Energy & Natural Resources
Tanzania recently released the Natural Wealth and Resources Regulations. In this article, we set out the procedures relevant to the re-negotiation of agreements and arrangements relating to natural wealth and resources as well as the Code of Conduct that investors in this sector must comply with.
Together, the Natural Wealth and Resources Regulations.
The Unconscionable Terms Act and the Permanent Sovereignty Act (together, the Natural Wealth Acts) introduced the term "natural wealth and resources" which means all materials or substances occurring in nature such as soil, subsoil, gaseous and water resources, mineral resources, petroleum resources, fauna and flora, genetic resources, aquatic resources, micro-organisms, air space, rivers, lakes and maritime space, including Tanzania's territorial sea and the continental shelf, living and non-living resources in the Exclusive Economic Zone which can be extracted, exploited or acquired and used for economic gain whether processed or not. This definition has been drafted quite widely to ensure that all such resources are protected by the Government of Tanzania having permanent sovereignty over them.
Some key highlights of the Natural Wealth Acts are as follows:
The Unconscionable Terms Regulations provide the procedure for re-negotiations of unconscionable terms in all agreements and arrangements that involve natural wealth and resources.
The National Assembly is responsible for determining unconscionable terms in the said arrangements or agreements which will be subject to re-negotiation.
As mentioned above, the President remains the trustee of the natural wealth and resources of Tanzania on behalf of the people. His power is to coordinate, monitor and manage all contracts in accordance with the applicable laws. This power is delegated to the Minister responsible for Constitutional Affairs (the Minister).
The Unconscionable Terms Regulations provide for a register at the Ministry responsible for Constitutional Affairs (the Ministry) that shall contain information related to natural wealth and resources arrangements and agreements. The Registrar of Natural Wealth and Resources Arrangements is tasked with keeping the register and with registration of all natural wealth and resources agreements and arrangements.
This information is to be completed in a table form and it should contain the following key information, among others:
The persons responsible for the registration of the relevant agreements is the responsible person on behalf of ministries, Government departments, and agencies or any other public or private institution dealing with natural wealth and resources that enters into a natural wealth and resource arrangement or agreement (Applicant) by submitting an application in a prescribed form which is contained in the schedule to the Unconscionable Terms Regulations.
Such submission shall be made:
The Applicant shall be issued with a registration number that will be used in all correspondence. It is worth noting that private entities which have entered into such contracts/agreements are obligated to submit those agreements for registration.
It is important to note that Regulation 13 of the Unconscionable Terms Regulations provides that all contract re-negotiation arrangements which are in existence on the date of coming into operation of these regulations shall continue and be concluded as if these Regulations had not been made.
The Code of Conduct Regulations aim to ensure that all business related to natural wealth and resources are conducted in a manner that is consistent with the highest ethical principles at all times. These regulations apply to an entity, consultant, supplier, contractor, investor, partner and agent, including any of their employees thereto (Investor).
In addition to the restrictions listed above, every Investor is required to sign an Integrity Pledge in the prescribed form set out in the schedule to the Code of Conduct Regulations to abide by ethical business practices in order to support the national campaign against corruption. The Code of Conduct is also considered implied in every arrangement or agreement on natural wealth and resources and the Code of Conduct Regulations even provide an honesty and integrity self-test to ensure that Investors are able to state their position in terms of compliance as accurately as possible.
From the above provisions of the Natural Wealth and Resources Regulations, it is evident that the Government intends to monitor investment in Tanzania quite closely by ensuring that there are no terms which are unconscionable and do not protect the natural wealth and resources of Tanzania. Furthermore the Code of Conduct Regulations provide for reporting requirements which would enable the Government to keep a close eye on investment to ensure compliance.
While the Code of Conduct Regulations provide the minimum standards to be met by Investors, they also allow time for compliance as Regulation 19(2) of the Code of Conduct Regulations specifically provides that "the Government is aware of the fact that some requirements may not be met immediately, but these are to be settled by open dialogue and corrective actions by those involved". Nevertheless, as expected, failure to comply with the Code of Conduct Regulations within a reasonable timeframe following serious of repeated violations may result in the Government terminating its business relationship with the Investor.