Air Tanzania aircraft may be seized over $100 million mining compensation claim

Air Tanzania aircraft may be seized over $100 million mining compensation claim

Simple Flying | 15th April 2023

By Tatenda Kawura

ustralian-based exploration company Indiana Resources has threatened to attach one of Air Tanzania’s aircraft to force the Tanzanian government to pay nearly $100 million as compensation for a failed nickel project.

The exploration company lost millions in a nickel project in Tanzania and is seeking significant compensation from the government. The value of an Air Tanzania aircraft is not enough to cover the claim, but Indiana Resources hopes that the attachment of high-profile national assets may force the government to act accordingly.

Indiana Resources is an Australian-based mining company exploring rare earth elements, gold, and base metals. The company is pursuing an arbitration claim against the government of Tanzania for illegal expropriation and the loss of the Ntaka Hill Nickel Project.

Background of the story

In September 2020, Indiana Resources lodged a Request for Arbitration with the World Bank’s International Center for Settlement of Investment Disputes (ICSID). The arbitration request includes background information on the issue and an estimate of the compensation due for the loss of the project due to the Tanzanian government’s actions. The claimed compensation is more than $95 million.

If the state fails to pay, Indiana will consider seizing national assets, including aircraft. The company is confident that it presented a clear case for nearly $100 million in compensation. Although the date for the decision was not stated, Indiana hopes it will be before the fourth quarter of 2023.

The potential attachment of a state-owned aircraft is a shock to many, but it would not be the first time an external organization is attaching an Air Tanzania aircraft. Last year, an Airbus A220-300 was seized in the Netherlands over a land rights dispute between Tanzania and two Swedish investors.

Given that aircraft are on the move in airports globally, and outside their home country, it is an easy targets for seizure. Indeed, aircraft globally have been seized as a result of outstanding claims, and the threat of seizing millions in aircraft is one routinely used by private companies suing countries. Pakistan International Airlines saw one of its 777s temporarily attached in Malaysia, while Air India was threatened with seizure of its widebodies in the US if did pay out a dispute over billions in taxation before reaching a deal to avoid this.

Air Tanzania’s fleet crisis

Indiana Resources did not state which aircraft it would target to receive its compensation from Tanzania. According to ch-aviation’s information, the flag carrier currently has a fleet of 12 active and inactive aircraft valued at $345.84 million.

The fleet includes four Airbus A220-300s, two Boeing 787-8s, five DHC-8-Q300s, and one DHC-8-Q400, wholly owned by the Tanzanian government. The value of one aircraft may not be enough to cover the claim, but the seizure of such an asset may force the state into action, as we saw with Pakistan International Airlines (although for a much smaller amount of $7mn).

In 2015, the former Tanzanian government made the revival of the national carrier a top priority. Since 2016, Air Tanzania has seen sturdy growth by adding new aircraft to its fleet and new routes to its network. It is currently awaiting delivery of its first Boeing 767 freighter.

However, the airline is experiencing challenges with its fleet. Three of its A220s have been grounded since late last year due to technical issues with the Pratt & Whitney engines. Additionally, the delivery long-awaited freighter was postponed, and its invoice was inflated by nearly $50 million.

Amid these challenges, the attachment of a valuable aircraft is the last thing Air Tanzania needs.

source: Simple Flying