$110m award emboldens firms suing Tanzania abroad

By Bob Karashani, DAR ES SALAAM Tanzania

The recent award of $109.5 million to an Australian company by the International Centre for Settlement of Investment Disputes (ICSID) in a case involving revocation of their mining licence in Tanzania has raised hopes for three other multinationals pursuing similar compensation against the country.

Two Canadian mining firms, Winshear Gold and Montero Mining, are pursuing arbitration awards by the tribunal for licence expropriations during the John Magufuli era.

A third company, British real estate developer Pennyroyal Ltd, also filed a billion-dollar claim on July 20 – less than a week after the ICSID awarded the Australian firm, Indiana Resources Ltd – seeking to conclude a dispute dating back to 2018.

The British firm is seeking compensation for a terminated land lease for a luxury resort project in Zanzibar.

Vancouver-based Winshear is seeking at least $96 million compensation for the expropriation of its SMP Gold Project licence in Tanzania. Its managers said the Indiana award has boosted its chances of success ahead of a ruling before the end of the year.

“It is reassuring that the ICSID tribunal in the Indiana case recognised the damage done to the company, its shareholders and investors, when the Tanzanian government decided to abolish retention licenses without consulting the investor community,” Winshear CEO Richard Williams said in a statement.

The other firm, Montero, is claiming $67 million in damages for a licence revocation for its Wigu Hill Rare Earth Element project in Morogoro. A hearing is scheduled for December.

Both companies have based their cases on a Bilateral Investment Treaty (BIT) signed between Tanzania and Canada in 2013.

Pennyroyal invested in a prospective luxury leisure and residential housing scheme in Matemwe on the northeastern coast of Unguja, but the Zanzibar government terminated the title deed for the project land in July 2022.

The company argues that it had already spent $55 million in construction costs for the $1.6 billion Blue Amber project and that the deed revocation was in breach of Tanzania’s BITs with both the UK and Mauritius. The exact claim amount has not been disclosed and the case remains pending on ICSID’s cause list.

Now concerns are mounting about the threat of Air Tanzania aircraft on international routes becoming easy targets for attachment as part of enforcement measures in the event of more ICSID rulings against Tanzania.

The method has been used by other beneficiaries of international arbitration proceedings against Tanzania, and Indiana Resources has previously threatened to pursue it.

As recently as July 6, authorities managed to rescue an Air Tanzania Airbus A220-300 that was being held by Dutch authorities at Maastricht Airport over a $165 million claim by Swedish firm EcoDevelopment for a contentious land title revocation in 2016. The Swedish firm alleged that Tanzania reneged on a deal for it to develop a sugarcane project in Bagamoyo.

But Dodoma on July 28 challenged the award. While the ICSID has yet to announce the appointment of a new ad hoc committee to hear the application for annulment by Tanzania, the respondents are facing an uphill battle to avoid coughing up the money unless they reach an out-of-court settlement.

Indiana says it remains “extremely confident” of eventual success at the appeal.

The award was issued on July 14 after four years of arbitration proceedings. Indiana Resources has since submitted a letter of demand for $113.6 million to the Tanzanian government, which includes interest accrued and legal costs. The losing party is also required to pay the ICSID’s own costs related to the case.

An ICSID ad hoc tribunal sitting in Washington DC ruled that Tanzania breached the UK-Tanzania BIT when it seized the Ntaka Hill Nickel Project in southern Tanzania and cancelled the mining retention license for the project held by three smaller companies fronted by Indiana Resources.

The licence was revoked in January 2018 under new mining laws during the tenure of the late John Magufuli, who argued for sovereign control of the country’s mineral resources.

While government officials have chosen not to go public with details of the application for annulment, Article 52 of the ICSID Convention cites five acceptable grounds for annulment: If the tribunal was not properly constituted; if the tribunal manifestly exceeded its powers; If there was corruption on the part of one or more of its members; if there was serious departure from fundamental rules of procedure;, and if the award failed to state the reasons on which it was based.

According to Indiana Resources, “an initial review by our legal representation suggests Tanzania will not be able to meet the requirements for the annulment.”

Executive Chairperson Bronwyn Barnes added in the company’s statement that “Indiana remains extremely confident of its position.”

But fears remain, mainly due to Tanzania’s history of troubles with plane seizures in this context.

The ICSID had ordered Tanzania to pay up in April 2022, but later granted a stay of execution pending annulment proceedings launched by Dodoma. Still, EcoDevelopment successfully convinced a Dutch district court to impound the plane.

The ICSID committee hearing the case issued a procedural order on May 16, 2023 which “took note of the discontinuance of the proceeding pursuant to ICSID Arbitration Rules 53 and 43(1).” No further explanation of how the case was resolved has been offered by either party so far.

Another Air Tanzania Airbus A220-300 was seized at Johannesburg’s OR Tambo Airport in August 2019 over a $33 million claim by a Namibian farmer, Hermanus Steyn, against Tanzania in delayed compensation after his farm was expropriated in 1982.

In December the same year, Mr Steyn also tried to have another Air Tanzania plane, a DHC-8-Q400, attached by a Canadian court in pursuit of his compensation. Both attempts came to naught after Tanzania used diplomatic channels to settle matters with both countries and recover the planes.