The Parliamentary Legal Affairs Committee has recommended a reduction in funding for the now controversial Heritage Oil arbitration case in London, United Kingdom.
The committee chairperson, Stephen Tashobya while presenting the recommendations to the Budget Committee on Tuesday, asked parliament to approve 8.7 billion shillings down from the requested 11.9 billion shillings.
Tashobya says there are more pressing issues in the country that the money would help solve. He proposes that the balance of the amount, which is about 3.2 billion shillings, should be returned to the treasury and channeled to the Ministry of Health to fight Nodding Disease in Northern Uganda.
In August 2011, parliament stayed the approval of 11.9 billion shillings for the arbitration case between government and Heritage Oil and Gas Ltd until necessary documents supporting the budget are put in place.
Later the committee on legal affairs was informed that the Ministry of Finance gave another supplementary budget of 6.7 billion shillings to enable them continue with the arbitration. This, the committee found out, was done in total disregard of the recommendation of parliament to stop funding for the case.
Under-Secretary, Earnest Bafaaki told the Budget Committee on Thursday that the Ministry of Justice had to facilitate the team handling the case in London. The Attorney General Peter Nyombi and the acting Solicitor General Harriet Lwabi are already in London to oversee the process. This is why they requested for 6.7 billion shillings under the supplementary budget.
The committee is now recommending that at least one billion be removed from the supplementary budget and reallocated to facilitate parliamentary committee activities. The other 5.7 billion should be channeled to the Ministry of Justice and Constitutional Affairs to fund other government activities.
The recommendations by the committee will first have to be approved by the whole house before being effected.
Heritage Oil, a British oil company, is fighting to keep US$404 million in capital gains tax.
In May 2011, Heritage initiated arbitration against the Government for the release of the US$404 million held by the Uganda Revenue Authority (URA) following the sale of its interests in Uganda in July 2010 to Tullow at US$1.45 billion.
In March 2011, Government signed a memorandum of understanding with Tullow, separating the tax dispute from Tullow’s US$2.93 billion deal with France’s Total and China’s CNOOC. Tullow finally sold its stake to Total and CNOOC early February this year. Tullow was forced to pay US$313 million as security for the unpaid tax bill.
In April 2011, Heritage received a claim from the London High Court in which Tullow was seeking to recover the funds. A month later, Heritage sued the Government in London, saying the sale of its assets in Uganda was not subject to a capital gains tax.
