ANALYSIS OF EXHAUSTION OF LOCAL REMEDY IN TANZANIA AS A CORPUS

FOR SOVEREIGNTY: A Reflection from SADC and EAC Investment Frameworks

By Prof (Dr) (Dr.Juris) Handley Mpoki Mafwenga*1

Abstract

Local remedies in Tanzania contour the legal environment and help in evaluating the time and
costs involved in adjudication of investment disputes, thereby apprising the decisions of foreign
investors; this includes enabling foreign investors to have access to the domestic legal system.
However, Tanzanian courts habitually apply domestic law as opposed to international law, in
that, it has not been clear as to whether the domestic law may not be sufficient at the level of
international law to safeguard the interests of foreign investors. Tanzania has experienced
litigation under the ICSID arbitral rules; intrinsically, Tanzania was not a shadowy State and
unreceptive witness of international rules but rather the sovereign state that enthusiastically
participated in the formulation of rules regulating interstate commercial relationships. This
article therefore provides analysis on the legal framework in Tanzania which advocates for the
exhaustion of local remedies.
1.0 Introduction
The legal framework of Tanzania as a Host State comprises of its laws, rules and
regulations, public administration, dispute resolution mechanism, execution or
enforcement machinery and the international obligations. In that vein, transparency and
due process in introducing legislative changes and enacting legislation, in addition to

1Prof Handley Mpoki Mafwenga is employed by the Ministry of Finance and Planning: He has pursued
for the Ph.D (Finance), Ph.D (Juris) in International Economic Law and Taxation, MSc (Finance), MBA
(Managerial Economics), LL.M (Taxation), LL.M (Procedural Law & International Legal Practice),
Postgraduate Diploma in Tax Management, LL.B (Hons), Advanced Diploma in Tax Management. [P.O
BOX 2802: Treasury Squire Building: 18 Jakaya Kikwete Road: 40468 DODOMA
mafwenga2000@yahoo.com; hmafwenga@mof.go.tz ]
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political will and macro-economic factors, would likely help Tanzania to regulate the
stability, predictability and effectiveness of its legal framework.

The key factors which were considered before Tanzania has embarked into prioritizing
exhaustion of local remedies to incorporate judicial sovereignty and enabling foreign
investors in accessing justice to Tanzanian Judicial system includes;
1) The quality of judges where Investor-state disputes before local courts demands
specialized and trained judges who have a sound understanding of commercial
disputes. This has currently no doubt in Tanzania Commercial disputes venture;
2) The strength of Tanzanian law governing the investment has been currently
reflected in a body of laws after amendments. The body of law therefore is
coherent and not volatile, as it avoids conflicting interpretation. This would
enhance confidence in the Tanzanian legal framework as a Host State, standing
on the edge of stability; and
3) The legal costs and expenses involved in litigation including the time normally
consumed in the investor-State dispute litigation has been a key factor taken into
consideration. Specifically, consideration of the value of investments at stake, the
losses that would be caused and the consequent erosion of expected economic
benefit. (See also Kshama & Vyapak, 2018)2
Furthermore, domestic judicial procedures are regarded in Tanzania as easier to access
and more efficient at determining a claim. Therefore, access to international
enforcement mechanisms have been viewed as the last resort, because Tanzania must be
given an opportunity to correct the violation or to carry out justice.

By virtue of Section 3 Article 41 of the ICSID Convention, the proceedings of cases

under ICSID tribunals are comprised of two stages; (1) proceedings on a preliminary
question of jurisdiction where an objection at this stage deals with the elements
stipulated in Article 25 of the ICSID Convention and (2) competence of the tribunal and
proceedings on the merits of disputes3 which concern with respect to at least one or all
of its elements which are rationae temporis, loci, personae, et materiae) (see Urbaser S.A and
Consorcio de Aguas Bilbao Bizkaia, Bilbao Biskaia Ur Partzuergoa v the Argentine Republic)4.

2 Kshama Loya Modani & Vyapak Desai, (2018): ―Exhaustion of Local Remedies in Bilateral Investment
Treaties— A Guide for Foreign Investors” IPA Legal Updates
3 ICSID, art 41
4 Urbaser S.A and Consorcio de Aguas Bilbao Bizkaia, Bilbao Biskaia Ur Partzuergoa v the Argentine

Republic (Decision on Jurisdiction) ICSID ARB/07/26, 19 December 2012, para 126

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However, resort to prior remedies does not fall within the elements to test whether a
tribunal has power and competence to adjudicate a case as the power and the
competence of the tribunal lies within the elements pursuant to article 25 of the ICSID
Convention.

In the second stage of tribunal‘s proceedings which is on the merit of the claims, to test
whether the claims has merit to be adjudicated under international investment treaties,
tribunals are entitled to examine the characteristic of the claims from the outlook of
substantives rights protected by the treaty. Such substantive rights conferred to foreign
investors include, among others fair and equitable treatment, non-favoured nation treatment,
protection from denial of justice, and protection from uncompensated expropriation (Campbell
Mc Lachlan, et al 2007)5. Issues of exhaustion of local remedies fall exclusively within
the second stage, concerning with the merits of the claims. In the event of allegation of
treaty breaches, such issues are overtly employed to substantiate whether or not denial
of justice against foreign investors has been committed by the domestic court of the host
state where the investment is performed and executed.

International claims are realistically invoked on the basis of two classes of injuries,
namely; direct injuries and indirect injuries (Illiyumade, O. 1994)6 The first is a wrongful
act allegedly committed by a state against an immediate interest of another state. In this
framework the rule of exhaustion of local remedies under customary international law
does not apply on the grounds that states have an equal sovereignty. The Corfu
Channel Case (the United Kingdom v Albania)7 illustrated that;
―An international wrongful act committed by a state (Albania) against an
immediate interest of another state (UK) may be brought to an international
court by the UK without first resorting to the local remedies available in
Albania‖.

5 Campbell Mc Lachlan QC, Laurence Shoer and Matthew Weiniger International Investment Arbitration
Substantive Principles (Oxford University Press, Oxford, 2007), at 11
6 Illiyumade, O. ―Dual Claim and the Exhaustion of Local Remedies Rule in International law‖, 10 Van.H.

Trans nat‘l L 83 at 1 (1994)

7 Corfu Channel Case (the United Kingdom v Albania) (Merits) (1949) ICJ Rep 4

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The second is indirect injury, well-defined as a wrongful act committed by a state
against an alien of another state. In this context the rule of exhaustion of local remedies
under customary international law applies on the grounds that the host state where the
investment is performed or executed is given an opportunity to repair the damages and
failure to redress the damages by the host state may raise an international claim
(Illiyumade, O.)8. Among the international claims grounded on indirect injuries to a
state is the Interhandel case (Switzerland v United States of America)9, which was litigated
in the ICJ between Switzerland against the US.
However, exceptions of the applicability of rule of exhaustion of local remedies are
recognised under international customary law; the remedies available in the host state
should not be pursued if it would be in effective or obviously futile or the court
available in the host state is not competent to hear the case (Amerasinghe, C F (1994)10.
2.0 What does “Exhaustion of Local Remedy” Mean?

The Exhaustion of Local Remedies (ELR) rule is primarily a customary international law
rule which aims at safeguarding state sovereignty by requiring individuals or
corporations to pursue redress for any harm allegedly caused by a state within its
domestic legal system before pursuing international proceedings against that state (see
Martin Dietrich Brauch, 2017)11. Therefore, where Tanzania commits an act that injures
a foreign investor such as unfair expropriation, lack of National Treatment Standards,
civil war which would destruct investor‘s property etc, the victim conventionally must
legally exhaust all the effective domestic legal remedies in Tanzania before its home
government which is known as an exporting capital state can choicely espouse its claim
in the exercise of diplomatic protection.

