International Tax Arbitration and Petroleum Dispute Resolution: A Case Study of Uganda
Abstract:Uganda’s estimated petroleum reserve capacity is currently 6.5 billion barrels, of which no less than 1.4 billion barrels are projected to be recoverable. The blocs in the Albertine Graben in western Uganda were initially jointly licensed to Anglo Canadian, Heritage Oil and the AngloIrish company, Tullow Oil. Heritage sold their stake to Tullow for US$ 1.5 billion.A Production Sharing Agreement between Heritage Oil and Gas and the Uganda Government was the root of a dispute where Government, through its tax organ, the Uganda Revenue Authority issued capital gains tax assessments for Heritage Oil and Gas company that it insisted was not meant to pay. The Government instituted a suit in the Tax Appeals Tribunal to recover unpaid taxes resulting from the transaction. The company on the other side rushed to the High Court. When both the Court and Tribunal ruled in favour of the Government, the Oil Company lodged a case in the International Court of Arbitration, which also ruled in favour of the Government. The dispute is a pointer in the direction of what is the appropriate forum for arbitration in Uganda. The research addresses the effectiveness of international tax arbitration in as far as petroleum tax dispute resolution is concerned, with specific reference to enforcement of arbitral awards. The research finds that there are several international instruments on international tax arbitration and focused on the New York Convention and the United Nations Commission on International Trade Law (UNCITRAL), which Uganda has domesticated. The research found that the major challenges to enforcement of arbitral awards in Uganda are: public policy due to conflict between domestic public policy and international public policy; the doctrine of arbitrability where problems arise when a matter that is arbitrable in one jurisdiction fails the test of arbitrability in Uganda, due to differences in legal frameworks; the scope of the courts’ control of arbitral awards, where court is to determine the validity of an arbitration agreement as a pre-requisite to referring a matter to arbitration; and national and political bias. It is recommended, amongst other things, that the stakeholders should fasten the operationalization of the Petroleum Authority of Uganda and this should work hand in hand with Center for Alternative Dispute Resolution and the Tax Appeals Tribunals to promote arbitration in the settlement of petroleum tax disputes. Further, the Arbitration and Conciliation Act should be amended and specifically provide that any dispute should be referred to arbitration in case of existence of an arbitration clause in a contract or an arbitration agreement. Finally, the laws governing the petroleum upstream, midstream and downstream sector need to be amended to make provision for the settlement of petroleum tax disputes through arbitration.
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