20 September 2017

Tanzania: Ecoenergy Lodges $500m Claim After Govt Revoked Its Land Title

Dar es Salaam — EcoEnergy Group has filed a $500 million arbitration claim against the Tanzanian government over its decision to unilaterally revoke land title for a multi-billion Bagamoyo sugar project.

The case has commenced at the International Centre for Settlement of Investment Disputes (ICSID), the World Bank organ, which is based in Washington D.C.

The Commissioner for Lands informed the Bagamoyo EcoEnergy Limited in November, 2017 that the government had resolved to revoke the title deed for the 20, 400 hactares and instead replaced it with the name of the President of the United Republic of Tanzania.

The unexpected move dealt a major blow to the Swedish company that had for over 10 years worked to develop the project and invested $52 million in a ready-to-go project for local production of sugar, renewable electricity and fuel.

Attorney General and government's chief legal adviser, George Masaju could not be reached by phone yesterday to react on the move. The project was tied under the bilateral investment protection between Tanzania and Sweden, which calls for disputes to be settled by international arbitration.

The revocation was followed by a series of unsuccessful attempts by the company to have dialogue with the government to save the project and pay compensation.

"Despite several invitations from EcoEnergy, GoT (Government of Tanzania) has ignored all offers to meet for a dialogue to save the project. Hence, EcoEnergy has no other option but to seek legal redress though an international arbitral tribunal," states the document filed at ICSID. The company wrote to President John Magufuli on December 5, 2016 to request his intervention after failed efforts to have the Prime Minister, Kassim Majaliwa and minister for Industry, Trade and Investment Charles Mwijage to give a go-ahead and full support to enable the sugar project to start.

The consortium of EcoEnergy Africa AB of Sweden and Uttam Group of India was to inject $100 million towards the Bagamoyo project as own equity.

The remaining fund of $250 million would have been a combination of DFI and commercial bank lending where a commitment was given by African Development Bank (AfDB) to act as a lead financing arranger. They already had a board decision of the AfDB to allocate $100 million towards the project.

AfDB withdrew their financing commitment later due to inaction by the government to respond to their requests of endorsing the Bagamoyo project in combination with information that the government had revoked the land title with the intention of giving it to a domestic investor.

"We are concerned that you have not been fully informed about the actual situation and about our ability and interest to have the Bagamoyo Sugar Project up and running by 2019... Taking governments inaction and recent actions and their consequences into consideration we and our partners have now undesirably been forced to reassess the entire situation," read part of the letter to President Magufuli.

The company has outlined several reasons why it opted for the international arbitration to resolve the dispute. "EcoEnergy has the right to be compensated for the financial harm suffered as the result of GoT's acts and omissions violating the bilateral investment treaty.

"If the government is allowed to continue unchecked, its damaging actions towards private investors will lead to the loss of credibility for Tanzania as a destination for much needed direct investments into agriculture, as well as into other parts of the economy," the company complains in the arbitration dossier.

The integrated sugar project that was to be carried out by the firm would have been one of the largest private agriculture investments in East Africa with an overall investment of about $500 million, including the outgrower programme.

The Bagamoyo project was estimated to create 20, 000 jobs in the processing facility, the estate, logistics, the outgrower programme and through indirect employment.

In 2013, the government of Tanzania issued a certificate of occupancy for 99 years for 20, 400 hactares free of encumbrance for the western portion of the abandoned Razaba ranch four years after an environment and social assessment certificate had been approved.

Then minister for Agriculture Livestock and Fisheries Mwigulu Nchemba sent a letter to Bagamoyo EcoEnergy on behalf of the government stating: "On behalf of the government of Tanzania and myself, we do appreciate your efforts in supporting the mentioned project. I think it is now time to make our outmost to bring the project to its successful implementation." EcoEnergy now says: "The government's act and omission, which have prevented the BEE project from being implemented, violate Tanzanian's obligations under the bilateral investment treaty. The government has failed to ensure fair and equitable treatment, it has taken unreasonable and discriminatory measures against EcoEnergy," read part of the document filed at ICSID.

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