Drilling for oil in western Uganda. Tullow Oil has received judgment in its favour in the London Court of Appeal.
What you need to know:
In its judgment, the Court of Appeal ruled in Tullow’s favour on all but one of the points appealed by Heritage.
Less than a week after losing a million dollar case to the Uganda Revenue Authority (URA), Tullow Oil has received judgment in its favour in the London Court of Appeal.
In June 2013, the London High Court ruled in favour of the company’s indemnity claims against Heritage Oil with regard to Capital Gains Tax payment worth $345.8 million Tullow had paid to Uganda on Heritage’s behalf. Heritage was granted permission by the Court of Appeal in September 2013 to appeal certain aspects of the High Court judgment and the appeal was heard in May this year.
However, in its judgment, the Court of Appeal ruled in Tullow’s favour on all but one of the points appealed by Heritage. On this point, Tullow says, it relates to part of one of its indemnity claims and will require the company to repay to Heritage approximately $2.5 million with some interest.
In an email exchange with the Daily Monitor, Tullow Oil Plc head of media relations George Cazenove said the Shs6.5 billion came about “because of a minor point of procedure”.
“The Court of Appeal ruled that we were not wholly indemnified on one of our claims. It ruled that this reduces one indemnity from $30m to $27.5m. Accordingly, we have to pay Heritage $2.5m,” Mr Cazenove said, adding: “This is a tiny sum compared to the $345.8m paid to us by Heritage last year.”
When Tullow took over Heritage’s interests in Uganda, it paid Capital Gains tax to URA, as per the laws of Uganda. Heritage was to pay back the money to Tullow Oil but it later contested the repayment, saying payment was commercially motivated rather than a legal obligation.
Tullow paid the $313 million on behalf of Heritage because URA had designated it as an agent in relation to the transaction between Tullow and Heritage.
Tullow’s argument was that since Heritage didn’t have a CGT waiver for the Exploration Area it had sold to Tullow, it was compelled to pay the capital gains tax and so Tullow agreed to pay it on its behalf and recover the money later.
