Tanzania Seeks Appeal in $109.5 Million Payment Order

Tanzania seeks appeal in $109.5 million payment order by the International Centre for Settlement of Investment Disputes (ICSID), which ordered the government to pay Australian firm Indiana Resources Limited (IDA) a sum of $109.5 million. The Attorney General of Tanzania, Eliezer Feleshi, confirmed the country’s decision to appeal, stating that they are “proceeding with appeal and other communication processes.”
This development comes after shares in IDA saw a rise when the company confirmed that it had won $109 million from Tanzania as part of an international civil settlement. The dispute stems from the seizure of the Ntaka Hill Nickel Project in 2018, during the tenure of late President John Magufuli.
The Tribunal, which operates under the International Centre for Settlement of Investment Disputes, found on July 14th that Tanzania had violated the UK-Tanzania Bilateral Investment Treaty by seizing the Ntaka Hill mine. The mine was owned by UK-registered Ntaka Nickel Holdings, Nachingwea UK, and Tanzania-registered Nachingwea Nickel, who acted as claimants in the case.
Indiana Resources, as a 62.4 percent majority shareholder of the claimants, was responsible for handling the arbitration process. Executive Chairman of Indiana Resources, Bronwyn Barnes, emphasised that the awarded sum of $109.5 million reflects the substantial investment lost by shareholders due to Tanzania’s unlawful expropriation of the Ntaka Hill mine.
Tanzania’s decision to appeal the ruling signifies its disagreement with the compensation ordered by the tribunal. The government likely believes that the amount awarded may not be justified given the circumstances surrounding the expropriation. By appealing the ruling, Tanzania aims to challenge the arbitration decision and potentially reduce the financial burden imposed by the compensation.
It is important to note that investment disputes and arbitration cases have become increasingly common in the international sphere. As countries seek to attract foreign investment, the protection of investors’ rights and assets is crucial. Bilateral investment treaties play a significant role in providing a framework for resolving disputes between governments and foreign investors.
The ICSID Convention, ratified by 158 Member States of the World Bank, including Tanzania, holds significant importance in the realm of international investment law. This ratification means that any award issued by an ICSID tribunal is enforceable in any of the 158 member states as if it were a judgement of their own courts. This provides a strong framework for protecting the rights of investors and ensuring the enforcement of arbitral awards.

EXCLUSIVE: Tanzania is seeking an appeal in relation to a $109.5 million payment order issued by the International Centre for Settlement of Investment Disputes.
This order requires Tanzanian government to pay the Australian firm Indiana Resources Limited the aforementioned sum. pic.twitter.com/HOQSa8XBoJ
— Ericson Mangoli (@ericsonmangoli) July 20, 2023

