Published 30 November 2022
Bilateral Investment Treaties (BITs) and Multilateral Investment Treaties (MITs) provide a standard of protection to investors in the contracting States. These standards include fair and equitable treatment, protection against nationalisation and expropriation, a guaranteed unrestricted transfer of investments and returns, and full protection and security. The infringement of the standard of protection offered under BITs and MITs empowers an investor affected to initiate proceedings under the forum agreed.
The Government of Tanzania has enacted two laws, the Natural Wealth and Resources (Permanent Sovereignty) Act of 2017 (Permanent Sovereignty Act) and the Natural Wealth and Resources Contract (Review and Re-negotiation of Unconscionable Terms) Act of 2017 (Unconscionable Act). The Permanent Sovereignty Act prohibits foreign dispute settlement, and the Unconscionable Act empowers the Government to amend existing Production Sharing Agreements (PSAs) unilaterally. The two laws contravene the already signed PSAs that allow foreign dispute settlement mechanisms and require mutual consent in amending the PSAs. They also contravene BITs and MITs to which the Government of Tanzania is a signatory party.
The two laws need to be amended to conform with the existing PSAs and international treaties and conventions signed and ratified by the Government of Tanzania. The Government should not opt to withdraw from BITs and MITs considering the necessity of foreign investors in the petroleum industry since they are tools for attracting investments.