Heritage Oil’s Request for Open Court Proceedings Denied

The commercial division of High court has rejected a request by Heritage Oil and Gas to handle its appeal challenging the ruling of Tax Appeals Tribunal ruling on its US $ 435 million tax assessment in an open court. In its application Heritage Oil and Gas requested court to have the proceedings in an open court on grounds that documents pertaining the ruling of the Tax Appeals Tribunal were already in the public domain.

Tullow, Total and CNOOC are now proceeding with their massive $10bn development of the Lake Albert fields, plus a new refinery and pipeline to the east coast of Africa. Photo: Alamy
Tullow, Total and CNOOC are now proceeding with their massive $10bn development of the Lake Albert fields, plus a new refinery and pipeline to the east coast of Africa. Photo: Alamy

However, Justice David Wangutusi rejected the request. In his ruling last week, Justice Wangutusi noted that previously, the cases in the Tax Appeals Tribunal had been held in camera at the request of Heritage Oil. He argued that since the parties had earlier agreed to a hearing in camera, the position will remain the same. “In a matter such as this one, confidentiality is meant to safeguard the commercially sensitive information in the extractives industries,” Wangutusi says in his ruling.

Heritage Oil is appealing a November 2011 decision by the Tax Appeals Tribunal, which had ruled in favor of Uganda Revenue Authority to slap US$435m capital gains tax change on the oil company. Heritage had completed the sale of its Ugandan assets to Tullow Oil Uganda at US$1.45bn, and argued that the transaction was not taxable in Uganda. In appealing the decision, they requested the High Court make the proceedings open to the public in court but Uganda Revenue Authority opposed the proposal.

Wangutusi in his judgment indicated that in as much as transparency is important for management on natural resources, disclosure of the certain details – in the Production Sharing Agreements – may prove to be very difficult. Prior to the November 2011 ruling by the Tax Appeals Tribunal, Heritage Oil had sought to halt the proceedings, but the high court denied their application. Mwajuma Nakku, the lawyer of Uganda Revenue Authority noted that Heritage at the time wanted the hearings of that appeal in camera so as to keep out Tullow Oil from the proceedings.

He noted that the request by Heritage was to maintain confidentiality of the matter. In fact, Heritage Oil through Kiwanuka & Karugire then argued that if the proceedings were held in an open court it would be “injurious to the company’s case.” Heritage has since taken on Denis Kusasira and Akunobera. There have been several attempts to have details of PSA’s made public, but all efforts have been quashed by various courts in Kampala. There is also a pending appeal over a decision by the Nakawa Magistrates Court to have PSA’s opened up and also another one in the constitutional court regarding disclosures of PSA’s. The confidentiality mentioned is mainly details in the Production Sharing Agreements (PSA’s) that Heritage Oil signed with the Uganda government.

The hearing of the main suit by Heritage over the decision by the Tax Appeals Tribunal is expected to start in May 2014. There are a host of other cases regarding this deal, with one being the arbitration hearing in London where the Uganda government and Heritage Oil are presenting their cases on whether the capital gains tax imposed was valid. Additionally, when Heritage failed to pay, Tullow paid money on its behalf and subsequently sued Heritage to recover the US$313m it had paid to the Uganda government. Heritage also lost this case in a June 2013 but has since appealed the ruling.

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