Tanzania to fight order to pay foreign investor $109.5 million

On Tuesday, shares in the microcap explorer IDA rose after the company confirmed it had won $109 million from Tanzania as part of an international civil settlement.

The Tribunal, which is part of the World Bank’s ICSID has ordered Tanzania to pay Indiana Resources the sum following the seizure of a nickel mine way back in 2018 when the country was under the leadership of the late John Magufuli.

The Tribunal found on 14 July that Tanzania had breached the UK-Tanzania Bilateral Investment Treaty when it seized the Ntaka Hill Nickel Project in early 2018.

Ntaka Hill was held by UK-registered Ntaka Nickel Holdings and Nachingwea UK, as well as a Tanzania-registered entity called Nachingwea Nickel. The three entities acted as claimants in the case.

Indiana Resources, in turn, is a 62.4 percent majority shareholder of the combined holdings of the claimants, and Indiana was responsible under JV agreements to handle arbitration.

“The amount of the Award reflects the substantial investment that has been lost by shareholders through Tanzania’s unlawful expropriation of Ntaka Hill,” Indiana Resources Executive Chairman Bronwyn Barnes said.

“The ICSID Convention has been ratified by 158 Member States of the World Bank – including Tanzania. This means that any award issued by an ICSID tribunal is enforceable in any one of those 158 member States as if it were a judgment of one of their own courts.”

Tanzania was also ordered to pay the ICSID’s legal costs, and part of the $109.5 million payment to Indiana includes compound interest.

Tanzania will also ultimately pay the UK-based international law professional Litigation Capital Management Limited some $15 million of the amount. That amount could climb further over the next 120 days.

Since coming into office on March 19, 2021, President Samia Suluhu Hassan has smade efforts to craft a more investor-friendly atmosphere.

Apart from her repeated assurance in her speeches, President Hassan has also met and held talks with various other global leaders, including the Vice President Kamala Harris, immediate past President of the World Bank Group David Malpass and managing director for the International Monetary Fund Kristalina Georgieva since she took office in March 2021.

President Hassan was last year awarded the Africa Road Builders–Babacar Ndiaye Trophy, an annual prize sponsored by the African Development Bank (AfDB), and organised by Acturoutes – an information platform on infrastructure and roads in Africa, as well as the Media for Infrastructure and Finance in Africa (MIFA) – a network of African journalists specialising in road infrastructure. According to AfDB, the prize is awarded to leading figures in Africa who have demonstrated their commitment to the development of transport infrastructure on the continent.

With several initiatives, the current regime has restored both domestic and foreign investors’ trust and confidence.

The ‘economic war’ that is costing the nation

In July 2017, former President Magufuli’s administration introduced wide-ranging amendments to the Mining Act 2010, which, inter alia, abolished the legislative basis for the Retention Licence classification with no replacement classification.

On January 10, 2018, Tanzania published the Mining (Mineral Rights) Regulations 2018 whereby the government cancelled all Retention Licences issued prior to 10 January 2018 at which point they ceased to have any legal effect.

The rights over all areas under Retention Licences, including the Retention Licence held for the Project, were immediately transferred to the Government of Tanzania.

IDA says in a statement posted on its website that during the time from January 2018 to December 2019, it (IDA) actively engaged with the Tanzanian Minister for Energy and Minerals and the Mining Commission in an effort to resolve a suitable tenure mechanism for the Project Licence to be reinstated.

In May, 2018, the company submitted to the government, an application for a Prospecting Licence as recommended by Government Officials.

Following numerous visits to Tanzania and meetings with the Minister for Energy and Minerals, Mining Commission and other senior government officials, a further submission was presented to the Minister for Energy and Minerals and the Mining Commission in October 2019 that outlined a four-year work programme and a $8-11 million proposed budget to progress the Project, the company says.

At a meeting on 9 December 2019 with the Minister for Energy and Minerals, the Mining Commission and other senior government officials, the Chairman of Indiana was reassured that the Company’s historic investment would be respected and the Government would shortly advise a process to agree an appropriate tenure for the Project.

On 19 December 2019, the Mining Commission of Tanzania announced a public invitation to tender for the joint development of areas covered previously by Retention Licences (the “19 December Tender”) as a condition of the 19 December Tender that the successful bidder compensate the previous Retention Licence holder for its exploration costs incurred. The public invitation was not sent to the Company but was advertised on the website for the Ministry of Energy and Minerals, IDA says on its website.

On 20 December 2019, the Mining Commission of Tanzania announced a revised public invitation to tender (the “20 December Tender”). The 20 December Tender removed the condition that the successful bidder compensate the previous retention licence holder for its exploration costs incurred.

That way, IDA says, it was now clear that Tanzania had removed the ownership of the Project from Ntaka Nickel Holdings Ltd (UK), Nachingwea Nickel Ltd (UK) and its local subsidiary Nachingwea Nickel Ltd (Tanzania). In doing, the company urged, Tanzania was breaching its obligations to the Investors under the UK-Tanzania BIT (the “BIT”) and international law.

Under the BIT, which Tanzania was breaching through the tenders, the country was being required not to nationalise or expropriate the Investors’ investments or subject them to measures having effect equivalent to nationalisation or expropriation without prompt, adequate and effective compensation under Article 5(1) of the BIT;

The country was also breaching its obligation to accord fair and equitable treatment to the Investors’ investments under Article 2(2) of the BIT.

Besides, Article 8(3) of the BIT provides that the Investors may submit the dispute to ICSID if the Investors and Tanzania are unable to reach an agreement concerning the dispute within six months of the dispute arising.