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Q&A – 31 July 2017

Review of agreements by new law

Our company entered into an agreement in the extractive industries with the Government nearly a decade ago. Our company has been diligently complying with each and every term of the agreement only to learn that there is a new law that might open up the agreement for negotiations. What is this new law and how will it affect us? What is the process for such negotiations?
OO, Dar

It is true that there is a new law, the Natural Wealth and Resources Contracts (Review and Renegotiation of Unconscionable Terms) Act, 2017. This new law applies to agreements going forward, and, agreements that have also already been signed. It does have retrospective effect, which brings in the unpredictability that you have mentioned.

This law defines an agreement as any contract relating to extraction, exploitation or acquisition and use of natural wealth and resources. Natural wealth and resources is defined as all materials or substances occurring in nature such as soil, subsoil, gaseous and water resources, and flora, fauna, genetic resources, aquatic resources, micro-organisms, air space, rivers, lakes and maritime space, including the Tanzania’s territorial sea and the continental shelf, living and non-living resources in the Exclusive Economic Zone any other natural wealth and resources as the Minister may by notice in the Gazette prescribe* which can be extracted, exploited or acquired and use for economic gain, whether processed or not.

All future agreements that the Government enters into now must be concluded in good faith and at all times observe the interests of the People of Tanzania.

The Act states that all agreements on natural wealth and resources must be reported in the next National Assembly sitting (within the first six days). If when the report is submitted, the National Assembly finds that the agreement contains unconscionable terms, it may, by resolution, advise the Government to initiate re-negotiation of the agreement with a view to rectifying the terms.

This means that even if a party signs an agreement after this law came into force, the National Assembly can still reopen it, notwithstanding that it was signed after enactment of this law. This Act states that where the National Assembly considers that certain terms of an agreement on natural wealth and resources or the entire agreement on natural wealth and resources made before coming into force of this Act are prejudicial to the interests of the People and the United Republic by reason of unconscionable terms it may, by resolution, advise the Government to initiate re-negotiation of the agreement with a view to rectifying the terms.

An unconscionable term is widely defined as any term in the agreement on natural wealth and resources which is contrary to good conscience and the enforceability of which jeopardises or is like to jeopardise the interests of the People of the United Republic.

You have not stated what kind of agreement you have. If it is a Mine Development Agreement (MDA) or a Production Sharing Agreement (PSA), and notwithstanding that it was signed before this new law came into force, if the National Assembly considers it to have ‘unconscionable terms,’ it may proceed to renegotiate it.

After the National Assembly resolves that there is an unconscionable term in an agreement, the Government must within 30 days serve the other party a notice of intention to renegotiate such unconscionable terms and the notice shall state nature of the unconscionable terms and intention to expunge (remove) the term if renegotiation is not concluded within a specified term. This leaves very little room for renegotiation. The Act provides, unless mutually agreed otherwise, for a maximum of 90 days to negotiate from date of service of the notice after which the unconscionable term is automatically removed, whether negotiations are completed or not. This leaves the agreements in vulnerable states and it is to be seen what the National Assembly will direct in the near future. This new law also puts the MDAs and PSAs stabilisation clauses to test especially considering that the MDAs and PSAs were signed after having been provided for under their respective laws at the time they were signed.

The bottom line for agreements signed before the coming into force of this law will depend on whether or not the National Assembly will consider terms therein as being unconscionable.

Defective affidavit consequence

We made an application at the High Court where the other party raised an objection on the affidavit we filed. It was a very minor omission in that the affidavit did not show the place and date at which it was sworn. Whilst the application was meritorious, the Judge said there was no application before him and did not entertain the matter. What should we do? Is the Judge biased?
JP, Dar

You are undermining the role of an affidavit in pleadings. An affidavit is a declaration of facts that is made voluntarily by the declarant before an officer authorized to administer oaths. The affidavit must be confined to such statements as the declarant is able of his own knowledge to prove but may also contain statements of information and belief with grounds stated thereon.

Apart from the statement declaring the facts, an affidavit also must contain a verification clause, a jurat and signature of the declarant. Without these an affidavit is rendered incurably defective. In your case, the Jurat was defective which is a certification that states when, where and before what authority the affidavit was made. The absence of the date and place at which the affidavit was sworn hence renders it incurably defective and usually entails in your application to be struck out.

Since there was no application before the Court because there of a defective affidavit, the Judge naturally cannot entertain you. On the facts we do not see how the Judge was biased- we suggest you refile the application in Court.

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