Political party ACT Wazalendo finally, on September 4, 2023, released its stance on the issue of investment in Tanzanian ports by the United Arab Emirates-based company DP World. Since June of this year, this matter has been a subject of intense legal debates among politicians, activists, and scholars within and outside Tanzania.
ACT Wazalendo conducted a professional process to arrive at its party position. According to the statement they posted on their social media page X, ACT Wazalendo established a commission of 22 experts, led by lawyer Emmanuel Mvula, who is both a member of the party’s central committee and its spokesperson for planning, investment, and social security sector, to address all the suspected issues within the IGA signed between the Tanzanian government and DP World.
The committee met with experts and conducted an in-depth analysis of all available information. The committee scrutinised the IGA agreements and their consequences, assessed various stakeholders’ statements and perspectives on the IGA, and examined its potential impacts.
To ensure that the committee fulfilled its responsibilities, it engaged with stakeholders such as the Tanganyika Law Society (TSL) and representatives from the Tanzania Ports Authority and the Ministry of Transportation. In summary, the committee gathered sufficient information to advise the ACT Wazalendo party on its stance regarding this investment.
ACT Wazalendo wants this DP World investment process in Tanzania to continue, as the CHADEMA party and the Tanzania Episcopal Conference (TEC) proposed. ACT Wazalendo wishes to see this investment continue. Still, they have fundamental concerns that they would like to address to ensure that it becomes a productive and broadly beneficial investment for the nation.
After conducting an extensive research, ACT Wazalendo has identified the following:
The Agreement between the Governments of Tanzania and Dubai is a bilateral agreement between two governments, namely the government of Tanzania and the government of Dubai, with the aim of promoting and protecting investments. Thus, this agreement possesses all the characteristics of a bilateral investment treaty (BIT).
The scope of cooperation outlined in the treaty for developing and improving the ports is divided into two phases. The annexe explicitly defines the first phase, focusing on specific port areas, namely docks 0-7. The second phase encompasses the potential development of other infrastructure in the major lake ports, special economic zones, logistics parks, and trading corridors.
Notably, the IGA between Tanzania and Dubai has a unique feature beyond its status as a bilateral investment treaty. This distinctiveness lies in the specific mention of DP World as an investment company.
Weaknesses of the Agreement according to ACT Wazalendo’s Research:
- Article 1 of the IGA: This article defines DP World and allows DP World to establish one or more companies for various project activities in Tanzania. ACT suggests that in line with the government’s transportation policy emphasising local participation in investments of this nature, Tanzanian citizens or local companies should be given priority in this investment. Alternatively, if DP World establishes these companies, a law should require a significant portion of these companies to be owned by Tanzanians or Tanzanian companies. This would enable local companies to obtain contracts and retain substantial profits and capital within the country.
- Create a special public company to enter into a partnership with DP World to oversee all project activities in the investment.
- The partnership should be able to own up to 50% of all shares in the partnership company.
- The land of Dar es Salaam Port in the relevant docks (0-7), investments already made by the government in these docks, and the government’s goodwill should be part of the government’s contribution to acquiring shares within the partnership company.
- The partnership company to be created should be responsible for entering into a concession agreement with the Tanzania Ports Authority.
- The government should establish a legal framework and contract system (share subscription agreements, shareholders agreements) that allows local participation either immediately or through DP World’s investment with the possibility of local investors buying shares in accordance with their capabilities, up to the limit of opportunities for local investors (buy-out or share redemption).
Definition of “Early Project Activity”: Article 1 in the IGA defines “Early Project Activity” as all activities performed before the final decision on investment projects, including crucial technical and structural work, such as road construction from the main road to the project areas. This article, when read together with Article 25 (2) and (3), which mentions that the parties to the agreement will agree to include the costs of early activities in the project contracts (HGAs), creates a situation that lacks clarity and generates confusion.
- Regarding early project activities, there should be a specific contract with local authorities to govern these activities. This would enable DP World to obtain environmental impact assessment reports and help the government understand and confirm these activities’ costs and scope, thereby avoiding uncertainty about the scope of early work and its associated costs.
- DPW Company Selection Process: The government should make the process of selecting DP World as the preferred company transparent, allowing Tanzanians to understand and verify that the legal procedures were followed.
- Scope of Cooperation with Implementing Bodies: Article 4 (2) of the IGA requires Tanzania to inform DP World of all investment opportunities related to ports and free economic zones in the transport sector so that Dubai can express its interest and propose projects for consideration.
- ACT views this provision as an avenue for DP World to sue Tanzania if the country engages with another investor potentially. ACT suggests that this article should be removed, and DP World should be given the right to participate in bids if the government initiates other projects. In such cases, Tanzania should be free to choose its preferred investor.
Exclusive Rights: Article 5 (1) grants exclusive rights to DP World to develop, manage, and operate all projects as listed in Appendix 1 and as detailed in project agreements (HGAs).
- ACT asserts that this provision should be a mutually binding measure demonstrating good intentions between Tanzania and Dubai in the investment. This clause currently restricts only the Tanzanian government from cooperating with any other partner in operations and improvement, except DPW. ACT recommends that this clause should be revised to also restrict DP World from investing in any other port that competes with Tanzania, as the current provision restricts Tanzania from engaging with any partner that may affect DPW Tanzania’s interests.
Dispute Resolution: Article 20 (2) (e-d) outlines the time and steps for arbitration, allowing either party to declare a dispute if voluntary agreement steps fail within 90 days.
- ACT proposes that the arbitration period should be reduced, and the arbitration steps should be at most 45 days due to the port’s significance as the main source of government revenue. All income generated during the arbitration process should be placed in a special account (ESCROW) until the case is resolved and a decision is reached.
- IGA Termination Clause: Article 23 (1) states that the agreement will end when all project activities are completed.
- ACT suggests that the IGA should include a termination clause, similar to other treaties (BITs) that Tanzania has entered into, such as the BIT between Tanzania and the UK dated August 2, 1996, which clearly stipulates a 10-year termination period. The IGA between Tanzania and the Canadian government also specifies a 10-year termination period.
Termination of Agreement – Articles 23 (3) and (4): These articles state that both parties do not have the right to terminate the agreement under any circumstances, even in the event of a violation of the fundamental agreement, breakdown of diplomatic agreements, or any other reason as provided for by international law. Any disputes between member countries will be addressed as described in Article 20 of the IGA.
- ACT recommends that these articles should be completely removed and rewritten to clearly outline the conditions for terminating this agreement.
Based on stakeholder feedback, IGA analysis, economic and operational perspectives, and ACT Wazalendo’s vision for the society they aim to build, ACT Wazalendo believes that with the suggested amendments in the areas they have outlined, the IGA can help the nation benefit from the geographical economic potential by increasing efficiency and productivity in port operations, government revenue, economic growth, and job creation for Tanzanians.