8 Ibid Note 6
9 Interhandel Case (Switzerland v United States of America) (Preliminary Objection) (1959) ICJ Rep 6
10 Amerasinghe, C F (1994); “Local Remedies in International Law” (1st Ed, Press Syndicate of the
University of Cambridge, Cambridge, 1994)
11 Martin Dietrich Brauch, (2017): “Exhaustion of Local Remedies in International Investment Law” IISD Best

Practices Series: Exhaustion of Local Remedies in International Investment Law: Winnipeg, Manitoba
Canada
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In this context, local courts in Tanzania where an allegedly wrongful act has been
committed and preferably where investment have been made should unconditionally
be given an opportunity to repair the damages; so as to substantiate that Tanzania as a
host state which is also known as capital importing state has failed to dispense justice to
an alien who has invested in Tanzania (see also Muniroh Rahim, 2015)12; see also
Cançado Trindade, 1983, p. 1)13; Newcombe & Paradell, 2009, p. 6)14

Furthermore, the ELR clause in a treaty framework allows a State seeking to take a
claim on behalf of an investor or investment to argue while showing evidences that no
local remedies are available under which to challenge the underlying measure. An
international investment claim brought by state‘s espousal under diplomatic protection
rules should satisfy the requirement of exhaustion of local remedies and failure of the
individual or corporation to do so leads to the case being unequivocally inadmissible
before the international forum (see also James Crawford Brownie‘s, 2012)15.

The ELR objectives is to safeguard state‘s sovereignty and in international investment

law, this rule has in great measure been dispensed with, as states conclude investment
treaties and chapters under which they give advance consent to international arbitration
with foreign investors. This practice is understood to mean that the investor could
initiate a claim without prior recourse to the host state‘s administrative or judicial
courts. Even under treaties lacking an explicit or implicit waiver of the exhaustion rule,
arbitral tribunals which have tended to rule on their own jurisdiction have generally

12 Muniroh Rahim, (2015); “Is A Requirement of Resort to Prior Remedies Jurisdictional?” LL.M Research
Paper: Victoria University of Wellington
13 Cançado Trindade, A. A. (198 13 ICSID Convention art 26 (3): “The application of the rule of exhaustion of

local remedies in international law: Its rationale in the international protection of individual rights”. Cambridge:
Cambridge University Press.
14 Newcombe, A. P. & Paradell, L. (2009); “Law and practice of investment treaties: Standards of treatment”.

Austin: Kluwer Law International.

15 James Crawford Brownie‘s (2012); “Principles of Public International Law” (8thed, Oxford University

Press, Oxford, 2012)

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allowed foreign investors to bypass local remedies (Martin Dietrich Brauch, 2017)16.
Jurisdiction in this context, refers to ―the court‘s prima facie capacity to entertain a
dispute, and this is determined by whether the court as the case may be arbitral tribunal
regards itself as a competent authority to hear and determine the dispute (Mary Keyes,
2005)17

Ikenson(2014)18 argues that BITs and investor-state dispute settlement (ISDS) give
foreign investors privileges unavailable to domestic firms, and undermine state
sovereignty by offering a means for investors to intimidate host governments to change
policies arrived at through the democratic process. Moreover, exhaustion of local
remedies gives rights to investor to have access to the justice through domestic legal
system under the auspices of the principle of natural justice more commonly termed as
―the right to be heard‖. Therefore it is a constitutional right which has to be executed by
the Laws guiding investment activities.

Nevertheless, certain investment treaties entail the irrefutably pursuit or exhaustion of

local remedies whether administrative, judicial or both for a specified period that
ranges from three months to five years before a foreign investor has decided to initiate
international proceedings against the host state. Not requiring a final decision by the
domestic courts, these provisions do not reflect the ELR rule as typically understood in
international law (See Siemens A.G. vs The Argentine Republic)19. Therefore, ELR rule
should not be interwoven with somewhat similar provisions in investment agreements
which are; cooling-off period, Exclusive forum choice clauses, and Fork-in-the-road
clauses.

16 Martin Dietrich Brauch, (2017): “Exhaustion of Local Remedies in International Investment Law” IISD Best
Practices Series: Exhaustion of Local Remedies in International Investment Law: Winnipeg, Manitoba
Canada
17 Keyes Mary “Jurisdiction in international litigation” Federal Press, Sydney, (2005) at 36
18 Ikenson, Daniel J., “A Compromise to Advance the Trade Agenda: Purge Negotiations of Investor-State Dispute

Settlement,” The Cato Institute, March 4, 2014.

19 Siemens A.G. vs The Argentine Republic, ICSID Case No ARB/02/8, Decision on Jurisdiction, para 104

(Aug. 3, 2004)
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2.1 Cooling-off period

This is also known as “waiting periods”; several treaties entail disputing parties to resort
to amicable means of dispute settlement for a specified period before initiating
international arbitration which include negotiation, conciliation and mediation, but do
not include local administrative or judicial remedies. This approach was remarkably
followed in Biwater Gauff vs Tanzania20, where ICSID tribunal held a six-month waiting
period to be ―procedural and directory in nature, rather than jurisdictional and
mandatory.‖ (2008, para 343) The tribunal observed that:
―a contrary finding would have ‗curious effects‘, such as ‗preventing the prosecution of
a claim, and forcing the claimant to do nothing until six months have elapsed, even
where further negotiations are obviously futile, or settlement obviously impossible for
any reason‘, and ‗forcing the claimant to recommence an arbitration started too soon,
even if the six-month period has elapsed by the time the Arbitral Tribunal considers the
matter.‖ (ICSID, Biwater Gauff v Tanzania, 2008, para 343) (See Aravind Ganesh,
2017)21
Reed et al, (2011, 97-98)22 consider this approach to be the most extensively adopted in
the arbitration practice. In that regard, the treaty must be enforceable and valuable.
However, numerous traditions of contract law treaty agreements to negotiate are often
as unenforceable for vagueness. (See Born, 2014, 918-91923; Born and Šćekić, 2015, 231-
232)24 For instance, the House of Lords has held that;
―A duty to negotiate in good faith is as unworkable in practice as it is inherently
inconsistent with the position of a negotiating party... while negotiations are in existence
either party is entitled to withdraw from these negotiations, at any time and for any
reason. There can be thus no obligation to continue to negotiate until there is a ‗proper
reason‘ to withdraw. Accordingly, a bare agreement to negotiate has no legal content‖.
(UK House of Lords, Walford v Miles, 1992, 138) (See Ganesh, Aravind, 2017)25

20 Biwater Gauff (Tanzania) Limited vs. United Republic of Tanzania (ICSID Case No. ARB/05/22
21 Ganesh Aravind (2017); “Cooling off period” Max Planck Institute Luxembourg. Department of
International Law and Dispute Resolution
22 Reed, L. Paulsson, J and Blackaby, N. (2011); “Guide to ICSID Arbitration” (Kluwer Dordrecht 2011).
23 Born, G. (2014); “International Commercial Arbitration” (2nd edn Kluwer Dordrecht 2014) Vol 1.
24 Born, G & M Šćekić, (2015); “Pre-Arbitration Procedural Requirements: „A Dismal Swamp”, in E Triantafilou

and A Cohen Smutny (eds) Practising Virtue: Inside International Arbitration (OUP Oxford 2015) 227-
263.
25 Ibid Note 21

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BITs require a written notification or ―trigger letter‖‘, which marks the start of the
cooling off period. In Lauder v Czech Republic26 the ad hoc UNCITRAL tribunal found that
―the cooling off period began not on the date of the breach, but on the date the state was
put on notice of it‖.

