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UK Investors struggle to get Shares in Uganda oil sector

Agnes Tumuheire — Wed, 31 Oct 2018 10:27:12 +0000

The businessmen from 11 UK companies, that deal in petrochemical, pipeline, power and renewable industries, met up with senior Ugandan delegates on Monday on a trip organised by the director of the non-profit Energy Industries Council,Mr Terry Willis.

The discussions centered at how the firms can scoop some deals for contractor, supplier or operator businesses.

They also shared information on investment environment, and potential partnership prospects.

The UK Prime Minister’s Trade envoy for Uganda and Rwanda, Lord Dolar Popat, while at the British High Commissioner’s residence yesterday, confirmed that they were to meet President Yoweri Museveni Monday evening.

“I want to see the UK revive and restore its trading relationship with Africa, which not so long ago accounted for 25 per cent of our Gross Domestic Product, but which has lamentably fallen to barely 3 per cent,” Lord Popat said.

“As we (UK) prepare to leave the European Union, we have no choice but to be bold, enterprising, forward-looking and outward-reaching. The oil and gas sectors offer some of the most exciting possibilities for the UK, and my job is to connect British businesses to those possibilities.” He added.

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US Ambassador, Deborah Malac urges Uganda to avoid the ‘oil curse’

Agnes Tumuheire — Thu, 30 Aug 2018 12:43:11 +0000

US Ambassador to Uganda Deborah Malac : COURTESY PHOTO

The US Ambassador to Uganda Deborah Malac has urged the Ugandan government to use proper procedures in the development of its oil and gas sector so as not to fall prey to the problems that other mineral rich countries face.

The ambassador, while Speaking to a delegation on the contract, transparency and accountability in the attractive sector said that the parties involved should be aware that much as oil and gas is a very useful mineral, it can have permanent impact on the people and land and that it is not a shock that 29 of the 51 countries classified by the International Monetary Fund as “resource-rich” are actually low- or lower-middle income countries.

“The industry requires heavy investments of capital, time, and technology. The sheer scale of these efforts to move mountains and reshape the ground beneath our feet takes great resources, and has the potential to generate large revenues. Likewise, the costs of mismanagement, malicious or otherwise, can quickly escalate. These revenues can be a powerful driver for corruption and unrest. Across the world and throughout history, mineral wealth has often served to undermine democracy, create violence, and increase inequality,” She remarked.

She however hailed the “government of Uganda for its past efforts to reform policy and law to make the extractive sector transparent and accountable. I also wish to thank civil society actors—ACODE and others—for the engagements you have had and continue to have with government and private sector to enhance transparency and accountability.”

Read full remarks by the ambassador HERE

The dialogue was organized by the Advocates Coalition for Development and Environment

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Ugandans cautioned to conserve their environment

Isaac Senabulya — Tue, 21 Apr 2015 18:14:54 +0000

The Minister of Water and Environment, Ephraim Kamuntu has cautioned conserve the environment while exploring its oil.

Uganda’s oil exploration areas are found in the Albertine Graben a place with a bio diversity so rich and one that boasts of exquisite flora and fauna

Kamuntu who was speaking at the official opening of the climate Change, oil and Gas Nexus meeting today in Kampala, tasked local Non Governmental Organizations and Government Departments that will be representing Uganda in the climate change conference in Paris to come up with a single binding document that will be used to advocate for climate change issues.

Kamuntu also advised Ugandans to have a drastic shift in their mindset if the nation is to avert the negative effects of Climate Change

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Tullow oil Uganda to appeal against court order to pay Capital gains tax

Gerald Businge — Wed, 16 Jul 2014 18:42:48 +0000

The Uganda Tax Appeals Tribunal on Wednesday delivered the long awaited ruling on the capital gains tax case against Tullow oil Uganda ordering the UK firm to pay $407,095,366 (about one trillion Uganda shillings) to the government of Uganda.

Tullow had challenged a capital gains tax assessment of $472,748,128 by the Uganda Revenue Authority with the oil firm citing provisions in the production sharing agreement signed secretly with the government that allowed tax exemptions to Tullow Uganda.

Tullow Oil drilling in Bulisa

But three judges of the Tax Appeals Tribunal Asa Mugenyi (its Chairman), George Wilson Mugerwa and Pius Bahemuka who have been hearing the case ruled that Tullow should pay the capital gains tax and then minister of Energy and Mineral Development Syda Bbumba did not have powers to grant tax reliefs to the oil company (Heritage then) when signing the PSA agreement.

Tullow today issued a statement saying they will appeal the ruling in the International Arbitration Tribunal so they can avoid paying any more capital gains tax. Following the assessment by URA, Tullow in February 2012 paid $142M as Capital Gains Tax pending this case challenging the $472M assessment.

The URA capital gains assessment followed the completion of the farm down of Tullow Uganda assets in Uganda after the the Irish firm sold 33$% of its stake to each of CNOOC and Total in 2012 for $9.2b.

“Tullow is very concerned by this ruling which ignores a contractual term signed by a Government Minister in Uganda. Tullow is Uganda’s largest foreign investor and a major taxpayer. Over the last 10 years, Tullow has spent $2.8 billion in Uganda and discovered 1.7 billion barrels of oil. This money was spent by Tullow on the understanding that our contracts with the Government, which contained important incentives to invest that were vital at a time when no oil had been discovered in Uganda, would be honoured. We will now carefully consider all our options to robustly challenge this rulin,” Tullow CEO Aidan Heavey said in a statement on Wednesday

Tullow was represented by Mr. Stephen Brandon QC, Mr. Oscar Kambona, Ms. Amanda Hardy, Ms. Reshma Shah, Mr. David Mpanga and Mr. Bruce Musinguzi; while URA was represented by Mr. Ali Ssekatawa, Mr. Peter Mulisa, Mr. Matthew Mugabi, Mr. Martin Muhanji, Ms. Syson Ainebabazi and Mr. Geoffrey Mucurezi.

But with Tullow’s predecessor Heritage Oil having lost a similar $434m case (when it sold to Tullow oil) in the Tax Appeals Tribunal and the International Arbitration Tribunal, it remains to be seen whether the lengthy court battles can save the company from paying the capital gains tax that many Ugandans feel is well deserved.

You can download the full ruling here

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Ruling of Capital Gains Tax case Tullow oil against Uganda Revenue Authority before Tax Appeals Tribunal

Gerald Businge — Wed, 16 Jul 2014 17:03:20 +0000

Download file of full ruling here

THE REPUBLIC OF UGANDA IN THE MATTER OF THE TAX APPEALS TRIBUNAL TAT APPLICATION NO. 4 OF 2011

TULLOW UGANDA LIMITED
TULOW OPERATIONAL PTY LTD ………………………………… APPLICANTS

VERSUS UGANDA REVENUE AUTHORITY ………………………….……..…… RESPONDENT RULING This ruling is in respect of an application brought by the applicants challenging initial assessments of income tax of US$ 472,748,128 by the respondent in respect of a transfer of their interests in Exploration Areas EA1, EA2 and EA3 to CNOOC and Total for the consideration of US$ 2,933,330,400. The said assessments were eventually revised by the respondent to US$ 467,271,971 being capital gains tax. The applicants being aggrieved by the said assessments appealed to the Tribunal. This ruling is brought after the Tribunal has complied with S. 13 of the Tax Appeals Tribunal (TAT) Act. Mr. Martin Feeta, one of the members of the panel listening to the dispute passed away on the 20^th May 2014. At the time of his passing away, all the parties had presented their evidence, closed their cases and made their submissions. Delivery of the ruling was pending. At the time of his passing away the then Tribunal had reached a decision. On the 16^th June 2014, when the matter came up for ruling, the parties were informed that the Tribunal did not have the legally required Coram to deliver a ruling. Counsel for the parties agreed that a new member should be assigned to the panel to replace Mr. Martin Fetaa. It was also agreed that matter be reheard by the record of evidence being availed to a new member under S. 13(5) of the Tax Appeals Tribunal Act without the need of recalling witnesses. Mr. Pius Bahemuka was appointed to replace the deceased. The record of the evidence and the submissions of the parties have been handed to him. Though the Tribunal cannot say that this is a ruling of four members as the Coram is three, it can say that this is a unanimous decision.

SUMMARY OF CASE

The facts agreed upon by both parties are:

The first applicant, Tullow Uganda Limited (hereinafter called “TUL”), is registered under the laws of the Isle of Man and was formerly Energy Africa Uganda Limited (“Energy Africa”). The second applicant, Tullow Uganda Operations Pty Limited (hereinafter called “TUOP”) is registered under the Corporations Act 2001 in Western Australia and was formerly Hardman Africa Pty Ltd (“Hardman”). The applicants are residents for tax purposes in Uganda.
On the 8^th October 2001, both the applicants and the Government of Uganda (“GOU”) executed a Production Sharing Agreement (PSA) under which they were granted exploration, development and production rights in Exploration Area EA2 (the “EA2 PSA”). It was signed by Hon. Syda N. M. Bbumba, Minister of Mineral and Energy Development for and on behalf of the Government, by Mr. Edward John Ellyard (Managing Director) on behalf of Hardman and by Mr. W.A Nel (Chief Operating Officer) on behalf of Energy Africa.
Another PSA, in relation to EA1, was entered into on the 1^st July 2004 (the “EA1 PSA”) between Energy Africa, Heritage Oil and Gas Limited (“Heritage”) and the GOU. The EA1 PSA was signed for and on behalf of the GOU by Hon. Daudi Migereko, Minister of State for Energy, also holding the portfolio of the Minster of Mineral and Energy Development, by Mr. Brian Smith on behalf of Heritage and by Mr. Rhimwaan Gasaut on behalf of Energy Africa.
Another PSA, in relation to EA3A, was entered into on the 8^th September 2004, between Energy Africa, Heritage and the GOU (“the EA3A PSA”). The EA3A PSA was signed for an behalf of the GOU by Hon. Syda N. M. Bbumba, Minster of Mineral and Energy Development, by Mr. Brian Smith on behalf of Heritage and by Mr. Andrew Wyndham on behalf of Energy Africa.
Heritage and Energy Africa agreed to continue with the Joint Operating Agreement (“JOA”) between Heritage and Energy Africa entered into on the 29^th August 2002 for EA3, under which the first applicant’s participating interest was 50%.
Prior to 2009, Tullow Oil Plc, the parent company of both applicants, acquired the Energy Africa Group, which had a subsidiary, which later became TUL. Tullow Oil Plc later acquired the Hardman Group, including Hardman Africa Pty Limited, which later became TUOP. Tullow Oil Plc acquired the relevant subsidiaries’ rights and interests in the PSAs in Uganda.
At this stage the interests in the PSAs were as follows:

a. TUL held 50% of EA1, EA2 and EA3A; b. TUOP held 50% of EA2; and c. 50% of each of EA1 and EA3A was held by Heritage and the interests then held by TUL in EA1 and EA3A are hereinafter referred to as “the Other Original Interests”.

