February 11, 2025

Ghana Loses $320 Million in Arbitration Case Over Tax Dispute with Tullow Oil

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Ghana loses $320 million arbitration dispute over tax assessment with Tullow Oil

In a significant development, the International Chamber of Commerce (ICC) has ruled in favor of Tullow Oil in a $320 million tax dispute with the Ghana Revenue Authority (GRA). This ruling, which came as a major victory for the oil company, indicates that the Branch Profit Remittance Tax (BPRT) does not apply to Tullow’s operations in Ghana’s Deepwater Tano and West Cape Three Points fields. This decision effectively exempts Tullow from the $320 million BPRT assessment, meaning the company is no longer liable for this tax or any future BPRT obligations associated with these operations.

The arbitration ruling is a setback for the Government of Ghana, as it had been counting on the $320 million in expected tax revenue from the oil giant. This decision also brings into focus broader issues concerning Ghana’s fiscal policies, especially regarding the tax frameworks that govern the country’s oil and gas sector. As Ghana continues to work on attracting more investment into the sector, the ruling highlights the ongoing challenge of ensuring that the country can secure fair tax payments from foreign companies while maintaining a favorable environment for investment.

Tullow Oil, which is a significant player in Ghana’s oil industry with major stakes in the Jubilee and TEN oil fields, expressed its relief after the ruling. The company emphasized that the ICC’s decision supported its position regarding the tax dispute with the GRA. In a press statement, Tullow said, “We are pleased that the ICC tribunal has confirmed our position that the $320 million BPRT assessment issued by the GRA in Ghana was not applicable to our operations. This ruling brings clarity on the applicability of BPRT to our operations under the relevant Petroleum Agreements and double tax treaties.”

The company also reiterated its commitment to continued collaboration with the Government of Ghana to resolve any remaining disputes in a mutually constructive way. This ruling provides clarity on the specific application of the BPRT, an important tax that applies to the profits foreign companies earn in Ghana and remit to their parent companies abroad. Tullow had previously contested the GRA’s assertion that the tax applied to its operations, arguing that it was inconsistent with the terms outlined in its Petroleum Agreements and Ghana’s existing tax treaties with the UK.

Despite the victory in this arbitration case, Tullow Oil still faces ongoing legal battles with the GRA. The company is involved in arbitration over two other significant tax-related issues. One dispute centers around the disallowance of loan interest deductions for the period from 2010 to 2020, while the other concerns proceeds received from Tullow’s Business Interruption Insurance policy for the years 2016 through 2019. The combined value of these disputed amounts exceeds $387 million, excluding any penalties that may be imposed.

Tullow Oil has made it clear that it remains committed to resolving these disputes through constructive dialogue with the GRA. Despite these ongoing disagreements, the company has emphasized its intention to settle these issues amicably and continue its operations in Ghana’s oil sector, which remains vital to the country’s economy.

The ICC’s ruling, while a significant victory for Tullow, underscores the need for clarity and consistency in the tax framework that governs the country’s oil and gas sector. For Ghana, the ruling may prompt a reassessment of its fiscal policies, particularly as it seeks to balance the need to generate revenue from its natural resources while fostering a competitive and attractive environment for international investors. As these legal and policy issues continue to evolve, the relationship between the Ghanaian government and foreign oil companies like Tullow will remain critical to the success and sustainability of the country’s oil and gas sector.

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