Tanzania

Tanzania

Ntaka Hill Nickel Project

Indiana is the majority shareholder of Nachingwea UK Ltd (“NUKL”) and Ntaka Nickel Holdings Ltd (“NNHL”) (both incorporated in the United Kingdom) which historically held the licences for the Ntaka Hill Nickel Project in Tanzania through NNHL’s 100% owned subsidiary Nachingwea Nickel Ltd (“NNL”) (incorporated in Tanzania).

The Ntaka Hill Nickel Project was a development ready, advanced nickel sulphide project, which was the subject of a Project Acquisition Agreement (“PAA”) executed between Indiana, NUKL and Loricatus Resource Investments (incorporated in Mauritius as an investment vehicle of Fig Tree Resources Fund II Ltd), together with NNHL, NNL and other entities.

NUKL, NNHL and NNL (“Claimants”) are three companies forming part of a larger group which invested in the Ntaka Hill Nickel Project over a period of about 20 years. From 2000 until the events which form the subject of the arbitration against the Government of Tanzania referred to below, the Project was developed under various corporate structures which were ultimately owned by Indiana.

At the time of entry into the PAA, the Ntaka Project comprised Prospecting Licence PL4422/2007 (“Ntaka Hill Prospecting Licence”) and associated project information, data and documentation.

In April 2015, Tanzania issued Retention Licence RL 0017/2015 for the Project (“Ntaka Hill Retention Licence”), covering the same area as the Ntaka Hill Prospecting Licence, for a period of 5 years, and the Ntaka Hill Retention Licence was transferred to NNL following execution of the PAA.

In July 2017, the Government of Tanzania introduced wide-ranging and severe amendments to the Mining Act 2010, including the Written Laws (Miscellaneous Amendments) Act 2017, which abolished the legislative basis for the Retention Licence classification under Tanzanian law, with no replacement classification.

On 10 January 2018, Tanzania published the Mining (Mineral Rights) Regulations 2018.  Under these Regulations, all Retention Licences issued prior to 10 January 2018 were cancelled by Tanzania and ceased to have any legal effect, and the underlying rights over all areas under Retention Licences, including the Ntaka Hill Retention Licence held for the Project, reverted to the Government of Tanzania without further assurances.

As a consequence, NUKL, NNHL and NNL were permanently deprived of their right to participate in the control and management of the Ntaka Hill Nickel Project, and the Project (as previously envisaged) could not be advanced.

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.

At all times Tanzanian Government representatives reassured the Claimants’ representatives, as well as Indiana Board members that visited Tanzania for the purpose of collaborative engagement with the Government, that their historical investment would be recognised and that their 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.  This initial invitation to tender provided that the successful bidder must compensate the previous Retention Licence holder for its exploration costs incurred.  This public invitation was not sent to the Company or the Claimants but was advertised on the website for the Ministry of Energy and Minerals.

One day after that invitation to tender was published, the Mining Commission of Tanzania announced a revised public invitation to tender on 20 December 2019, which removed the requirement that the successful bidder must compensate the previous retention licence holder for its exploration costs incurred.

Through the measures described above, Tanzania removed the ownership of the Project from the Claimants and in doing so breached its obligations to the Claimants under the UK-Tanzania Bilateral Investment Treaty (the “BIT”).  These include Tanzania’s obligation not to nationalise or expropriate the Claimants’ 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.

Arbitration against the Government of Tanzania

In early 2020, the Claimants advised the Tanzanian Government that a dispute had arisen in relation to the cancellation of the Ntaka Hill Retention Licence.  Indiana, as the manager of the Joint Venture for the Project, is responsible for leading activities relating to the 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 for US$4.65 million with Litigation Capital Management Limited (“LCM”), a firm listed on the Alternative Investment Market (“AIM”) of the London Stock Exchange. The litigation funding facility covers all legal costs associated with arbitration and is repayable to LCM on the successful enforcement of an Award against Tanzania.

In September 2020, the Company lodged a Request for Arbitration 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”).

LALIVE and Boies Schiller Flexner LLP, two international law firms that specialise in international arbitration, represented the Claimants in the ICSID arbitration process.

The arbitration Tribunal delivered its Award in the arbitration proceedings on 14 July 2023, and unanimously found that Tanzania had unlawfully expropriated the Ntaka Hill Nickel Project on 10 January 2018 in breach of the BIT.

The arbitration Tribunal unanimously ordered Tanzania to pay the Claimants US$76,706,461 in damages and additional losses, as well as compound interest at the rate of 2% above the USD Prime rate on the amount awarded from 10 January 2018 to the date of payment.  This amounts to a total of more than US$109.5 million in damages and accrued interest at the date of the Tribunal’s Award (and interest continues to accrue until payment).

The Tribunal decided that the costs of the arbitration, including the fees and expenses of ICSID and the Tribunal, should be borne by Tanzania. The Tribunal also ordered that Tanzania pay the Claimants US$3,859,161 in respect of the Claimants’ legal costs and expenses.

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.

However, Tanzania subsequently lodged a Request for Annulment with the ICSID, seeking to have the Award set aside.

ICSID has appointed an ad hoc Committee that will consider Tanzania’s application for the annulment of the award dated 14 July 2023, with the members being: 1. Prof Rolf Knieper (President) 2. Ms Bertha Cooper-Rousseau 3. Mr Githu Muigai.

Boies Schiller Flexner LLP has been appointed by the Claimants to represent them during the annulment and enforcement phase. The BSF team will be led by Mr Timothy Foden, who has had extensive experience in working with the Claimants during the Arbitration process.