Taimour Lay who is a PLATFORM campaigner based in Uganda says that a number of organisations are so concerned at the deals which have been signed for oil production in the Lake Albert region that they are challenging them in court in the UK.
Click to learn more...
Action is being taken in Britain because that is where arbitration over regulation into oil deals is decided.
The World Development Movement, along with PLATFORM and People and Planet, are going to court to challenge the UK Treasury's decision to finance Royal Bank of Scotland, the mainly state owned bank which supports Tullow Oil, saying the support ignores the government's own environmental and human rights criteria - contained in the Treasury's Green Book - when providing funds for investment projects around the world.
"Our appeal for judicial review, filed on December 9, argues that the UK Treasury, majority shareholder in RBS through UK Financial Investments, has unlawfully failed to assess the environmental and human rights impact of RBS investments, including its role as Tullow Oil's lead backer in Uganda," Ms Lay wrote in the Guardian.
Rosa Curling, solicitor at Leigh Day & Co, says a successful appeal will give the government no option but to reconsider its position.
"Legal proceedings have already resulted in a significant victory. Having strenuously resisted the suggestion that the Treasury should even consider applying environmental and human rights standards to the way in which public money is used by banks such as RBS, it has now conceded that it does have to, and indeed has, undertaken an assessment on whether such standards should be imposed.
"However, the wholly inadequate assessment they carried out concluded that when it comes to considerations such as climate change and human rights it would be unlawful for the government to require RBS to go beyond what is narrowly in the 'commercial' interests of the company.
Lawyers will argue that conclusion contravenes the duty of directors, under Section 172 of the Companies Act 2006, to take the impact of their business on the environment and the community into account."
Ms Lay says that the government in Kampala appears to see the exploration and imminent production of oil in western Uganda as "an easy answer to complex problems.
"Both government and the oil companies involved have been busy painting a roseate picture of bumper revenues and a country transformed. Forget the intricacies of agricultural reform, social ownership and political liberalisation; Uganda, we are told, will be turned into a middle-income country by $2 billion a year in hard cash.
"But the problems facing Uganda are almost certain to be exacerbated rather than solved by oil. Last month PLATFORM published three of the production sharing agreements (PSAs) the government has spent years keeping a closely guarded secret. The deals point towards a resource extraction programme designed for profit, not development, and contain a series of provisions that undermine any hope of changing course.
"Our analysis reveals that the international oil companies, including Tullow Oil, backed by a $1.4 billion loan arranged by the Royal Bank of Scotland, and Heritage are set to reap huge sums at Lake Albert - as much as a 35 per cent return on their capital investment. That's three times what's internationally recognised as a fair profit."
Ms Lay says an additional problem is that the oil contracts are structured so that price risk lies primarily with the state, while the private companies are virtually guaranteed a healthy return even if the market slumps. As the oil price rises, investors will make a higher and unlimited profit, taking close to one quarter of oil revenues, whether each barrel is fetching $70 or $200.
"Even the Norwegian experts advising the government have expressed serious reservations," PLATFORM says. "A review of Uganda's contracts commissioned by the Norwegian Agency for International Cooperation (NORAD) in 2008 concluded that the profit-share model adopted 'cannot be regarded as being in accordance with the interests of the host country'."
"The 20-year contracts, consistently weak or completely silent on human rights protection, also include a sweeping "stabilisation clause" -- article 19 requires the Ugandan government to compensate the companies for any future change in the law that affects their profits - designed to militate against improvements in environmental standards."
Legal disputes between the two sides will not be resolved in Uganda, but in London: at the Energy Institute, whose president will pick the all-powerful arbitrator.
But PLATFORM says ordinary Ugandans will not get a fair hearing as the institution is currently headed by James Smith, chairman of Shell UK. Tullow Oil says that its contracts with Kampala were "the best deals in the world" for the government.
Its supporters moreover point out that Tullow's exploration was "high risk" and Uganda would not have attracted companies to risk large sums of money on exploration without a guarantee of good profit at the end.
"If Uganda had chosen to emulate Libya where the tax rate is close to 80% for some onshore production I can guarantee you that there would be no articles about oil production today as they would still be sitting there undiscovered," one businessman said.
Another former Tullow worker said that he believed the company was "committed to very high environmental and safety values."
PLATFORM however says that since its report was released, "senior government figures have now accepted that the PSAs are flawed and need to be altered," and that Ugandan civil society "remains deeply concerned that the contracts allow no room for renegotiation.
"The ingredients for the so-called "resource curse" are all in place: contract secrecy, government corruption, commercial disinformation campaigns, and environmental protections ignored," PLATFORM says.
"British taxpayers find themselves unwittingly complicit in this unfolding disaster. Given the companies involved and the Ugandan government's reluctance to change course, the urgency could not be greater. The UK is supporting oil exploitation while turning its back on the problems it will generate, refusing to use its role as financier to ensure a meaningful impact evaluation is carried out.
"Uganda stands on the brink of entering production with no Strategic Environmental Assessment (SEA) having yet been carried out. A coalition of NGOs in Kampala is now calling for a suspension of exploration drilling in protected areas of Murchison Park while the effects on wildlife remain so uncertain.
"It is these botched contracts and the financial interests of oil companies that will do most to define Uganda's future. While increased oil revenues give the impression of superficial growth, the sudden influx of cash distorts the economy and exchange rates, undermining alternative sectors, including agriculture and industry, that employ and feed far greater numbers.
"Oil always promises growth, affordable energy and employment; from Nigeria to Angola, Sudan to Equatorial Guinea and Gabon, it has delivered only poverty and repression in Africa. Uganda will not be transformed into Norway, whatever President Museveni may like to claim. The deals he has already signed for Lake Albert give little cause for optimism."