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Opinion

Tanzania’s PPP (Amendments) Act 2018

Robert Coffey, Managing Partner at Cooke, Young and Keidan
Nov. 19, 2018, 1:16 p.m.
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Word count: 606

In September 2018, the Government of Tanzania, at the Parliamentary debating stage of the Public Private Partnership (Amendment) Bill 2018 (the PPP Amendment Bill) introduced an amendment (new Section 25A) with the effect that all PPP projects relating to Tanzania’s “natural wealth and resources” would be subject to the provisions of the Natural Wealth and Resources (Permanent Sovereignty) Act 2017 (the Sovereignty Act), and the Natural Wealth and Resources Contracts (Review and Re-Negotiation of Unconscionable Terms) Act 2017 (the Re-Negotiation Act). The PPP Bill was passed, and is now the Public Private partnership (Amendments) Act 2018 (the PPP Amendment Act). The ‘Objects and reasons’ section of the PPP Amendment Act gives no further insight into the significance of the new Section 25A than to say that it is “…added for the purpose of making provisions for recognition and safeguarding of natural wealth and  resources.” However, the amendment provide controversial among parliamentarians and commentators, as its effect is of great significance of PPP projects.

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In September 2018, the Government of Tanzania, at the Parliamentary debating stage of the Public Private Partnership (Amendment) Bill 2018 (the PPP Amendment Bill) introduced an amendment (new Section 25A) with the effect that all PPP projects relating to Tanzania’s “natural wealth and resources” would be subject to the provisions of the Natural Wealth and Resources (Permanent Sovereignty) Act 2017 (the Sovereignty Act), and the Natural Wealth and Resources Contracts (Review and Re-Negotiation of Unconscionable Terms) Act 2017 (the Re-Negotiation Act). The PPP Bill was passed, and is now the Public Private partnership (Amendments) Act 2018 (the PPP Amendment Act). The ‘Objects and reasons’ section of the PPP Amendment Act gives no further insight into the significance of the new Section 25A than to say that it is “…added for the purpose of making provisions for recognition and safeguarding of natural wealth and  resources.” However, the amendment provide controversial among parliamentarians and commentators, as its effect is of great significance of PPP projects.

The Sovereignty Act and the Re-negotiation Act both attracted widespread comment when they (along with The Written Laws (Miscellaneous Amendments) Act) entered into force in Tanzania in 2017. The precise scope and effect of the Sovereignty Act and Re Negotiation Act were not clear in all respects, but there was little doubt that Tanzania was now seeking to limit the resolution of disputes to the jurisdiction of Tanzanian courts and bodies. Less clear was whether this would apply to existing agreements, and also to agreements made between private entities.

International arbitration

International investors in PPP projects typically rely on arbitration as a means of settling disputes with sovereign nations. Tanzania is party to a number of Bilateral Investment Treaties, and Investment Treaties and is a member of the international Centre for the Settlement of Investment Dispute (ICSID) and the Multilateral Guarantee Agency (MIGA). ICSID and MIGA are both international arbitral bodies. However, Tanzania has argued that international arbitration is inherently biased in favour of investors, and that this method of dispute resolution prejudices the interests of Tanzania. Tanzania has been accused in the past of breaching the ICSID Convention, including by its High Court’s 2014 injunction preventing the enforcement of an ICSID decision in favour of Standard Chartered Bank Hong Kong against Tanzania Electricity Supply Company (TANESCO). On August 2, 2018 ICSID, in an appeal ruling, upheld the $148.4m award in favour of Standard Chartered Bank Hong Kong. In an ongoing arbitration before the International Chamber of Commerce’s International Court of Arbitration, Symbion Power is claiming $561m from TANESCO, following an alleged breach of contract. 

Critics of Tanzania’s anti-international arbitration stance have argued that the effect of the Sovereignty Act, the Renegotiation Act, and the PPP Act is to withdraw Tanzania from the World Bank. Further, it is argued that Tanzania is effectively closing its doors to international investment of all types, due to the uncertainly created by laws allowing for the re-negotiation of agreements, and the restriction of methods of dispute resolution. Tanzanian commentators have further expressed doubt regarding the neutrality and capacity of their country’s courts. 

There has been quite considerable press coverage regarding the recent passing into law of the PPP Amendment Act, with most journalists for African press focussing on the likely very negative reaction from current and potential investors, and also those to whom Tanzania has made commitments in investment treaties. It seems inevitable that there will be legal challenges to the position taken by Tanzania by interested parties at a state and investor level. In the meanwhile, the effect on both existing and potential international investment in Tanzania is likely to be very significant.
 

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