The applicants contended that RW1, Mr. Rubondo, admitted that when an agreement was reached the Ministry would send it to the cabinet before signing.   The applicants submitted that the Minster validly entered into the agreement on the basis of powers conferred under the Petroleum and Energy Production Act 1985 (PEPA). The applicants argued that under S. 2 of the PEPA, the GOU may enter into an agreement with any person in respect of, inter alia, the grant of a licence, etc and any matters incidental to or connected with the foregoing. The applicants argued that S. 2 applied to Article 23.5 of the PSA and granted necessary powers to the Minister to enter into the agreement where an exemption was granted. This was because Article 23.5 was incidental and connected with the foregoing, that is, the granting of a licence. The applicants cited the case of Scottish Widows plc V RCC [2010] STC 2133 where the court emphasised that “…the phrase ‘in connection with’ generally merits a wide interpretation…” it was their submission that “connected with” requires a very wide interpretation, akin to “having to do with” in PEPA, S.2.

The applicants submitted that the fact that there may be specific exemptions in the ITA governed by particular rules does not mean that the GOU cannot grant a tax exemption under another Act.   The applicants argued that though the ITA was enacted after the PEPA, there is nothing in the ITA that could be said to amend or repeal the PEPA. A later law can only implicitly amend an earlier law where two provisions in question cannot co-exist. S. 2 of the PEPA covers a number of possible matters, most of which have nothing to do with tax. Thus the taxing legislation cannot possibly be said to repeal implicitly a provision with wider import. S. 2 of the Act does not grant an exemption from tax, it empowers the Minister to grant such an exemption. It empowers the GOU to agree to refrain from enforcing the ITA in certain circumstances which are “incidental to or connected with” the matters in the PEPA.

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