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In a major development impacting investors, Tanzanian law now expressly allows a natural resources agreement to provide for a foreign seat of arbitration or non-Tanzanian jurisdiction, provided the Cabinet has approved the agreement. This development was introduced by the Written Laws (Miscellaneous Amendments) (No. 2) Act, 2026 (Act No. 7 of 2026) (Amendment Act), which amends the Natural Wealth and Resources (Permanent Sovereignty) Act, Cap. 449 (NWR Act).
Part VI of the Amendment Act (sections 18 and 19), which is to be read as one with the NWR Act, amends section 11 of the NWR Act by adding a new subsection (4).
The position before the amendment
Since 2017, section 11 of the NWR Act has provided that:
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- permanent sovereignty over natural wealth and resources shall not be the subject of proceedings in any foreign court or tribunal (section 11(1));
- disputes arising from the extraction, exploitation or acquisition and use of natural wealth and resources shall be adjudicated by judicial bodies or other organs established in the United Republic and in accordance with the laws of Tanzania (section 11(2)); and
- the applicable Tanzanian fora and Tanzanian law shall be acknowledged and incorporated into the relevant arrangement or agreement (section 11(3)).
These provisions were generally understood to restrict foreign-seated arbitration and non-Tanzanian jurisdiction in agreements within their scope. Such restrictions were viewed unfavourably by investors and financial institutions, as they adversely affected project financing and bankability.
By limiting investors’ ability to choose a more developed and established arbitral seat, with a well-developed arbitration framework, experienced supervisory courts and established jurisprudence on international arbitration.
As a result, in certain exceptional circumstances warranting the inclusion of a foreign seat of arbitration or a foreign jurisdiction in an agreement, the Government was amenable to and permitted such arrangements. However, investors lacked the additional assurance of an express legislative provision establishing a clear procedure for invoking such exceptions.
The latest amendment is therefore welcome, as it goes a step further in enhancing investor confidence by providing a legislative basis for investors to negotiate a seat of arbitration or jurisdiction with which they are more comfortable, while expressly recognising the circumstances in which an exception may be permitted.
Section 11(4) provides that:
‘Notwithstanding the provisions of this section, where an agreement provides for a special arrangement relating to proceedings, seat of arbitration or jurisdiction in disputes arising from extraction, exploitation or acquisition and use of natural wealth resources, and such agreement has been approved by the Cabinet, the application of the provisions of this section shall not prejudice the implementation of such agreement.’
Key implications
Natural Resources (Mining, Oil and Gas, etc)
- Improved bankability and investor confidence: The amendment may make large-scale mining, oil and gas, concession and other long-term natural resources projects more bankable and attractive, particularly where sponsors, lenders, joint venture partners or other investors require internationally accepted dispute resolution arrangements.
- Structuring and record-keeping: Cabinet approval is now key where parties intend to depart from the default position under section 11. The approval should be properly documented and kept as part of the transaction’s closing and regulatory record.
- The exception is not automatic: The carve-out is not a general liberalisation. An agreement that is silent on seat or jurisdiction, or that the Cabinet has not approved, remains subject to sections 11(1) to 11(3).
Arbitration
- Statutory basis for foreign-seated arbitration: Where its conditions are met, section 11(4) gives a clear statutory basis for a foreign seat of arbitration, despite the general restrictions in section 11.
- Reduced enforcement risk: Because section 11 ‘shall not prejudice the implementation’ of a Cabinet-approved agreement, the amendment should strengthen the position of parties relying on a foreign-seated arbitration or jurisdiction clause and limit arguments that the clause is void or unenforceable as contrary to Tanzanian public policy.
- Drafting of agreements: Dispute resolution clauses that depart from section 11 should expressly record the special arrangement and refer to the Cabinet approval, so that the agreement clearly falls within section 11(4).
Open questions
The Amendment Act leaves several important issues unresolved, including:
- the meaning and scope of ‘special arrangement’;
- the procedure, form, timing and evidential requirements for Cabinet approval;
- whether Cabinet approval must be obtained before the agreement is signed or may be obtained subsequently; and
- whether, and to what extent, section 11(4) applies to agreements entered into before 2 October 2026, including whether retrospective Cabinet approval is possible.
Practical considerations
- Review dispute resolution clauses in existing and pipeline natural resources agreements against the new section 11(4).
- Audit approval records to establish whether Cabinet approval exists and in what form.
- For transactions under negotiation that contemplate a special dispute resolution arrangement, make Cabinet approval an express condition precedent and closing deliverable.
Recommendations
To mitigate risk and ensure compliance, investors, sponsors and lenders in Tanzania should:
- Parties to existing agreements containing special arrangements relating to dispute resolution proceedings, the seat of arbitration or jurisdiction should consider seeking retrospective Cabinet approval for such arrangements, as a precautionary measure.
Evarist Kameja is a Senior Associate at Bowmans.
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