The applicants also argued that the language used in the ITA when considered in conjunction with the language used in Article 23.5, it is clear that an exemption was granted under the Article.   The applicants submitted that the evidence of Mr. Rubondo and Mr. Kajubi in interpreting Article 23.5 of the EA2 PSA is inadmissible. Neither of them was a signatory to the PSA, or involved in negotiating the terms of Article 23.5 of the PSA. What the Tribunal should take into consideration is what a reasonable man would have considered as the intent in light of all background knowledge. Mr. Kajubi’s experience as Commissioner means that he is not likely to see the provision in the same way as the objective reasonable man. The applicants argued that the evidence of Mr. Richard Inch should be relied on. He testified that the intention of GOU was to bring on board partners who would share the risk of oil exploration.

The applicants also submitted that the respondent’s attempt to point to the provisions in the SPAs to support its interpretations was wanting. The SPAs were between different parties and were negotiated at different times approximately ten years apart. At the time the EA2 PSA was signed it was considered unlikely that any commercial oil or gas would be found. The SPAs are not between the GOU and the applicants. There are between the applicants and other commercial parties.   The applicants argued that the Minister of Finance could enter into agreement containing Article 23.5on behalf of the GOU.

There is a difference when an exemption is granted by the Government as opposed to statutory body acting outside its powers. The applicants submitted that as a matter of constitutional law, the GOU was empowered to enter into Article 23.5 and the Minister acting for and on behalf of the GOU, had authority to sign the PSA.   The applicants argued that Article 152(2) of the Constitution does not say that tax can only be waived or varied. Article 152(2) merely provides that where a taxing law passed in accordance with Article 152(1) grants a person authority to waive or vary tax there must be periodic reports to Parliament by the said person. The ITA which is the taxing authority, the applicants submitted, confer general power[s] on any person or authority to waive or vary a tax imposed by that law. The applicants also argued that Article 23.5 of the EA2 PSA is not a “waiver or variation”. It is an exemption from tax, which tax is therefore never chargeable.

It is not a waiver or variation granted “pursuant to a law enacted under Article 152(1). The applicants also argued that Article 23.5 of the EA2 PSA does not violate Article 152 of the Constitution for the simple reason that it does not involve “imposing” a tax.   The applicants also argued that the respondent’s application of Article 79 of the Constitution is misconceived. Article 79 applies to the power to make laws, not to the terms of an agreement. The applicants also argued that the respondent’s submission on Article 99 of the Constitution is not correct. Article 99 does not mention a restriction on the President’s authority to “waive the law”. The applicant argued that the President has power to grant a tax exemption.

Granting an exemption does not show the Government’s failure to act according to the Constitution. The applicants argued that Article 99 of the Constitution should be read in conjunction with Article 113 of the Constitution. It provides for the delegation of powers to cabinet ministers. The Minister was appointed by the President with inherent powers to enter into agreements such as the EA2 PSA.   The applicants argued that the respondent’s reference to the removal of broad discretionary exemptions under the Income Tax Decree and the Investment Code has no relevance to the matter before the Tribunal. Firstly, they relate to completely different specific statutory powers granted to a different minister, the finance minister.

Secondly, the said Decree and Code ceased to have effect in 1997 and the EA2 PSA was entered into by the Minister in 2001. The respondent’s assertion that S. 12 of the Income Tax Decree granted broad discretionary exemptions is inaccurate. S.12 provided specific statutory exemptions. The applicants argued that respondent does not rely on evidence in making these sweeping allegations of facts.   The applicants argued that the granting of a capital gains tax exemption in relation to assignment or transfer of an interest in EA2 PSA is clearly connected with the granting of a petroleum licence, and exploration or development under the licence as from the evidence of the witness. There is no reason why such an exemption should not be regarded as incidental to the matters set above.   As regards estoppel, the applicants argued that the respondent failed to distinguish between an act of government and an act of a statutory body. Article 23.5 is not ultra vires because the government did have power to enter in the EA2 PSA Article 23.5.

The GOU is not a statutory body. Consequently it does not have statutory powers. The applicants posed a question: “If the government is not able to grant tax exemptions, then who can?” There is no statutory prohibition on the GOU giving a tax exemption. The GOU as a principal has powers to bind URA, its agent, and has done so. The applicants argued that the cases cited by the respondent in respect to estoppel are therefore not applicable. The respondent cannot identify a statutory power Article 23.5 is said to be in excess of.   The applicants contended that the respondent’s argument on the sale of undivided interests was an attempt to introduce a new issue that was not raised at the scheduling. The applicants did not adduce any evidence in respect thereof because they were not notified.

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