Arbitration against the Government of Tanzania

Indiana is also the major shareholder of Ntaka Nickel Holdings Ltd and Nachingwea UK Ltd (both incorporated in the United Kingdom) which historically held the licences for the Ntaka Hill Nickel Project through its 100% owned subsidiary Nachingwea Nickel Ltd.  The Ntaka Hill Nickel Project is an advanced nickel sulphide project that is development ready.  In early 2020, the Companies advised the Tanzanian Government that a dispute had arisen in relation to the cancellation of the Retention Licence for Ntaka Hill.  Indiana is the manager of the Joint Venture for the Project and is leading activities to progress a Claim to Arbitration against the Government of Tanzania for the illegal expropriation and loss of the Ntaka Hill Nickel Project.

In August 2020, the Company secured a Litigation Funding Agreement (“LFA”) for USD 4,653,400 with Litigation Capital Management Limited (“LCM”) – a firm listed on the Alternative Investment Market (“AIM”) of the London Stock Exchange. The LFA provides for a non-recourse financing facility which is only repayable to LCM in the event of a successful Claim or settlement of the Dispute that results in the recovery of any monies.  If there is no settlement or award, then LCM is not entitled to any repayment of the financing facility.

In September 2020, the Company lodged a Request for Arbitration (“RfA”) under the BIT with the International Centre for Settlement of Investment Disputes (“ICSID”), part of the World Bank, in accordance with the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the “ICSID Convention”). The RfA contains background to the dispute, a summary of the Claimant’s claims and an initial estimate of compensation for loss of the Project and damages sustained by the Investors resulting from the actions of the Government of Tanzania, which is currently in excess of US$95 million.

ICSID sent the RfA to the Government of Tanzania in September and registered it in October 2020. Tanzania was invited to agree with the Claimants on a method of constitution of the arbitral tribunal. Tanzania has now formally advised ICSID that it will be represented by the Hon. Attorney General of the United Republic of Tanzania, Prof. Adelardus Kilangi and the Hon. Solicitor General of the United Republic of Tanzania, Mr. Gabriel Malata.

In the RfA, the Claimants had proposed that the arbitral tribunal consist of three members and nominated Mr R. Doak Bishop as their arbitrator panel member. Mr Bishop is a Partner in United States firm King & Spalding.

Once the arbitral tribunal has been appointed, the next step will be the preparation and filing of the Claimants’ Memorial, which will include all evidence and supporting documents to support the Claimant’s Claim for Compensation. Work on the Memorial is currently ongoing.

The ICSID Convention has been ratified by 154 States, including Tanzania. An award issued by an ICSID tribunal is enforceable in any one of those 154 member States as if it were a judgment of one of their own courts. Partly because of this, States have overwhelmingly and historically complied voluntarily with the payment terms of such awards.

The Company has engaged LALIVE, an international law firm, to act on its behalf. LALIVE has offices in Geneva, Zurich and London, and specialises in international arbitration. The firm has extensive experience in international investment arbitration concerning mining and other natural resources and is representing investors and States as counsel worldwide.

Background to Claim

In July 2017, the Government of Tanzania introduced wide-ranging and severe amendments to the Mining Act 2010, which, inter alia, abolished the legislative basis for the Retention Licence classification with no replacement classification.

On 10 January 2018, Tanzania published the Mining (Mineral Rights) Regulations 2018.  Under Regulation 21 of these Regulations, Tanzania cancelled all Retention Licences issued prior to 10 January 2018 at which point they ceased to have any legal effect.  The rights over all areas under Retention Licences, including the Retention Licence held for the Project, were immediately transferred to the Government of Tanzania.

During the time from January 2018 to December 2019, the Company actively engaged with the Tanzanian Minister for Energy and Minerals and the Mining Commission in an effort to resolve a suitable tenure mechanism for the Project Licence to be reinstated.

A submission presented to the Government in May 2018 included an application for a Prospecting Licence as recommended by Government Officials.

Following numerous visits to Tanzania and meetings with the Minister for Energy and Minerals, Mining Commission and other senior government officials, a further submission was presented to the Minister for Energy and Minerals and the Mining Commission in October 2019 that outlined a four-year work programme and a US$8-11 million proposed budget to progress the Project.  At a meeting on 9 December 2019 with the Minister for Energy and Minerals, the Mining Commission and other senior government officials, the Chairman of Indiana was reassured that the Company’s historic investment would be respected and the Government would shortly advise a process to agree an appropriate tenure for the Project.

At all times Tanzanian Government representatives reassured Company representatives, including Indiana Board members that visited Tanzania for the purpose of collaborative engagement with the Government, that the historic investment of the Company would be recognised and that our rights would be respected and protected.

On 19 December 2019, the Mining Commission of Tanzania announced a public invitation to tender for the joint development of areas covered previously by Retention Licences (the “19 December Tender”).  It was a condition of the 19 December Tender that the successful bidder compensate the previous Retention Licence holder for its exploration costs incurred.  This public invitation was not sent to the Company but was advertised on the website for the Ministry of Energy and Minerals.

On 20 December 2019, the Mining Commission of Tanzania announced a revised public invitation to tender (the “20 December Tender”).  The 20 December Tender removed the condition that the successful bidder compensate the previous retention licence holder for its exploration costs incurred.

Through the measures described above, it is now clear that Tanzania has removed the ownership of the Project from Ntaka Nickel Holdings Ltd (UK), Nachingwea Nickel Ltd (UK) and and its local subsidiary Nachingwea Nickel Ltd (Tanzania) and in doing so has breached its obligations to the Investors under the UK-Tanzania BIT (the “BIT”) and international law.  These include, but are not limited to:

  1. Tanzania’s obligation not to nationalise or expropriate the Investors’ investments or subject them to measures having effect equivalent to nationalisation or expropriation without prompt, adequate and effective compensation under Article 5(1) of the BIT;
  2. Tanzania’s obligation to accord fair and equitable treatment to the Investors’ investments under Article 2(2) of the BIT.

Article 8(3) of the BIT provides that the Investors may submit the dispute to ICSID if the Investors and Tanzania are unable to reach an agreement concerning the dispute within six months of the dispute arising (in this instance from the date of the Investors’ dispute notice being 14 January 2020).