Negotiate investment disputes out of court, says TLS President

Dar es Salaam.Tanzania can avoid paying heavy penalties for cases filed at the international tribunes by engaging the aggrieved parties out of court instead of waiting to ride the storm, the Tanganyika Law Society (TLS) has advised.

Speaking to The Citizen, TLS President Harold Sungusia said Tanzania stands a chance of negotiating a better settlement out of court in such cases before an award granted by the tribune because such awards are not appealable.

“After the award is granted all that remains is the execution by registering the award locally for execution because there is nothing you can do thereafter,” said Mr Sungusia.

According to him what comes first is usually the notification of any form of expropriation and when that is not dealt with is when the aggrieved parties go for international arbitration.

This comes in the wake of several cases that Tanzania has lost at the International Centre for Settlement of Investment Disputes (ICSID) with the most recent one being against Australian firm, Indiana Resources Limited (IDA) where Tanzania has been ordered to pay $109.5 million for breach of contract on the Ntaka Hill Nickel Project in 2018.

Apart from that, in July another case was filed against the United Republic of Tanzania by British developer Pennyroyal over a revocation of a title deed for the development of the Blue Amber Resort in Matemwe, Zanzibar with sources claiming the company could be demanding hundreds of billions.

According to the TLS supremo, most of the cases that has been filed against Tanzania are usually because of political interference into matters that are purely legal, instead of following properly established channels.

“When an investment dispute like what we have seen in recent years comes up, it is prudent that the clauses of the agreement be adhered to, instead making political utterances that interferes with the legal interpretation of the agreement,” he said.

He says that for Tanzania to increase the chances of avoiding losing cases of arbitration at the International Centre for Settlement of Investment Disputes (ICSID) or any similar institution, it is important to consider a comprehensive investment agreements.

“Ensure that the country has well-drafted and comprehensive investment agreements that provide strong protections for foreign investors. These agreements should include clear provisions on dispute resolution mechanisms, such as arbitration, to provide a fair and neutral forum to resolve investment disputes,” he said.

Mr Sungusia allayed fears that the losses were due to nature of lawyers that Tanzania sends to represent its interests in such cases.

“I have practiced in the public sector and to be sincere we have very good lawyers there, the only problem is that the lawyers who deal with government cases often receive them when they are beyond repair,” he said.

In his view, the only reason why investors opt for to file cases abroad is because of the legal framework of the country that seems to lean towards the government.

“Our laws protect the government whereas government is an equal partner in business, if the law was giving leverage to the investor or businesses then they would feel confident to file cases here,” he said.

He, however, believes that the trajectory that is being taken by the current administration through the 4R (Reconciliation, Resilience, Reforms and rebuilding of the country) could be a turning point with major reforms envisaged in the judicial system.

Mr Sungusia’s sentiments are corroborated by opposition politician Zitto Kabwe who believes Tanzania is not an Island, therefore it has an obligation to play on the international scene.

“Our country is not an island, it is part of the community of nations and it must act in accordance with rules. Politicians with power must know that it comes with responsiblity and avoid interference in contractual matters,” said Mr Kabwe.

In his view, for Tanzania to avoid losing cases of arbitration at the International Centre for Settlement of Investment Disputes (ICSID) or any such organs, it is important to consider establishing a stable and predictable legal framework that provides certainty and confidence to foreign investors.

“This includes maintaining a transparent and consistent legal system, avoiding frequent changes in laws and regulations, and ensuring the rule of law is upheld,” he said.

He added: Negotiate and enter into bilateral investment treaties with key trading partners and countries that are major sources of foreign direct investment (FDI). These treaties typically contain provisions for arbitration and provide additional protections for investors.

He, too, shared the view that there is need for early dispute prevention and resolution with investors because it helps to avoid costly and time-consuming proceedings.

“Tanzania needs to establish mechanisms for early dispute prevention and resolution, such as negotiation, mediation, and conciliation.”