The jurisprudence on cooling off clauses divulges substantial diversity, prompting

some analysts to condemn it as a ‗dismal swamp.‘ (Born and Šćekić, 2015, 227)27. The
first views cooling off clauses as mere exhortations to attempt Alternative Dispute
Resolution (‗ADR‘), rather than as suitable legal obligations. The second construes such
clauses as ‗conditions precedent‘ to arbitration, and as imposing a defeasible obligation
to pursue ADR upon the claimant to negotiate unless futile. Non-compliance with this
obligation enforces the tribunal of jurisdiction to hear the dispute. A third line of
reasoning falls somewhere between the first two: cooling off provisions are
characterized as contractual obligations, breach of which results not in lack of
jurisdiction or inadmissibility, but in damages or injunctive relief (See Aravind Ganesh,
2017)28

2.2 Exclusive forum choice clauses

Some investment treaties and contracts designate an exclusive jurisdiction to the

domestic courts as the exclusive forum for settling disputes. This framework is also
known as “Mandatory forum”, where domestic courts are an exclusive choice;
contrasting to the ELR rule, “exclusive forum choice clauses” do not construct pre-
conditions to initiate international arbitration. The Clause can read as follows;
―Any litigation based hereon, or arising out of, under, or in connection with this
Agreement, shall be brought and maintained exclusively in courts located in the United
Republic of Tanzania. Each party to this Agreement consents to the jurisdiction thereon
or and agrees that any personal service of process may be made by registered or certified

26 Lauder v Czech Republic, Final Award, 3 September 2001, (2006) 9 ICSID Rep 62, (2006) 9 ICSID Rep 66
Ad Hoc Tribunal (UNCITRAL),
27 Ibid Note 24
28 Ibid Note 25

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 mail to the notice address as set forth in Section ………….. hereof, and as the same may
be changed from time to time as provided therein‖.
It has nowadays become common practice for contracts to include a provision that sets
out where future disputes are to be litigated and what law will apply. Practical,
financial or commercial considerations often factor in on this choice. A forum selection
clause basically names the jurisdiction, commonly referred to as the ―forum‖, where the
dispute is to be resolved (Brett G. Harrison, 2005)29. In Tzortzis vs. Monark Line, A/B30 it
was held that a contract for the sale of a ship which provided for arbitration in London
was to be governed by English law even though the contract was most substantially
connected with Sweden. Lord Denning, M.R., formulated the rule as follows:

―It is clear that if there is an express clause in a contract providing what the proper law
is to be, that is conclusive in the absence of some public policy to the contrary. But where
there is no express clause it is a matter of inference from the circumstances of the case‖
In the similar vein, a governing law and choice of forum clause deals with two distinct
issues: (1) the choice of law that is to govern any dispute arising under the agreement;
once the governing law is chosen, the selected law becomes the law of the contract and
will generally be upheld by courts, provided that it is bona fide, legal and not contrary
to public policy; and (2) the choice of forum where disputes will be heard. These issues
are often dealt with in a single provision but can also be dealt with separately (Nick
Kangles& Theresa Kim, 2017)31.

2.3 Fork-in-the-road clauses

These clauses specify alternative forums to which the investor, at her choice, may
submit an investment dispute; they moreover define that the choice made is final. In the
same vein, fork-in-the-road clauses do not establish that domestic remedies should be the
first step before escalating the dispute to the international level; if the investor chooses

29 Brett G. Harrison, (2005); “A Clause in Time Saves Time, Money and Maybe Even Your Case… How Proper
Jurisdiction and Governing Law Clauses May Give You One Less”: Cross-Border Litigation Bulletin: Mcmillan
Binch Mendelsohn Thing to Worry About in Cross-Border Contracts
30 Tzortzis vs Monark Line, A/B. [1968] 1 W.L.R. 406
31 Nick Kangles & Theresa Kim (2017); ―Governing law and choice of forum clause Explained‖ Lexis

Practice Advisor: Canada

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to resort to domestic remedies, that choice forecloses the option of resorting to
international arbitration.

In bilateral investment treaties (BITs), the claimant investor must make a choice
between pursuing its claims against the state either through the arbitration mechanisms
provided in the relevant BIT or in local courts or other venues provided for in the
relevant contractual mechanisms. In Occidental v Ecuador32, Ecuador argued that the
USA-Ecuador BIT contained a FITR provision which prevented the claimant from
bringing an investment treaty claim due to its already having challenged the offending
legislation before local courts. The tribunal demurred, accepting instead the claimant‘s
argument that:
―The investment treaty claim was founded upon the question of its rights under the BIT;
and the local action was founded upon the question of the legality of the legislation
under local law. Although the objective of these actions – a declaration that the local
legislation was illegal – was similar, the causes of action underlying the claims were
distinct. The tribunal also suggested that FITR clauses are predicated on a true and free
‗choice‘ between alternate avenues, which may be defeated if there are onerous timelines
which urge a claimant toward choosing one over the other (e.g. 20 days for the claimant
to challenge the VAT law under Ecuadorian law, failing which it became final and
binding)‖.
By virtue of the Article 26 of the ICSID, the ―exhaustion of local remedies under
customary international law‖ is comparatively different from resort to prior remedies
under international investment treaties. Contracting parties to the ICSID Convention
waived their rights to invoke the diplomatic protection doctrine of customary
international law should international claims be brought at the international level.
Therefore, foreign investors, whose home country and the country where the
investment is made are contracting parties to the Convention, are not required to
exhaust local remedies before seeking international arbitration (Amerasinghe, C F
(1994)33. However, (Rudolf Dolzer & C. Schreuer, 2012)34 argue that, Contracting States

32 Occidental v The Republic of Ecuador (UNCITRAL Case No UN3467)

33 Ibid Note 10
34 Rudolf Dolzer & C. Schreuer (2012); “Principles of International Investment Law” ( 2nd edition Oxford

University Press, Oxford, 2012), at 389

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would be free to impose such an exhaustion requirement in their instrument of consent
Several states have reinstated a mandatory requirement to pursue or exhaust local
remedies for the settlement of investment disputes in their investment treaties which
empower domestic legal systems and avoid their bypassing. SADC35 and EAC regions,
have also reintroduced a mandatory requirement to pursue or exhaust local remedies
for the settlement of investment disputes in their investment treaties.

3.0 Origin of the Local Remedies Rule

Denial of justice was archaeologically the utmost industrialized measure of the

international standard on the treatment, providing the international obligation of the
treatment of aliens in administration of justice. Therefore, denial of justice becomes
internationally wrongful only after the whole system of administration of justice has
been put to the test by exhaustion of local remedies. Roberto Ago (2010)36 argues that;

―An internationally wrongful act as understood in the term "denial of justice" is not
considered as complete until the higher courts have successively given their judgment
and confirmed the decision of the court of first instance‖
Amerasinghe Chittharanjan (2004)37, argue that the local remedies rule, like many
similar principles of international law was established through non-judicial practice;
diplomatic means entirely received recognition in a formal dispute resolution body. In
that, Aliens resident in another region has had some kind of protection since at least the
14th century. In its early period, diplomatic protection was only functional as giving an
individual right to reprisal against an individual from the host area, where none was
provided there (Joel Dahlquist, 2012)38. This kind of private reprisal with public

35 Article 28: (28.3 and 28.4) : State-State Dispute Settlement SADC Model Bilateral Investment Treaty
36 Roberts, Ago ―Power and Persuasion in Investment Treaty Interpretation: The Dual Role of States‖
(2010) 104 AJIL 179.
37 Amerasinghe, Chittharanjan F, (2004): “Local Remedies in International Law”, 2nd ed., Cambridge

University Press Cambridge, 2004. Cited: Amerasinghe 2004

38 Dahlquist, Joel, (2012); “How to BITe the Apple Is There a Requirement to Exhaust Local Remedies in

Investment Treaty Arbitration?” Master Thesis: International Trade Law, Public International Law,
Procedural Law: Faculty Of Law Lund University
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sanction was practiced in international relations for a long time and the injured party
needed to exhaust local remedies before requesting right to reprisals.

In the 1600s and 1700s, as nation States were formed in the USA, the principle that
reprisals could only be pursued after a failed or delayed attempt at local rectification
entered the growing treaty body (Joel Dahlquist, 2012)39. As private reprisals slowly
changed into public ones, the idea that local judicial mechanisms should be tried first
persisted; the first time the local remedies rule was actually applied in a structured
context was in 1863, in a case between Montano, Peru vs. USA,40.

In Tanzania, the first recorded treaty that involved a form of taxation was in 1502
immediately when Portuguese explorer Vasco da Gama Estêvão reached Kilwa on a
second expedition on 14th July, 1502. The then Sultan Emir Ibrahim of Malindi was held
against his wishes and forced to accept defeat and while being detained hostage during
negotiations on Vasco da Gamma‘s boat, a treaty of surrender was signed with Portugal
for an annual tribute of 1,500 meticals of gold ―the gold dinar coin that was used
throughout much of Africa until the 19th century‖ (see also Strandes, Justus, 1989)41.

