On oil and political risk in Uganda

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.

…. 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.

More on this here.

Total Uganda (or is it Total Netherlands?) is probably trying to dodge taxes in Uganda. But the Ugandan government lacks the means to effectively counteract this since it insists on keeping the details of its production sharing agreement with the French Dutch company secret. So there’s that.

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