The applicants through their exploration activities discovered hydrocarbons in the respective exploration areas.
On or about the 17^th January 2010, TUL invoked its pre-emptive rights under the JOA for the purchase of 50% participating interests of Heritage in Exploration Areas EA1 and EA3A (the Heritage interests”) at a consideration of US$ 1,450,000,000 (United States Dollars one billion four hundred and fifty million), subject to approval from the GOU.
On about the 26^th January 2010, TUL and Heritage signed a Sale and Purchase Agreement (the “SPA”) under which TUL would acquire Heritage’s 50% participation rights in Exploration Areas EA1 and EA3A.
On the 6^th July 2010, the GOU granted a conditional approval to the transaction between Heritage and TUL.
On the 18^th October 2010, the respondent raised assessment number SA/LTO/2569 of US$ 390,924,460 and assessment number SA/LTO/2570 of US$ 84,999,660 on TUL and TUOP respectively being income tax (Capital Gains Tax).
On the 1^st December 2010, the applicants objected to the assessments.
On the 24^th February 2011, the respondent made an objection decision that adjusted the assessment on the TUL. The assessment No. SA/LTO/2569 of US$ 390,924,460 was amended to US$ 387,748,469, while assessment No. SA/LTO/2570 of US$ 84,999,660 was unaffected, resulting in a total of US$ 472,748,128.
On the 15^th March 2011, the applicant, the GOU and the respondent executed a memorandum of understanding (“MOU”).
On the 25^th March 2011, the applicants filed an application for review before the Tax Appeals Tribunal (TAT) contesting the assessments and the objection decision by the Commissioner of the respondent.
TUL acquired the Heritage Interests pursuant to the SPA and upon fulfilment of conditions in the MOU of 15^th March 2011. Following the acquisition the holdings in the Exploration Areas were:

a. TUL held 50% of EA2 and 100% of EA 1 and EA 3A; and b. TUOP held 50% of EA2.

The applicants disposed of 66.67% of their interests in EAs 1, 2, and 3A to CNOOC and Total at US$ 2,933,330,400 (United States Dollars two billion nine hundred thirty three million three hundred thirty thousand four hundred).
Following the disposal the holdings are:

a. TUL holds 33.33% of the interests under the EA 1, and EA 3A PSAs. b. TUOP holds 33.33% of the interests under the EA2 PSA. c. CNOOC holds 33.33% of each of the interests under the EA1, EA2 and EA3A PSAs; and d. Total holds 33.33% of each of the interests under the EA1, EA2 and EA3A PSAs.

On or about the 22^nd February 2012, the applicants paid US$ 141,824,438 (United States Dollars one hundred forty two million eight hundred twenty four thousand four hundred thirty eight) being 30% of the tax assessed.

ISSUES

The issues agreed upon by both parties are: 1. In respect of EA2 1.1 Whether Article 23.5 of the PSA for area EA2 covers capital gains/income tax arising from gains derived out of disposal of interests in the PSA? 1.2 Whether Article 23.5 of the PSA for EA2 entered into by and between the Government of Uganda acting through the Minister of Energy and Mineral Development is valid/lawful under Uganda Law? 1.3 Whether Article 23.5 is valid/lawful under international law? 1.4 If the answer of either issue 1.2 or 1.3 is in the affirmative, should Article 23.5 be enforced by the TAT, and if yes do the assessments fall to be discharged or not? 1.5 Whether the respondent is estopped by Article 23.5 from raising an assessment in respect of the gains made on the disposal of the applicants’ interest in EA2, and if yes, do the assessments fall to be discharged or not? 1.6 Whether the reference to the respondent being estopped includes references to principles rooted in fairness including legitimate expectation? 2. In respect of the other PSAs What is the gain, and how is that gain computed, on the disposal of the interests in the PSAs (a) purchased by TUL from Heritage; and (b) otherwise? 3. Reinvestment relief 3.1 Whether the applicants are entitled to reinvestment relief under S. 54(1) (c) of the Income Tax Act Cap 340? 3.2 If so what is the quantum of the disposal consideration in respect of which reinvestment relief can apply?

REPRESENTATION OF THE PARTIES see more on pages 1,2,3,4,5,…below or

Download file of full ruling here

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Tullow oil wins Uganda case against Heritage Oil in UK Court

Gerald Businge — Fri, 14 Jun 2013 16:41:59 +0000

News Release

Tullow Oil Wins case against Heritage

14 June 2013 – Tullow Oil plc (Tullow) is pleased to announce that Tullow Uganda Limited, its Ugandan subsidiary, has received judgment in its favour in the proceedings against Heritage Oil and Gas Ltd and Heritage Oil Plc (together ‘Heritage’) in the High Court in London (Case No: 2011 Folio 471).

In 2010, Tullow agreed to acquire Heritage’s Ugandan assets pursuant to a Sale and Purchase Agreement (SPA). The Uganda Revenue Authority (URA) designated Tullow Uganda Limited as agent in relation to this transaction which required Tullow to pay, on Heritage’s behalf, US$313 million to the URA. This sum was the outstanding Capital Gains Tax that the Ugandan Government claimed from Heritage in respect of the transaction. Tullow sought an indemnity from Heritage under the SPA in respect of this US$313 million payment to the URA.

In his judgment, Mr. Justice Burton found in favour of Tullow’s indemnity claim for US$313 million in its entirety and also dismissed Heritage’s counterclaim. A further hearing will be scheduled in due course to address matters arising from the judgment such as the amount of interest Heritage owes Tullow on the US$313 million and Tullow’s submissions in respect of payment of its costs by Heritage.

FOR FURTHER INFORMATION CONTACT:

Tullow Oil plc

(London)
(+44 20 3249 9000)
Chris Perry (Investor Relations)

James Arnold (Investor Relations)

George Cazenove (Media Relations)

Citigate Dewe Rogerson

(London)
(+44 207 638 9571)
Martin Jackson

Jack Rich

Murray Consultants
(Dublin)

(+353 1 498 0300)
Ed Micheau

Joe Heron

Notes to Editors

Tullow Oil plc

Tullow is a leading independent oil & gas, exploration and production group, quoted on the London, Irish and Ghanaian stock exchanges (symbol: TLW) and is a constituent of the FTSE 100 Index. The Group has interests in over 150 exploration and production licences across 25 countries which are managed as three regional business units: West & North Africa, South & East Africa and Europe, South America and Asia.

Follow Tullow on:

Twitter: www.twitter.com/TullowOilplc
You Tube: www.youtube.com/TullowOilplc
Facebook: www.facebook.com/TullowOilplc
LinkedIn: www.linkedin.com/company/Tullow-Oil

Further Notes

What has happened today?

Tullow has won its case against Heritage in the High Court in London.

In his judgement Mr. Justice Burton found in favour of Tullow’s indemnity claim for US$313 million in its entirety and also dismissed Heritage’s counterclaim.

What was the case about?

In 2010, Tullow agreed to acquire Heritage’s Ugandan assets pursuant to a Sale and Purchase Agreement (SPA). The Uganda Revenue Authority (URA) designated Tullow Uganda Limited as agent in relation to the transaction which required Tullow to pay, on Heritage’s behalf, US$313 million to the URA. This sum was the outstanding Capital Gains Tax that the URA claimed from Heritage in respect of the transaction. Tullow sought an indemnity from Heritage under the SPA in respect of this US$313 million payment to the URA.

What happens now?

The next step will involve a further hearing at which Mr Justice Burton will consider certain consequential matters arising from the judgment, such as the amount of interest Heritage owes Tullow on the US$313 million and the allocation of the costs of the proceedings.

When will this further hearing take place?

It is hoped that the further hearing will be fixed as soon as possible. We are not in a position to assess when Mr Justice Burton will have availability to hear the parties on consequential matters.

What happened at the handing-down of the judgment on Friday, then?

The handing-down on Friday did not involve submissions by the parties. Counsel did not attend, the parties were not represented, and Mr Justice Burton merely issued his judgment formally into the public domain.

What will happen in relation to the Escrow Funds?

In July 2010, when Tullow agreed to acquire Heritage’s Ugandan assets, Tullow agreed with Heritage to pay US$283 million into an escrow account. This was intended to cover the outstanding amount of capital gains tax that the Ugandan Revenue Authority sought, at the time, from Heritage. These funds remain in escrow.

During the proceedings, Tullow undertook, if suitable directions could be agreed and provided to the escrow agent, to permit Heritage to satisfy any judgment in part from the amount held in the escrow account.

What did the Judge say about Tullow and its witnesses?

Mr. Justice Burton said: “There were the two witnesses from the Claimant Company, Mr Martin and Mr Inch, together with Mr Kabatsi, Senior Partner of KAA…I listened to Mr Martin cross-examined for 3½ days and Mr Inch for the best part of 3. I have thought long and hard about this, but I must record my conclusion that I found them both impressive and honourable witnesses, doing their best to give their recollections and a true account…I concluded that Mr Martin and Mr Inch were both impressive witnesses.”

Mr. Justice Burton added, “I found Mr Kabatsi a persuasive and impressive witness, not surprisingly given the high office which he had held in Uganda.”

What did Mr. Justice Burton say about the corruption allegations against Tullow referred to in the press?

During the trial, on 20 March 2013, Leading Counsel for Heritage expressly disavowed any allegations of corruption against Tullow. Mr Justice Burton did not find that Tullow had engaged in any corrupt activities. Indeed, he was clearly impressed by the conduct, bearing and testimony of our two witnesses (as indicated above). On the last day of the trial, an article in the Daily Telegraph containing these false allegations was pointed out to Mr Justice Burton and his response was as follows:

“I have to say I was very disturbed to see the Daily Telegraph report…I can’t understand how their libel reader didn’t pick it up and stop it. There was absolutely no question of it being true or indeed, as far as I am concerned, privileged. It seems to me to go way outside anything that was said in this courtroom and anyone here from the Daily Telegraph should be ashamed of themselves for allowing it to be published. I trust that if there are any journalists here today they will take a great deal more care.”

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London Court Ruling Tullow Uganda Vs Heritage Oil and Gas case

Gerald Businge — Fri, 14 Jun 2013 16:35:29 +0000

This is the gull ruling of the case in which Heritage Oil had sued Tullow Oil over the capital gains tax dispute after Tullow acquired Heritage oil Uganda assets.

