Dispute resolution in extractive sector

I am a director of a Mauritian company. Our company intends to invest in Tanzania’s extractive sector. Given Tanzania’s legal framework regarding settlement of disputes arising from natural resources, what mechanisms or structured exceptions exist to ensure international arbitration remains a viable option?

DM, Mauritius 

The Tanzanian legal landscape concerning foreign arbitration in the extractive sector has been marked by significant restrictions introduced in 2017, which sought to mandate that disputes related to natural resources be settled by judicial or arbitral forums in Tanzania and in accordance with Tanzanian laws. This approach created a challenging environment for investments, especially considering that foreign investors traditionally rely on neutral international arbitration forums to safeguard their investments against regulatory or contractual risks.

However, recent developments indicate that the Tanzanian government has recognized the necessity of balancing national sovereignty and the need to attract foreign investment, leading to exceptions to the 2017 restrictions. The recent amendments provide that an agreement relating to the extraction of natural resources may provide for a special arrangement relating to proceedings, the seat of arbitration or jurisdiction. However, such an agreement must have been approved by Cabinet. Should this requirement be satisfied, such restrictions should not prejudice the implementation of the agreed arrangement.

In these circumstances, for a prospective investor, the strategy should involve proactive engagement with the government to negotiate clear, enforceable arbitration clauses that explicitly incorporate these permitted exceptions.