Recent events in Tanzania have shed light on the significance of the ICSID Convention. In a high-profile case, Tanzania was ordered to pay $109.5 million to Indiana-based investors, stemming from a mining dispute. The award also included compound interest and required the country to cover the ICSID’s legal costs. In addition, Tanzania will have to pay Litigation Capital Management Limited, a UK-based international law professional, an additional $15 million. This signifies the financial consequences that can arise from non-compliance with international investment obligations.
However, the Tanzanian government, under the leadership of President Samia Suluhu Hassan, has been taking steps to create a more investor-friendly atmosphere in the country. Since assuming office in March 2021, President Hassan has been actively engaging with global leaders, including Vice President Kamala Harris, former President of the World Bank Group David Malpass, and managing director for the International Monetary Fund Kristalina Georgieva. These meetings and discussions demonstrate President Hassan’s commitment to fostering partnerships and attracting foreign investment.
President Hassan’s efforts have not gone unnoticed. She was awarded the Africa Road Builders–Babacar Ndiaye Trophy last year, an annual prize sponsored by the African Development Bank that recognizes individuals who have made significant contributions to the development of transport infrastructure in Africa. This recognition reflects President Hassan’s dedication to enhancing infrastructure and promoting economic growth in Tanzania.
The ‘economic war’ that is costing Tanzania
In recent years, Tanzania has found itself embroiled in an ‘economic war’ that is costing the country dearly. The conflict revolves around the mining sector, an industry that has long been an important contributor to Tanzania’s economy. However, recent changes to legislation and government actions have created uncertainty and distrust within the industry, leading to a decline in investment and economic growth.
It all began in July 2017 when former President Magufuli’s administration introduced amendments to the Mining Act 2010. These changes had far-reaching consequences, including the abolition of the Retention Licence classification without any suitable replacement. This move effectively took away the rights of companies holding Retention Licences and transferred them to the government.
Then, in January 2018, the government published the Mining (Mineral Rights) Regulations 2018, which cancelled all Retention Licences issued prior to that date. This decision rendered these licences null and void, leaving companies in a state of uncertainty and financial loss.
One company that has been significantly affected by these changes is the International Development Association (IDA). IDA held a Retention Licence for a mining project in Tanzania, but this licence was also revoked in January 2018. Since then, the company has been actively engaged with the Tanzanian Minister for Energy and Minerals and the Mining Commission in an effort to find a resolution.
In May 2018, IDA submitted an application to the government for a Prospecting Licence, as recommended by government officials. This was followed by numerous visits to Tanzania and meetings with senior government officials to outline a four-year work program and proposed budget for the project. However, despite these efforts, IDA and other companies in similar situations have yet to see their licence reinstated.
The repercussions of this ‘economic war’ have been severe. The mining industry, once a key driver of Tanzania’s economic growth, has seen a decline in investment and output. Many international mining companies have chosen to withdraw from the country altogether, fearing further uncertainty and government intervention. This loss of investment and expertise has had a detrimental effect on job creation, local development, and revenue generation for the government.
The impact is not limited to the mining sector alone. The uncertainty and instability created by these actions have sent shockwaves throughout the entire Tanzanian economy. Foreign direct investment has declined, as investors shy away from a country that does not provide a stable and predictable business environment. This lack of investment stifles economic growth and hampers Tanzania’s ability to diversify its economy and reduce dependency on natural resources.
Moreover, the ‘economic war’ has damaged Tanzania’s reputation on the international stage. The country was once considered a promising investment destination in Africa, attracting companies from around the world. However, the recent actions of the government have tarnished this reputation, making it harder for Tanzania to attract new investments and build meaningful relationships with foreign partners.
At a meeting on 9 December 2019, important discussions were held between the Minister for Energy and Minerals, the Mining Commission, and other high-ranking government officials. The Chairman of Indiana attended this meeting with the hope of receiving reassurance that the company’s historic investment would be respected. The government officials also disclosed that they would soon provide guidance on how to establish an appropriate tenure for the Project.
However, just ten days later, on 19th December 2019, the Mining Commission of Tanzania surprised the Indiana Company by announcing a public invitation to tender for the joint development of areas previously covered by Retention Licences. This move was made on the condition that the successful bidder would compensate the previous Retention License holder for their exploration costs. Surprisingly, the Indiana Company was not directly informed about this public invitation. Instead, it learned about it through an advertisement posted on the Ministry of Energy and Minerals’ website.
The following day, on 20th December 2019, the Mining Commission of Tanzania made an announcement regarding a revised public invitation to tender. This revised invitation removed the condition of compensating the previous retention licence holder for their exploration costs. The Indiana Company argued that this justification clearly indicated that Tanzania had effectively removed the ownership of the Project from Ntaka Nickel Holdings Ltd (UK), Nachingwea Nickel Ltd (UK), and Nachingwea Nickel Ltd (Tanzania). The company firmly believed that Tanzania’s actions in doing so constituted a breach of its obligations to the investors under the UK-Tanzania BIT (the “BIT”) and international law.
The Indiana Company had made significant investments in the Project, and their expectation of respecting their rights and interests was well-founded. However, the sudden change in the tender conditions left them perplexed and concerned. They believed that the company’s investments and efforts should have been respected and protected by the Tanzanian government, as pledged during the meeting with the Minister for Energy and Minerals.
The Indiana Company argued that the removal of compensation for the previous retention licence holder undervalued their contributions and undermined their confidence in the fairness and transparency of the tender process. They stressed that the government’s actions not only violated their rights as investors but also contravened international legal obligations.
The company asserted that Tanzania’s actions had far-reaching implications, not only for the investors involved but also for the reputation and credibility of the country when it came to attracting foreign direct investment. They emphasised that international investors typically consider a country’s track record of honouring agreements and protecting investments before making new commitments. By breaching its obligations under the BIT and international law, Tanzania risked deterring potential investors and damaging its reputation as an investment-friendly destination.
According to the provisions of the BIT, Tanzania was found to be in violation by nationalising or expropriating the investments made by investors without providing prompt, adequate, and effective compensation as stated in Article 5(1) of the BIT. Additionally, Tanzania failed to fulfil its duty of granting fair and equitable treatment to these investments as outlined in Article 2(2) of the BIT.
Furthermore, according to Article 8(3) of the BIT, if no agreement is reached between the investors and Tanzania within six months following the emergence of a dispute, the investors have the right to bring their case before ICSID for resolution.