England and Wales High Court (Commercial Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> Tullow Uganda Ltd v Heritage Oil and Gas Ltd & Anor [2013] EWHC 1656 (Comm) (14 June 2013) URL: http://www.bailii.org/ew/cases/EWHC/Comm/2013/1656.html Cite as: [2013] EWHC 1656 (Comm)

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		Neutral Citation Number: [2013] EWHC 1656 (Comm)
		Case No: 2011 Folio 471

IN THE HIGH COURT OF JUSTICE
QUEEN’S BENCH DIVISION
COMMERCIAL COURT

		Royal Courts of Justice Strand, London, WC2A 2LL
		14/06/2013

B e f o r e :

MR JUSTICE BURTON
____________________

Between:

	Tullow Uganda Ltd	Claimant
	– and –
	(1) Heritage Oil and Gas Ltd (2) Heritage Oil Plc	Defendants

____________________

Mr David Wolfson QC and Mr Richard Mott (instructed by Ashurst LLP) for the Claimant
Mr Khawar Qureshi QC, Mr Jonathan Brettler and Mr Alexander Cook (instructed by McCarthy Tétrault) for the Defendants

Hearing dates: 12, 13, 14, 18, 19, 20, 21, 25, 26, 27, 28 March and 26 April 2013
____________________

HTML VERSION OF JUDGMENT
____________________

Mr Justice Burton :

Prior to January 2010 the Claimant, Tullow Uganda Ltd, and the First Defendant (whom I shall call the Defendant), Heritage Oil and Gas Ltd, each held a 50% interest in the licence of certain petroleum exploration areas in Uganda, known as Blocks 1 and 3A; in addition the Claimant held 100% of the interest in Block 2. These were very significant oil fields in Uganda, where oil was only relatively recently discovered, and their development was of great significance to the Government of Uganda (“GOU”). The Claimant’s parent company and the Second Defendant, the Defendant’s parent company, are both substantial FTSE companies. Both companies are involved in the business of oil and gas explorations. The Claimant wished to extend its commitment to Uganda and the Defendant to realise its investment in Uganda and move on.

It was a term of the Joint Operating Agreement (“JOA”) between them that in the event of the Defendant wishing to dispose of its 50% interest the Claimant had a right of pre-emption, and when the Defendant entered into first a Letter of Intent in November and then a Sale and Purchase Agreement in December 2009 with a third party, Eni S.p.A., the Claimant exercised its right of pre-emption, with the result that the Claimant and Defendant entered (on the same terms) into a Sale and Purchase Agreement (“the SPA”) dated 26 January 2010, whereby conditional (by Article 2) upon various matters, in particular the consent of the GOU, the Defendant agreed to sell, and the Claimant to purchase such 50% interest. The condition of the GOU’s consent was obviously crucial, and by Article 2.3 each party agreed to use best endeavours to procure it. The consideration was a Base Purchase Price of $1.35 billion, plus an Adjustment Amount (Article 3.3(a)) to be determined, and by Article 3.1(b) a Contingent Amount of $150 million (or in certain circumstances a lesser amount) conditional as there set out. This amounted to a sum which the Claimant asserts, and the GOU subsequently calculated, to amount to a profit to the Defendant of some $1.3 billion.

Provision was made by the SPA for the incidence of taxes. By Article 7.1 all “Transfer Taxes“, defined as “stamp duty payable under the laws of the Republic of Uganda” were to be borne by the Claimant as purchaser. “Non-Transfer Taxes“, meaning “any Taxes other than Transfer Taxes“, were to be the responsibility of the Defendant as Seller. This dispute arises out of the indemnity sought by the Claimant in respect of the payment by it on 7 April 2011 to the GOU of US$313,477,500, claimed by the GOU in respect of Non-Transfer Taxes, thus made the responsibility of the Defendant.

Articles 7.2 and 7.3 read as follows, the “Indemnifying Party” being the Defendant and the “Indemnified Party” being the Claimant:

“7.2 Any Non-Transfer Taxes arising in respect of the Transaction, including any capital gains tax, shall be borne by the Seller. The Seller shall be solely responsible for the determination of, timely filing for, and prompt payment of, any such Non-Transfer Taxes imposed upon, or attributable to, the Seller or any of its Affiliates. In the event that any Non-Transfer Tax is charged at any time to the Buyer . . . in connection with the Transaction, the Seller shall in each case pay to the Buyer an amount equal to such Tax.

7.3 The Indemnifying Party shall pay to the Indemnified Party any amount claimed under the indemnities in Articles 7.1 and 7.2 on or before the date that is the latest of (1) 10 (ten) Business Days after demand is made therefor by the Indemnified Party, (2) 10 (ten) Business Days prior to the latest date on which the Tax in question can be paid to the relevant Tax Authority in order to avoid a liability to interest or penalties accruing and, (3) in circumstances where the Tax in question is not payable in advance of the date on which the amount of Tax is finally and conclusively determined, within 15 (fifteen) Business Days of such date. For this purpose, an amount of Tax shall be deemed to be finally determined when (i) the Indemnified Party makes a binding agreement with the Indemnifying Party as to the amount payable in respect of such Tax under the indemnities in Articles 7.1 and 7.2, as appropriate, (ii) the Indemnified Party makes a binding agreement with the relevant Tax Authority in respect of the amount of such Tax, or (iii) a decision of a court or tribunal of competent jurisdiction is given or any other binding agreement or determination is made in respect of the amount of such Tax from which either no appeal lies or in respect of which no appeal is made within the prescribed time limit. For the avoidance of doubt, this Article 7.3 is subject to the following provisions of this Article 7.“

By Article 3.2 of the SPA, the Base Purchase Price was to be paid into an escrow account on the third business day prior to the Closing Date. The Closing Date was in the event 26 July 2010. By an Agreement of that date (“the Supplemental Agreement”) the parties set out as follows, Recital A having referred to the SPA:

“(B) On 6 July, the Minister, Ministry of Energy and Mineral Development (the “Minister”) issued Assignment Approvals to the Seller that were conditional upon the Seller paying all taxes accruing from the Transfer as shall be assessed by the Commissioner, Uganda Revenue Authority (the “Conditional Assignment Approvals”).

(C) On 6 July the Commissioner, Uganda Revenue Authority, delivered to the Seller an Income Tax Assessment assessing taxes in relation to the Transfer in the amount of $404,925,000 (the “Assessment”). The Seller disputes with the Government and the Uganda Revenue Authority (the “URA”) that any tax is payable on or in relation to the Transfer, that either the Government or the URA has the right to issue the Assessment or any other assessment of tax levied on or in relation to the Transfer and the content of the Assessment (the “Dispute”).

(D) On 16 July the Permanent Secretary, Ministry of Energy and Mineral Development wrote to . . . McCarthy Tetrault [the Defendant’s solicitors] and confirmed that upon the Seller depositing with the URA an amount equal to 30% of the amount of tax stated in the Assessment and providing a bank guarantee acceptable to the Government to secure the remaining 70% of the amount of tax, the Government will be satisfied that the conditions set out in the Conditional Assignment Approvals are met.

(E) In order to facilitate the satisfaction of the condition set out in the Conditional Assignment Approvals and the procurement of the Assignment Approvals on an unconditional basis such that the parties are able to proceed to Closing, the parties have agreed to enter into this . . . Agreement in relation to certain matters that are supplemental to or which amend the Sale and Purchase Agreement.“

After these Recitals, there was provision, so far as the consideration was concerned, by Article 3.1(c) and Article 4.2, for the Contingent Amount to be settled in the sum of $100 million, and for the following payments:

(i) $1,045,075,000 to be made direct to the Defendant:

and, as to the balance of the figure now agreed as $1.45 billion,

(ii) $121,477,500, being the 30% of the Income Tax Assessment referred to in Recital (C), to be made by the Claimant, on the Defendant’s behalf, to a GOU nominated bank account:

(iii) $283,447,500 into an escrow account established with Standard Chartered Bank in London, pursuant to the terms of an Escrow Agreement dated 23 July 2010.

Although the letter dated 16 July 2010 referred to in Recital (D) of the Supplemental Agreement was indeed written to the Defendant’s solicitors by the Permanent Secretary, it soon became clear that the payment of the 70% of the tax into an escrow account in London was not regarded by the GOU as a satisfactory compliance with the provision for an acceptable bank guarantee and on 3 August 2010 the Minister of Energy and Mineral Development, Mr Onek, wrote to both the Claimant and Defendant stating that the conditions stipulated for Government consent had not been fulfilled, and therefore the transaction was of no effect.

A tax assessment had been issued on the Defendant by the Uganda Revenue Authority (“URA”) dated 9 April 2010, assessing the tax payable on the Defendant’s gain by reference to the Base Purchase Price of $1.35 billion at $404,925,000. The Defendant responded, by letter dated 13 April 2010, asking for the withdrawal of such assessment because it was premature “to demand payment of tax in respect of the Proposed Sale when the sale may not be completed and at a time when [the Defendant] has yet to receive, and has no basis for receiving, any sale proceeds“. The URA withdrew the assessment by letter dated 22 April 2010 “without prejudice” to its reissue, and such reissue occurred by Notice dated 6 July 2010, under letter signed by Mrs Allen Kagina as Commissioner General, the same day as the issue of Minister Onek’s letter of conditional consent. This is the assessment to which reference is expressly made in Recital (C) of the Supplemental Agreement above set out. As provided by the Supplemental Agreement, 30% of the assessment was paid over to the URA, by the Claimant on the Defendant’s behalf out of the purchase price, and the balance of 70% of the sum assessed was paid into the escrow account. This Notice of 6 July 2010 is referred to as “the First Assessment Notice”. The Defendant lodged an objection to the First Assessment Notice under s 99(1) of the Income Tax Act (“ITA”) on 18 August 2010, and on 12 November 2010 Mrs Kagina as Commissioner General issued an “Objection Decision“, rejecting the Defendant’s objection to the First Assessment Notice.

A “Second Assessment Notice”, in respect of tax assessed on the $100 million paid additionally to the Base Purchase Price by way of the agreed Contingent Amount, was issued against the Defendant on 19 August 2010 in the sum of $30 million. The Defendant lodged its objection to the Second Assessment Notice on 1 October 2010, and an Objection Decision from the URA rejecting the Defendant’s objection was delivered on 1 December 2010.

The Defendant has taken two steps to contest these assessments. First by way of appeal in Uganda to the Tax Appeals Tribunal against both Notices, which appeals were dismissed respectively on 23 November and 7 December 2011 after a hearing; the Defendant has lodged appeals to the Ugandan High Court against these decisions, which appeals have not yet been heard. The second step was by way of challenge to the GOU by the Defendant in an Uncitral Arbitration arising out of the Production Sharing Agreements of 2004 to which the Defendant and the GOU were parties, containing an arbitration clause. Although I have not seen those arbitration pleadings, it was common ground before me that a jurisdictional point was taken by the GOU that the Arbitrators had no jurisdiction to resolve the issue relating to the liability of the Defendant for tax pursuant to the assessments, and that by a decision issued during the hearing before me the Arbitrators resolved that jurisdictional point in favour of the GOU, so that, although that arbitration continues in respect of other matters, there can and will be no challenge to the tax liability of the Defendant otherwise than in its appeal to the Uganda High Court.

The claim in this action arises by reference to the indemnity claim by the Claimant, arising out of the following steps taken against it by the GOU:

(i) Service upon it of a notice on 27 July 2010 under s108 of the ITA (“the First Agency Notice”). This arose by reference to the following section of the ITA:

“108. Recovery from Agent of Non-Resident.

(1) The Commissioner may, by notice in writing, require any person who is in possession of an asset, including money, belonging to a non-resident taxpayer to pay tax on behalf of the non-resident, up to the market value of the asset but not exceeding the amount of tax due.