However, in Tanzania, the then Tanganyika as British Protectorate, Britain concluded

seventeen bilateral commercial treaties for and on behalf of the people of Tanzania
without seeking approval from Tanzanian tribal chiefs (Seaton, E.E & Maliti, S.T
(1973)42. Furthermore, the government of Tanzania issued declaratory statements to
third party states notifying them that Tanzania considered such commercial treaties
obsolete and was not bound by the undertakings. The government of Tanzania after
acquiring independence terminated virtually all commercial treaties concluded during
the colonial period on the premise that such treaties had been concluded with British

39 Ibid Note 38
40 Montano, Peru vs. USA, 1863, from Moore, JB, A Digest of International Law 8th ed, US Government
Printing Office, 1906, p.1630. Cited: The Montano Case
41 Strandes, Justus (1989); “The Portuguese Period in East Africa” (Kenya Literature Bureau, Nairobi, Kenya)

Vol 41
42 Seaton, E.E & Maliti, S.T (1973); “Tanzania Treaty Practice” (OUP 1973) 66.

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interests in mind rather than Tanzanian interests. Therefore, Tanzania congruently
resisted traditional international law principles developed during the colonial period.

During the colonial period, foreign direct investment was made predominantly in the
framework of colonial expansion and as such foreign investors exporting capital
required minimal protection (Sornarajah, M. (2004).43 Manifestly therefore, investors
transferring capital or engaged in foreign conquests received adequate protection both
at the pre-establishment and the post-establishment stage (Sornarajah, M. (2004).44

Carlos Calvo formulated the Calvo doctrine in 186845 which postulates that foreign
investors should not receive treatment better than that accorded to domestic investors
and restrains home states from pursuing investment claims through the ambit of
diplomatic protection. Practically, this means that aggrieved foreign investors must
seek recourse through domestic courts notwithstanding any doubts about real or
perceived impartiality that foreign investors may have against domestic courts.

Commenting on the Calvo clause the Commission in the North American Dredging
Company of Texas (USA) vs United Mexican States46 held that ―The Calvo clause is neither
completely valid nor competently invalid. The Commission sought to strike a balance
between diplomatic protection and the Calvo clause‖. Precisely, according to the
decision of the Commission, so long as aggrieved foreign investors exhaust local
remedies, nothing proscribes home states from exercising diplomatic protection on
behalf of foreign investors (see Mavrommatis Palestine Concessions (Greece v United
Kingdom),47

43 Sornarajah, M. (2004); “The International Law on Foreign Investment‖ (2nd edn, Cambridge University
Press 2004) 9.
44 Ibid Note 43
45 Carlos Calvo (1968); “International Law of Europe and America in Theory and Practice”
www.britannica.com/bps/topic/90348/Calvo-Doctrine
46 North American Dredging Company of Texas (USA) v United Mexican States, 4 R.Int‘l Arbitration

Awards 1926, para 22

47 Mavrommatis Palestine Concessions (Greece v United Kingdom), (Jurisdiction)1924 PCIJ (ser.B) No.3

(Aug. 30)
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It is worth noting that the Commission did not rule out the likelihood of states adopting
the Calvo clause either in contracts, constitutions or national legislation. The investment
system was predominantly imperialist in nature and designed for the purposes of
economically exploiting weak states such as indigenous African states. Secondly,
provisions articulated in early FCN treaties which existed before Calvo doctrine
inadequately protected foreign investors because FCN treaties aimed essentially at
promoting commercial relations as opposed to offering foreign investors favourable
protection making diplomatic protection followed with coercive excessive force
inevitable (Kenneth J Vandevelde,2010)48.

After the First World War, Tanzania practiced protectionist measures aimed at
improving economic conditions and preserving the social welfare of their citizens this
includes among others Arusha Declaration, of 1967 (See also Rondo Cameron, 1997)49;
Mafwenga, H.M, 2014)50. Influential African nationalists like Dr Kwame ―Francis Nwia
Kofi‖ Nkrumah of Ghana one of the founding members of the Non-Aligned Movement
(NAM) supported by Mwal (Dr) Julius ―Mugendi‖ Kambarage Nyerere of Tanzania
and Dr Kenneth David Kaunda of Zambia argued fervently for nationalisation of
natural resources and postulated that it is possible for state revenue, profits from mines
and marketing boards to be shared equally despite the size of the state (Michael Barratt
Brown, (1995)51.

The NAM was founded during the collapse of the colonial system and the
independence struggles of the peoples of Africa, Asia, Latin America and other regions
of the world and at the height of the Cold War. Throughout its history, the Movement
of NAM has played a fundamental role in the preservation of world peace and security.

48 Kenneth J Vandevelde, (2010); “Bilateral Investment treaties: History, Policy and Interpretation” (OUP 2010)
38.
49 Rondo Cameron, (1997); “A Concise Economic History of the World: From Palaeolithic Times to the Present”

(3rd edn, OUP 1997) 371-80.

50 Mafwenga, H.M. (2014); “Do Bilateral Investment Treaties Increase FDIs to Developing Countries” Investors

Forum on Investment Policy and Law; Ministry of Finance-Policy Analysis Department (The Treasury)
51 Michael Barratt Brown, (1995); ―Models in Political Economy” (2nd edn, Penguin Books 1995) 193-274

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A key role was played in this process by the then Heads of State and Government
Gamal Abdel Nasser of Egypt, Kwame Nkrumah of Ghana, Shri Jawaharlal Nehru of
India, Ahmed Sukarno of Indonesia and Josip Broz Tito of Yugoslavia, who later
became the founding fathers of the movement and its emblematic leaders.

Furthermost outstandingly, Mwal Julius Nyerere of Tanzania provided the intellectual

and ideological locus through which third world countries could prompt demands for
the establishment of a New International Economic Order (NIEO) that allowed all the
peoples of the world to make use of their wealth and natural resources and provided a
wide platform for a fundamental change in international economic relations and the
economic emancipation.

NAM successfully institutionalised UNCTAD and pressed for the Declaration

demanding a NIEO. Furthermore, the Bretton Woods conferences envisaged the
establishment of an International Trade Organisation that would formulate and adopt
fair trade rules binding on member states. In that, the 1947 Havana charter which aimed
at establishing rules for international cooperation including trade, investment
regulations and economic development attributed to the success of the Bretton Woods
conferences52.

From the mid-20th century, the local remedies rule was established as customary
international law in cases of diplomatic protection, as demonstrated in judgments and
awards such as Interhandel, Switzerland v. United States of America53, Finnish Ships
(Finland vs Great Britain) 54 and Ambatielos Arbitration55. However, Protection of
investors‘ rights is however something different than diplomatic protection, because it
is based on the mentioned State agreement and not on a softer principle of international

52 Articles 11 and 12 of the Havana Charter

53 Interhandel, Switzerland vs United States, Interim Measures of Protection, Order, [1957] ICJ Rep 105,
ICGJ 170 (ICJ 1957), 24th October 1957, International Court of Justice [ICJ] & Interhandel, Switzerland vs.
United States of America, Issued by the International Court of Justice March 21 1959. ICJ Reports 1959, 27
Cited: Interhandel
54 Finnish Vessels in Great Britain during the War (Finland vs Great Britain) 3 RIAA 1481; 7 ILR 231
55 The Ambatielos Claim (Greece, United Kingdom of Great Britain and Northern Ireland)

15 | P a g e
law. Bilateral Investment Treaties (BITs), the most common agreement on which to
base investment arbitration, often refer to a specific investment dispute rule set or
institution, the most established being ICSID, but also other rules to be used are under
UNCITRAL. The ICSID rules dismiss the local remedies rule by excluding it unless
otherwise quantified, as per article 26 ICSID Convention, while the UNCITRAL rules
are inaudible, leaving it entirely up to the parties because these arbitration rules, though
used frequently in investment arbitration, were drafted in a purely commercial context
– meaning that pursuit of local remedies would undermine the premise for the rules.

