Effects of Tanzania sovereign immunity on government contracting

Monday September 16 2019



PAUL KIBUUKA tax@paulkibuuka.com 

There is scanty Tanzanian domestic legislation on the issue of sovereign immunity. Disputants have to cope to with a dearth of case law on the matter. In addition, Tanzania has not signed the United Nations Convention on Jurisdictional Immunities of States and Their Property (2004) which addresses issues of sovereign immunity.

The Executive Agencies Act, Cap 245 (“the EAA”), which permits the creation of an agency capable of suing and being sued in its own name only in contract, does not grant such agencies absolute immunity from suit. Accordingly, in African Banking Corporation Tanzania Limited v Tanzania National Road Agency, Misc Commercial Application No. 235 of 2016, the court found that as the applicant’s application for temporary injunction was not based on contract, the application was not properly filed against the respondent without joining the government and the Attorney General.

However, the EAA includes a prohibition on the execution, attachment or similar process for purposes of enforcing payment by the Government. Moreover, in terms of the Government Proceedings Act, Cap 5 [R.E. 2002] (“the GPA”), suits against the Tanzanian Government or any of its agencies must follow the specific statutory procedures governing the institution of civil proceedings by and against the Government.

The EAA and the GPA do not plainly identify the substantive law that governs a contracts-based claim. However, if a claim is founded simply upon contract, the source of substantive law is the Law of Contract Act, Cap 345.

Under section 66(1) of the Bank of Tanzania Act, 2006, assets of the Government of Tanzania held by or managed by the Bank of Tanzania are immune from enforcement proceedings and no payment in relation to such assets may be collected by means of execution, attachment or any other similar process.

Although the Government has fairly lowered the shield of sovereign immunity by allowing suits in contract, quasi-contract, detinue and tort situations where an aggrieved party would desire relief, in practice, however, this consent to suit does not subject the Government to a limitless spectrum of liability.


Indeed, there may be situations where a claimant obtains a successful court verdict against the Government at too great a cost if the State raises the defence of sovereign immunity in order to prevent enforcement of an award and execution against its assets. Contractors should seek a waiver of sovereign immunity as to suit and execution to avoid such a situation.

Even though an express waiver offers superior protection to the contractor, an arbitration clause is normally viewed as an implicit waiver of the right to sovereign immunity from suit. According to Ernest K. Bankas’ book titled “The State Immunity Controversy in International Law: Private Suits Against Sovereign States in Domestic Courts”, this was clearly espoused in Birch Shipping Corporation v. Embassy of the United Republic of Tanzania IL Reports 82 p.524 [1970)507 F. Supp. 31]. But, under general international law, can the Tanzanian State be assumed to have waived its right to immunity when it accedes to a provision in an arbitration contract stating that the contract be governed by the law of a specific state?

The decision in Birch Shipping Corporation regarding waiver of sovereign immunity could be challenged for not being a part of customary international law, especially in light of section 2(2) of the UK’s extant State Immunity Act, 1978.

Overall, the question of waiver of sovereign immunity is not quite distinct. Therefore, a failure to deal with questions of sovereign immunity could have serious repercussions for government contractors.

By prohibiting natural resource investors from resorting to international dispute resolution mechanisms, Tanzania’s Permanent Sovereignty Act 2017 may engage the country’s obligations under bilateral investment treaties (BITs) that recognize the finality and binding effect of an arbitral award.

The argument is that by signing the BITs, Tanzania consequently waived all its jurisdictional immunities. Also, since states grant these immunities to other states on a reciprocal basis and can withdraw such immunity, what level of protection will Tanzania enjoy in future enforcement proceedings against it and its assets in the courts of foreign countries? Suffice it to say that Tanzania is facing today a wave of investor-state arbitration claims.

Paul Kibuuka (tax@paulkibuuka.com) is a tax and corporate lawyer, tax policy analyst and the chief executive of Isidora & Company.