(2) The captain of any aircraft or ship owned or chartered by a nonresident person is deemed to be in possession of the aircraft or ship for the purposes of this section.

(3) The tax payable in respect of an amount included in the gross income of a non-resident partner under section 67 is assessable in the name of the partnership or of any resident partner of the partnership and may be recovered out of the assets of the partnership or from the resident partner personally.

(4) The tax payable in respect of an amount included in the gross income of a non-resident beneficiary as a result of the operation of section 72 or 73 is assessable in the name of the trustee and may be recovered out of the assets of the trust or from the trustee personally.

(5) A person making a payment pursuant to a notice under subsection (1), (3) or (4) is deemed to have been acting under the authority of the taxpayer and of all other persons concerned and is indemnified in respect of the payment against all proceedings, civil or criminal, and all processes, judicial or extrajudicial, notwithstanding any provisions to the contrary in any written law, contract, or agreement.

(6) An amount due under this section is treated for the purposes of the tax as if it were tax due.“

The First Agency Notice, addressed to the Claimant, stating that it was copied to the Defendant, signed by Mrs Kagina, attached a copy of s108 and read in material part as follows:

“RE: APPOINTMENT AS COLLECTION AGENT FOR HERITAGE OIL & GAS LIMITED

In exercise of the powers conferred upon me by s108(1) of the [ITA], I hereby require you to pay to [URA] the sum of USD 283,477,500 . . . being tax payable by Heritage Oil & Gas Limited registered in Mauritius from any monies which may, at any time from the date of service of this notice be held by you for, or due by you to the said person; including but not limited to, pension, salary, wages or any other remuneration.

Payment Instructions:

Period: Payment should be effected immediately ON THE DATE OF RECEIPT of this notice

Payee: [URA]

. . .

Amount: Not exceeding USD 283,477,500 . . .

Form of payment: Bank Draft/Transfer

On behalf of: Heritage Oil & Gas Limited

Precedence: Before paying any other party including the account holder.

Note the following:

a) You should, on the date of receipt of this notice, immediately remit USD 283,477,500 . . .

b) Where you comply with this notice and have effected payment of the FULL amount as required, this Agency Notice is automatically lifted.“

(ii) “The Second Agency Notice” was issued against the Claimant on 2 December 2010, under s108 (above), but also pursuant to s106 of the ITA, which reads as follows:

“106. Recovery of Tax from Person Owing Money to the Taxpayer

(1) Where a taxpayer fails to pay income tax on the date on which it becomes due and payable, and the tax payable is not the subject of a dispute the Commissioner may, by notice in writing, require any person –

(a) owing or who may owe money to the taxpayer;

(b) holding or who may subsequently hold money for, or on account of, the taxpayer;

(c) holding or who may subsequently hold money on account of some other person for payment to the taxpayer; or

(d) having authority from some other person to pay money to the taxpayer,

to pay the money to the Commissioner on the date set out in the notice, up to the amount of tax due.

(2) The date specified in the notice under subsection (1) must not be a date before the money becomes due to the taxpayer or is held on behalf of the taxpayer.

(3) At the same time that notice is served under subsection (1), the Commissioner shall also serve a copy of the notice on the taxpayer.

(4) Where a person served with a notice under subsection (1) is unable to comply with the notice by reason of lack of moneys owing to, or held for the taxpayer, the person shall, as soon as is practicable and in any event before the payment date specified in the notice, notify the Commissioner accordingly in writing setting out the reasons for the inability to comply.

(5) Where a notice is served on the Commissioner under subsection (4), the Commissioner may, by notice in writing-

(a) accept the notification and cancel or amend the notice issued under subsection (1); or

(b) reject the notification.

(6) A person dissatisfied with a decision under subsection (5) may only challenge the decision under the objection and appeal procedure in this Part.

(7) A person making a payment pursuant to a notice under subsection (1) is deemed to have been acting under the authority of the taxpayer and of all other persons concerned and is indemnified in respect of the payment against all proceedings, civil or criminal, and all processes, judicial or extrajudicial, notwithstanding any provisions to the contrary in any written law, contract or agreement.

(8) An amount due under this section is treated for all purposes of this Act as if it were tax due.“

This Second Agency Notice was again served upon the Claimant, copy to the Defendant, from Mrs Kagina, and again attached the statutory provisions. Apart from the fact that it was headed up by reference to both sections, and related to $30 million rather than $283,477,500 it was identical to the earlier Notice.

(iii) By letter dated 15 March 2011 (“the March Demand”), written in circumstances to which I shall refer below, the URA (by Mrs Kagina) wrote to the Claimant under the heading “Without Prejudice Re: Liability Under Notices Issued Under Section 108 [ITA] in respect of [the Defendant]” as follows:

“Reference is made to the Agency Notices issued to you on 27^th July 2010 and 2^nd December 2010.

Please be advised that objection decisions under s 99(5) [ITA] were issued on 15^th November 2010 rejecting objections made by Heritage Oil & Gas Limited against a) an assessment for USD 404,925,000 issued on 6^th July 2010 and b) an assessment of $30,000,000 issued on 19^th August 2010. You are hereby required to pay the balance due in respect of these assessments of $313,447,500 on or before 12^th April 2011.

Your attention is drawn to s 108(6). Interest will accrue under s136 in respect of late payment.”

By letter dated 29 December 2010 (“the 29 December Letter”) the Ugandan solicitors for the Defendant wrote to the Claimant as follows:

“We act for and on behalf of [the Defendant] and make reference to the third party agency notice dated 2^nd December 2010 wherein . . . the URA tried to appoint you as a collection agent for our client.

s106(1) of the [ITA] empowers the URA to issue a third party agency notice only where the tax payable is not the subject of a dispute. As you are well aware, the amount being claimed by the URA in the third party agency notice is still the subject of a dispute. Our client raised an objection to the tax and an objection decision was served on our client on 2^ndDecember 2010. Our client is entitled to exercise its statutory right to file an application for review before the Tax Appeals Tribunal or to lodge an appeal in the High Court, which it intends to do within the prescribed time period. Accordingly, take note that the third party agency notice is not in compliance with the provisions of the law.

Furthermore, s106(2) of the [ITA] provides that the date specified in the notice (i.e. date of receipt of the third party agency notice) must not be a date before the money becomes due to the taxpayer or is held on behalf of the taxpayer.

Lastly, we would like to draw your attention to clause 3.7 of the [SPA] entered into between yourself and our client which provides inter alia that all payments to be made under the agreement shall be paid without set-off, withholding or any deduction of any kind of taxes or claims. We trust that you will honour this provision of the agreement.

Our client shall not recognise any amounts remitted to the URA pursuant to the invalid third party agency notice and shall still demand the amounts from yourselves as and when any amounts become due.“

The Claimant paid the URA the sums the subject matter of the First and Second Agency Notice and of the March Demand, in the total sum of $313,447,500, on 7 April 2011, having signed with the GOU a Memorandum of Understanding dated 15 March 2011, which contained a number of provisions, to which further reference will be made below, but relevant at this stage is Clause 1, which read:

“Payment by [the Claimant] as agent in respect of tax payable by [the Defendant] on the Heritage Sale

1.1 In accordance with the terms of the Agency Notice served on [the Claimant] by the URA, [the Claimant] shall pay unencumbered US$313,447,500 to URA (being equivalent to part of the tax assessed to be payable by [the Defendant] to the URA in relation to the Heritage Sale.“

The Memorandum of Understanding was contemporaneous with the March Demand and with a “Letter of Commitment to Tullow” which reads as follows (I omit capital letters):

“Reference is made to the Memorandum of Understanding between the . . . [GOU] . . . URA and [the Claimant] in which . . . [the Claimant] agreed to pay USD 313,447,500 on the strength of the Agency Notice issued by URA under s108 of the ITA, being equivalent to the tax assessed to be payable by [the Defendant] in relation to the assignment of [the Defendant’s] 50% participating interests in [Blocks] 1 and 3A to [the Claimant].

This letter serves to give URA’s commitment that;

1. Upon payment of the USD 313,447,500 being equivalent to the tax assessed and payable by [the Defendant] in relation to the Heritage Sale, URA shall issue a receipt to [the Claimant] acknowledging receipt of taxes paid by [the Claimant] on account of [the Defendant] in accordance with S. 108 of ITA.

2.In the event that [the Defendant] pursues an appeal against the assessment, in the Uganda courts or Tax Appeals Tribunal and the Tax Appeals Tribunal / Uganda courts affirm the assessment, consequent upon which the money in escrow account is paid to the [GOU], URA undertakes to refund [the Claimant] and not [the Defendant].

3. In the event that [the Claimant] is required to pursue a claim against [the Defendant], the URA will on a strictly good faith basis but without prejudice, give all evidence necessary to enable recovery of the said amount from [the Defendant] or its escrow agent. “

The Claimant claims recovery of the sums so paid to the GOU/URA plus interest, by way of an indemnity claim pursuant to Article 7.2 of the SPA and in the alternative (because so to claim is unnecessary if it succeeds in contract) in restitution/unjust enrichment.

The following matters are common ground:

(i) I should decide the case without resolving the issue (which would only be relevant to the alternative claim in unjust enrichment) whether in fact the Defendant was liable for the Ugandan tax or was rightly assessed, and adjudged on appeal, liable to pay such tax. The parties reached the following agreement during the course of the hearing:

“1.The Court will determine the Claimant’s contractual claim at this hearing.

2.The Court will determine all issues relating to the Claimant’s restitution claim at this hearing, save for [the] following issues, which will be dealt with as set out below; (i) the . . . Defendant’s alleged tax liability under Ugandan law; (ii) the amount of any such alleged tax liability; (iii) the question of whether this alleged tax liability was discharged by the Claimant’s payment.

3.The issues identified in paragraph 2 will be postponed, will not be the subject of submissions at the present hearing, and will not be determined at the present hearing. Following the Court’s ruling on the other issues that arise in respect of the Claimant’s restitution claim, that claim will (assuming that it has not been dismissed as a result of the Court’s ruling) be stayed pending the final conclusion of (a) the Ugandan proceedings between the . . . Defendant and the [URA], and (b) the arbitration between the . . . Defendant and the [GOU] after which the parties will take steps to arrange for the outstanding issues to be determined by the Court.“

The reference to the Arbitration has of course gone by the board in the light of the subsequent decision in that Arbitration, to which I have referred in para-graph 10 above. A suggested challenge to the quantum of the assessments was thus not explored before me.

(ii) No separate issue arises before me in respect of the Second Defendant, which is the Guarantor under the SPA, and whose liability stands or falls with that of the Defendant.

(iii) Notwithstanding matters raised in the pleadings and in the written submissions, I am not, at any rate until and unless I consider any consequential relief arising out of my judgment, to consider issues relating to payment out of the escrow account.

(iv) No time bar arises in respect of Article 7.4 of the SPA, which provides that the indemnities in Article 7.1 and 7.2 shall not apply unless the Notice is given within 7 years of the closing date.

