- Posted January 10, 2013 by
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Tullow Oil sues Ugandan government over tax
UK-based oil firm Tullow Oil is suing the Ugandan government in an international court after it was hit with value added tax on goods and services it purchased during its operational work in the country.
The case was filed on 31 October 2012 at the World Bank-established International Centre for Settlement of Investment Disputes (ICSID) and it is under seal – that is to say the specifics of the case are not public. What is known is that the subject relates to “petroleum exploration, development and production agreement”, according to the ICSID website. However, court proceedings are yet to commence as the ICSID secretary Meg Kinnear has not appointed members for the tribunal that will handle the case.
The lawsuit will add to the burden of court cases Tullow are already experiencing; the firm is still locked in arbitration in a London court with Heritage Oil over a dispute relating to the recovery of $404 million capital gains tax arising from its $1.45 billion acquisition of Heritage Oil’s Uganda assets.
Tullow Uganda’s general manager Jimmy Mugerwa was quoted as saying that the new court case relates to “to the assessment of Value Added Tax on Tullow Uganda on the importation of certain goods and services”.
Tullow, which has extensive interests across the African continent, is represented by UK law firm Ashurst and the Uganda-based Kampala Associated Advocates (KAA). The employment of the latter has triggered some controversy; one of KAA’s partners, Peter Kabatsi, was Uganda’s Solicitor General between 1990 and 2002 and there is concern over whether any negotiations of agreements with foreign oil firms during this tenure might present a conflict of interest. Kabatsi, when quoted, denied this. Even more concerning though is that KAA’s founder is Elly Karuhanga, the President of Tullow Uganda.
The lawsuit could have serious ramifications for the Ugandan government as, according to a New York law attorney, “multi-lateral investment treaties and associated guarantees are a pre-condition to membership of the World Bank”. The World Bank could also sanction Uganda if it is found guilty of breaching trade and investment agreements signed with the UK, where Tullow is based.