Tanzania, Canadian miner to settle case out of court

Dar es Salaam. The Tanzanian government and Canadian mining company Winshear Gold Corp. have agreed to suspend arbitration proceedings regarding the expropriation of the SMP Gold Project in south-west Tanzania; instead, a conditional settlement agreement has been reached, The Citizen has learnt.

In a statement, the Vancouver-based company said there was no guarantee that the conditional settlement agreement would be concluded in a case where the claimant was originally seeking compensation in excess of Sh250 billion.

Speaking to The Citizen, Tanzania’s Attorney General, Dr Eliezer Felesh, said he was aware of the developments; however, he did not disclose the details or timeliness of the negotiations.

“Yes, I have seen it, and that’s the direction. However, the fate is still governed by negotiated terms confined to parties per ICSID Rules,” said the AG.

Winshear, formerly Helio Resource Corp., early this year completed an evidentiary hearing in its arbitration case at the International Centre for Settlement of Investment Disputes (ICSID) in Washington against the Government of Tanzania to recover its investment in the SMP gold project in Tanzania.

According to Winshear, its SMP Mineral Resource was wholly contained within four ‘Retention Licences’ that were expropriated in 2017.

The arbitration hearing was held in February 2023, and a judgement was expected within six months of the conclusion of the hearings.

The suspension of the arbitration comes a few weeks after Tanganyika Law Society (TLS) President Harold Sungusia advised that Tanzania stands a chance of negotiating a better settlement out of court in investment disputes instead of waiting to ride the storm.

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 was ordered to pay $109.5 million for breach of contract on the Ntaka Hill Nickel Project in 2018.

Background to the Winshear claim

According to the company, in July 2017, Tanzania amended the Mining Act 2010 by abolishing the retention licence classification. The company’s SMP Mineral Resource was wholly contained within four Retention Licences.

It further states that on January 10, 2018, Tanzania published the new Mining (Mineral Rights) Regulations 2018, which cancelled all Retention Licences at which point they ceased to have any legal effect.

Therefore, the rights over all areas under Retention Licences, including the Retention Licences held for the SMP Gold Project, were immediately transferred to the Government of Tanzania.

During the period from January 2018 to December 2019, the company says it actively engaged with the Tanzanian Ministry for Minerals and the Mining Commission in an effort to resolve a suitable tenure mechanism for the Project Licence to be reinstated, but without success.

On December 19, 2019, the Mining Commission of Tanzania announced a public invitation to tender for the joint development of areas covered previously by Retention Licences.

The invitation provided that the successful bidder should compensate the previous Retention Licence holder.

On December 20, 2019, the Mining Commission of Tanzania announced a revised public invitation to tender, which removed the condition that the successful bidder compensate the previous retention licence holder.

Winshear says the measures taken by the Tanzania Mining Commission (TMC) removed the ownership of the project from the claimant, and in doing so, Tanzania breached its obligations to the mining company under the Canada-Tanzania BIT and international law.

Under the bilateral investment treaty, it is Tanzania’s obligation not to nationalise or expropriate Winshear’s investments or subject them to measures having an effect equivalent to nationalisation or expropriation without prompt, adequate, and effective compensation.

Tanzania’s obligation is to accord fair and equitable treatment and full protection and security to the claimant’s investment and not to impair by unreasonable or discriminatory measures the maintenance, use, enjoyment, or disposal of the claimant’s investment under the BIT.

The ICSID convention has been ratified by 158 states, including Tanzania. An award issued by an ICSID tribunal is enforceable in any one of those 158 member states, comparable to any judgement of one of the local courts.