Tanzania Dragged to Court Over Alleged Involvement Breaches

In a dramatic turn of events, Tanzania has found itself in the middle of a legal battle with British real estate company Pennyroyal Ltd. The developers of the prestigious Blue Amber Resort have filed a claim against Tanzania, accusing the country of breaching bilateral investment treaties it had entered into with both the United Kingdom and Mauritius.
The claim revolves around the revocation of the title deed on which the Blue Amber Resort was being constructed. According to Steptoe, the law firm representing Pennyroyal, this action constitutes a violation of the bilateral investment treaties. As a result, Pennyroyal has taken the matter to the International Center for Settlement of Investment Disputes (ICSID), a World Bank tribunal.
The Blue Amber Resort project, a highly anticipated development, was poised to be a game-changer in the tourism industry in Tanzania. However, the termination of the title deed has cast a dark cloud over the project. Audited reports presented at the Zanzibar Investment Promotions Authority (ZIPA) revealed that a total of $55 million had already been invested in the project before the termination.
The roots of the dispute can be traced back to early 2022 when the Revolutionary Government of Zanzibar terminated a land lease held by Pennyroyal Limited in Matemwe. The termination was based on the claim that a portion of the land, approximately 20 hectares out of the total 411 hectares, was owned by a third party, effectively rendering the lease invalid.
This sudden turn of events has left both investors and the general public puzzled and disappointed. The Blue Amber Resort project was touted as a transformative development, set to boost the economy of Zanzibar by attracting high-end tourists and creating job opportunities for the local population. The termination of the lease and subsequent revocation of the title deed has put a halt to these dreams and aspirations.
In a letter dated July 25, 2022, the Zanzibar Investment Promotion Authority (ZIPA) informed Pennyroyal Limited that it would not renew the construction permit following the termination of the leasehold by the Ministry of Lands. This further compounded the challenges faced by Pennyroyal in developing the Blue Amber Resort.
As the legal battle unfolds, there are concerns about the broader implications for Tanzania’s reputation as an investment-friendly destination. The country has been making efforts to attract foreign direct investment and promote economic growth. This case could potentially send a negative message to the international community regarding Tanzania’s commitment to honoring its investment agreements.
On July 25, 2022, Pennyroyal received a letter from the Zanzibar Investment Promotion Authority (ZIPA) stating that their construction permit would not be renewed due to the termination of the land lease by the Ministry of Lands. This sudden turn of events has cast uncertainty over the future of the Blue Amber Resort project, which had been making steady progress towards its initial phase of unit delivery scheduled for December 2022.
In response to these developments, Pennyroyal owner Mr Brian Thomson announced their intent to file for arbitration under the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the ICSID Convention). Despite sending multiple letters to various government bodies seeking resolution, they have yet to receive a response.
Tanzania’s Attorney General Dr Eliezer Feleshi confirmed awareness of the claims and expressed plans to meet with the developer; however, it remains unclear whether this meeting ever took place. The situation is currently unresolved, leaving Pennyroyal and their Blue Amber Resort project in limbo.
But Why Tanzania and Not Zanzibar?
So, why exactly has the developer decided to file a lawsuit against the United Republic of Tanzania instead of the Revolutionary Government of Zanzibar, who terminated the land lease?
In accordance with both international and local laws, Zanzibar is considered a part of the United Republic of Tanzania, where the investment is located.
As a result, any actions taken by the Revolutionary Government of Zanzibar regarding British investments fall under the jurisdiction of the 1994 agreement. Consequently, it is the responsibility of the United Republic of Tanzania Government (which encompasses Zanzibar) to be held accountable for such decisions.
Tanzania and Britain bilateral treaty
In January 7, 1994, the governments of Tanzania and the United Kingdom of Great Britain and Northern Ireland signed a bilateral treaty to promote and protect investments. This agreement, which took effect in August 1996, plays a crucial role in safeguarding British investments in Tanzania and Tanzanian investments in the United Kingdom.
The purpose of this treaty is to encourage and mutually protect these investments as it recognizes that fostering such initiatives will generate economic growth and prosperity for both nations.
Under this agreement, investments made by nationals or companies from either country cannot be nationalized, expropriated, or subjected to any measures equivalent to nationalization or expropriation in the territory of the other country. The only exception is if there is a public purpose related to the internal needs of the country. In such cases, compensation must be provided promptly, adequately, and effectively on a non-discriminatory basis.