Sunlodges Ltd (BVI) and Sunlodges (T) Limited v. United Republic of Tanzania
PCA · Investment (ICSID and treaty) · Tanzania · 20 Dec 2019
Why it matters
This award is significant for its detailed analysis of the interplay between domestic land law and international investment treaty protections. It clarifies that revocation of a right of occupancy can amount to expropriation under a BIT, and that compensation must be assessed under international law standards, not just domestic law. The case also addresses the valuation of agricultural investments and the application of the MFN clause to import more favorable expropriation provisions from another treaty.
Summary
The dispute arose from the revocation of three rights of occupancy held by Sunlodges (T) Limited over an agricultural estate in Tanzania. The Claimants, Sunlodges Ltd (BVI) and Sunlodges (T) Limited, alleged that the revocation by the Tanzanian government was unlawful and amounted to expropriation without compensation, violating the Italy-Tanzania BIT. The Respondent argued that the revocation was lawful under Tanzanian law due to non-compliance with conditions of the rights of occupancy, and that the Claimants had not exhausted local remedies. The Tribunal, constituted under UNCITRAL Rules, found that it had jurisdiction and that the revocation was an expropriation. It held that the expropriation was unlawful because it was not for a public purpose, did not follow due process, and was not accompanied by compensation. The Tribunal rejected the Respondent's counterclaims for damages. Applying the standard of compensation for unlawful expropriation under international law, the Tribunal awarded the fair market value of the investment as of the date of expropriation (5 September 2011), plus interest at 7% compounded annually. The total compensation awarded was USD 11,257,004.45, plus costs. The award is notable for its rejection of the Respondent's argument that the Claimants' failure to comply with domestic law precluded BIT protection, and for its application of the MFN clause to import the Denmark-Tanzania BIT's more favorable expropriation provisions.
The detail
Parties: Sunlodges Ltd (BVI) and Sunlodges (T) Limited v. United Republic of Tanzania
Case number: PCA Case No. 2018-09
Outcome: The Tribunal upheld the Claimants' claim of unlawful expropriation and awarded compensation: USD 8,919,842.45 to Sunlodges BVI and USD 2,337,162 to Sunlodges Tanzania, plus interest and costs.
Quantum: USD 11,257,004.45
Applicable law: Italy-Tanzania BIT (2001); UNCITRAL Arbitration Rules (1976); Tanzanian Land Act, 1999
Issues in play: The case involved the interaction between Tanzania's domestic land law (rights of occupancy and revocation) and the BIT's protection against expropriation without prompt, adequate, and effective compensation. The Tribunal had to determine whether the revocation of the Claimants' rights of occupancy constituted an expropriation under the BIT and whether it was lawful.
Read the full decision at italaw ↗
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