The heavily criticized legal mechanism, known as ISDS, is an important tool for European companies to pressurize developing countries. This year Uganda joins the rank of developing nations asking themselves: “Why have we ever signed this?”

Earlier this year, the French oil company Total filed a request for arbitration against the government of Uganda. In essence, arbitration is a way to resolve a dispute, not by going to a public court, but by asking the verdict of a private court. Both parties choose an arbitrator, usually an investment lawyer, and the two of them choose a third one. The arbitration is hosted, in this case, by the World Bank.

This is a new step in the frustrating process of Uganda trying to turn its oil into cash.

Peaceful names

Crude oil reserves in Uganda are estimated by government geologists at 6.5 billion barrels, half of which lies beneath the famous Murchison Falls, a famous national park, known for its wild animals. Wells have been given exotic names, like Crocodile, Buffalo, Giraffe and Warthog.

These peaceful names contrast with the bitter fights that are being fought over the oil. Commercial production has been repeatedly delayed by disputes with explorers over taxes and development plans. Now it’s the French oil company Total refusing to pay tax. It acquired a 33 per cent share in a 2.9 billion dollar project owned by Tullow Oil. According to Ugandan law, when a stock is bought, a stamp duty must be paid.

However, the oil firm refuses to do so, citing no legal obligation to honor the government claims. Total has not disclosed how much tax is at the heart of the dispute or why it objects to the tax levy but a source at the Uganda Revenue Authority told Reuters earlier that the Production Sharing Agreement (PSA) includes a tax waiver.

Secret

From their offices in an eight-story glass building located in the lush green high-end Nakasero area in the capital city Kampala, Total’s Corporate Affairs Manager Ms. Ahlem Friga-Noy stated that “given the applicable confidentiality obligations, we are not in a position to comment further on the proceedings.”

The Office of the Attorney General of the Government of Uganda replies in the same manner: “We are under obligation not to disclose the content of the matter to the public until it is appropriate.”

This points exactly to the problem of arbitration. In a court room all affected parties and stakeholders have the right to speak, or at least listen, but an arbitration procedure is very secretive. No one is obliged to disclose details. Has the state really behaved badly? Or is it the company who abuses arbitration as a pressure to get a tax reduction? The public remains completely in the mist, until the final verdict of the tribunal is published, which can be a multimillion dollar fine.

The Dutch sandwich

The problem Uganda now faces has been made possible by the Bilateral Investment Treaty signed in 2000 with the Netherlands. According to the treaty, all Dutch investors in Uganda have the right to pursue arbitration before the World Bank court if they feel treated unfairly. The French company Total Uganda registered itself as a Dutch company.

This is known as the Dutch Sandwich; you put a Dutch company in between and then you become a Dutch investor. Which turns the treaty into a tool to drag a state before a tribunal of three men in Washington, having a commercial background and the ability to award billion dollar fines, without a possibility to appeal. If Uganda is condemned to a compensation but refuses to pay, the company has the right to seize Ugandan assets in the world.

Against Ugandan law

This is against Ugandan law, says the renowned Human Rights lawyer Isaac Ssemakadde. “According to the constitution, taxation is wholly the creation of the law of the state.” Which means that disputes have to be settled on the basis of the law alone. “Even an agreement between parties cannot supercede the obligation fixed in the law. There is therefore no room for arbitration on taxation,” he said.

“In an earlier tax dispute, between Heritage Oil and Gas against Uganda Revenue Authority, the High Court has forbidden the state to refer proceedings to the arbitration processes in London or anywhere else outside the jurisdiction of the Ugandan courts of law,” noted Ssemakadde.

In short, “Total is being treated differently to other business persons which is in violation of article 21 of the constitution of Uganda which states that all persons are equal before and under the law.”

Nobody can check Total’s claims about a tax waiver, because the Product Sharing Agreements are confidential. This is so despite the fact that Uganda has an Access to Information law that was promulgated in 2005. This limits the discussion, and knowledge, about the proceedings in the country’s oil sector to senior politicians and bureaucrats. The ordinary Ugandan is kept in darkness about what happens there.

The secrecy is not only advantageous for oil companies, but also for certain politicians, who seem to be interested in “personalizing” the oil resources. The Ugandan president Yoweri Museveni recently told Ugandans that those people who are challenging him politically in the forthcoming general elections “are after my oil.”

Why BITs?

A new interactive map made by Dutch journalists, with all known ISDS cases in the world, shows that ISDS is mainly used against developing countries. Sometimes because they clearly behaved badly towards an investor, but in other cases it’s more likely that it is used as a bargaining tool and a threat by multinational companies for better deals. Litigation costs amount to 8 million dollars on average, calculated the Organisation for Economic Co-operation and Development.

For lawyers and arbitrators this is simply an effective tool to defend the rule of law. “I’m happy there is arbitration”, a Dutch investment lawyer says. “There are many thug states in the world. And why do they complain? They signed the treaty themselves.”

“In the end, it’s the ordinary Ugandan taxpayer to bear the brunt and consequences for the enormous amounts of money that is going to be spent on this arbitration process,” says Ssemakadde. “Whereas Total can afford to maintain a given team of lawyers in Washington for, say, a month, Uganda can hardly afford this.”

