Tanzania Overhauls Mining Laws, Fines Investor US$190 Billion: Is Your Investment Protected?

The Situation: Hoping to increase the nation's revenue from natural resources, the Tanzanian government is introducing a number of increasingly drastic reforms to the mining industry.

The Result: The new laws heighten the government's role and power in investment contracts, increase the costs of foreign investment, and substantially reduce investment protections, including international arbitration.

Looking Ahead: Investors should take immediate action to mitigate the risks associated with the Tanzanian government's actions pertaining to the mining industry.

Recently, Tanzania enacted a series of mining laws that significantly erode protection for existing and future investments in the mining industry. As part of these measures, one foreign investor has been assessed a US$190 billion penalty. It is important for investors to obtain immediate legal advice to address and mitigate the risks associated with the Tanzanian government's changes to the mining industry. Any foreign investor that has already invested in Tanzania or is considering an investment in Tanzania should urgently evaluate its status and determine the available legal options, including international arbitration.

These legislative changes may, unfortunately, slow economic growth in Tanzania, which had been steadily growing despite diminishing growth in Sub-Saharan Africa generally. This high level of growth has made the region a magnet for foreign investment, particularly with respect to investment in agriculture, mining, tourism, telecommunications, financial services, energy, and transportation infrastructure. However, investors in the region face relatively high political risk, and every investor is well advised to evaluate potential political, legal, and economic risk in a holistic manner.

Tanzania's New Mining Laws

Tanzanian President John Magufuli is spearheading efforts to overhaul the mining industry to increase state revenue from natural resources. This has led to a series of increasingly drastic reforms. First, in March 2017, Tanzania banned the export of unprocessed ores. Next, effective July 1, 2017, Tanzania enacted the Finance Act, which imposes a one percent clearing fee on all minerals exported from Tanzania. The largest changes came a few days later, when President Magufuli signed three bills into law that dramatically change the landscape for current and future natural resources investments in the country.

Among other things, the new laws require the...