Heritage seeks Uganda tax claim halt

Saturday July 30, 2011

London-listed Heritage Oil has applied to Uganda's Tax Appeals Tribunal to stay the hearing of its tax dispute with government in Kampala to allow the parties to proceed with the impending arbitration in London, Ugandan officials said today.

Heritage lawyers asked the tribunal during a hearing today to stay the proceedings because Heritage has already commenced an arbitration process in London over a similar dispute.

"Heritage lawyers submitted their written application, the government side will respond before the end of the week and the tribunal is likely to make a ruling on the application within a month," a court official who attended the hearing told Dow Jones Newswires.

Today’s hearing was closed to the press.

The dispute involves a $404 million tax claim by Uganda, emanating from Heritage's $1.45 billion sale last year of its stakes in two oil blocks in the country to UK-based Tullow Oil.

Ugandan officials say the tax dispute falls under Ugandan laws and should be decided from within the country.

In March, the Ugandan government signed a memorandum of understanding with Tullow, separating the tax dispute from Tullow's $2.93 billion deals with France's Total and China's CNOOC. However, Tullow was forced to pay $313 million as security for the unpaid tax bill.

In April, Heritage received a claim from the London High Court in which Tullow is seeking to recover the funds.

A month later, Heritage also began action in London against the Ugandan government, saying the sale of its assets in Uganda doesn't attract a capital gains tax based upon "comprehensive advice" from leading tax experts in Uganda, the UK, and the US.

Despite Uganda's objection to international arbitration, the government has constituted its legal team headed by Harriet Lwabi, the solicitor general, in addition to New York-based Curtis.

The government has also appointed as its arbitrator Ahmed Sadej El Kosheri, a senior partner in Egypt-based Kosheri, Rashed and Raid.

News wires