We could see about eleven recent relevant investor-State cases when an arbitration
tribunal has discussed the substantive or procedural function of the local remedies rule.
In the case of Chevron vs Ecuador (US - Ecuador BIT)56; Encana Corporation vs. Ecuador
(Canada - Ecuador BIT)57; Marvin Feldman vs Mexico (NAFTA)58; Helnan vs Egypt
(Denmark - Egypt BIT)59; Loewen Group Inc. vs United States (NAFTA)60; Pantechniki vs
Albania (Greece - Albania BIT)61; Parkerings-compagniet AS vs Lithuania (Norway -
Lithuania BIT)62; Saipem vs Bangladesh (Italy - Bangladesh BIT)63; Waste Management Inc
vs United Mexico States (NAFTA)64; Yaung Chi Oo Trading PTE Ltd vs Myanmar

56 Chevron Corporation and Texaco Petroleum Corporation vs The Republic of Ecuador, UNCITRAL
Arbitration PCA Case No. 34877, Partial Awards on the Merits, Issued March 30, 2010. Cited:
Chevron/Texaco
57 EnCana Corporation vs Republic of Ecuador, LCIA Case No UN348, issued Feb. 3 2006. Cited: EnCana
58 Marvin Feldman v. Mexico, ICSID Case No ARB(AF)/99/1, Award issued Dec 16, 2002. Cited: Feldman
59 Helnan International Hotels A/S vs Arab Republic of Egypt, ICSID Case No ARB/05/19, Award issued

July 3, 2008.
60 Loewen Group Inc. vs United States, ICSID Case No ARB(AF)/98/3, Award on the merits issued June

26 2003, 7 ICSID Rep. 44.

61 Pantechniki S.A. Contractors & Eng‘rs vs The Republic of Albania, ICSID Case No ARB/07/21, Award

issued July 30, 2009.

62 Parkerings-compagniet AS vs. Republic of Lithuania, ICSID Case No ARB/05/08: Issued Sep 11th,

2007.
63 Saipem S.p.A vs The Peoples‘ Republic of Bangladesh, ICSID Case No ARB/05/07, Award: issued June

30, 2009. Cited: Saipem

64 Waste Management Inc vs. United Mexico States II, ICSID Case No. ARB (AF)/00/03, Final Award

issued Apr. 30 2004, 43 I.L.M 967. Cited: Waste Management II

16 | P a g e
(ASEAN)65; and Generation Ukraine Inc. vs Ukraine (Ukraine - US BIT)66. In several of
these cases, were governed either by ICSID or UNCITRAL rules, did the rule find its
way into the tribunal‘s reasoning even though the underlying treaties excluded it. This
was managed by applying the rule as part of the substance of the claim, as opposed to a
procedural requirement.

Egypt is a leading State in Africa to have more cases at the ICSID with 29 while
Tanzania has only 4 cases similar to Republic of Congo, Gabon, Gambia, Burundi, and
Tunisia. Tanzania signed the ICSID Convention on 10th Jan, 1992 and deposited its
instrument of ratification on 18th May, 1992, the Convention entered into force for
Tanzania on 17th June, 1992. Graham Mayeda; (2008)67 argues that international
investment agreements have a detrimental effect for developing countries because limit
a government‘s ability to regulate in the public interest, especially where these interests
run counter to the foreign investors. In the same vein, Tienhaara, (2011) 68 argues that
investment treaties do not offer states sufficient regulatory space or appropriate
deference to regulate in the public interest.

65 Yaung Chi Oo Trading PTE Ltd vs. Myanmar, ASEAN I.D. Case No ARB/01/1, Award: issued March
31 2003. Cited: Yaung Chi Oo
66 Generation Ukraine Inc. vs Ukraine, ICSID CASE No ARB/00/9, Award Sept. 16 2003, 44 I.L.M 404.

Cited: Generation Ukraine

67 Graham Mayeda; (2008); "International Investment Agreements between Developed and Developing Countries

Dancing with Devil?” : Case comment on the Vivend, Sempra and Enron Awards" (2008) 4 McGill
International Journal on Sustainable Development Law & Policy 189
68 Tienhaara, Kyla (2011); “Regulatory chill and the threat of arbitration: A view from political science” in

Chester Brown & Kate Miles (eds), Evolution in Investment Treaty Law and Arbitration (Cambridge
University Press 2011) 606-627.
17 | P a g e
Figure 1: Number of Cases Submitted To the ICSID As of 2017 (Excluding Countries that Have no Cases at
the ICSID)
35

30 29

25
NUMBER OF CASES

20

15

10 9
7
6
5
5 4 4 4 4 4 4 4
3 3 3 3 3 3 3 3 3 3 3
2 2 2
1 1 1 1 1 1 1 1 1 1 1
0

Mali
Burundi

Cameroon

Togo
Gabon

Ghana

Kenya
Burkina Faso

Cabo Verde

Congo, Rep. of

Gambia, The
Equatorial Guinea

Guinea

Liberia

Mauritius

Rwanda
Senegal
Algeria

Central African Republic

Libya

Mozambique

Nigeria

Tanzania
Congo, Democratic Rep. of

Madagascar

Morocco

Niger

Seychelles
Egypt, Arab Rep. of

Mauritania

South Africa
South Sudan
Sudan

Tunisia
Uganda
Zimbabwe
Côte d’Ivoire

Number of ICSID Cases

AFRICAN STATES
Source: Mafwenga, H.M (2019)

Likewise, Paulsen and Aishett (2013)69 argue that many BIT negotiators from
developing countries do not thoroughly assess the implication of signing BITs and do
not take decisions seriously, partly due to lack of capacity and expertise. Based on this
argument, we can conclude that, settlement of international investment disputes
through ICSID may lack credibility and precious reflection of the real economic, legal
and other social realities.

Prior to the colonial period Tanzania participated in commercial activities within its
boundaries, established diplomatic links and concluded both intra-Africa treaties and
International agreements (see also Elias, T.O, 1988)70. Collins et al71, argue that foreign
investors can recourse their disputes to international commercial arbitration process
only if the state granted its consent to arbitration by contracts. However, the ICSID itself

69 Lauge N. Skovgaard Poulsen and Emma Aisbett (2013); “When the Claim Hits: Bilateral Investment
Treaties and Bounded Rational Learning”. World Politics 65 (2): 273-31.
70 Elias, T.O, (1988); “Africa and the Development of International Law” (Richard Akinjide ed, 2nd edn,

Kluwer Academic Publishers 1988) 3-15.

71 Lawrence Collins et al; (2006); “The Conflict of Laws”, 14th Edition, Sweet & Maxwell Publishers, 2006 at

page 779
18 | P a g e
does not monitor investments or resolve investment disputes. Instead, it executes the
administrative functions essential to establish and support the operation of
international arbitration tribunals. The enormous mainstream of developing countries
have been exposed to ICSID72 proceedings for breach of BIT treaty standards-for
example African states have been involved in 84 ICSID proceedings which represents
close to 22% of all ICSID proceedings (Karel Daele, 2012)73 .

The condition that ICSID arbitration or conciliation could only be initiated ―after the
exhaustion of all local administrative and judicial remedies‖ was included, with slightly
varying language, in three BITs concluded by the Netherlands in the early 1970s: with
Malaysia (1971), Singapore (1972)74 . Other treaties like the 1976 Germany–Israel BIT
also provided that: ―Local judicial remedies shall be exhausted before any dispute is
submitted to an arbitral tribunal.‖75 The East African Community (EAC) Model
Investment Treaty, adopted in February 2016, also requires exhaustion of
administrative remedies and pursuit of judicial remedies, incorporating the same
language of the SADC Model BIT (EAC, 2016).

