Heritage Oil says tribunal decision "fatally flawed"

By Samuel Sanya

HERITAGE Oil has responded to the Tax Appeals Tribunal decision granting the Uganda Revenue Authority (URA) rights to collect $434.9m (sh1.22 trillion) in capital gains tax saying the ruling was “fatally flawed in many respects” and “not final and determinative.”

The firm has issued a statement affirming that following specialist advice received in Uganda, the US and the UK, no tax was due or owing on the $1.5b (sh3.9trillion) sale of its stake in the Lake Albert oil fields  to Tullow oil. 

“Given the publicity this case has generated in Uganda, it was always going to be difficult for the tribunal to rule against Government but we believe firmly in our position that no tax was due in Uganda as a result of the sale of Blocks 1 and 3A,” said Paul Atherton, the Heritage Chief Financial Officer.

"We instigated arbitration in London as provided for in the PSAs (Production Sharing Agreements) as we consider this to be the appropriate avenue and that process is ongoing,

“We will also continue to vigorously pursue all legal forums open to us against this fundamentally flawed ruling," he added.

Heritage in December last year rushed to the High Court to stop the case from being heard in Ugandan courts, however, it was ruled that the tax dispute be heard in the country.

In the statement released, Heritage says it will appeal the ruling through the Ugandan court system commencing with the High Court and subsequently the Court of Appeal and Supreme Court if necessary. 

An arbitration process that started in May between Heritage and the Ugandan government in the International Court of Arbitration in London is still ongoing. 

The oil firm has, however, already deposited $121m (sh312b) in national treasury and the $283.5m (sh730b) balance on an escrow account in the Standard Chartered Bank UK pending a resolution of the dispute. 

In December last year, Heritage oil had announced its intention to transfer its Ugandan petroleum assets to Italian giant ENI. The decision was stayed as Tullow Oil Uganda exercised its first right of option rights and paid the required $1.5b.

Presently, Tullow Oil Uganda intends to transfer 66.6% of its Ugandan interests to France’s TOTAL and China’s National Offshore Oil Corporation (CNOOC) at a cost close to $3b (sh7.7trillion). 

Meanwhile, the Heritage Oil share price has dropped 6% to £160.4 (sh641,600) from £170 (sh680,000) before the ruling on the London Stock Exchange.