House bitter over Heritage Oil case billions

Sep 17, 2011

AS a legislative house, Parliament every week handles and makes several decisions. Some decisions are controversial while others are not. Some issues discussed just come and go, attracting no attention.

AS a legislative house, Parliament every week handles and makes several decisions. Some decisions are controversial while others are not. Some issues discussed just come and go, attracting no attention.

Consequently, people have accused Parliament of being a rubber stamp.

However, this view of Parliament somehow changed this week.

The MPs discussed the sh11.9b supplementary budget presented by the justice ministry, causing a storm.
Finance minister Maria Kiwanuka said the money is meant to facilitate the Government’s technical and legal team in the Heritage Oil arbitration case.

Heritage, in May 2011, initiated arbitration against the Government for the release of, among other things, the $404m held by the Uganda Revenue Authority (URA) following the sale of its interests in Blocks 1 and 3A in Uganda on July 26, 2010.

Last year, Heritage sold its stake to UK-based Tullow Oil at $1.45b.

In March, the Government signed a Memorandum of Understanding with Tullow, separating the tax dispute from Tullow’s $2.93b deals with France’s Total and China’s CNOOC.
However, Tullow was forced to pay $313m as security for the unpaid tax bill.

In April, Heritage received a claim from the London High Court in which Tullow is seeking to recover the funds.

A month later, Heritage also began action in London against the Government, saying the sale of its assets in Uganda does not attract a capital gains tax based upon “comprehensive advice” from leading tax experts in Uganda, the UK and US.

The hired legal team comprises lawyers from the Attorney General’s chambers supported by a technical team from the energy ministry and tax experts from URA.

The Government has also engaged external legal counsel to support the legal team.

“The successful defence of the arbitration requires the Government to secure funding to support the activities relating to the arbitration. The money is ring-fenced and can only be removed when there is serious need,” Kiwanuka said.

The case is expected to last three years. Unlike other supplementary budgets, the money is just banked on an Escrow account in Bank of Uganda to cater for the demands as they arise.
For now, over sh200m has already been spent.
Finance permanent secretary Chris Kasami, however, warned that if the money is taken back, the Government risks putting the case in jeopardy because when the lawyers want money, it will not be readily available.

“We are looking at saving over sh1trillion. The sh11b budget is insurance such that when the lawyers say they need money, it is readily available. We have put measures to ensure that it is not misused,” he said.

Parliament, however, rejected the idea of keeping the money on an account and demanded that the balance be taken back to the Treasury.

The MPs argued that on an escrow account, the money is likely to be misused.

Some MPs have argued that given the huge expenses government is likely to incur in allowances and other costs as a result of the case, the predicated oil curse has just began. Others are questioning why the Government agreed to handle the case from London yet the transactions were held in Kampala.

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