72 Presently ICSID has registered 369 cases under the ICSID Convention and Additional Facility Rules.
For detailed statistics see ICSID, The ICSID Case Load-Statistics Issue 2012-1 (ICSID Secretariat 2012).
73 Karel Daele, ‗Investment Disputes across Africa: Lessons to Be Learned From‘ (2012) 6

http://www.africanlaw.org/images/papers/daelepaper.pdf
74 Agreement on Economic Co-operation between the Kingdom of the Netherlands and Malaysia, Malay.–

Neth., art. 12, (June 15, 1971), retrieved from

http://investmentpolicyhub.unctad.org/Download/TreatyFile/1959;
75 Treaty between the Federal Republic of Germany and the State of Israel concerning the Encouragement

and Reciprocal Protection of Investments, Ger.–Isr., (June 24, 1976), art. 10, para. 5, retrieved from
http://investmentpolicyhub.unctad.org/Download/TreatyFile/1344 .
19 | P a g e
Figure 2: Type of Cases Registered Under the ICSID Convention and Additional Facility Rules

Source: ICSID (2019)

4.0 Measures Taken By Tanzania on Exhaustion of Local Remedies for Investors

In 2017 the parliament of Tanzania made significant reforms in the legal and
institutional frameworks governing oil, gas and mineral extraction. Amendments were
made on it legal framework: the Written Laws (Miscellaneous Amendments) Act 201776
amended Section 10 of the Income Tax Act, Cap 33277, by deleting subsection (3) and
substituting for it the following:

―(3) Notwithstanding any law to the contrary, no exemption shall be provided from tax
imposed by this Act and no agreement shall be concluded that affects or purports to
affect the application of this Act, except as provided for: (a) by the provisions of this Act;
(b) by an agreement: (i) on a strategic project; and (ii) on public interest, as may be
approved by the Cabinet.‖
In the similar vein, the Natural Wealth and Resources (Permanent Sovereignty) Act
201778 requires Parliamentary approval for future investor-state agreements, which
must ―effusively secure‖ the interests of Tanzanian citizens, and restricts investors from
exporting raw minerals, repatriating funds and accessing international dispute
resolution mechanism. Likewise, the Natural Wealth and Resources Contracts (Review

76 (―Amendments Act‖) No. 2 of 3rd March, 2017 (GN No. 9 Vol. 98 dated 3rd March, 2017
77 Income Tax Act, No 11 Cap 332 of 1st July, 2004 (R.E 2008)
78 No. 5 of 7th July, 2017 (GN No. 27 Vol 98 dated 7th July, 2017)

20 | P a g e
and Renegotiation of Unconscionable Terms Act),79 mandates the Government to
renegotiate or remove terms from investor-state agreements that Parliament considers
"unconscionable"; by virtue of section 6(2) any clause that subjects the ―State to the
jurisdiction of foreign laws and fora‖ is “deemed to be unconscionable‖. These changes aimed
at rectifying the gaps in managing natural resources and to vividly intensify
government‘s mandate in its control over mining, oil and gas operations in the country.
By virtue of section 3 ―unconscionable term‖ means;
―Any term in the arrangement or agreement on natural wealth and resources which is
contrary to good conscience and the enforceability of which jeopardises or is like to
jeopardise the interests of the People of the United Republic‖.
Parliament has premised this noble legal framework on the sovereignty Tanzania has
over its natural resources. In livelihood of this ambiance, the preamble to the
Unconscionable Terms Act80 and the Permanent Sovereignty Act81 both invoke the
United Nations General Assembly's Resolution 1803 (XVIII) of 14th December 1962
("Resolution"). This means if a contract contains a clause that refers disputes to
international arbitration; the clause might be deemed ―unconscionable‖ and could be
subject to renegotiation.

If the investor, however, refuses to renegotiate or renegotiation fails, then the term
ceases to have any effect and is treated as having been expunged (section 6 (3) (1) and
section 7 (1)). Furthermore, Section 11(2) of the Natural Wealth and Resources
(Permanent Sovereignty) Act 201782 proscribes investors from resorting to international
dispute resolution mechanisms or any foreign court or tribunal. It stipulates that;
―Any disputes arising from extraction, exploitation or acquisition and use of natural
wealth and resources shall be adjudicated by judicial bodies or other organs established
in the United Republic and in accordance with laws of Tanzania.‖ Section 11(3) further
requires that ―judicial bodies or other bodies established in the United Republic and
application of laws of Tanzania shall be acknowledged and incorporated in any
contracts or agreements relating to natural resources‖

79 No. 6 of 7th July, 2017 (GN No. 27 Vol 98 dated 7th July, 2017)
80 Ibid Note 79
81 Ibid Note 78
82 Ibid Note 78

21 | P a g e
These provisions rule out any arbitration clause that makes reference to international
arbitration bodies in tandem with the application of foreign laws to the dispute. In the
same vein, the Parliament of Tanzania passed the Public-Private Partnership
(Amendment) Act, No. 9 of 2018 that came into force on the 24th September, 2018 (read
with CAP 103 RE 2018)83 that bans international arbitration as a method for resolving
investor-state disputes with the country. Section 22 of the Act (Dispute Resolution),
provides as follows;
―22. Any dispute arising during the course of the agreement shall- (a) be resolved
through negotiation; or (b) in the case of mediation or arbitration, be adjudicated by
judicial bodies or other organs established in the United Republic and in accordance
with laws of Tanzania.‖
Accordingly, ‗international‘ arbitration is no longer permitted in the PPP Agreements.
This is a vital transformation from the old Public-Private Partnership Act,84 which has
been permitting foreign investors to resort to international arbitration. Foreign investors
in PPP agreements under the new Act are compelled and they can only seek recourse
over disputes through domestic courts of competent authority and in accordance with
Tanzanian laws.

From the outset, we should seriously consider that Private companies with their own
capital investment at stake assuming risks on investment are whispered to have a
healthier trajectory record of managing projects, and therefore involving them heavily
in all phases of infrastructure life cycle is expected to yield better value for taxpayers'
money (see also Grimsey and Lewis, 2004)85; by using the international arbitration it
may be time consuming and costly cumbersome which consequently would likely
erode the tax net and dilutes the taxpayers‘ money.

The government of the URT postulates to guarantee that investor disputes are locally
determined to the extent that government is not subject to international arbitration

83 G.N. No156A of 2011

84 Public-Private Partnership Act, No. 19 of 2010
85 Grimsey, D. & Lewis, M. K (2004); “Public private partnerships: the worldwide revolution in infrastructure

provision and project finance. Northampton‖: Edward Elgar Publishing Limited.

22 | P a g e
forums for instance the ―ICSID‖. Tanzanian seems to have no confidence in multilateral
arbitration bodies because they lack impartiality when it comes to resolving disputes
between member countries and investors.

Likewise, Tanzania has terminated URT-the Netherlands BIT (2001) which entered into
force on 27th-09-2002. The treaty was set to expire on April 1, 2019, however
notification on the intention of terminating the Treaty was submitted by Tanzania as a
compliance with Article 14 of the BIT which states that;
―[u]nless notice of termination has been given by either Contracting Party at least six
months before the date of the expiry of its validity, the present Agreement shall be
extended tacitly for periods of ten years.‖
The termination notice as the case may be decision was abruptly executed. Contrary to
other Tanzanian BITs which are in force, the Tanzanian-Dutch BIT (2001) has been the
only BIT which had automatically deemed to be renewed if neither party issues a notice
of intention to terminate at least six months after its expiry. In this BIT, a deadline was
set in which therefore, if Tanzania had not terminated the BIT before the said deadline,
which was 1st, October, 2018, it would have been automatically extended to April 2029.