(v) As was expressly conceded in the course of argument by Mr Qureshi QC on behalf of the Defendant, after the point was identified, in Closing Submissions (paragraphs 113 to 116) by Mr Wolfson QC for the Claimant, causation is not in issue, indeed is not pleaded, i.e. it is not suggested by the Defendant that the Claimant must show that ‘but for’ its belief in the validity of the Notices it would not have paid.

(vi) After some earlier interlocutory skirmishes, there was no privilege claimed (and/or it was waived) in respect of legal advice given to the Claimant at the material time in respect of the Agency Notices, by either its Ugandan or English lawyers.

With regard to the issues with which I must deal, and which at this stage I only briefly summarise:

(i) If the Agency Notices were valid at Ugandan law, then it is not in dispute that the Claimant succeeds, subject to any contractual defences referred to below.

(ii) If I am not satisfied that the Agency Notices were valid at Ugandan law, then:

(a) Did the Claimant pay the $313,447,500 knowing that the Notices were not valid? If so, then they cannot recover. The Defendant submits that the Claimant did so pay without any belief in the validity of the Notices, but did so simply in order to further or maintain their relationship with the GOU. The Claimant denies this: although the initial view of the relevant representatives of the Claimant was that the Notices were invalid, and indeed they were resisted, and although their initial Ugandan law advice was to that effect, by the time they made payment in April 2011 they had and relied upon Ugandan legal advice that the Notices were valid, as asserted by the URA. The Claimant accepts that it cannot recover if it knew that the Notices were not valid or if a belief in their validity was fanciful, and submits that there is thus only a limited role if any for what Mr Qureshi has submitted to be an objective test.

(b) The Defendant however does not accept that ‘objectivity’ is so limited. Although the Defendant’s case is primarily, and forcefully, that the Claimant had no genuine belief in the validity of the Notices when payment was made (and that it had not changed its mind from the initial view), and although (subject to a ‘contractual’ point to which I shall immediately refer) there is no such case in their pleadings, their case is that no reasonable person knowing what the Claimant knew could have formed or had the view that the Notices were valid (paragraph 2 of their Closing Submissions), or that there was no reasonable basis for the Claimant to have such view or belief or to have changed its mind (Transcript Day 12/259). This is derived from a case that was pleaded (paragraph 26.1 of the Reamended Defence and Counterclaim) namely that:

“Tullow was not ‘charged’ to tax within the meaning of Article 7.2 SPA in circumstances where there was no legal basis for the payment request made by the URA to Tullow and/or no apparent legal basis for such payment request and/or Tullow was aware of the absence of any such legal basis or apparent legal basis“.

Leaving aside the assertion of lack of genuine belief, to which I have already referred, the assertion of lack of “apparent legal basis” is derived by the Defendant from reference to Article 7.5 of the SPA, (set out in paragraph 18 below) which prescribes what is to happen when the Indemnified Party becomes “aware of any Tax Claim” being made to which the indemnities in Articles 7.1 or 7.2 may apply, and from the definition of Tax Claim as being “any claim, counterclaim, notice, demand, assessment, return, account, letter or other document issued or prepared by or on behalf of any Tax Authority from which it appears that a liability for Taxes will fall on the Buyer“. The Claimant does not accept this proposition, and refers, as being more relevant, because the words “Tax Claim” do not appear in Article 7.2, to the definition of Tax or Taxes (which words do appear in Article 7.2), and to which I shall refer in paragraph 67 below. In any event the Claimant asserts that I should not conclude, if such case arises, that there was no reasonable basis for the Claimant’s belief as to the validity of the Notices at the time when payment was made in April 2011.

I turn to address the contractual defences, for which purpose I must set out the rest of Article 7, so far as is material:

“7.5 Upon the Indemnified Party becoming aware of any Tax Claim being made to which the indemnities in Articles 7.1 or 7.2 (as applicable) may apply, that Indemnified Party shall:

(a) within 20 . . .Business Days, give notice in writing of the Tax Claim to the Indemnifying Party; and

(b) (subject to Articles 7.6 and 7.7) take . . . such action as the Indemnifying Party may reasonably request to dispute, resist, appeal, compromise or defend such Tax Claim and any adjudication in respect thereof, including:

(i) agreeing to any reasonable settlement, compromise or discharge of such Tax Claim as the Indemnifying Party may recommend; and

(ii) (upon the Indemnifying Party’s reasonable request) providing to the Indemnifying Party such records and information as are reasonably relevant to such Tax Claim and making employees available on a mutually convenient basis to provide additional information or explanation of any material provided or to testify at proceedings related to such Tax Claim.

7.6 The Indemnified Party shall not be required to take any action pursuant to Article 7.5(b):

(a) unless the Indemnified Party . . . is . . . promptly indemnified and secured to the Indemnified Party’s reasonable satisfaction by the Indemnifying Party against all losses, costs, damages and expenses that are or may be thereby incurred; or

(b) if, in the Indemnified Party’s reasonable opinion, the action is likely to affect adversely either the future liability of the Indemnified Party . . . to Tax or the business or financial interests of any of them or of any person connected with any of them.

7.7 If the Indemnifying Party does not request the Indemnified Party to take any appropriate action within 28 (twenty-eight) days of notice to the Indemnifying Party, or no action is required to be taken by virtue of any of the provisions of Article 7.6, the Indemnified Party shall be free to satisfy or settle . . . the relevant Tax liability on such terms as it may in its absolute discretion think fit.“

These defences are:

(i) Is the Agency Notice an “execution remedy“, so that it does not fall within Article 7.2 at all? The Defendant submits that it is, and does not. The Claimant submits that it is not an execution remedy, and even if it were it does not fall without Article 7.2.

(ii) Was notice given within Article 7.5(a) of the First Agency Notice, or of the Second Agency Notice? The Defendant denies receiving a copy from the URA of the First Agency Notice, even though it was addressed to it, but accepts having notice of the Second Agency Notice (as a result of which the 29 December Letter was written). The Claimant itself gave notice of the 15 March Demand.

(iii) If not, what is the consequence? Is the giving (or receiving) of such notice a condition precedent to the Claimant’s entitlement to the indemnity?

(iv) If Article 7.5(b) applies (or would have applied), would the Claimant have been entitled to have relied upon Article 7.6 (b)?

(v) Were Articles 7.5 to 7.7 overridden by the provisions of Clause 3.1(a) of the Supplemental Agreement, namely:

“3.1 The Buyer agrees that:

(a) notwithstanding any provision of the Sale and Purchase Agreement, any of the Interest Documents or any other instrument, the Seller has the right to conduct the Dispute and any and all proceedings relating thereto, whether by arbitration, court proceedings or otherwise, and that such conduct of the Dispute and its resolution, whether by settlement, compromise or award of an arbitral tribunal shall be the sole responsibility of the Seller.“

(vi) Whatever be the effect of Clause 3.1(a), was there a breach of that clause by the Claimant (it is conceded that any such breach must post-date the Supplemental Agreement)?

(vii) If so, what was or would have been its effect?

There are two final defences put forward by Mr Qureshi which fall within a slightly different category:

(viii) The first is what he calls “collusion”. He asserts that by virtue of the alleged collusion between the Claimant and the URA, the Claimant is disentitled from recovery under the indemnity because:

(a) The Claimant was not a ‘passive recipient’ of the Notices, and thus falls without the protection of Article 7.2 as properly construed.

(b) It was in breach of Clause 3.1(a) of the Supplemental Agreement, and is thus disentitled from the relief.

(c) He relies on the analogy of the law of guarantee, in which a creditor can be disentitled by virtue of collusion or bad faith.

The Claimant denies the factual basis, and in any event the relevance, of the allegations, asserting that it was entitled to protect itself and its commercial interests, not least by reference to Article 7.6(b), denies any breach of Clause 3.1(a), and any such construction of Clause 7.2 by reference to “passive recipient” as is asserted, rejects, by reference to decided authority, any analogy with the law of guarantee, and relies, so far as necessary, upon Article 15.7 of the SPA, namely:

“The indemnities provided in this Agreement shall apply irrespective of cause and notwithstanding the negligence or breach of duty (whether statutory or otherwise) of the Indemnified Party and shall apply irrespective of whether any claim is in tort, under contract, or otherwise at law provided, for the avoidance of doubt, that nothing in this Article 15.7 shall reduce the Seller’s liability under the Warranties.“

(ix) Finally Mr Qureshi asserts that the indemnity is inapplicable where the party seeking to be indemnified has obtained benefits as part of what he calls a “package“.

I turn then to summarise the issues so far as restitution is concerned, making plain that the parties accept that this only arises if the Claimant has not succeeded on its contractual indemnity claim, due to an inability to surmount the contractual restrictions on the claim for indemnity. It is common ground that payment under legal compulsion, which the Claimant here asserts, of another’s debt leads to an entitlement in unjust enrichment. It is in this regard that the parties have reached the agreement set out in paragraph 16(i) above that I should decide all other questions than whether in fact the Defendant was under liability to pay the tax. The live issues here will be:

(i) Whether, as Mr Qureshi asserts, if the Claimant has not been entitled to recover its indemnity by reliance on contract, it cannot get round it by claiming restitution. Mr Wolfson submits that this is a misconceived submission in law.

(ii) That apart, the Defendant relies by way of defence to restitution upon the following:

(a) The defence adumbrated in paragraph 19(ix) above to the contractual claim, by reference to the Claimant having obtained other benefits. Mr Wolfson submits that this is not only as misconceived as it is by way of defence to the claim for the contractual indemnity, but misinterprets the concept of unjust enrichment.

(b) Finally Mr Qureshi submits that to allow recovery by way of unjust enrichment would be indirectly to enforce a foreign revenue law, a submission which Mr Wolfson contends is misconceived.

So far as the Defendant’s counterclaim is concerned, now that no case is, at any rate at this stage, pursued in respect of the Escrow Agreement (see paragraph 16(iii) above), the case put forward is in respect of alleged breach of Clause 3.1(a), namely that if the Claimant is entitled to recover notwithstanding having breached, if it has, such clause, the Defendant would be entitled by way of counterclaim to recover the same sum.

The Background

The GOU was already, when the proposed deal was to be with Eni in December 2009, and certainly by February 2010, publicising the fact that it was expecting payment of substantial capital gains tax by the Defendant in respect of the sale of its interest, which would involve a very substantial contribution to its budget; and the Defendant, who was, and remained, non-resident in Uganda, and was in the event to transfer the consideration (save for the deposit) out of Uganda was, as can be seen from its subsequent objection once the First Assessment Notice was served, denying liability, at least in the amounts claimed.

There is no doubt that by at least May 2010 the GOU was planning to place a burden upon the Claimant, remaining in Uganda, to pay the sums which were to be, and in the event were, assessed against the Defendant, and the pressure which was brought to bear by the GOU on the Claimant was enormous. This pressure began with the letter from Minister Onek of 3 August 2010 referred to in paragraph 7 above, but it was followed with a letter of 17 August 2010 from Minister Onek stating that the deadline to apply for a petroleum production licence for the Kingfisher field in exploration area 3A had now expired, and that this field no longer formed part of the Claimant’s exploration area, and, as will be seen, this was followed by an unremitting series of very stern, indeed often intimidating, meetings with the highest officers of the GOU, from the President himself downwards.

