The two entities â€˜Tullow and Heritage Oilâ€™ have been engaged in legal battles arising from a deal that was struck in 2010 which saw Tullow agree to pay Â£1.45billion to buy Heritage's assets at the Lake Albert basin. The basin is estimated to hold about one billion barrels of oil.
Tullow Oil plc, announced this afternoon that, Tullow Uganda Limited, its Ugandan subsidiary, had received judgment in its favor in the proceedings against Heritage Oil and Gas Ltd in the Court of Appeal in London. A detailed ruling could however not be obtained by press time.
The two entities ‘Tullow and Heritage Oil’ have been engaged in legal battles arising from a deal that was struck in 2010 which saw Tullow agree to pay £1.45billion to buy Heritage's assets at the Lake Albert basin. The basin is estimated to hold about one billion barrels of oil.
But Heritage claimed that it wasn't liable for a $434million capital gains tax bill that was due as a result of the sale, and handed over just $121.5million to the Ugandan government. Tullow then sued Heritage in London, having sought an indemnity from Heritage under the sale agreement in respect of the $313million payment it handed over to Ugandan authorities.
In June 2013, Tullow succeeded in the High Court in London with its indemnity claims against Heritage with regard to Capital Gains Tax payments that Tullow had made on Heritage's behalf to the Uganda Revenue Authority. In August 2013, Tullow received $345.8 million from Heritage in satisfaction of this High Court judgment.
But in September 2013, Heritage was granted permission by the Court of Appeal to appeal certain aspects of the High Court judgment. The appeal was heard in May 2014. Heritage in the appeal claimed Tullow’s payments to Uganda Revenue Authority were commercially motivated and not based on a valid legal obligation.
In its judgment, the Court of Appeal ruled in Tullow's favor on all but one of the points appealed by Heritage. This point relates to part of one of Tullow's indemnity claims and will require Tullow to repay to Heritage approximately $2.5 million plus some interest.
Last week Tullow Oil Company was ordered by a tax appeals tribunal to pay $407m, to Uganda Revenue Authority (URA) as Capital Gains Tax that URA relating to the 2011 sale of a combined 66pc stake in the Lake Albert basin to China National Offshore Oil Corporation (CNOOC) and Total. Tullow sold that stake for $2.9billion.
But Tullow said it would challenge the $407million tax bill that was slapped on it by the Ugandan Revenue Authority. It insists it is only liable to pay $143million in tax related to the deal on account that the amount already paid exceeds its liabilities in relation to Capital Gains Tax.
A statement issued by Tullow today says that the ruling of the appeals Court in London today ruled in its favor in most of the appeals raised by Heritage.
Heritage oil however according to the statement won just one of the issues in the appeal regarding Tullows indemnity claims. Tullow now retains most of the $313 million but will have to refund Heritage $2.5 million plus some interest.
Heritage had argued in the appeal that was not liable to pay the tax because the Capital Gains Tax regime was different when it signed its initial contract to explore in Uganda.