Tullow sues government in new tax dispute

Monday December 17 2012



Tullow has sued the government in an international court based in the United States, challenging imposition of value added tax on goods and services it buys for its oil exploration work in Uganda.

The London-listed oil company, represented by UK’s Ashurst and Kampala Associated Advocates law firms, filed the case at the World Bank-created International Centre for Settlement of Investment Disputes (ICSID) on October 31.

The case is under seal, meaning its specifics are not public. However, the subject matter up for determination relates to “petroleum exploration, development and production agreement”, according to information on the ICSID website.

Tullow confirmed the lawsuit, which is separate from the on-going arbitration in a London court over the recovery of $404 million capital gains tax arising from its $1.45 billion buy-out of Heritage Oil’s Uganda assets. Determination of the arbitration case is pending.

In an email to the Daily Monitor, Tullow Uganda’s General Manager Jimmy Mugerwa said “the [new] dispute relates to the assessment of Value Added Tax on Tullow Uganda on the importation of certain goods and services.”


Energy Minister, Ms Irene Muloni, yesterday said she did not have details and would only be able to provide “credible information” today. This newspaper understands that proceedings of the latest arbitration sought by Tullow have not commenced because ICSID secretary-general, Ms Meg Kinnear, is yet to appoint members to constitute the tribunal to handle it.

Mr Karoli Ssemogerere, an attorney at Law in New York, told the Daily Monitor that Tullow’s new case against the Uganda government could have serious ramifications because “multi-lateral investment treaties and associated guarantees are a pre-condition to membership of the World Bank.”

This would mean that the Britton Woods institution could sanction Uganda if found in breach of trade and investment agreement signed bilaterally with the United Kingdom, where Tullow originates, or under other multilateral arrangements.

To be accepted by the international community after years of isolation, Uganda was in 1982 forced to pass a legislation reversing expropriation of assets owned by British Asians, which Idi Amin’s government seized in 1972.

Kampala Associated Advocates partner Peter Kabatsi, who was Uganda’s Solicitor General from 1990 to 2002, said his colleague Oscar Kambona is representing the firm in the case to be heard in Washington D.C.

Mr Kabatsi said he did not, in his tenure as Solicitor General negotiate agreements with foreign oil firms, and the case of possible conflict of interest raised by other quarters would not arise. “Not at all,” he said. KAA law firm founder, Mr Elly Karuhanga, is the President of Tullow Uganda.