The London High Court has finally ruled in favour of Tullow Oil in the multi-million dollar tax dispute raised by Heritage Oil.
In a 61-page ruling, the court’s judge, Justice Burton, dismissed claims by Heritage and found that Tullow Uganda, now involved in oil exploration activities in the Albertine region, was entitled to claim for 313 million dollars capital gains tax.
Justice Burton ruled in the Commercial Court case that Tullow Oil was entitled to an indemnity from Heritage Oil under the sale and purchase agreement in which Tullow Oil farmed into Heritage Oil’s assets in Uganda.
The judge dismissed Heritage Oil’s counter-claim that Tullow Oil had colluded with the government to extract the tax money from the Canadian-registered oil explorer.
The court is to consider how much interest could be owed on the payment and a submission by Tullow Oil over its legal costs at a later date.
In 2010, Tullow bought interests in two blocks in the Lake Albert Basin from Heritage for about 1.5 billion dollars. In 2011, London-based Tullow paid the Ugandan government 313 million dollars in capital gains tax after Heritage refused to pay and the government threatened to block the deal. The Uganda Revenue Authority (URA) asked Tullow Uganda to pay on Heritage’s behalf.
The 313 million dollars bill 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 agreement to recover the money since heritage had refused to pay it to government.
In a statement, Tullow Corporate Communications Manager, Cathy Adengo says the judge did not however rule on the amount of interest Heritage owes Tullow on the 313 million dollars.
Onesmus Mugenyi, Deputy Executive Director of Advocates Coalition For Development and Environment says the Tullow win over Heritage is good for Uganda as well. He says Uganda would have had a double loss if Heritage had won the London case.
Government had hired a team of lawyers headed by former solicitor General, Peter Kabatsi to represent it in the case.
Meanwhile the judge dismissed any allegations of corruption against Tullow. The judge ruled that he did not find that Tullow had engaged in any corrupt activities.
A further hearing will be scheduled in due course to address matters arising from the judgment such as the amount of interest Heritage owes.