Mr. Patel. However, Mr. Patel says that the letter of instruction was a forgery, and the hon. Gentleman has reinforced that statement. The Tanzanian Government consider that they acted in good faith and that they have paid off the principal debt. Since 1996, we have advised Mr. Patel to take legal action against his former local representative to recover that money.

As the hon. Gentleman says, Mr. Patel is now pursuing a claim for the interest due on the unpaid principal sum from April 1982 to 1996, the agreed cut-off point for the debt. Mr. Patel calculated that at a rate of 10 per cent. per annum, giving a total claim of £387,110. In April 2000, the Ministry of Finance and Economic Development wrote to Mr. Patel, stating that a 10 per cent. rate of interest was too high and requesting that they agree a rate of 5 per cent. instead. Mr. Patel responded in May 2000, suggesting a rate of 7.5 per cent. from 1982 to 1996, plus an additional four years-1996 to 2000—at a rate of 5 per cent.

The Ministry replied on 11 August 2000, reminding Mr. Patel of the agreed cut-off date. It did not refer to his suggested 7.5 per cent. rate for the pre cut-off period. Mr. Patel replied to the Ministry on 5 September, confirming that he would drop his claim for interest from 1996 to 2000. That left his claim for 1982 to 1996 at 7.5 per cent. per annum—a total of £277,374. Since then, there has been no response from the Ministry. It has not accepted Mr. Patel's calculations or agreed that it owes him that amount.

299WH Regrettably, Mr. Patel's situation is not unique. The Foreign and Commonwealth Office receives many requests for help from people who have a claim against foreign Governments following a commercial transaction, property dispute or pension entitlement. As we have seen with Mr. Patel, such cases can drag on for many years. Often the delay is not the result of a deliberate attempt to obstruct the claim or deny the claimant's legal rights. It may simply be the result of a lack of capacity in the local administration to address the issues raised by a specific claim, or of an inadequate legal framework.

However much we sympathise with Mr. Patel's situation, I am afraid that there is now little more that the Foreign and Commonwealth Office can undertake to do. The matter is essentially a private dispute between Mr. Patel and the Tanzanian authorities over a commercial debt. Her Majesty's Government have no formal standing to intervene in cases of that nature.

In addition, Tanzania is one of several poor countries that have been unable to repay their debt. The enhanced heavily indebted poor countries initiative—for which Tanzania qualified in April 2000—stipulates that all creditors, bilateral, multilateral and commercial, should provide debt relief on comparable terms. The United Kingdom Government strongly support that principle, which is essential if Tanzania is to exit the shadow of debt and fulfil its commitment to tackling the extreme poverty that exists in the country. Unfortunately, there is no reason why Mr. Patel's claim could be considered to fall outside the remit of the HIPC initiative.

Britain and Tanzania have an excellent and warm bilateral relationship. We share historic Commonwealth ties and have similar interests in the Great Lakes region and east Africa, such as their stability, security and economic growth. Tanzania is a major recipient of United Kingdom development assistance—about £65 million in this financial year.

It is regrettable that Mr. Patel has had to experience such a delay and so much anxiety in his efforts to secure payment from the Government of Tanzania. However, I hope that the hon. Member for Twickenham understands the United Kingdom Government's position. Achieving substantial debt relief for the poorest, most highly indebted countries is a key objective for the Government. Now that Tanzania has been granted debt relief under the HIPC initiative, the Foreign and Commonwealth Office can no longer continue to push the Government of Tanzania to pay Mr. Patel. However, we always remain happy to pass on correspondence.