Tanzania is one of 158 Contracting States to the International Centre for Settlement of Investment Disputes (“ICSID”), which provides facilities for conciliationand arbitration of investment between Contracting Parties and nationals of other Contracting Parties. We consider here one of the instruments through which the ICSID facilities are extended to Contracting Parties, the Bilateral Investment Treaty (“BIT”) disputes.
Tanzania currently has BITs in place with eleven other Contracting Parties: Canada, China, Denmark, Finland, Italy, Germany, Mauritius, Sweden, Switzerland, Turkey and the United Kingdom. One has been terminated (with the Netherlands), and a further eight have been signed but are not in force (with Egypt, Iran, Jordan, Kuwait, Oman, South Africa and South Korea). For ease of discussion, we shall refer to each BIT with the name of the other Contracting Party (for instance, the Canada–Tanzania BIT will be referred to as the “Canada BIT”, etc.)
Statistically, it is not a given that an investor availing itself of a BIT will be successful. In the calendar year 2024, according to the 2025 caseload statistics produced by the ICSID, the tribunal decided in 78% of the claims (the other 22% were either settled or discontinued for other reasons). In 55% of the decided claims, it upheld the award in whole or in part; in 30% of the decided cases, it dismissed the claim; and in the remaining 20% of the decided cases, it denied jurisdiction. The plaintiff (usually the investor) therefore wins in just over half of the claims that go to full determination; the defendant (usually a Contracting Party) wins – or does not lose – in just under half.
These statistics are not reflected in the Tanzanian experience. Since 1998 the Tanzanian State has been directly involved in 11 ICSID arbitrations, covering economic sectors as diverse as tourism, finance, agriculture, fishing and forestry, water sanitation and flood protection, oil, gas and mining, and electric power and other energy. A further two arbitration claims, involving TANESCO and IPTL, and a foreign investor and TANESCO, both concerned electric power and other energy. The claims against Tanzania were brought under the UK BIT, the Mauritius BIT, the Canada BIT, the Netherlands BIT, and the Sweden BIT. On three occasions, the State has been represented by external counsel; in eight by the office of the Solicitor General.
Investors
Broadly, BITs protect the Investors from one Contracting State in respect of their investments in the territory of the other Contracting State. The term ‘Investor” means either a natural person or a corporation, but the definition of the latter varies. For instance, the Turkey BIT requires a claimant to have “substantial business activitiesin the territory of the Contracting Party” from which it originates; the Italy BIT allows a claimant to bring a claim through any “foreign subsidiaries, affiliates, and branches” controlled by the claimant; whilstthe China BIT includes “legal entities constituted under the laws of a non-Contracting Party but directly owned or controlled by” the claimant.
Investments
What constitutes an ‘investment’ is also usually broadly defined. However, in Salini Costruttori S.P.A. and Italstrade S.P.A. v Kingdom of Morocco (42 ILM 609 (2003) of the 23rd of July 2001), the Court distinguished between an ‘Investment’ under the BIT and an ‘Investment’ under Article 25(1) of the ICSID Convention, and introduced the so-called ‘Salini Test’ (at para 52):
“The doctrine generally considers that investment infers: contributions, a certain duration of performance of the contract and a participation in the risks of the transaction (cf commentary by E. Gaillard, cited above, p. 292). In reading the Convention’s preamble, one may add the contribution to the economic development of the host State of the investment as an additional condition”. (emphasis added).
The need to contribute to the economic development of the host State is generally not considered further because of its inherent vagueness, but the Salini test effectively requires an investment to be more than ‘de minimis’.
Standards of Treatment
In addition, an investor expects to be treated fairly once the investment is made, and BITs include all or some of four main standards:
- The Fair and Equitable Standard, a code of conduct that covers, for example, denial of justice or arbitrary and discriminatory treatment;
- The right to full security and protection for the Investment;
- Most Favoured Nation Treatment, ensuring that investments from an investor from a Contracting Party are not treated any less favourably, in comparable circumstances, than investments from investors from a non-Party by the other Contracting Party; and
- So-called ‘umbrella clauses’, which bring commitments made by a Contracting Party under national legislation under the BIT ‘umbrella’, thus making a breach of an obligation under national law one that is actionable under the BIT.
Failure to comply with the BITs can be expensive
A State that loses a BIT claim can face significant costs, even where it settles a matter through negotiation rather than as a consequence of a formal award. The past four cases, for instance, have cost Tanzania some $284 million: US$30 million to Winshear Gold Corporation; US$90 million to Indiana Resources Limited; US$27 million to Montero Mining and Exploration Limited; and US$137 million to Symbion Power (not including the award of costs plus its own legal fees).
Conclusions
Tanzania is one of 158 countries contractors to the ICSID convention and has BITs in place with 11 other nations. The terms of each BIT may differ from those of others, but the general intention is to create an environment for investors to enjoy their investments in each other’s territory. The BITs work in both directions, though, and properly used can provide Tanzanian companies with protection elsewhere.
Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of any other agency, organization, employer, or company. The information provided is for general informational purposes only and does not constitute legal advice.
Author Information: Dr. David Mestress is a consulting partner at RIVE & C, where he specializes in the energy sector, with a focus on oil, gas, and renewable energy.