Introduction
This essay seeks to compare and contrast the dispute resolution mechanisms outlined in Bilateral Investment Treaties (BITs) signed by Tanzania with foreign states and those provided in Tanzania’s Natural Resources Permanent Sovereignty Act of 2020. Dispute resolution mechanisms are pivotal in international investment law, as they provide frameworks for addressing conflicts between investors and host states, ensuring fairness and legal certainty. Tanzania, a resource-rich nation, has engaged in numerous BITs to attract foreign direct investment while simultaneously enacting domestic legislation to assert control over its natural resources. This analysis will explore the differences and similarities between the international arbitration-centric approach in BITs and the domestically-oriented framework of the 2020 Act, focusing on legal provisions and key cases. By drawing on academic literature and statutory texts, the essay aims to highlight the implications of these mechanisms for Tanzania’s investment climate and sovereignty over natural resources.
Dispute Resolution in Bilateral Investment Treaties (BITs)
Bilateral Investment Treaties are agreements between two states that aim to provide protections for investments from one state in the other, often including provisions on dispute resolution. Tanzania has signed numerous BITs with countries such as the United Kingdom, Germany, and China, typically incorporating mechanisms that favor international arbitration. A common feature in these treaties is the inclusion of Investor-State Dispute Settlement (ISDS) clauses, which allow foreign investors to bring claims against the host state in international forums like the International Centre for Settlement of Investment Disputes (ICSID). For instance, the Tanzania-UK BIT (1994) explicitly provides for arbitration under ICSID or the United Nations Commission on International Trade Law (UNCITRAL) rules in case of disputes (Tanzania-UK BIT, 1994).
Scholars such as Dolzer and Schreuer (2012) argue that ISDS mechanisms in BITs are designed to depoliticize disputes by offering a neutral platform, thereby increasing investor confidence. However, this often comes at the expense of the host state’s sovereignty, as decisions made by international tribunals may override domestic laws or policies (Dolzer and Schreuer, 2012). Moreover, the case of Biwater Gauff (Tanzania) Ltd. v. United Republic of Tanzania (ICSID Case No. ARB/05/22) illustrates the complexities of such mechanisms. In this case, the tribunal ruled against Tanzania, finding that the state had breached fair and equitable treatment obligations under the Tanzania-UK BIT, ordering compensation to the investor. This highlights how BITs can limit a state’s ability to regulate in the public interest, especially concerning natural resources (ICSID, 2008).
Dispute Resolution under the Natural Resources Permanent Sovereignty Act of 2020
In contrast to the international focus of BITs, Tanzania’s Natural Resources Permanent Sovereignty Act of 2020 emphasizes domestic control over dispute resolution mechanisms related to natural resources. Enacted as part of broader reforms to assert national sovereignty, the Act mandates that disputes arising from natural resource contracts must be resolved within Tanzania, using domestic courts or local arbitration bodies. Section 11 of the Act explicitly states that agreements involving natural resources shall not include clauses that subject disputes to foreign jurisdictions or arbitration forums unless expressly approved by the Tanzanian government (Natural Resources Permanent Sovereignty Act, 2020).
This legislative stance reflects a growing trend among resource-rich nations to prioritize national interests over international commitments, as noted by Muchlinski (2007), who argues that such laws aim to counterbalance the perceived biases of international arbitration (Muchlinski, 2007). However, this approach raises concerns about judicial independence and the capacity of local institutions to handle complex investment disputes fairly. For example, critics such as Reinisch (2013) highlight that domestic courts in developing nations may lack the expertise or impartiality required to adjudicate disputes involving powerful foreign investors (Reinisch, 2013).
