Tanzania liable over revoked mining licence

An ICSID tribunal has ordered Tanzania to pay nearly US$110 million to an Australian nickel miner over legislation that revoked its project licence.

In an announcement today on the Australian stock exchange, Perth-based Indiana Resources says it was awarded US$76.7 million in damages and additional losses for unlawful expropriation of a licence held by three of its subsidiaries. 

It says the award is currently worth around US$109.5 million, including interest and US$3.9 million in costs. Indiana executive chairman Bronwyn Barnes says enforcement efforts “will commence now”.

GAR understands that the tribunal chaired by Singaporean arbitrator Cavinder Bull unanimously held that Tanzania must pay sunk costs of the project, adjusted to market value by reflecting an element of profit, plus interest and legal costs in full. The final damages claim was understood to be around US$85 million plus interest. 

The co-arbitrators were Houston-based King & Spalding partner Doak Bishop and Botswanan judge Sanji Monageng. The award, which was issued within six months of the hearing, has yet to be published.

A Lalive team in London and Geneva acted for Indiana’s UK-registered subsidiaries, Ntaka Nickel Holdings and Nachingwea UK, and Tanzanian subsidiary Nachingwea Nickel alongside former colleague Tim Foden, who joined Boies Schiller Flexner last year. Tanzania used government lawyers.

Indiana’s claim was backed by US$4.65 million in funding from London-listed Litigation Capital Management. The mining company says the amount of the award due to LCM is around US$15 million, rising with interest until it has been paid.

Ntaka Nickel and Nachingwea UK manage the Ntaka Hill nickel project in south-eastern Tanzania in a joint venture with Mauritius-based private equity fund Fig Tree Resources.

The three Indiana entities filed the ICSID claim in 2020, two years after Tanzania passed the Mining (Mineral Rights) Regulations. The regulations abolished “retention licences” – a type of licence granted for mineral deposits that could not be immediately developed – and transferred all rights issued under them to the government.

Indiana says that the Mining Commission of Tanzania later announced a public invitation to tender for the joint development of areas previously covered by retention licences before subsequently removing the condition that the previous licence holder be compensated by any successful bidder.

The miner previously said it would seek compensation and damages of around US$95 million.

Following a four-day hearing on jurisdiction and the merits in Washington, DC in January, GAR understands the tribunal accepted the claimants’ positions on jurisdiction and liability in full. It accepted the claimants’ quantum calculation with a minor adjustment and calculated interest due from January 2018 when the state retracted rights issued under the licences.

Indiana’s shares on the ASX exchange ceased trading once the award appeared on the ICSID docket last week. It is understood to be worth several times Indiana’s market capitalisation. 

Marc Veit of Lalive, counsel to the Indiana entities, says: “The tribunal’s decision should give further confidence to other companies involved in the extraction of natural resources, even at the exploration and development stage, in the protection provided by investment treaties. Resource nationalism has a price tag.”

Indiana co-counsel Foden says he is “very pleased with a remarkable result” for Indiana. He calls it a “bittersweet victory” having travelled for hours on dirt roads to see the current condition of the Ntaka Hill nickel project, which has no formally declared new owner. Tanzania has “not put any development into the ground,” he says, and the project may have avoided the poverty and illegal and dangerous mining activity that is currently taking place had Indiana been allowed to move forward.

While counsel declined to comment on the enforcement phase, Bronwyn Barnes reportedly threatened in April to seek attachments over Tanzanian aircraft to force it to pay compensation for the loss of the nickel project. "Tanzania took my asset. I'm quite happy to do the same," she said.

Indiana also refers in its statement to a pending dispute at the Australian Centre for International Commercial Arbitration (ACICA) between Ntaka Nickel’s two shareholders – Nachingwea UK and Mauritius-registered Loricatus Resource Investments, an investment vehicle of Fig Tree.

Indiana said in March that Loricatus had filed for Perth-seated ACICA arbitration over a project acquisition agreement for Ntaka Nickel. Nachingwea UK claims it is entitled to an increased shareholding in Ntaka Nickel after Loricatus allegedly missed a deadline to contribute to cash reserves last year, which Loricatus disputes. 

The Australian miner says that Loricatus has since filed a second ACICA claim, alleging that the call for funds did not comply with the project agreement. The company says Ntaka Nickel will not participate in either arbitration but will comply with any award. An evidentiary hearing is scheduled for December.

Indiana is one of three mining companies to have threatened Tanzania with treaty claims over the same legislative reforms. The other two are also backed by third-party funding – from Australian funder Omni Bridgeway and an affiliate.

Vancouver-based Winshear Gold also launched its ICSID claim in 2020 in which an award is pending. A tribunal chaired by Switzerland’s Gabrielle Kaufmann-Kohler and including US judge Thomas Johnson and Botswanan arbitrator Edward Fashole-Luke held a four-day hearing in Washington, DC, in February. Videos of the hearings in the case, in which Lalive and Boies Schiller are also acting for the investor, have been posted on YouTube.

Montero Mining and Exploration, also based in Vancouver, filed the third claim in 2021 over a retention licence for a rare earth element project.

Achille Ngwanza of Paris boutique Jus Africa is chairing the tribunal in that proceeding. The panel, which includes France’s Eric Teynier of Teynier Pic and Malaysia’s Cecil Abraham, has yet to hold a hearing on the merits. Boies Schiller Flexner is also acting for Montero alongside French firm Jeantet. Tanzania is again not using external counsel in the Winshear and Montero claims.

Nachingwea U.K. Limited (UK), Ntaka Nickel Holdings Limited (UK) and Nachingwea Nickel Limited (Tanzania) v. United Republic of Tanzania (ICSID Case No. ARB/20/38)

• Cavinder Bull (Singapore) (chair) (appointed by co-arbitrators)
• Doak Bishop (US) (appointed by the claimants)
• Sanji Mmasenono Monageng (Botswana) (appointed by Tanzania)

Counsel to the Indiana entities

• Lalive

Partner Marc Veit and associates Robert Denison and Eden Jardine* in London; counsel Augustin Barrier in Geneva

*joined Hogan Lovells in 2023

• Boies Schiller Flexner

Partner Timothy Foden in London

** from 2022 when Foden left Lalive

Counsel to Tanzania

• Office of the Attorney General of Tanzania in Dar Es Salaam

Expert witnesses for the Indiana entities

• Secretariat

Travis Taylor and Abigail Harris in London