There is also no doubt that the Claimant had, as was obviously the GOU’s intention, a very substantial incentive to reach an agreement with the GOU, involving what Mr Martin, Tullow’s General Counsel and Company Secretary, described in his witness statement as a “strong commercial imperative” to resolve the disputes with the GOU which were thus created against the background of the GOU’s determination to ensure its receipt of the capital gains tax assessed on the Defendant, all of which required to be resolved by the Memorandum of Understanding referred to in paragraph 14 above:

(i) The Claimant had paid the purchase price of $1.45 billion to or to the order of the Defendant (as appears in paragraph 6 above), but while the Defendant had received all such consideration (with the exception of the deposit and the sum in escrow), distributing a substantial quantity of it in dividends, the Claimant was unable, until the Government was prepared to give its consent, to receive and thus to operate, the interest which it had purchased.

(ii) The Claimant was in the course of negotiating to ‘farm down’ to third parties its interests in the oil fields in a sum of $2.9 billion, but which it was prevented from completing, unless and until the GOU gave its approval.

(iii) The GOU had refused, and was continuing to refuse, to renew the licence for the Kingfisher field, and was refusing to consider a new licence in respect of Exploration Area 1, which was due to expire on 30 June 2011.

(iv) The GOU was pressing for payment of substantial payments of tax in respect of various challenged assessments.

This was all compounded by the service on the Claimant of the First Agency Notice referred to in paragraph 11(i) above.

It is quite clear that, for those reasons, quite apart from the service of the First Agency Notice upon them, which the URA was insisting was valid, and should be complied with, that the Claimant was under immense pressure to pay the tax assessed against the Defendant.

The advice that the Claimant received from its Uganda lawyers, Kampala Associated Advocates (“KAA”) and its tax advisers, PricewaterhouseCoopers in August and September 2010 was:

(i) that the capital gains tax assessed against the Defendant appeared to be due.

(ii) that the First Agency Notice was not valid, for reasons referred to further below.

By September 2010, after three meetings with the President, the Claimant could see that there was going to be no alternative for it but to make payment under the First Agency Notice, and by December 2010 the Second Agency Notice also.

The picture which is clear from the evidence of Mr Martin and of Mr Inch, the Claimant’s Head of Tax, is one of constant meetings with representatives of the URA and the GOU at which they put their case, including the case that they could not be required to pay under the Agency Notices. It seems that, at least in the early days, the URA believed that the purchase price had been paid away by the Claimant after the service of the First Agency Notice, although it appears that at least Mrs Kagina was persuaded at a meeting in October 2010 that the monies had been paid into the escrow account prior to the receipt by the Claimant of the First Agency Notice, but this made no difference to the URA’s determination that the Claimant should, pursuant to the First Agency Notice, pay to the URA the sum of $283,477,500, being the amount that had been paid into the escrow account.

When the Claimant received, on 18 November 2010, for the first time advice (by Mr Peter Kabatsi the senior partner of KAA) that the Agency Notice was likely to be found valid by a Uganda Court, as will appear below, the Claimant had already committed to the President to make the payment required by the URA: on 2 December 2010 Mr Martin confirmed to Minister Onek the Claimant’s agreement to the package of proposals which had been offered by the GOU at a meeting with the President and others at Gulu (“the Gulu Meeting”) on 18 November, but negotiations continued thereafter and, as set out in paragraphs 13 and 14 above, it was not until 15 March 2011 that a Memorandum of Understanding was signed which resolved all issues between the Claimant and the GOU and was accompanied by the Letter of Commitment.

During this period of negotiation, various developments occurred so far as the Claimant was concerned. As will appear below, the Claimant, by Mr Inch and Mr Murray (another in-house solicitor), took advice at English law from English solicitors, Ashurst LLP (“Ashursts”), and English Counsel, Mr Wolfson QC, who advised that they were very doubtful, as a matter of English law, about the validity of the Notices, as to which Mr Inch informed them that the Claimant had had Ugandan advice as to their validity. As will appear, further instructions were given to KAA in Uganda, and by a draft advice, to which I shall refer below, KAA gave their advice that, insofar as the Notices relied upon s108 of the ITA they were valid. As to this, Mr Inch gave the following answer in cross-examination, as to whether he had to receive the advice of KAA to make the payment, and he said as follows (Transcript Day 10/170):

“I didn’t believe we had to have that specific advice to make the payment. We would have made the payment – the discussions with the Ugandan authorities were over. Now we would have made the payment under the – you know, in accordance with the MOU by this stage, in Uganda, the Ugandans now and Tullow are agreed were making the payment under the Notice. I’m not seeking any further legal advice with respect to that payment under the MOU. That’s done, I think. You know that’s the URA’s position. We’re agreeing with it. Nevertheless having made the payment on that basis, we would not have done, – we would not have launched separately the indemnity proceedings against Heritage without the comprehensive legal advice.“

Mr Qureshi said:

“If I have understood, the comprehensive legal advice was to support the proceedings against Heritage but was irrelevant for the payment to the Ugandans?

A: Yes.“

Prior to the Memorandum of Understanding, and in particular prior to the making of the payment on 7 April 2011, Mr Martin put his recommendation to the Board of the Claimant, in the following terms:

“The URA is demanding $313 million payment from us as agent for Heritage on the basis we are in possession of assets belonging to Heritage, namely (i) the $283 million in escrow and (ii) certain rights and obligations arising under the SPA. We are advised this is a valid position for the URA to take under Ugandan law, even if not under English law.“

The Relevant History

The first meeting between the Claimant and the URA after the receipt of the First Agency Notice, was a meeting between Mr Inch and Mrs Kagina and her officials on 3 August 2010, in which the URA was quite insistent that the Claimant should pay pursuant to the Notice, and, as described by Mr Inch, Mrs Kagina lost her temper, and there was shouting and she was very angry. Things fared little better at a meeting between a delegation of the Claimant led by Mr Heavey, its Chief Executive Officer, and the President on 23 August 2010. The Claimant attempted to instruct and make use of a significant local figure, Mr Bitature, as a go between, but a suggestion of the provision of a guarantee by the Claimant in the sum of the amount in the escrow account fell on deaf ears.

At this stage the Claimant was obtaining the professional advice as to the validity of the Agency Notice to which I referred in paragraph 26 above. Mr Mpanga, a tax partner at KAA, said in terms on 27 August 2010:

“URA’s basis for considering action against Tullow could be, I suppose, based on the fact that Tullow is a signatory to the escrow account, and that the escrow account is still in credit. Whereas I fully understand your explanation, it needs to be clear to everyone that if this matter came up before a judge there is no way Tullow can be found to [be] in control of the funds. For information, the effect of the appointment as collection agent is that, if it is found that Tullow is in possession or control of Heritage’s funds, then Tullow would [be] obliged to pay the tax due from Heritage. In the event of failure, in such an event, URA would initiate recovery measures against Tullow. It is in view of the above that it is important that the issue of the entire transaction and what Tullow remains in control of is carefully analysed and interrogated so that a legal strategy is mapped for action.“

Similar advice was given from another tax partner of KAA, Mr Kambona on 2 September 2010, who took two grounds of opposition to the Agency Notice. First, in agreement with Mr Mpanga he said that:

“Clearly, the reading of s108 requires that Tullow must be in possession of money belonging to Heritage, which is no longer the case. The funds in escrow are not funds in possession of Tullow. Tullow cannot unilaterally withdraw the funds from the account and this is critical for s108 to come into play. The escrow Agreement has set out the conditions upon which the funds can be released and the only exception would be a court order. My opinion is therefore that URA cannot enforce s108 on Tullow as there are no funds in its possession due to Heritage.“

He then raised what he called a “second line of argument“, namely that, by reference to sections 99 and 103(2) of the ITA, where a taxpayer, had lodged a notice of objection to an assessment, as the Defendant had, and 30% had been deposited (which the Claimant had done on its behalf) there was “technically . . . no further tax due until a decision has been made by the URA on the objection.”

PricewaterhouseCoopers gave similar advice on 27 September 2010. Mr Inch reported to Mr Martin on 19 September 2010 that “we don’t believe the s108 notice issued on 27 July is valid as the tax is under appeal and the $283m isn’t due. In any event, though, we are not in possession of cash that belongs to Heritage, nor were we at completion, as it was already in escrow.“

Notwithstanding that these points were put to the URA and to the GOU, the pressure to pay continued, and in a meeting between the President and Mr O’Hanlon, the Vice-President of the Claimant, and Mr Bitature on 15 September 2010, the Claimant’s arguments were again rejected, and Mr O’Hanlon found himself having to start committing the Claimant to making payment: Minister Onek confirmed by a letter dated 15 October 2010 to Mr O’Hanlon that the GOU would only confirm the Claimant’s acquisition of the Defendant’s interests in Exploration Areas 1 and 3A as unconditional upon full payment of the taxes due from the Defendant. A further fruitless meeting between Mr O’Hanlon and the President took place on 16 October.

Meanwhile, at a private meeting at the home of Mrs Kagina at the beginning of October 2010, Mrs Kagina at a meeting with another partner of KAA, Mr Matsiko, appeared to relent, certainly to the extent that she was at least persuaded by a dossier of documents which she was shown that the monies had indeed been placed into escrow before the service of the First Agency Notice. The Claimant’s case that the URA ‘never wavered‘ is to that extent inaccurate. But unfortunately, Mrs Kagina was back on song at a meeting of the GOU Technical Committee on 19 October 2010, when there was complete stalemate, and Mrs Kagina insisted, as she stated in an email to Mr Inch shortly afterwards on 26 October 2010 that “Tax is imposed and collected by law not by compromise.” Mr Mpanga felt that at that meeting there had been a compromise, even though Mrs Kagina did not recognise it as such. He had suggested, and agreement was reached, that the Claimant should make the payment, which would be “deemed” to be paid under s108. Mr Martin remained sceptical. Mr O’Hanlon wrote a letter to the President dated 29 October 2010 to say that he was “very pleased that, together with the URA, we have found a solution acceptable to all parties to enable Tullow to pay $283m to the Government, bringing total payments on account of the taxes due by Heritage to $404m“, and on 26 October to his potential partners in the proposed ‘farm down’, that any proposal that GOU should wait until the Courts decided on the matter and the $283m was released from escrow “was not acceptable to [President] Museveni, who described Tullow as ‘having let the criminal escape’: so Tullow must pay $283m of its own money and recover (if it can) the other $283 from escrow later.“

By the time of the Gulu Meeting the figure which the Claimant was going to have to pay had increased to $313 million, because of the extra $30 million the subject of the Second Assessment Notice, and discussion was continuing to resolve the other problems set out in paragraph 24 above, with a view to a ‘package’ which could be agreed. There was much to discuss, and legal advice to be obtained from KAA by the Claimant on all the various issues. In addition to Mr Mpanga and Mr Kambona from KAA, the Senior Partner Mr Peter Kabatsi, a former director of Public Prosecutions of Uganda (1986 to 1990) and Solicitor General of Uganda (1990 to 2002) was present. Mr Martin and Mr Inch gave evidence, as did Mr Kabatsi, about discussions which they had with him both in the evening after the Gulu Meeting and on the following day when the Claimant and its lawyers had what has been called a ‘post mortem’ meeting.

