East Africa

Tanzania Pays $30 million to Canadian Company Over Investment Dispute

The Tanzanian government yesterday paid $30 million to Winshear Gold Corp to settle an investment dispute with the Canadian company out of court.

Winshear had filed a suit at the International Centre for Settlement of Investment Disputes (ICSID), seeking close to $100 million in damages from the Tanzanian government following the cancelation of its mining retention licence.

By settling out of court, the Tanzanian government sought to minimise tarnishing the country’s reputation as an investment destination and avoided a waste of time and large sums of money that would be incurred if the case dragged on until its conclusion.

On the other hand, Winshear said in a statement that after deducting it’s own legal costs, it has received a windfall of a net amount of $18.5 million from the $30m paid by the Tanzanian government.

How It Started

Tanzanian President John Magufuli declared an economic war against “imperialistic foreign investors” during his rule (November 2015 to March 2021) and publicly accused them of looting the country’s natural resources.

Under a nationalist fervor, he ordered an overhaul of the country’s mining laws and his government passed drastic retrospective legislation in 2017, which among other things, cancelled mining retention licences.

The revocation of mining licences violated Bilateral Investment Treaties (BITs) that Tanzania signed with several foreign countries, which protect investors from those countries by specifically prohibiting expropriation of their rights and assets, including the mining retention licences

The BITs clearly stipulate that when a dispute occurs, foreign investors can sue Tanzania in international arbitration tribunals like ICSID, whose decisions are final and binding.

After the abrupt cancellation of their mining licences, several foreign investors invoked the BITs and sued Tanzania at ICSID. Tanzania will most likely lose ALL these cases and pay hefty fines and fees.

Prof. Abdulkarim Mruma, one of Magufuli’s trusted lieutenants in the economic war against foreign mining companies, appeared as an expert witness for the government at ICSID and came under brutal cross-examination by Winshear’s lawyers.

The cancellation of mining licences without taking into consideration pre-existing BITs was a costly mistake by Tanzania.

Several similar cases filed by foreign mining companies are still pending at ICSID, which the Tanzania government will probably lose despite spending huge sums of money on legal fees and other expenses.

The best course of action is for the Tanzanian government to cut it’s losses and settle out of court with the claimants to quickly resolve the disputes.

Magufuli’s successor, President Samia Suluhu Hassan, has abandoned her predecessor’s confrontational style and has instead adopted a business-friendly approach to woo foreign investors back to Tanzania.

While Magufuli’s intentions to seek more benefits for Tanzania from its mining wealth may have been good, the execution of this vision was all wrong.

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Lawrence Baraza

Lawrence Baraza is a dynamic journalist currently overseeing content at Metropol TV Digital. With a keen focus on business news and analytics, Lawrence guides the platform in delivering insightful, data-driven content that empowers its audience to make informed decisions. Lawrence’s commitment to quality and his ability to anticipate market trends make him a key figure in the digital media landscape. His work continues to shape the way business news is consumed, making a significant impact in the field.

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