The Supreme Court’s Decision on Heritage Oil’s Tax Dispute
The Supreme Court in Uganda has made a decision in the long-standing tax dispute between Heritage Oil and the Uganda Revenue Authority (URA). Heritage Oil had appealed to the Supreme Court to challenge some of the arguments put forth by URA in a case before the High Court related to a $435 million tax dispute.
In a unanimous decision authored by Prof. Lilian Tibatemwa, five justices dismissed Heritage Oil’s appeal, citing a lack of jurisdiction for the Supreme Court to handle this matter. The court explained that the appeal sought to challenge an interlocutory order issued by the High Court during the exercise of its appellate jurisdiction, making it beyond the scope of the Supreme Court’s jurisdiction. This judgment was issued on October 5, 2023.
Background of the Dispute
The tax dispute between Heritage Oil and URA dates back to 2011 and revolves around a $435 million capital gains tax stemming from Heritage Oil’s sale of its oil and gas blocks to Tullow Oil in the Albertine Graben.
Heritage Oil had been seeking the release of $405 million held in an escrow account with Standard Chartered Bank by URA. Meanwhile, URA aimed to retain the $405 million and collect an additional $30 million as capital gains tax from the transaction. The Tax Appeals Tribunal had previously ruled that the transaction was taxable, agreeing with URA’s assessment of $434.9 million.
Heritage Oil had argued that the transaction was not taxable in Uganda because the company was incorporated in The Bahamas and later registered as a tax resident in Mauritius, with Uganda having a double taxation agreement with Mauritius.
Legal Proceedings
Heritage Oil had initially proposed settling the tax dispute through the International Court of Arbitration in London, but URA opted for the Ugandan Tax Appeals Tribunal. The Tribunal, chaired by Asa Mugenyi, determined that Heritage was indeed liable to pay the assessed tax.
Unsatisfied with the Tribunal’s decision, Heritage Oil lodged two appeals in the High Court, which were consolidated for proceedings. During the High Court proceedings, presided over by Judge Jane Elizabeth Alividza, Heritage Oil objected to some of URA’s arguments. The judge did not accept Heritage Oil’s objections and instructed the parties to prepare their final submissions for the appeal, focusing on the relevant points of law.
Heritage Oil disagreed with this decision and filed an appeal with the Court of Appeal, seeking to overturn Judge Alividza’s ruling. However, the Court of Appeal upheld the High Court’s decision, stating that the judge had not yet heard the main appeal and that her directives were meant to facilitate progress in the appeal.
The Supreme Court’s Decision
Heritage Oil further appealed the Court of Appeal’s decision to the Supreme Court, asserting that errors had been made in determining the right to appeal the High Court’s decision in a Tax Appeals Tribunal matter. Heritage also challenged the characterization of their appeal as a third appeal, contending that it did not require a certificate of importance under section 73 of the CPA. Additionally, they contested the Court of Appeal’s position that there was no legal provision for striking out contentious submissions.
In its ruling, the Supreme Court upheld the Court of Appeal’s decision, emphasizing that the relevant statutory provisions at the time of the appeal did not allow for appeals against interlocutory decisions made by the High Court. Prof. Tibatemwa noted that amendments had since been made to allow appeals to the Court of Appeal and Supreme Court from tax disputes, but these changes had come into effect after the Court of Appeal’s decision in this case. Consequently, the said amendments did not apply to this particular appeal.
