Tononoka Steels Limited v. The Eastern and Southern African Trade and Development Bank

The Tononoka Steels Limited, a private company, suited the Eastern and Southern African Trade and Development Bank (TDB), an international organization established by the Charter of the Eastern and Southern Trade and Development Bank – adopted pursuant to the Treaty for the establishment of the Preferential Trade Area for Eastern and Southern African States – and based in Kenya. The applicant claimed that the respondent organization had breached a loan agreement concluded between the company and the Bank.

Before the Civil Tribunal of Nairobi, the Bank objected the Tribunal’s jurisdiction and invoked its immunity from legal process granted to it under the Charter and the Privileges and Immunities Act. In addition, it asserted that, according to the terms of the loan agreement, any dispute arising from the contract shall be settled through arbitration. The Tribunal upheld the preliminary objection, finding that the Bank enjoys absolute immunity from all forms of legal process.

The Company appealed the Tribunal’s judgment, arguing that the dispute concerned commercial activities performed by the Bank as a private actor and out from the scope of the Bank’s jurisdictional immunity. In support of this claims, the appellant relied on the doctrine of restrictive immunity emerged in the context of State immunity.

While the Court of Appeal did not expressly confirmed the applicability of the legal regime of State immunity to international organizations, it accepted the appeal, stating that the Bank’s immunity does not cover private law disputes. The Court observed that the Bank has the capacity to act as a private bank, performing purely commercial activities that are “outside its scope and mandate”. In this regard, it stressed that “immunity from suit and legal process conferred on The PTA Bank and other’ similar organizations was necessary for the fulfillment of their purposes, for the preservation of their independence and neutrality from control by or interference from the host state and for the effective and uninterrupted exercise of their multinational functions only and not private functions.”