The people remain ignorant about the deals that are made, and who exercises pressure on whom. Unless the general public starts to view the oil, as well as the treaties their government signs, as belonging to them and not the selected few in government, companies like Total will continue dragging the state into expensive arbitration processes, paid by the Ugandan taxpayers, who are the actual owners of the national resources.

This article is part of a research by De Groene Amsterdammer, Oneworld and Inter Press Service, supported by the European Journalism Centre (made possible by the Gates Foundation). See www.aboutisds.org.

Edinburgh Castle, symbol of the Scottish capital, whose university has just decided not to disinvest in fossil fuels. Photo credit: Kim Traynor/CC BY-SA 3.0 via Wikimedia Commons

By Kirsty Haigh, Eric Lai, and Ellen Young
EDINBURGH, May 17 2015 (IPS)

The University of Edinburgh has taken the decision to not divest from fossil fuels, bowing to the short-term economic interests of departments funded by the fossil fuel industry, with little to no acknowledgement of the long-term repercussions of these investments.

The decision, which was announced on May 12, exemplifies the influence that vested interests have gained over academic institutions in the United Kingdom.“Our university has decided to take a reactionary approach to climate change, failing to make any statement of commitment to the staff and students who have been demanding divestment from fossil fuel companies for the past three years”

Collectively, U.K. universities invest over eight billion dollars in fossil fuels, more than 3,000 dollars for every student. The University of Edinburgh has the country’s third largest university endowment, after Oxford and Cambridge, totalling 457 million dollars, of which approximately 14 million is invested in fossil fuel companies, including Total, Shell and BHP Billiton.

Our university has decided to take a reactionary approach to climate change, failing to make any statement of commitment to the staff and students who have been demanding divestment from fossil fuel companies for the past three years.

Announcing it decision, the university said: ”The university will withdraw from investment in these [fossil fuel consuming and extracting] companies if: realistic alternative sources of energy are available and the companies involved are not investing in technologies that help address the effects of carbon emissions and climate change.”

However, given the fossil fuel industry’s continued destruction of the planet, the university’s approach leaves far too much to the imagination and indeed allows for the potential to not divest from harmful industries at all.

We are going to find our existence completely altered – and in a way that we do not want – if   we do not stop extracting and burning fossil fuels, and we know the big fossil fuel companies have no intention of stopping.

Climate change not only poses a massive economic threat but also presents the world’s biggest global health hazard – and its effects are hitting the poorest parts of the world hardest. The University of Edinburgh is fundamentally failing to acknowledge the part it is playing in funding climate chaos.

Our university claims to be a “world leader in addressing global challenges including … climate change” but if the university had any desire to take the moral lead, it would have divested. Divestment would have seen Edinburgh join a global movement of universities and numerous other forward-thinking organisations in divorcing itself from the tightening grip of the fossil fuel industry.

The University of Edinburgh came down firmly on the side of departments funded by the industry which have been scaremongering throughout the process

Freedom of Information (FOI) requests have revealed, for example, that the university’s Geosciences Department has received funding from a range of fossil fuel companies over the past 10 years, including BP, Shell and ConocoPhillips, as well as grants and gifts of money from Total and Cairn Energy.

Sixty-five students in the university’s School of Engineering have already signed an open letter to the Head of the School, Prof Hugh McCann, angered by his public opposition to fossil fuel divestment.

Their letter states: “The School of Engineering has and will continue to have a pivotal role in the university’s future. It is after all engineers who will be on the frontlines of the transition to a low carbon society.

“By basing its argument against divestment on engineering students’ chances of employment in one dead-end industry, the school appears to be failing to prepare its students for careers in the rapidly changing energy markets of the 21st century, whilst neglecting the faculty’s broader responsibility to the student body as a whole. As a consequence, they gamble employment against our common future.”

Divesting is a way of taking on and dismantling the big fossil fuel companies and the power they hold over our society and governments. We rightly condemn companies that do not pay their taxes or who exploit their workers, and so we must do this to the companies who are threatening our very existence.

Divestment is also about creating more democratic institutions where those who are part of universities can have a say in how their money is spent and invested. The university’s announcement has shown that we still have a long way to go in creating transparent, democratic and ethical institutions. It brings into question the validity of the university’s decision-making process.

For the past three years, students, staff and alumni have supported full divestment – yet the University of Edinburgh has ignored their calls. The consultation run by the university found staff, students and the public in favour of ethical investment. A year later we still have zero commitment to change.

A process which began with promise has been allowed to descend into a complete breakdown in communication between students and the university. Serious questions need to be asked about why the decision was taken in favour of the views from the university’s Department of Geosciences, which freely admits its vested interested in maintaining the status quo for financial reasons.

The University of Edinburgh needs to invest in alternatives to dirty and unhealthy energy sources. These alternatives will create new jobs, so that when the fossil fuel industry ceases to exist there is something to replace it and our students are trained to work in it.

Edited by Phil Harris    

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service. 

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