Heritage to appeal ruling

 

 

The move follows a decision by a London court on Friday in which Tullow oil won a multi-million dollar court battle against Heritage Oil Company in which it sought to recover $313 million (about Shs780b) it claims to have paid in capital gains taxes on behalf of Heritage Oil. Court also cleared Tullow of allegations of corruption.

 

In his judgment,  Justice Burton of High Court in London found in favour of Tullow’s indemnity claim for US$313 million in its entirety and also dismissed Heritage’s counterclaim. 

 

A statement issued by Heritage’s Chief Executive Officer Tony Buckingham and Paul Atherton the Chief Finance Officer on Friday evening reads in part, “The Company strongly disagrees with the decision. It maintains the view that Tallow’s original payment to the Uganda Revenue Authority was commercially motivated rather than as the result of valid legal obligation.”

 

Heritage said the decision had no bearing on the outcome of an international arbitration proceedings against the Ugandan Government which was ongoing in London.

 

It also said the judgment did not in any way have an impact on the company’s current cash position. “The $283.4 million placed in escrow account in July 2010 by Heritage in relation to any potential Ugandan tax liability remains in escrow in London held by Standard Chartered Bank. Additionally in July 2010, Heritage deposited $121.5 million with the Ugandan Government and so substantially all of the cash has been reserved.”

 

In 2010, the two companies entered into a transaction under which Heritage sold $1.3 billion of Ugandan oil assets pursuant to a Sale and Purchase Agreement (SPA)  to Tullow but left Uganda without paying capital gains tax on the transaction.

 

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.