In the course of discussion about the possibility of judicial review being brought by the Claimant against the GOU to challenge the GOU’s position in relation to the Kingfisher field, Mr Kabatsi expressed pessimism as to the outcome of such an application, and in that context Mr Martin asked him what he thought would be the position if the Claimant challenged the validity of the Agency Notice. Mr Kabatsi expressed the view on both occasions, more fully at the post mortem meeting, that the Notice was valid, and he gave the following evidence (Transcript Day 6/141):

“A. My view was that the Ugandan court interpreting s108 of the Income Tax Act would very likely come to the conclusion that in the circumstances of that notice and the surrounding factors it would be considered to be valid. My Lord, if I may give the reasons I gave at that time?. . .

First, that there was no dispute between Tullow and Heritage as to whose asset it was. It was actually Heritage’s, Tullow had no claim on it but Tullow held power to let Heritage have it. That was number one.

Number two, the fact that this account had been opened outside the jurisdiction, I thought that was an important factor the court would consider.

Number three, I also knew from practice, I couldn’t remember an occasion where a receiver, a recipient of a notice had actually objected to it successfully and somebody mentioned a case which I later saw which was a Supreme Court decision. It wasn’t dealing with possession but it did say that a recipient of a notice will not challenge its validity, the taxpayer would.

And all of this was at the back of my mind and I felt that it would be that local court, and also the policy of taxation, it is very very strong both in that section as well as in the Act as a whole, that unless there are clear provisions exempting tax payment costs tended to be decided in favour of the Commission of Income Tax.

My Lord, I should also add that since 1995 when our new constitution came into force, courts were taking a broader view of interpreting sections of the law or provisions of the law in such a way that substantive justice is done without the due regard of technicalities. That is in the constitution. There are many, many cases after that. My view then was that my friends, my colleagues, were taking a very, very narrow view of this section and it would be more likely than not the Ugandan court at that time, or even now, would come to the conclusion that Tullow was in possession of this asset.”

He said that he thus expressed the view at the post mortem meeting that in his opinion it was more likely than not that the Agency Notice would be upheld in a Uganda court, which he explained in evidence as being “perhaps 60/40“. Mr Martin stated that it was apparent that Mr Kabatsi was putting forward an opinion with which his more junior partners, the specialists in tax, did not agree. KAA was in any event to provide a ‘comprehensive opinion’ on all the matters in issue, and this aspect was to be dealt with as part of that advice.

This oral advice, ‘off the cuff’ as Mr Qureshi described it, was described by the Claimant as a turning point in its thinking. Mr Inch describes his view of what happened as follows, namely that, after the discussion of the implication of a judicial review application with regard to Kingfisher, he asked Mr Kabatsi (Transcript Day 10/17) “Peter, what would happen then on this Agency Notice, would we be found to be in possession of an asset?” He said that it was “highly significant when the former Solicitor General of Uganda . . . looked me right in the eye . . . and said ‘Richard, a judge in Kampala could quite easily find you were in possession of that asset’, and he said it with a quite credible authority.“

When the ‘comprehensive advice’ arrived, dated 30 November 2010, it was signed by Mr Kabatsi and by a retired judge (now deceased) Justice Mulenga (“the November Advice”), although Mr Kabatsi told the court that it had in fact been drafted by Mr Mpanga, and approved by him and Justice Mulenga. The passage dealing with the “Payment of the Heritage Capital Gains Tax” formed only a small part of the lengthy opinion. On the material question the Advice recorded as follows:

“Tullow’s position notwithstanding, and in the interest and in consideration of reaching a resolution of this issue with Government on this and all, Tullow is agreeable to paying the amount due from HOCL on account of tax. This payment would be made on the basis that in accordance with s108 of the Income Tax Act (ITA) and Tullow being one of the signatories to the escrow account into which up to USD 283m was paid, it is in a position of being deemed to be in possession of [the Defendant’s] asset. On making this payment and on the basis of the indemnity contained in the same s108 of the ITA, Tullow is able to recover the amount paid from the escrow account.“

It is apparent that, as Mr Kabatsi himself accepted in the witness box, this does not record the view as he had expressed it, but simply repeats or ratifies the ‘deeming compromise’ which Mr Mpanga had formulated at the meeting on 19 October. Not only did Mr Martin, as he put it in evidence, not “focus” on that opinion but in fact he had not even received the advice, let alone read it, when, on 2 December 2010 he wrote to Minister Onek confirming the Claimant’s agreement to the package of proposals which had been offered at the Gulu meeting, attaching a draft Memorandum of Understanding, which was to form the basis of negotiations which took place over the following months.

Mr Inch gave evidence, which was challenged by Mr Qureshi, pointing out that it was neither confirmed by any contemporaneous notes nor contained in his witness statement, that he at some stage in December had a conversation with Mr Murray because he had noted that the simple reference to deeming in the November Advice did not in terms reflect what Mr Kabatsi had said in the post mortem meeting; and he recalled that he was told by Mr Murray that Mr Murray had had a conference call, either with Ms Shah or direct with Mr Kabatsi, when he was told that (Transcript Day 10/46-49) “what Peter was saying was: you were deemed to be in possession in accordance with the section, ie a court would deem you to be in possession.” Mr Inch said that he did not know until February that what he “was going to get back was the kind of Mpanga/Kambona revised opinion“, when he had expected a fully reasoned and explained opinion from Kabatsi/Mulenga. Mr Kabatsi said that he had had no further contact with the Claimant on this topic after the Gulu Meeting, Mr Wolfson speculates that the response in fact came back from Mr Mpanga, and Mr Qureshi speculated that there was a disagreement between the KAA colleagues and that they were not able to produce an agreed position.

At a meeting with the representatives of the URA, including Mr Sseketawa, the URA’s litigator, at the end of January, Mr Inch had a discussion with Mr Sseketawa at the end of the meeting, when he took the opportunity to ask him about the practice and frequency of the URA sending out Agency Notices where there was a dispute, from which discussion he concluded that s108 was used as a provision intended to deal with securing tax owed by a non-resident, was usually sent out to banks when there was a dispute, and that the banks did not challenge the Notices but paid up, and if the Notice were later lifted the URA would give the money back to the banks.

Mr Inch and Mr Murray were now involved in obtaining advice from Ashursts and in consultation with Mr Wolfson on a number of matters. The relevant documents recording Instructions to counsel and advice given both by the solicitors and by counsel are as follows:

(i) Telephone advice on 20 December 2010, seemingly in the context of the receipt of the Second Agency Notice based upon s106 as well as s108 . Given that the entirety of the money in the escrow account was covered by the First Agency Notice, the Second Agency Notice could only apply, if at all, to other monies owing by the Claimant to the Defendant arising out of the SPA or the JOA, which by that time amounted to some $20 million, and the Adjustment Amount pursuant to Article 3.3 of the SPA remained to be agreed (and was agreed in March 2011 as some $13 million).

“Mr David Wolfson QC (“DW”), Mr Ronnie King of Ashurst (“RCK”), Mr Murray (“AM”) and Mr Inch (“RI”).

4. DW – URA Notice: don’t think 108 easily applies. Section 106: very difficult for Tullow to know whether or not tax is disputed.

. . .

6. [DW] Don’t think that 108 applies – difficult to read ‘in possession of an asset’ as including a debt you owe someone. In ‘possession’ usually means of a physical item. Difficult to apply to a chose in action plus fact that 106 is there suggests that 108 doesn’t apply to owing cash.

7. RI – for purposes of s108 could say we are (1) in possession of legal interest in Blocks, which still belongs to H; (2) Escrow Funds?

8. DW – both quite difficult. If H has only legal interest and thus no beneficial interest, his interest is probably of no value.

9. RCK – Ashurst and DW saying 108 doesn’t apply. S. 106: problem: we know tax is disputed by H.

. . .

14. AM – URA says money in escrow is in our possession.

15. DW – that’s inconsistent with saying we’ve paid money in escrow to H.

16. RI – unless can get same Ugandan advice saying we’re in possession, don’t see on what basis we can pay out.

17. RCK – seems extremely unlikely.

. . .

23. RCK . . . 106 and 108 . . . don’t seem to apply, . . . Quite comfortable that transaction is subject to CGT. RCK has serious concerns that we may be paying without a legal obligation to do so.“

(ii) Teleconference between Mr Inch and Mr Murray and Ms Shah and Ashursts of 27 January 2011:

“6. Ashurst and David Wolfson QC have previously advised Tullow that s106 and s108 of the Ugandan Income Tax Act do not appear to give the Government authority to require Tullow to pay the tax on the Heritage Transaction on Heritage’s behalf:

(a) s106 is ousted by the fact that Heritage has appealed the tax assessment;

(b) s108 applies where a person is ‘. . . in possession of an asset, including money belonging to a non-resident taxpayer . . .’

7. The fact that Heritage is a co-signatory to the escrow Agreement and/or that Tullow may owe a debt to Heritage under the SPA in respect of the completion adjustment amount does not, in English law, mean that Tullow possesses an asset owned by Heritage, as required by s108 . Accordingly, Ashurst is concerned that a notice issued by the URA requiring Tullow to pay the tax on the Heritage Transaction will be invalid.

8. RI responded that Tullow has obtained advice from Ugandan lawyers that the s108 notice issued by the URA is binding on Tullow. Tullow’s Ugandan lawyers are of the opinion that Tullow’s rights against the funds held in escrow constitute ‘possession of an asset’ belonging to Heritage for the purposes of s108, RI also noted that Tullow believes there may be an argument that Tullow is in possession of Heritage’s legal interest in Blocks 1 and 3A, given that the Government has not yet given its unconditional consent to the Heritage Transaction. RI thought that this could give further grounds for arguing that Tullow is in possession of an asset belonging to Heritage for the purposes of s108 . RI admitted that this was somewhat of a ‘grey area’.

. . .

10. RCK stressed that in his view, s108 was not applicable to Tullow. It appeared that s106 and s108 were intended to dove-tail and were not intended to apply simultaneously to the same factual situation. RCK thought that Tullow fell clearly within s106, not s108. In response, RI stated that Tullow had to make a commercial decision based on the fact that it had been served with a notice from the Ugandan Government requiring it to pay the tax and based on the advice received from Tullow’s Ugandan lawyers that the notice was valid and binding on Tullow.“

(iii) A letter dated 28 January 2011 from Ashurst to Mr Murray refers to Mr Inch’s “understanding“, seemingly derived from Mr Sseketawa,

“. . . of the status of a payment made pursuant to a s108 demand in circumstances where the taxpayer (Heritage) has disputed the amount of tax, namely that it is a form of security fund which it held pending final determination of a challenge by the taxpayer “

and continues

“First, they may argue that a s108 notice is not valid given the nature of the escrow arrangement. I understand that you have received Ugandan legal advice which indicates that a s108 notice would still be valid, as a matter of Ugandan law notwithstanding the escrow. As you know, both David Wolfson QC and I have reservations about that analysis.”

