Monday, May 27, 2024

MACRA smiles all the way to the bank with $22 million ‘Spy Machine’ Arbitration award

MACRA boss Suleman

Malawi Communication Regulatory Authority (MACRA) has secured a significant victory in its legal battle against American company Agilis International Inc., with an arbitrator appointed by the Malawi Law Society, Patrice Nkhono, awarding MACRA over $22 million (K20 billion).

The arbitrator’s final award, dated May 19, reveals that Agilis International Inc. failed to submit a defence or participate in the proceedings.

The case centres around MACRA’s October 10, 2022 claim, seeking $22,961,719 in damages, compound interest at 10% above the National Bank of Malawi’s base lending rate, and arbitration costs.

MACRA alleged that Agilis International breached contracts it had entered into with the regulatory body in 2010 to supply, install, and commission a telecommunications monitoring system known as the Consolidated ICT Regulatory Management System (CIRMS).

The CIRMS, often called the “spy machine” due to its purported ability to record voice calls, was designed to enhance MACRA’s regulatory capabilities in overseeing the telecommunications industry in Malawi, where MACRA serves as the regulator.

According to Nkhono’s arbitration award, MACRA and Agilis International initially entered into the Master Services Agreement on May 21, 2010, for the supply of the CIRMS. However, implementing the agreement faced challenges when telecommunications operators in Malawi launched court challenges against implementing the CIRMS.

These legal challenges were resolved in favour of MACRA around 2015.

“However, by this time, the CIRMS, in its initial structuring, had been overtaken by technological changes. Consequently, the parties agreed to upgrade the CIRMS and, to that end, entered into an amended agreement dated March 13, 2015. Further technological changes and the passage of time necessitated additional amendments. The parties entered into two addenda to the Amended Agreement on March 29, 2018, and April 4, 2018, respectively,” reads the ruling.

The first Addendum revised the contract duration from 36 months to 72 months. The second Addendum recorded an agreement to upgrade the CIRMS for compatibility with LTE/4G technology. The parties also agreed to a Software Support Agreement on February 16, 2018, to seamlessly implement the Amended Agreement.

The first issue in the case was whether Agilis International breached the contract, as MACRA contended. The second issue was what remedies MACRA was entitled to if Agilis International was found in breach of contract.ACRA

Former MACRA director general Godfrey Itaye launched the ‘spy machine in 2018

MACRA presented the evidence of its Deputy Director of Legal Services, Dan Chiwoni, who testified that MACRA entered into a contract with Agilis to supply computer hardware and software. The equipment was supposed to deliver four functionalities to MACRA for its regulatory functions:

  • A revenue assurance functionality to obtain first-hand information on international and local voice traffic flowing through MACRA’s licensed operators.
  • The Quality of Service (QoS) function, which would allow MACRA to monitor and ensure that licensed providers met expected standards.
  • The fraud management function to detect fraudulent activity on the networks of licensed telecom operators.
  • The spectrum management system, which would enable MACRA’s system to analyse data from the frequency, monetary, and management system viewpoints.

Chiwoni testified that out of the four functionalities, Agilis only supplied the quality of services (QoS) functionality and partially delivered the revenue assurance functionality by enabling MACRA to monitor international, but not local, traffic. He stated in his affidavit that the rest of the functionalities were not delivered, despite MACRA having paid Agilis a total sum of $22,961,719 over a 10-year period.

However, in a letter dated April 5, 2021, Agilis offered to replace all hardware devices, upgrade all software to the latest version, implement all deliverables within 90 days, and provide on-site Agilis personnel for one month. The conditions for achieving this proposal included MACRA extending the maintenance agreement for one year for $1.4 million.

MACRA rejected Agilis’ proposal, citing the company’s failure to fulfil its contractual obligations over the past three years and finding the requested $41.4 million payment condition unacceptable. MACRA highlighted in its response letter that it had already fulfilled all its financial obligations on the contract, making Agilis’ payment claim redundant.

In response, Agilis indicated in a letter dated June 4, 2021, that without the requested payment of $1.4 million from MACRA, there was no path forward as third-party involvement was necessary but would not proceed without payment.

Chiwoni testified that upon the expiration of the agreement’s duration in March 2021, MACRA decommissioned the system due to the issues faced by Agilis.

In delivering his ruling, Nkhono noted that MACRA’s claim for $22,961,719 appeared to be sufficient once the aspects of the contract that Agilis failed to deliver upon were considered. However, Nkhono rejected MACRA’s plea for an additional $17 million as damages for breach of contract, stating that a more thorough assessment of damages would require additional evidence.

As of publication, Agilis International Inc. had not responded to PIJ’s questionnaire. In a previous interview with PIJ on August 2, 2022, Agilis CEO and Managing Director Rawlvan Bennett accused certain individuals within MACRA of sabotage. Bennett claimed that the ‘spy machine’ had performed as intended, but those in charge had ulterior motives.

Founded in 2003 and based in Rockville, Maryland, United States, Agilis International provides IT services and consulting. Although the company’s website has been offline for over a year, its online profile describes Agilis International as a leading provider of Customer and Operational Analytics, specialising in Revenue and Cost Assurance, Fraud Management, Margin Visibility, Customer Lifecycle Management, Data Warehousing, and Reporting for Communication Service Providers (CSPs). The solutions deployed by Agilis International cover wireline, GSM/CDMA, and broadband-based networks for voice, data, and video services.

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