PPP: Why government wants local arbitration

Dodoma. The government reiterated on Wednesday September 12 that it has no faith in multilateral arbitration and investment guarantee bodies, saying they lack impartiality when it comes to resolving disputes between member countries and investors.

The issue, which partly formed the basis for the enactment of two laws on the protection of Tanzania’s natural resources last year, resurfaced when Parliament debated the Public Private Partnership (Amendment) Bill, 2018.

The government’s response followed opposition by some lawmakers to a provision in the Amendment Bill that obliges investors involved in PPP projects to use local courts, and not international arbitration entities, in the event of a dispute with the government.

According to the shadow Finance and Planning minister, Ms Halima Mdee, the decision to compel investors to seek redress domestically was against the terms and conditions that define Tanzania’s membership in the Multilateral Investment Guarantee Agency (Miga) Convention and the International Centre for Settlement of Investment Disputes (ICSID), among others.

“If we really want to attract serious investors to partner with us in PPPs, we need to rethink our laws. The decision on the arbitration to be used should be agreed by partners to make investors comfortable as far as their role in partnerships is concerned,” she said.

Her fellow opposition lawmakers Peter Msigwa (Iringa Urban-Chadema) and Cecil Mwambe (Ndanda-Chadema) shared similar sentiments.

But Attorney General Aderladus Kilangi said it was highly unlikely that Miga, for instance, could rule in favour of the government in a dispute with a multinational investor.

“There is no neutral ground in international arbitration. The best way is to use our own courts,” Dr Kilangi told Parliament.

Miga – which seeks to promote investment foreign direct investment in developing countries in support of initiatives towards economic growth, poverty reduction and improvement of people’s welfare – was established in 1985 and came into effect on April 12, 1988.

“Miga was formed by the World Bank, which finances numerous multinationals. Do you expect this entity to be on our side in any dispute?” Dr Kilangi asked.

He said multilateral arbitration and investment guarantee bodies, to which many developing countries belong as members, were formed to protect the interests of investors, not member countries.

“As confidence and trust wane, many developing countries are considering using their own legal systems,” said Dr Kilangi.

The chairman of Parliament’s Budget Committee chairman, Mr George Simbachawene, shared similar sentiments.

“Natural resources should be exploited for the benefit Tanzanians. PPP arrangements should not be lopsided in investors’ favour,” he said.

Last year, Parliament approved the Written Laws (Miscellaneous Amendments) Act, 2017; the Natural Wealth and Contracts (Review and Renegotiation of Unconscionable terms) Act, 2017 and the Natural Wealth and Resources (Permanent Sovereignty) Act 2017 on Certificate of Urgency that saw legal experts advise the government to start the process of withdrawing from multilateral arbitration and investment guarantee bodies for the laws to be implemented effectively.