Heritage Vs Uganda oil case starts in UK

Friday, 2nd September, 2011

The hearing of a case in which Heritage Oil sued Uganda over an oil tax amounting to $404m (about sh1.1 trillion) has started in London.

Officials from Uganda's justice ministry told MPs on the public accounts committee on Wednesday that the Ugandan legal team would be led by the attorney general Peter Nyombi.

The team left early this week for the UK, where the arbitration hearings will be held.

Although the officials did not name the members on the legal team, New Vision learnt that Ahmed Sadej El Kosheri, a senior partner in Egypt-based firm Kosheri, Rashed and Raid, was part of the team.
Kosheri, according to sources, will act as the Government arbitrator.

While appearing before the legal and parliamentary affairs committee last month, Nyombi informed MPs that the Government had hired an external lawyer at sh11b to defend it.

He explained that the sh11b was for arbitration costs, travel and operation expenses.

He declined to give details of the case.

In May 2011, Heritage initiated arbitration against the Government for the release of, among other things, the $405m held by the Uganda Revenue Authority (URA) following the sale of its interests in oil Blocks 1 and 3A in Uganda in July, 2010. The stake was acquired by UK-based Tullow Oil at $1.45b last year.

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

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

A month later, Heritage sued the Government in London, saying the sale of its assets in Uganda was not subject to a capital gains tax.

It based its argument on ‘comprehensive advice’ from 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 and New York-based firm Curtis.

By Mary Karugaba: The New Vision Newspaper