In his judgment, Mr. Justice Burton found in favour of Tullow’s indemnity claim for US$313 million in its entirety and also dismissed Heritage’s counterclaim.
Shortly after, the upbeat Tullow Oil put up a statement on its website that read “Tullow Oil plc (Tullow) is pleased to announce that Tullow Uganda Limited, its Ugandan subsidiary, has received judgment in its favour in the proceedings against Heritage Oil and Gas Ltd and Heritage Oil Plc in the High Court in London.”
But Heritage said it strongly disagreed with the decision. It maintains the view that Tullow’s original payments to the Uganda Revenue Authority were commercially motivated rather than as the result of a valid legal obligation.
Stockmarketwire.com reports that Heritage will now perform a robust and exhaustive evaluation of its legal options with a view to appealing the judgment. Any appeal process will be commenced within the prescribed time period of 21 days from the date of judgment.
Heritage said it was apparent that Mr Justice Burton was not ruling on the fundamental legality of the imposition of the tax by the Uganda Revenue Authority, and it has no bearing on the outcome of the international arbitration proceedings against the Ugandan government in London, which are ongoing.
The case arises from a 2010 transaction in which Tullow agreed to acquire Heritage’s Ugandan assets pursuant to a Sale and Purchase Agreement. The Uganda Revenue Authority designated Tullow Uganda Limited as agent in relation to this transaction which required Tullow to pay, on Heritage’s behalf, US$313 million to the URA. This sum was the outstanding Capital Gains Tax that the Ugandan Government claimed from Heritage in respect of the transaction. Tullow sought an indemnity from Heritage under the SPA in respect of this US$313 million payment to the URA.
Pending appeals in Ugandan High Court
Heritage’s position remains, based on comprehensive advice from leading counsel, legal and tax experts, that this retrospectively placed tax, with no precedent, is not valid.
Heritage said the The $283.4m placed in escrow in July 2010 in relation to any potential Ugandan tax liability remains in escrow in London held by Standard Chartered Bank.
Additionally, in July 2010, Heritage deposited $121.5m with the Ugandan government and so substantially all of the cash has been reserved and does not impact on the Company’s current cash position.
Read entire ruling here