British developer sues Tanzania at the ICSID over Zanzibar investment

The current state of the villas at the Blue Amber Resort. The units were supposed to be delivered in December 2022

Dar es Salaam. British real estate company Pennyroyal Ltd, the developers of Blue Amber Resort has filed a claim against Tanzania for alleged breaches of bilateral investment treaties that Tanzania entered into with both the United Kingdom and Mauritius, The Citizen has learnt.

According to Steptoe the law firm representing Pennyroyal, the breach concerns the revoking of the title deed on which the Blue Amber Resort was being constructed.

The firm has also confirmed that the case no ARB/23/26 had been filed at the International Center for Settlement of Investment Disputes (ICSID)- which is a world bank tribunal.

Though the real value of the claim has not been revealed, it could well run into hundreds of millions of dollars.

The current state of the hotel building that was under construction when the building permit was cancelled after the title deed was revoked

 By the time of the termination, audited reports that had been presented at the Zanzibar Investment Promotions Authority (ZIPA) showed that some $55 million had been invested by then.

Early in 2022, the Revolutionary Government of Zanzibar (SMZ) through the ministry of lands terminated a land lease held by British property developer Pennyroyal Limited in Matemwe, after it was claimed that an area of 20 hectares out of the 411 hectares inside the project was owned by another third party

The Blue Amber Resort project was under construction with first phase delivery of units initially set for December 2022.

The termination was followed by a letter on July 25, 2022, from the Zanzibar Investment Promotion Authority (ZIPA) informing Pennyroyal Limited that it will not renew its construction permit following the termination of leasehold by the Ministry of Lands.

In an earlier press release, Mr Brian Thomson, owner of Pennyroyal, exclusively confirmed that the company intent to file for arbitration under the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the ICSID Convention).

He said that they were left with no choice but to seek international arbitration.

“We have followed the requisite process, We wrote to the government of the United Republic of Tanzania regarding our intent to file a case following the termination of our land lease, but to date we have not gotten any response,” Mr Thomson said then.

It was further confirmed by Tanzania’s Attorney General Dr Eliezer Feleshi that he was aware of the claims and they were preparing to meet with the developer, however, it was never confirmed whether the meeting ever took place.

Why the United Republic of Tanzania

But why has the developer chosen to sue the United Republic of Tanzania instead of the Revolutionary Government of Zanzibar which terminated the land lease?

According to international and local law, Zanzibar, where the investment is located, is part of the United Republic of Tanzania.

Therefore any acts of the Revolutionary Government Zanzibar in respect of British investments, fall under the purview of the 1994 agreement and makes the United Republic of Tanzania Government (which includes Zanzibar) responsible for such decisions.

Tanzania and Britain bilateral treaty

The governments of Tanzania and the United Kingdom of Great Britain and Northern Ireland on January 7, 1994 in Dar es Salaam, signed a promotion and protection of investments agreement which came into force in August 1996.

It is this agreement that protects British investments in Tanzania and likewise Tanzanian investments in the United Kingdom.

The agreement states that it recognises that the encouragement and reciprocal protection under international agreement of such investments will be conducive to the stimulation of individual business initiative and will increase prosperity in both states.

It also states that investments of nationals or companies of either Contracting Party shall not be nationalised, expropriated or subjected to measures having effect equivalent to nationalisation or expropriation in the territory of the other country except for a public purpose related to the internal needs of the country on a non-discriminatory basis and against prompt, adequate and effective compensation.