Q&A – 15 September 2014

TRA on PSAs and MDAs

I was quite impressed to see that there was a recent statement and adverts by the Tanzania Revenue Authority (“TRA”) in that they wanted all Production Sharing Agreements (PSA) and Mining Development Agreements (MDA) to be reviewed and renegotiated. I thought this was a good idea, only to see the TRA withdraw the advert a few days later. I am of the opinion that the country is not getting a fair value of its share from these agreements. Can TRA unilaterally withdraw such adverts? I am flabbergasted at the lack of patriotism within TRA in deciding not to pursue this. How can I take TRA to task?
PO, Dar

We are unsure what causes you such flabbergastion. TRA is the statutory tax body in the country and neither is it a signatory to the PSA and MDAs, nor will it ever likely be. TRAs job is to administer taxation in the country. PSAs and MDAs are entered into by the government through the Ministry of Energy and Minerals. In the case of PSAs, there is one further signatory that is the Tanzania Petroleum Development Corporation (“TPDC”).

When TRA made such an announcement, it was directly interfering with the role of the Ministry of Energy and Minerals. Surely someone at the Ministerial level or the government must have alerted TRA that they were acting illegally which led to the withdrawal of the adverts. Sadly TRA did not mention specifically why the adverts were being withdrawn, perhaps a soft landing to avoid further embarrassment.

You are flabbergasted about the withdrawal of the adverts. We are sure the oil and gas, and mining community were flabbergasted at the way TRA suddenly and out of the blue decided to make such a statement. Your patriotism can be very costly for the company. We explain to you why below.

Tanzania is signatory to various international agreements and treaties that protect against expropriation and nationalization. In fact there is a domestic law, the Tanzania Investment Act, that covers this explicitly and states in section 22 that (l) Subject to subsection (2) and (3) of this section- (a) no business enterprise shall be nationalised or expropriated by the government, and (b) no person who owns, whether wholly or in part, the capital of any business enterprise shall be compelled by law to cede his interest in the capital to any other person. (2) There shall not be any acquisition, whether wholly or in part of a business enterprise to which this Act applies by the State unless the acquisition is under the due process of law which makes provision for- (a) payment of fair, adequate and prompt compensation, and (b) a right of access to the Court or a right to arbitration for the determination of the investor’s interest or right and the amount of compensation to which he is entitled. (3) Any compensation payable under this section shall be paid promptly and authorisation for its repatriation in convertible currency, where applicable, shall be issued.

Amending PSAs or MDAs unilaterally could amount to expropriation and even an indirect attempt to nationalize such companies. Most, if not all these agreements, have arbitration clauses and attempts by the TRA, or even any other government body, to unilaterally change such agreements becomes an arbitral issue, which would likely be ruled against the government in international arbitration.

In case the government decides to renegotiate with these companies the general principles of contract law apply, that such negotiations be done consensually, and if such companies refuse to renegotiate or amend any terms, which they likely will, then they cannot be forced to enter into any such renegotiations or amendment. Apart from this becoming an arbitral issue, if anything is forced upon such companies, it will create a black hole in Tanzania’s ambition to be a preferred investment destination in Tanzania.

And to answer your question, TRA has all the power to withdraw the advert which we believe was a mature thing to
do. Furthermore, on whether you can do anything to TRA for such withdrawal, the answer is no. You have unlikely any locus to sue TRA for this and your patriotism should be balanced with realism based on the law.

PCCB powers to search

PCCB officials came to conduct a search of our premises. We demanded to know who they were and they refused and forcefully entered. Is this allowed?
RT, Dar

You did not tell us what happened after they entered. We find this very awkward as it is mandatory under the Prevention and Combatting of Corruption Act which states clearly the following in section 11: (1) The Director General shall issue to a member of the Bureau an identity card which shall be prima facie evidence of appointment as a member of the Bureau. (2) Every member of the Bureau, shall on demand, produce his identity card to the person demanding that identity card. (3) Any officer of the Bureau conducting investigations into an offence alleged or suspected to have been committed under this Act or any other law relating to corruption may request any public official for assistance in the reasonable exercise of his powers or the discharge of his duties under this Act.

Section 12 is the search provision which states: (1) The Director-General may, by writing, authorize any officer to search any person, if it is reasonably suspected that such person is in possession of property corruptly or illicitly acquired or to search any premises, vessel, boat, aircraft or other vehicle whatsoever in or upon which there is reasonable cause to believe that any property corruptly or illicitly acquired has been placed, deposited or concealed.

Hence whilst searching the premises is allowed under the law, if the officers who are present are unwilling to show their identification, they cannot be from the PCCB and you likely were dealing with some crooks especially considering that they forced their way in.