The International Centre for Settlement of Investment Disputes (ICSID), which is part of the World Bank, has now closed the arbitration proceedings, with a tribunal unanimously finding that the government of Tanzania in 2018 breached the UK-Tanzania Bilateral Investment Treaty. The result of these proceedings is that the Tanzanian Government will need to pay more than $109m in compensation to a group of companies relating to the Retention Licence for the pre-development stage mineral project.
Case Background
In this case, the claimants are Nachingwea UK Limited and Ntaka Nickel Holdings Limited, both incorporated in the UK and Nachingwea Nickel Limited. The majority shareholder of these companies is ASX-listed Australian company Indiana Resources Limited.
In 2015 Tanzania issued a retention licence for the Ntaka Hill project. The licence has been valid for five years, but in 2017 the Mining Act was abolished, and the retention licence classification was removed with no replacement classification issued.
In 2018, Tanzania published the Mining (Mineral Rights) Regulations 2018, which clarified that Retention Licences no longer existed and that the underlying rights over all areas under those licences, including the Retention Licence held for the Project, reverted to the Government of Tanzania.
Between January 2018 and December 2019, Indiana Resources Limited actively engaged with the Tanzanian government to develop a suitable tenure mechanism for the Project Licence to be reinstated. The government reassured the company that its historical investment would be recognised and its rights would be respected and protected. However, in December 2019, the Mining Commission of Tanzania announced a public invitation to tender for the joint development areas previously covered by the Ntaka Hill retention licence.
This invitation was not issued to Indiana Resources Limited or its joint venture partners. The initial invitation also stated that the successful bidder had to compensate the previous retention license holder for its exploration costs, but this requirement was later removed.
The Tribunal Result
On 14 July, the ICSID tribunal ruled that the Tanzanian government breached the UK-Tanzania Bilateral Investment Treaty when it seized the Ntaka Hill Project. According to a statement published on Indiana Resources’ website, the ICSID arbitration tribunal unanimously ordered Tanzania to pay the claimants US$76,706,461 in damages and additional losses, as well as compound interest at the rate of 2% above the USD Prime rate on the amount awarded from 10 January 2018 to the date of payment. This amounts to more than US$109.5 million in damages – nearly 100% of the amount claimed – plus accrued interest at the date of the Tribunal’s Award, and interest continues to accrue until payment.