Comparative Analysis: Key Similarities and Differences
While both the BITs and the 2020 Act aim to provide structured mechanisms for resolving disputes, their approaches diverge significantly in terms of jurisdiction and underlying philosophy. One notable similarity is the shared goal of ensuring legal certainty for parties involved in investment agreements. BITs achieve this through internationally recognized arbitration rules, whereas the Act seeks to anchor certainty within Tanzania’s legal system. As Brownlie (2008) notes, certainty in dispute resolution is critical for fostering trust between states and investors, irrespective of the forum (Brownlie, 2008).
However, the differences are stark. BITs, with their reliance on ISDS, often prioritize investor protections, sometimes to the detriment of the host state’s regulatory autonomy. In contrast, the 2020 Act is explicitly state-centric, aiming to shield Tanzania’s sovereignty over natural resources from external interference. This creates a tension between Tanzania’s international obligations under BITs and its domestic legal framework. For instance, in the case of Acacia Mining plc v. United Republic of Tanzania (ICSID Case No. ARB/18/41), ongoing disputes regarding mining contracts have brought to light potential conflicts between BIT provisions and domestic laws like the 2020 Act, although a final ruling is pending (ICSID, 2018). Furthermore, the impartiality of international tribunals versus domestic courts remains a point of contention, with scholars such as Sornarajah (2010) arguing that ISDS can favor investors disproportionately, while domestic mechanisms risk political interference (Sornarajah, 2010).
Another critical difference lies in accessibility and enforcement. Awards from international arbitration under BITs are often binding and enforceable globally under instruments like the New York Convention, whereas decisions under the 2020 Act may face enforcement challenges outside Tanzania. As Dugan et al. (2008) suggest, the enforceability of awards is a significant factor in the efficacy of any dispute resolution mechanism, and this disparity could impact investor confidence in Tanzania (Dugan et al., 2008).
Implications for Tanzania’s Investment Climate
The divergence between BITs and the 2020 Act poses complex challenges for Tanzania. On one hand, BITs have historically played a role in attracting foreign investment by providing assurances to investors through ISDS. On the other hand, the 2020 Act reflects Tanzania’s intent to reclaim control over its natural resources, aligning with broader African trends towards resource nationalism, as discussed by Lowenfeld (2008). This dual framework risks creating legal uncertainty, as investors may be deterred by the prospect of mandatory domestic dispute resolution, while the state may face challenges in reconciling its international commitments with domestic policies (Lowenfeld, 2008).
Conclusion
In conclusion, the dispute resolution mechanisms in Tanzania’s BITs and the Natural Resources Permanent Sovereignty Act of 2020 represent contrasting approaches to balancing investor protections with state sovereignty. While BITs emphasize international arbitration to ensure neutrality and investor confidence, the 2020 Act prioritizes domestic jurisdiction to safeguard national interests over natural resources. Cases such as **Biwater Gauff v. Tanzania** and ongoing disputes like **Acacia Mining v. Tanzania** underscore the practical challenges of navigating these frameworks. Ultimately, the tension between these mechanisms highlights the broader struggle faced by resource-rich developing nations in attracting foreign investment while asserting control over their assets. Further research is needed to explore how Tanzania can harmonize its international obligations with domestic priorities, ensuring both legal certainty and equitable outcomes for all stakeholders.
References
- Brownlie, I. (2008) Principles of Public International Law. 7th ed. Oxford University Press, Oxford.
- Dolzer, R. and Schreuer, C. (2012) Principles of International Investment Law. 2nd ed. Oxford University Press, Oxford.
- Dugan, C., Wallace, D., Rubins, N. and Sabahi, B. (2008) Investor-State Arbitration. Oxford University Press, New York.
- Lowenfeld, A. F. (2008) International Economic Law. 2nd ed. Oxford University Press, Oxford.
- Muchlinski, P. (2007) Multinational Enterprises and the Law. 2nd ed. Oxford University Press, Oxford.
- Reinisch, A. (2013) Standards of Investment Protection. Oxford University Press, Oxford.
- Sornarajah, M. (2010) The International Law on Foreign Investment. 3rd ed. Cambridge University Press, Cambridge.
