BANGLADESH Trends and Developments Contributed by: Arunima Dutta Aurni and M Imtiaz Farooq, Farooq & Associates
ment during the tenure of the agreement. How- ever, based on the recommendations of the National Committee, the Power Division has started directing the independent power pro- ducers (IPPs) to renegotiate tariff rates, including during ongoing operations or as a pre-condition to starting operations. These directions are being given outside the purview of the signed agreements and, while no legal challenges have yet been filed, it remains to be seen whether the IPPs will accept rene- gotiations or contest them in court. So far, no renegotiation has resulted in a confirmed tariff reduction. Cancellation of Letters of Intent (LOIs) As part of the reform activities, the Power Divi- sion has cancelled all LOIs for power projects. Some of the sponsors who had been awarded LOIs had undertaken significant preparatory work for the project and had made financial commitments. An outright cancellation of the LOI at such a stage, without citing any specific breach, can be challenged. Under the Contract Act of 1872 in Bangladesh, a contract is concluded when there is an offer by one party and this is accepted by another, both with the intention to create legal relations. The contract must involve lawful consideration, be entered into by parties with legal capacity, and have free consent, meaning it is not induced by coercion, fraud or misrepresentation. The terms must be certain, the contract’s purpose must be lawful, and the performance must be possible. Additionally, any required legal formalities must be fulfilled. When these elements are met, the contract is legally binding and enforceable. Given that the LOI fulfils the essential elements of a contract (ie, offer, acceptance, intention to
create legal relations, consideration, certainty of terms, and compliance with legal formalities), it can be argued that the LOI constitutes a binding contract under the Contract Act of 1872. A writ petition had been filed challenging a similar cancellation of an LOI during the term of the former government, but the judgment was passed only recently. As per the judgment, the cancellation of the LOI by the Bangladesh Power Development Board (BPDB) without involving the highest decision-making body, that is, the Cabinet of Bangladesh, was illegal due to pro- cedural irregularity. While no legal proceedings have yet been filed against the recent cancellation of LOIs, it remains to be seen what the judicial position will be if such a matter is brought before the court under the current administration, especially since the cancellations were carried out using the same procedures. Transition to Competitive Procurement Now that the Special Act has been repealed, the Ministry of Power, Energy and Mineral Resourc- es intends to undertake projects relating to gen- eration, transmission or distribution under the Public Procurement Act, 2006 (PPA 2006) and the Public Procurement Rules, 2008 (PPR 2008). This marks a significant shift in the power sector, where projects had been implemented under the 2010 Act for almost 14 years. According to Section 33 of the PPA 2006, the procuring entity may undertake public procure- ment using an open international procurement method where it is not feasible to conduct procurement by inviting competitive tenders within Bangladesh, and it reasonably appears that effective international competition cannot be ensured without special efforts. Therefore,
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