(iv) Mr Inch to Ashurst dated 3 February 2011, copied to Mr Murray and to Mr Martin:

“a) So far as the notices are concerned, the background is that we didn’t pay on receipt as firstly we didn’t believe originally we had to pay while the tax was under dispute. I now think that is incorrect : as discussed payment is due under 108 even though no tax is payable by H at this until their assessment is complete, and it is in that sense I say the payment is security for the payment by H – it is tax paid on their behalf to satisfy any liability they may have.

The second point is the ‘in possession point’ where, while not easy to accept, the advice is we have is that a Kampala court could well take the view we are in possession of the escrow account as a signatory.

b) $283m versus $313m : we didn’t touch much on this, but leaving aside the whole issue of ownership of the licences, it is primarily due to commercial considerations, including advice from our lawyers that we are unlikely to get a win no matter how good our case, that we can’t challenge paying the $30m, which is in excess of the MV of the escrow account.“

(v) Further consultation with Mr Wolfson on a number of matters on 4 February 2011:

a) The Instructions include:

“Tullow accepts that s106 ITA is inapplicable in the present circumstances as Tullow is aware that Heritage has challenged all the tax assessed to it in relation to the Transaction. However, Tullow has received advice from its Ugandan lawyers that Tullow is ‘in possession of an asset’ belonging to Heritage for the purposes of s108 ITA by virtue of Tullow’s rights pursuant to the escrow account (see the third paragraph on page 2 of the letter of advice from Kampala Associated Advocates at tab 4). [This is the November Advice]. Tullow also believes that as the Government has not given its unconditional consent to the Transaction, the legal interest in Blocks 1 and 3A remains vested in Heritage and Tullow holds that interest on trust for Heritage. Tullow believes that this may also constitute possession of an asset belonging to Heritage for the purposes of s108 ITA. Instructing Solicitors are concerned that the Ugandan advice received by Tullow is unconvincing. It is difficult, in Instructing Solicitors’ opinion, to consider the funds in arrears as being in Tullow’s ‘possession’. The legal interests retained by Heritage in Blocks 1 and 3A are title without any value. “

b) Consultation by telephone

“1. Leading Counsel reminded Tullow that Ashurst and Leading Counsel were not persuaded by the advice from Tullow’s Ugandan lawyers that s108 ITA gave the URA the power to require Tullow to make the Tax Payment.

. . .

3. Leading Counsel noted that Tullow accepted the advice from its Ugandan lawyers that the s108 URA Notice was valid. RI noted that Tullow was comfortable in relation to the amount of USD283 million URA Notice but less comfortable in relation to the USD 30 million URA Notice.”

The next step was to go back to KAA for a final written advice, and Mr Inch sent an email of 16 February 2011 to Ms Shah the Claimant’s International Tax Manager:

“When you have a chance could you follow up with [Mr Kambona] on the position with the URA defence filing? Seems we are close now to finalising. We also need something from him confirming liability under s108, but perhaps you could discuss that with [Mr Murray]. I’m not sure how he wants to cover the gap between the 283 plus [Working Capital] versus the 313 [being a reference to the extra $30 million in the Second Agency Notice].”

There are then two emails from Ms Shah to KAA, of which I set out the material parts below, because it is submitted by Mr Qureshi that this was not a “genuine exercise“:

(i) 16 February 2011 to Mr Kambona:

“As discussed on the call earlier today we should be grateful if you would assist us with the following formal opinions:

1) Whether Tullow is in possession of an asset, including money, belonging to Heritage for the purposes of a s108 notice. We should be grateful if you would consider the escrow account, the amount owed to Heritage as part of the completion process and also any other assets such as the legal ownership of the interests in EA 1 and 3A.

2) Status of a payment made under a s108 notice and also the implications if Heritage and/or the URA pull out of the CGT case filed at TAT either before or after the $313m payment is made by Tullow to the URA under a s108 notice.

As discussed on the call we need these opinions for our lawyers here in London (to assist in recovering, from Heritage, the amount paid) and also for our Executives who will rely on these opinions to support their decision to make the 313 payment. We would therefore need the opinions to be as comprehensive as possible and to refer to all Ugandan law references, relevant case law, statutory instruments, precedents etc.“

(ii) To Mr Kambona and Mr Mpanga dated 17 February 2011:

“As discussed on our call earlier today below is a summary of the scope of the two opinions requested [the second related to the Status of a payment under a s108 notice, in relation to which Mr Kambona had already supplied a draft]:

Opinion 1: Whether Tullow is in possession of an “asset” belonging to Heritage under s108 and as a matter of Ugandan law.

In respect of the $313m payment Tullow would be looking to claim under the indemnities provisions in the SPA with Heritage on the basis that the Heritage tax was been charged to Tullow under s108. To support this claim we should be grateful if you would consider, with reference to any legal basis under Ugandan law, including any case law or practice notes whether the following could be argued to be a) an asset belonging to Heritage and b) in Tullow’s possession for the purposes of s108 ITA:

i) escrow account

ii) Amount owed to Heritage as part of the completion process (Article 3.3 and 3.4 and Schedule A of the SPA)

iii) Any other assets, including interests in EA1 and 3A, and rights and obligations in the SPA with Heritage.

For the purposes of this opinion, it is important that we put ourselves in the URA’s shoes and also consider the arguments they have forward in reaching the position that Tullow is in possession of assets belonging to Heritage. I now understand following our call earlier today that the issue of whether Tullow is in possession of an asset was previously discussed with Elly [Karuhanga, another KAA partner] and perhaps also Peter Kabatsi and they were of the opinion that a local judge would also take the same position as the URA i.e. that Tullow was in possession of an asset belonging to Heritage. This I believe was in the context of the escrow account. Perhaps you can also touch base with Elly and Peter in case they have any further thoughts on this.

Following our call I also looked at the comprehensive opinion again and on page 2 KAA does refer to the position that as Tullow is one of the signatories to the escrow account it would be deemed to be in possession of HOGL’s asset. As discussed on the call we should be grateful if you could expand on this with your analysis of how we reach to this conclusion under Ugandan law.“

Mr Murray sent an email dated 21 February 2011 to Mr Inch noting:

“- (a) Recent mixed messages from KAA on the possession of an ‘asset’ advice and (b) Ashurst/Wolfson scepticism around ‘asset’ argument. $283 v $30 in relation to ‘asset’ discussion. $30 million is harder argument to make.“

The advice from KAA dated 21 February 2011 (“the February Advice”) was supplied to Ms Shah on 22 February under cover of an email which said: “Attached is the draft opinion requested.” It was never further formalised. The relevant part of the advice is as follows:

“You have requested our opinion on whether the following could legally be considered a HOGL asset in Tullow’s possession:

i) Funds held in the escrow account

ii) Amount owed to Heritage as part of the completion process (Article 3.3 and 3.4 and Schedule A of the SPA)

iii) Any other assets, including interests in EA1 and 3A, and rights and obligations in the SPA with Heritage.

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Uganda oil companies offer scholarships by Tullow, E&P, Total

Gerald Businge — Tue, 05 Feb 2013 16:38:42 +0000

I would like to share this information with you regarding scholarships

The fields of study to be sponsored include:

Tullow Oil PLC(Masters degrees)

Engineering and Technology
Environment and Geosciences
Oil and Gas Economics
Business Journalism
Logistics and Supply Chain
Law and legal courses
Other applied sciences apart from medicine

Total E&P

1. Masters Degree in Petroleum Engineering & Project Development: Ref No: MASTER IPS1
2. Masters Degree in Health & Safety Engineering: Ref No: MASTER HSE2

For all application related information, please refer to the snapshot and the brochure attached and visit http://bit.ly/TullowGSS

Help others:

Please inform others who may potentially benefit from this information

DISCLAIMER:

Please take note that I am not an employee; not even an authorized spokesperson of the mentioned Oil companies. I am only sharing the opportunities with you on the understanding that iwe nanyowe tulibanyoro therefore we belong together and ought to share any information within our reach.

The post Uganda oil companies offer scholarships by Tullow, E&P, Total first appeared on Uganda Multimedia News & Information.

NRM MPs fail to agree on Uganda oil development bill

Tue, 16 Oct 2012 12:10:19 +0000

Members of NRM caucus have failed to agree on petroleum and oil development bill that is currently being debated by parliament.

Tullow Oil drilling in Bulisa

In an impromptu caucus meeting chaired today by the party’s chief whip Justine Lumumba, members failed to harmonize the amendments proposed by the natural resources committee, and individual members including Theodore Ssekikubo and Ken Lukyamuzi.

The amendments seek to reduce the powers of the minister or any Presidential appointee in the bill saying that it denies other stake holders like parliament and the community a say and control on Petroleum issues.

The caucus vice chair person David Bahati confirmed the disagreement and said that another meeting has been set to discuss the matter until a common position is arrived at.

The post NRM MPs fail to agree on Uganda oil development bill first appeared on Uganda Multimedia News & Information.

Tullow Oil denies giving bribes to Uganda ministers

Gerald Businge — Thu, 13 Oct 2011 12:36:24 +0000

United Kingdom registered oil prospecting firm Tullow Plc has denied allegations that it offered bribes to Uganda ministers to get favuorable oil deals in Uganda.

oil drilling in western Uganda

Uganda’s parliament this week started discussions on the oil sector and Tullow was mentioned as having transferred money to two ministers’ accounts.

But Tullow’s CEO, Aidan Heavey, refuted these allegations in a letter written to the Speaker of Parliament in Uganda.

“Tullow is deeply committed to its work in Uganda and operates to the highest standards of ethical behaviour. We take a zero tolerance approach to bribery and corruption and our policies are enshrined in our Code of Business Conduct,” Heavey said in a statement.

Western Uganda Youth MP Gerald Karuhanga presented documents alleging that Foreign Affairs Minister Kutesa Kahamba Sam through his company East African Development company Kenya received 17m Euros (close to 74 billion Uganda shillings)through his bank called EFK in Zurich. It is alleged that the money was leaving a Tullow account 40037242019 in a bank in Malta…through a recipient bank in UAE Dubai.

It was further alleged:

That On June 21, from Tullow on account 4003724191 from the same back to Dubai the Hon Hillary Onek (shows bank statements) received 500,000 Euros.
That July 6, Hillary Onek received another 500,000 Euros on his account 0034450627007 in a Dubai bank
Hillary Onek also received another 500,000 Euros on July 17, 2010 same bank same account
That Hillary Onek received 1.5mEuros on the same account same day.

The MPs want the ministers together with Prime Minister Amama Mbabazi to resign their posts. The MPs agreed to set up a committee to investigate the allegations of bribery and influence peddling in the oil sector.

Ultimate Media

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