Heritage Oil Plc (LSE: HOIL), an independent upstream exploration and production company, responds to recent press speculation and statements attributed to Ugandan officials in relation to confidential international arbitration proceedings which are ongoing between the Government of the Republic of Uganda (the “Ugandan Government”) and Heritage Oil & Gas Limited (a wholly owned subsidiary of Heritage) (“HOGL”) following HOGL’s sale of its interests in Blocks 1 and 3A in Uganda on 26 July 2010.
Heritage can confirm that a determination on jurisdictional challenges raised by the Ugandan Government was issued last night by the arbitration tribunal. Heritage is still reviewing the decision but the recent press comments attributed to the Ugandan Government and/or the Uganda Revenue Authority are a misleading representation of a detailed decision. While the arbitral tribunal concluded that it does not have jurisdiction to hear arguments relating to the underlying substantive Ugandan tax matters, Heritage is delighted that the tribunal has rejected the Ugandan Government’s challenge to jurisdiction to determine the central question as to the propriety of the alleged imposition of tax with reference to contractual stabilisation clause protection invoked by Heritage together with the breach of other contractual obligations.
The determination by the arbitral tribunal is supposed to be confidential and marks the end to the preliminary phase of the international arbitration proceedings. The international arbitration will now continue and move to deal with the merits phase of Heritage’s contractual claims against the Ugandan Government and the underlying substantive Ugandan tax matters remain under appeal in the Ugandan courts.
Heritage is concerned to note that press comments attributed to the Ugandan authorities regarding the arbitral decision are inaccurate as well as being breaches of the requirement of confidentiality imposed upon both parties to the proceedings.
The $283.4 million placed in escrow in July 2010 by Heritage in relation to any potential Ugandan tax liability remains in escrow in London held by Standard Chartered Bank.
Additionally, in July 2010, Heritage deposited $121.5 million 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. As such Heritage’s position remains unchanged.