Oryx/Oilcom arbitration case has risen significant questions

The recent report regarding the incredible legal claim figures in the Oryx/Oilcom arbitration case has raised significant questions. According to an article in The Citizen, the final award issued by the arbitral tribunal on November 30, 2023—signed by Hon. Dr. Engera Kileo, Hon. Sophia Wambura, and Prof. Mussa Assad—amounts to a staggering Sh468 billion. This amount primarily stems from Oryx’s “failure to provide a minimum of 40% of indicative volume of imported oil products for transit transportation,” representing 85% of the total claim.

The core issue revolves around Oryx's obligation to use Oilcom’s trucks to transport oil products to inland countries from Tanzania. A source from Oryx clarified that this obligation pertained to 40% of actual transit volume for a specified list of customers. However, the tribunal’s award calculated compensation based on the entire indicative transit volume, resulting in a claim of USD 147,200,221 over 75 months of activity. This implies a remarkable monthly profit of nearly USD 2,000,000 for Oilcom’s trucking operations—figures more lucrative than some infamous operations in history.

Several discrepancies challenge the credibility of these numbers:

Financial Records vs. Claim Profits: Oilcom’s reported profits to the Tanzania Revenue Authority (TRA) are minimal or nonexistent. If Oilcom’s claim reflects reality, the company should have consistently reported an annual profit of USD 24,000,000. The disparity between these numbers suggests potential undeclared revenue, which warrants further scrutiny by the TRA.

Continued Operations: The claim implies losses due to Oryx’s failure, yet market sources confirm that Oilcom’s trucks continued operations throughout the period. If true, Oilcom’s financial records should reflect substantial transportation margins.

Calculation Methodology: The claim’s basis—using turnover figures rather than profit margins—appears flawed. Typically, a legitimate claim for losses should reflect lost profit margins, not gross turnover. Oilcom’s use of turnover inflates the claim and creates confusion between figures quoted in Tanzanian shillings and U.S. dollars.

Operational Costs Ignored: Turnover figures should be adjusted for operating costs, including fuel, maintenance, salaries, and other operational expenses. Ignoring these factors exaggerates the net profit implied by the claim.

Ownership of Fleet: Notably, Oilcom owns zero trucks; its fleet operations largely fall under Al-Hushoom Investment (T) Ltd, which is not within the contract’s scope. This raises questions about the legitimacy of including such volumes in the claim.

These points highlight the need for a thorough investigation into the claim’s basis and figures. A closer review by the TRA and relevant authorities could clarify inconsistencies and ensure transparency. Further analysis on other aspects of the case is underway, and we will continue to keep readers informed.

Stay tuned for more insights into this developing story.

The recent report regarding the incredible legal claim figures in the Oryx/Oilcom arbitration case has raised significant questions. According to an article in The Citizen, the final award issued by the arbitral tribunal on November 30, 2023—signed by Hon. Dr. Engera Kileo, Hon. Sophia Wambura, and Prof. Mussa Assad—amounts to a staggering Sh468 billion. This amount primarily stems from Oryx’s “failure to provide a minimum of 40% of indicative volume of imported oil products for transit transportation,” representing 85% of the total claim.

The core issue revolves around Oryx's obligation to use Oilcom’s trucks to transport oil products to inland countries from Tanzania. A source from Oryx clarified that this obligation pertained to 40% of actual transit volume for a specified list of customers. However, the tribunal’s award calculated compensation based on the entire indicative transit volume, resulting in a claim of USD 147,200,221 over 75 months of activity. This implies a remarkable monthly profit of nearly USD 2,000,000 for Oilcom’s trucking operations—figures more lucrative than some infamous operations in history.

Several discrepancies challenge the credibility of these numbers:

Financial Records vs. Claim Profits: Oilcom’s reported profits to the Tanzania Revenue Authority (TRA) are minimal or nonexistent. If Oilcom’s claim reflects reality, the company should have consistently reported an annual profit of USD 24,000,000. The disparity between these numbers suggests potential undeclared revenue, which warrants further scrutiny by the TRA.

Continued Operations: The claim implies losses due to Oryx’s failure, yet market sources confirm that Oilcom’s trucks continued operations throughout the period. If true, Oilcom’s financial records should reflect substantial transportation margins.

Calculation Methodology: The claim’s basis—using turnover figures rather than profit margins—appears flawed. Typically, a legitimate claim for losses should reflect lost profit margins, not gross turnover. Oilcom’s use of turnover inflates the claim and creates confusion between figures quoted in Tanzanian shillings and U.S. dollars.

Operational Costs Ignored: Turnover figures should be adjusted for operating costs, including fuel, maintenance, salaries, and other operational expenses. Ignoring these factors exaggerates the net profit implied by the claim.

Ownership of Fleet: Notably, Oilcom owns zero trucks; its fleet operations largely fall under Al-Hushoom Investment (T) Ltd, which is not within the contract’s scope. This raises questions about the legitimacy of including such volumes in the claim.

These points highlight the need for a thorough investigation into the claim’s basis and figures. A closer review by the TRA and relevant authorities could clarify inconsistencies and ensure transparency. Further analysis on other aspects of the case is underway, and we will continue to keep readers informed.

