Samia warns against illegal investor contract terminations, cites potential costs
President Samia Suluhu Hassan speaks at the annual general meeting of the Association of Local Authorities of Tanzania (ALAT) in Dodoma on March 11, 2025. PHOTO | STATE HOUSE
What you need to know:
- While acknowledging that some investors may have made mistakes, she stressed that sudden contract cancellations can create more harm than good.
Dar es Salaam. President Samia Suluhu Hassan has issued a stern warning against terminating contracts with investors without adhering to proper legal procedures, emphasising the significant financial and legal costs such actions could impose on the government.
Speaking at the 39th General Meeting of the Association of Local Authorities of Tanzania (ALAT) in Dodoma on Tuesday, March 11, 2025, President Hassan highlighted the potential for international lawsuits that could result from improper contract terminations, which often lead to the government being forced to pay large compensation amounts.
“When you want to challenge or terminate an investor’s contract, you must follow the law, involve investment authorities, and consult the Attorney General to reduce lawsuits and the burden of paying huge compensation,” President Hassan said, urging caution when handling such matters.
She noted that legal disputes with investors often end up being costly for the government, particularly when a district commissioner or municipal director unilaterally cancels an investment project without following legal protocols.
While acknowledging that some investors may have made mistakes, she stressed that sudden contract cancellations can create more harm than good.
"We have cases where a district commissioner or a municipal director arbitrarily decides to cancel an investment project. Yes, it might be true that the investor has made mistakes, but abruptly declaring the project null and void without considering that this investor had signed contracts with the government is problematic," she explained.
The President further pointed out that investors usually do not respond immediately to such actions.
Instead, they often appeal the decision before taking the matter to international courts if their concerns remain unresolved.
She warned that these cases can be financially draining for the government, as Tanzania often loses such lawsuits, which are typically backed by strong legal documentation from the investors.
"As per our contracts, if we make mistakes, they take us to international courts, and since they have all the necessary documentation, we end up paying huge amounts in compensation. These lawsuits are expensive, and we often lose because the investors have legal grounds,” she said, though she did not cite specific examples.
Her warning comes just a week after Tanzania made a final $7 million payment to Canadian company Montero over a dispute related to the Wigu Hills investment.
Several other cases are still pending before the International Centre for Settlement of Investment Disputes (ICSID).
President Hassan called on local government leaders to handle disputes with investors carefully and through the appropriate legal channels. She stressed the need for due diligence, saying that following legal procedures and consulting with the relevant authorities, including the Attorney General, would reduce the risk of costly lawsuits.
“If you need to take action against an investor, follow the existing legal procedures, consult with investment authorities, and engage the Attorney General. This way, we can avoid unnecessary lawsuits and financial losses. At the same time, if an investor has caused harm in your jurisdiction, engage with the relevant Tanzanian investment authorities to explore possible solutions,” she advised.
She concluded by emphasizing that adhering to the rule of law would not only help avoid financial losses but also allow those funds to be redirected toward other crucial national development projects.