Tanzania has been a respondent in several investment arbitration cases – six cases
under ICSID and one case under the Permanent Court of Arbitration (PCA). In these
cases, investors have invoked an investment contract and different BITs. The status of
International Investment Cases in Tanzania from 2005 to 2018 comprises of four cases
which are;
1. Sun lodges Ltd (BVI) and Sunlodges (T) Limited vs. The United Republic of Tanzania,
the pending case86 Claims arising out of the Government's alleged seizure of the
claimants‘ cattle farming land in order to build a cement works and a power
station while home state of investor is Italy;
2. Agro EcoEnergy Tanzania Limited, Bagamoyo EcoEnergy Limited, EcoDevelopment in
Europe AB, EcoEnergy Africa AB vs. United Republic of Tanzania (Pending case)87
Claims arising out of the cancellation by the Government, in 2016, of the

86 Sun lodges Ltd (BVI) and Sunlodges (T) Limited vs. The United Republic of Tanzania (PCA Case No.
2018-09) (Pending) (2018)
87 Agro EcoEnergy Tanzania Limited, Bagamoyo EcoEnergy Limited, EcoDevelopment in Europe AB,

EcoEnergy Africa AB vs. United Republic of Tanzania (ICSID Case No ARB/17/33) (Pending)(2017)
23 | P a g e
 claimants‘ sugar cane and ethanol project on the grounds that it would have
adverse impact on local wildlife, home state of investor is Sweden;
3. Standard Chartered Bank vs. United Republic of Tanzania88 Claims arising out of
outstanding invoices under a loan agreement concluded by claimant's subsidiary
and a company that had contracted with a State-owned enterprise for the
construction and operation an electricity generating facility, Government's
control over the power plant and the refusal by Tanzanian courts to enforce a
LCIA award in favor of the investor, while home state of investor is the United
Kingdom.
4. Standard Chartered Bank (Hong Kong) Limited vs Tanzania Electric Supply Company
Limited89 the case relates to the 2001-2003 loan restructuring of the Independent
Power Tanzania Limited (―IPTL‖), the latter being in charge of constructing and
operating an electricity generating facility in Tanzania.
5. Biwater Gauff (Tanzania) Limited vs. United Republic of Tanzania90 Claims arising
out of contractual disputes between claimant's locally-incorporated company
and Tanzania's Water and Sewerage Authority, followed by a series of events led
to the deportation of the investor's senior management, and the seizure of its
assets and takeover of its business, home state of investor is the United
Kingdom91.
The other remaining BITs in force grant Tanzania the right to give a notice of
termination at any time after the initial ten years from the date of entry into force. As of
2011, about 76% of cases registered under the ICSID framework have invoked BITs as
the basis of consent to establish ICSID jurisdiction 92 The enormous mainstream of
developing countries have been exposed to ICSID proceedings for breach of BIT treaty
standards-for example African states have been involved in 84 ICSID proceedings
which represents close to 22% of all ICSID proceedings (Karel Daele, 2012)93

88 Standard Chartered Bank vs. United Republic of Tanzania (ICSID Case No. ARB/10/12) (Decided in
favour of State) (2010)
89 Standard Chartered Bank (Hong Kong) Limited vs Tanzania Electric Supply Company Limited

ARB/10/20
90 Biwater Gauff (Tanzania) Limited vs. United Republic of Tanzania (ICSID Case No. ARB/05/22)

(Decided in favour of neither party (liability found but no damages awarded) (2005)
91 https://investmentpolicyhub.unctad.org/ISDS/CountryCases/222?partyRole=2
92 Presently ICSID has registered 369 cases under the ICSID Convention and Additional Facility Rules.

For detailed statistics see ICSID, The ICSID Case Load-Statistics Issue 2012-1 (ICSID Secretariat 2012).
93 Karel Daele, ‗Investment Disputes across Africa: Lessons to Be Learned From‘ (2012) 6

http://www.africanlaw.org/images/papers/daelepaper.pdf
24 | P a g e
 Table 1: Disputes Settlements for the Selected Bilateral Investment Treaties in Tanzania
Country Date of Dispute Settlement between Investors and One Contracting Parties
Enforcement
Germany 12th-07-1968** Settled through the diplomatic channel. If a not settled, it shall upon the
X request of either Contracting Party be submitted to an arbitral tribunal.
United 2nd-08-1996 ü Settled through the diplomatic channel. If a not settled, it shall upon the
Kingdom request of either Contracting Party be submitted to an arbitral tribunal.
Denmark 9th-01-2002 ü Settled through negotiations. If not settled within 3months, it shall, upon
URT* the request of either Contracting Party, be submitted to an arbitral tribunal.
Sweden 1st-03-2002** X Settled amicably. If not settled within 6 Months the disputing investor will
submit claims to the competent courts of the Host state where investment is
made or ICSID or to arbitration by the Additional Facility under
UNCITRAL
Finland 30th-10-2002 ü Settled amicably through Negotiations if not settled within 6 Months the
disputing investor will submit claims to the competent courts of the Host
state where investment is made or ICSID or to arbitration by the Additional
Facility under UNCITRAL
Netherlands 27th-09-2002*** Settled through diplomatic negotiations. If not settled within six months
shall unless the Parties have otherwise agreed, be submitted, at the request
of either Party, to an arbitral tribunal.
Italy 27th-09-2002* Settled through consultations and negotiations, as far as possible. If not
settled within 6 months the investor in may submit at his choice the dispute
to the Contracting party‘s courts of territorial jurisdictional or ad hoc
arbitration under UNCITRAL or ICSID
Switzerland 6th-04-2006 ü Settled through consultations between thé parties concerned. If not settled
within six months thé investor may submit thé dispute either to thé courts
or thé administrative tribunals of thé Contracting Party in whose territory
thé investment has been made or to international arbitration by choice
either ICSID or Ad hoc tribunal under UNCITRAL
Mauritius 2nd-04-2013 ü Settled amicably through negotiations. If not settled within 6 months the
investor may submit the dispute before the competent courts or ad hoc
arbitration under UNCITRAL or ICSID
Turkey 18th-09-2013 ü Settled amicably through Negotiations. If not settled within 6 Months the
Turkey* disputing investor will submit claims to the competent courts of the Host
state where investment is made or ICSID or ad hoc arbitral tribunal under
UNCITRAL
China 18th-03-2014 ü Settled amicably through Negotiations. If not settled within 6 Months the
URT* disputing investor will submit claims to the competent courts of the Host
state where investment is made or ICSID
Canada 9th-12-2013 ü Settled amicably through Consultation. If not settled within 180 days the
disputing investor will submit claims to the ICSID or ad hoc arbitral
tribunal under UNCITRAL
Source: Ministry of Finance and Planning 2017
KEY: = Yes; x= No
*(Name of the Country) = The Government of the United republic of Tanzania has notified the other State on the fulfilment of the requirements for
the Agreement to enter into force. The other State is yet to reply.
***Terminated

25 | P a g e
CONCLUSION AND RECOMMENDATIONS
The decision to comprise a local remedies clause in an investment contract or a BIT is
challenging. Nevertheless, once incorporated, it is inescapable upon Tanzania as the
Host State to strengthen its investor-State dispute resolution machinery. It is
quintessential that administrative and judicial bodies in Tanzania enhance expertise and
commercial knowledge to effectively adjudicate upon BIT claims as they currently
assume jurisdiction. However, based on the current legal framework changes, it is
probable as to whether the Tanzanian government will end any of its remaining BITs in
the future and whether Tanzania intends to formally denounce the ICSID Convention
and other multilateral investment agreements providing for international arbitration.

The quality of judges and magistrates regarding Investor-state disputes before local
courts that have a sound understanding of commercial disputes must be enhanced to
maintain the credibility of the legal system as far as impartiality element is concerned.
Moreover, the arbitration process must be as neutral as possible to maintain fairness
and justice to investors.