Stay tuned for more insights into this developing story.

In a case that has captured national attention, the arbitration dispute between Oryx and Oilcom has raised profound questions about business integrity, arbitration practices, and transparency in Tanzania. The controversy began with a contractual disagreement over oil transport volumes and culminated in an unprecedented TZS 468 billion arbitration award, a figure that has stunned industry experts and legal analysts alike.

At the heart of the dispute lies a 2016 agreement in which ORYX, a leading oil importer, committed to using Oilcom’s trucks for at least 40% of its oil product transit to neighboring countries. However, Oilcom alleged that ORYX had failed to meet this obligation and lodged an initial claim of USD 5,087,078 in May 2019. Over the years, the claim ballooned, first to USD 131,602,238 in 2021 and eventually to a staggering USD 173,084,708 by March 2023. The arbitral tribunal, composed of Hon. Dr. Engera Kileo, Hon. Sophia Wambura, and Prof. Mussa Assad, ruled in favor of Oilcom, awarding TZS 468 billion on November 30, 2023.

Summary from ORYX Website: News - Oryx Energies

However, the size of the award prompted immediate scrutiny. Oilcom’s claim was based on alleged losses resulting from ORYX’s failure to allocate the agreed transport volumes. A closer look revealed that the figures presented by Oilcom were based on gross turnover rather than net profit—a fundamental flaw in calculating damages. By ignoring operational costs such as fuel, maintenance, and salaries, the claim appeared grossly inflated.

Adding to the skepticism, Oilcom’s financial records showed minimal or nonexistent profits during the disputed period. If the claim were accurate, Oilcom should have reported annual profits of USD 24 million, yet no such figures were reflected in reports submitted to the Tanzania Revenue Authority (TRA). Moreover, evidence indicated that Oilcom’s fleet continued operating during this time, undermining the claim of substantial losses resulting from ORYX failure to fulfil its contractual obligations. Questions also arose about Oilcom’s fleet ownership. It was revealed that Oilcom did not own any trucks; its operations were handled by Al-Hushoom Investment (T) Ltd, a company not covered under the original contract with ORYX. Including volumes managed by Al-Hushoom in the claim further cast doubt on its legitimacy.

The arbitral tribunal’s handling of the case raised even more concerns. Prof. Mussa Assad, one of the arbitrators, had undisclosed ties to Oilcom, having previously worked as a consultant for the company and served on the board of a Kenyan bank partially owned by Oilcom’s shareholders. Despite ORYX’s requests for his recusal and to stay the proceedings, the tribunal dismissed these objections.

More on the link: THREE OIL COMPANIES LOCK HORNS AS EX-CAG REMAIN ARBITRATOR

Professor Mussa Juma Assad - Premier Bank

The tribunal also refused to hear testimony from an international expert engaged (attached) by ORYX to challenge the inflated figures. When ORYX proposed a local expert as an alternative, this request was also denied. Such decisions cast a shadow over the tribunal’s impartiality and the fairness of the process.

The controversy deepened during the enforcement phase of the arbitration award, where the conduct of Deputy Registrar raised significant alarm. On November 6, 2024, Oilcom reported difficulties in recovering the full awarded sum from ORYX’s attached bank accounts. Despite a scheduled court hearing on November 15, 2024, the Deputy Registrar unexpectedly summoned ORYX’s legal team for an unscheduled session on November 7, 2024. During this session, ORYX legal team was informed them that liability would be extended to ORYX’s shareholders and shares in several Tanzanian companies owned by ORYX Energies, including TIPER—a joint venture between ORYX Energies and the Tanzanian government—entities not named in the original arbitration proceedings. This decision violated standard legal procedures requiring a new application for such actions and bypassed the 15-day notice period stipulated in the garnishee order. The unprecedented extension of liability to affiliates uninvolved in the arbitration, coupled with actions perceived as favoring Oilcom, has fueled widespread speculation about undue influence and partiality.

Timing added another layer of complexity. Under the framework agreement, ORYX had until 2032 to reconcile any shortfalls in meeting the agreed transport volumes. By awarding damages before the contract’s expiration, the tribunal issued what ORYX described as a premature decision. Furthermore, the outturn reports cited by Oilcom to support its claim were called into question. According to the TRA, ORYX was merely a notified party in the importation process, not the consignee, rendering these reports an unreliable basis for the claim.

The TZS 468 billion award has spotlighted critical flaws in Tanzania’s arbitration system. Arbitration, intended as a neutral and efficient alternative to litigation, is still evolving in the country. This case has exposed vulnerabilities in the process, from questions of impartiality to the rejection of expert evidence.

As calls grow for an investigation into the tribunal’s decision and Oilcom’s financial disclosures, the broader implications of this case are becoming clear. Beyond the specifics of the ORYX-Oilcom dispute, it underscores the urgent need for transparency, fairness, and rigor in arbitration practices.

The resolution of this case will not only determine the fate of ORYX and Oilcom but will also set a precedent for how such disputes are handled in Tanzania. As the nation watches closely, this saga serves as a critical moment for accountability in business and arbitration, with lessons that could shape the future of Tanzania’s legal and economic landscape.