DAR ES SALAAM, Tanzania
The Tanzanian government recently disbursed $30 million (TZS 76.5 billion) to Winshear Gold Corp as part of an out-of-court settlement, resolving an investment dispute with the Canadian company.
Winshear had initiated legal
action at the International Centre for Settlement of Investment Disputes
(ICSID), seeking approximately $100 million in damages resulting from the
Tanzanian government’s cancellation of its mining retention license.
Opting for an out-of-court
settlement, the Tanzanian government aimed to protect its reputation as an
investment destination and avoid the protracted legal process that would
consume valuable time and resources.
Meanwhile, Winshear, after
deducting its legal costs, netted $18.5 million from the $30 million
settlement.
Tanzanian President John
Magufuli’s tenure, spanning November 2015 to March 2021, witnessed an
aggressive stance against foreign investors whom he accused of exploiting the
nation’s natural resources.
Driven by a nationalist
fervor, he implemented significant amendments to the country’s mining laws,
including the retroactive legislation of 2017 that invalidated mining retention
licenses.
These actions contradicted
Bilateral Investment Treaties (BITs) signed by Tanzania with various foreign
countries.
These treaties typically
safeguard investors’ rights and assets, including mining retention licenses, by
prohibiting expropriation. Under the BITs, foreign investors can take their
disputes with Tanzania to international arbitration tribunals like ICSID, whose
decisions are legally binding.
The hasty cancellation of
mining licenses by Tanzania led several foreign investors to invoke the BITs
and sue the country at ICSID. It’s highly likely that Tanzania will face
unfavorable outcomes in these cases, incurring substantial penalties and legal
fees.
Prof. Abdulkarim Mruma, a
prominent figure in Magufuli’s economic crusade against foreign mining
companies, appeared as an expert witness for the Tanzanian government at
ICSID.
Nevertheless, he faced a
rigorous cross-examination by Winshear’s legal team.
Tanzania’s abrupt revocation
of mining licenses without due consideration for pre-existing BITs has proven
costly.
Multiple similar cases filed
by foreign mining companies remain pending at ICSID, and Tanzania is expected
to face more unfavorable verdicts, incurring substantial legal expenses.
The most sensible approach for
the Tanzanian government would be to mitigate losses by settling out of court
with the claimants to expedite dispute resolutions.
While Magufuli’s intentions of maximizing Tanzania’s benefits from its mineral wealth were commendable, the execution of this vision left much to be desired.
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