References
Books
Amerasinghe, C, F. “Local Remedies in International Law”, 2nd ed., Cambridge University
Press Cambridge, 2004.
Barratt, M, B. ―Models in Political Economy” (2nd edn, Penguin Books 1995) p 193-274
Born, G. B. “International Commercial Arbitration” (2nd edn Kluwer Dordrecht 2014) Vol
1
Born, G & Šćekić, M. “Pre-Arbitration Procedural Requirements: „A Dismal Swamp”, in E
Triantafilou and A Cohen Smutny (eds) Practising Virtue: Inside
International Arbitration (OUP Oxford 2015) 227-263.
Brauch, M. D. “Exhaustion of Local Remedies in International Investment Law” IISD Best
Practices Series: Exhaustion of Local Remedies in International
Investment Law: Winnipeg, Manitoba Canada
Calvo, C. S. “International Law of Europe and America in Theory and Practice” (1968);
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Principles” : Oxford University Press, Oxford, (2007), at 11
Collins, L. et al; “The Conflict of Laws”, 14th Edition, Sweet & Maxwell Publishers, 2006 p
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edn, Kluwer Academic Publishers 1988) 3-15
Grimsey, D. & Lewis, M. K. “Public private partnerships: the worldwide revolution in
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Keyes, M. “Jurisdiction in international litigation” Federal Press, Sydney, (2005) at 36
Newcombe, A. & Paradell, L. “Law and practice of investment treaties: Standards of
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Reed, L. P. et al, ―Guide to ICSID Arbitration” (Kluwer Dordrecht 2011)
Rudolf, D. & Schreuer, C. “Principles of International Investment Law” ( 2nd edition
Oxford University Press, Oxford, 2012), at 389
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Vandevelde, K, J. “Bilateral Investment treaties: History, Policy and Interpretation” (Oxford
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Chapters in Book
TIENHAARA, Kyla. “Regulatory chill and the threat of arbitration: A view from political
science” in CHESTER Brown & KATE Miles (eds), Evolution in
Investment Treaty Law and Arbitration (Cambridge University Press
2011) 606-627.
BORN, G, & ŠĆEKIĆ, M, “Pre-Arbitration Procedural Requirements: „A Dismal Swamp”, in
E Triantafilou and A Cohen Smutny (eds) Practising Virtue: Inside
International Arbitration (Oxford University Press Oxford 2015) 227-
263.
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BRETT, Harrison, G. ―A Clause in Time Saves Time, Money and Maybe Even Your
Case….‖: Cross-Border Litigation Bulletin: Mcmillan Binch Mendelsohn
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DAHLQUIST, Joel. ―How to BITE the Apple; Is There a Requirement to Exhaust Local
Remedies in Investment Treaty Arbitration?‖ Master Thesis:
International Trade Law, Public International Law, Procedural Law. Faculty
of Law Lund University
GANESH, Aravind ―Cooling off period‖ Max Planck Institute Luxembourg: Department
of International Law and Dispute Resolution
ILLIYUMADE, O. ―Dual Claim and the Exhaustion of Local Remedies Rule in
International law‖, 10 Van.H. Trans nat‟l L 83 at 1 (1994)

27 | P a g e
IKENSON, Daniel, J. ―A Compromise to Advance the Trade Agenda: Purge
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KAREL, Daele. (2012); ‗Investment Disputes across Africa: Lessons to Be Learned From‘
(2012) 6 Kluwer Arbitration Blog
KSHAMA Loya & VYAPAK Desai, ―Exhaustion of Local Remedies in Bilateral
Investment Treaties— A Guide for Foreign Investors‖ IPA Legal Updates
(2018):
MAYEDA, Graham. "International Investment Agreements between Developed and
Developing Countries Dancing with Devil?: (….)" (2008) 4 McGill
International Journal on Sustainable Development Law & Policy 189
MUNIROH, Rahim. (2015); ―Is A Requirement of Resort to Prior Remedies
Jurisdictional?‖ LL.M Research Paper: Victoria University of Wellington
NICK Kangles & THERESA Kim (2017); ―Governing law and choice of forum clause
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POULSEN, Lauge, et al, ―When the Claim Hits: Bilateral Investment Treaties and
Bounded Rational Learning‖. World Politics 65 (2): 273-31 ( 2013).
ROBERTS, Ago ―Power and Persuasion in Investment Treaty Interpretation: The Dual
Role of States‖ (2010) 104 AJIL 179.
Website Sources

www.britannica.com/bps/topic/90348/Calvo-Doctrine
http://www.icsid.worldbank.org/ICSID/FrontServlet?requestType=ICSIDDocRH&actionVal=S
howDocument&language=English
https://investmentpolicyhub.unctad.org/ISDS/CountryCases/222?partyRole=2
http://investmentpolicyhub.unctad.org/Download/TreatyFile/1959: (1344:2079)
http://www.africanlaw.org/images/papers/daelepaper.pdf
http://icsid.worldbank.org/ICSID/FrontServlet?requestType=ICSIDDocRH&actionVal=ShowD
ocument&language=English

List of Cases

Local Cases
Agro EcoEnergy Tanzania Limited, Bagamoyo EcoEnergy Limited, EcoDevelopment in
Europe AB, EcoEnergy Africa AB v. United Republic of Tanzania (ICSID Case No
ARB/17/33) (2017)
Biwater Gauff (Tanzania) Limited v. United Republic of Tanzania (ICSID Case No.
ARB/05/22) (Decided in favour of neither party) (2005)

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Standard Chartered Bank v. United Republic of Tanzania (ICSID Case No. ARB/10/12)
(2010)
Standard Chartered Bank (Hong Kong) Limited vs Tanzania Electric Supply Company
Limited ARB/10/20
Sun lodges Ltd (BVI) and Sunlodges (T) Limited v. The United Republic of Tanzania
(PCA Case No. 2018-09) (2018)
International Cases
Ambatielos Claim (Greece vs United Kingdom of Great Britain and Northern Ireland)
Chevron Corporation and Texaco Petroleum Corporation vs The Republic of Ecuador,
UNCITRAL Arbitration, PCA Case No. 34877, Partial Awards on the Merits, Issued
March 30, 2010. Cited: Chevron/Texaco
Corfu Channel Case (the United Kingdom v Albania) (Merits) (1949) ICJ Rep 4
Finnish Vessels in Great Britain during the War (Finland vs Great Britain) 3 RIAA 1481;
7 ILR 231
Helnan International Hotels A/S vs Arab Republic of Egypt, ICSID Case No
ARB/05/19, Award issued July 3, 2008. Cited: Helnan
Interhandel, (Switzerland vs United States), Interim Measures of Protection, Order,
[1957] ICJ Rep 105, ICGJ 170 (ICJ 1957), 24th October 1957, International Court of Justice
[ICJ]
Lauder vs Czech Republic, Final Award, 3 September 2001, (2006) 9 ICSID Rep 62,
(2006) 9 ICSID Rep 66 Ad Hoc Tribunal (UNCITRAL),
Marvin Feldman vs Mexico, ICSID Case No ARB (AF)/99/1, Award issued Dec 16,
2002. Cited: Feldman
Mavrommatis Palestine Concessions (Greece vs United Kingdom), (Jurisdiction)1924
PCIJ (ser.B) No.3 (Aug. 30)
Montano, (Peru vs USA), 1863, from Moore, JB, A Digest of International Law 8th ed,
US Government Printing Office, 1906, p.1630
North American Dredging Company of Texas (USA) vs United Mexican States, 4 R.Int‘l
Arbitration Awards 1926, para 22
Occidental vs The Republic of Ecuador (UNCITRAL Case No UN3467)
Saipem S.p.A vs The Peoples‘ Republic of Bangladesh, ICSID Case No ARB/05/07:
Award issued June 30, 2009. Cited: Saipem
Siemens A.G. vs The Argentine Republic, ICSID Case No ARB/02/8, Decision on
Jurisdiction, para 104 (Aug. 3, 2004)

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Urbaser S.A and Consorcio de Aguas Bilbao Bizkaia, Bilbao Biskaia Ur Partzuergoa vs
the Argentine Republic (Decision on Jurisdiction) ICSID ARB/07/26, 19 December 2012,
para 126

Legislations
Income Tax Act, No 11 Cap 332 of 1st July, 2004 (R.E 2008)
Natural Wealth and Resources (Permanent Sovereignty) Act 2017 No. 5 of 2017 (GN No.
27 Vol 98 dated 7th July, 2017)
Natural Wealth and Resources Contracts (Review and Renegotiation of Unconscionable
Terms Act) No. 6 of 2017 (GN No. 27 Vol 98 dated 7th July, 2017)
Public-Private Partnership Act, No. 19 of 2010, (GN. No. 32 Vol 19 of 6th August, 2010)
Public-Private Partnership (Amendment) Act, No. 9 of 2011 (G.N. No. 156A of 201I)
Public-Private Partnership (Amendment) Act, CAP 103 RE 2018
Written Laws (Miscellaneous Amendments) Act No. 2 of 3rd March, 2017 (GN No. 9
Vol. 98 dated 3rd March, 2017

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