Tunisia: Oil Firm Enters Arbitration Claiming Government “Impediments”

by | Jun 10, 2023 | Diplomacy, Economic, Legal, Tunisia

Summary:

On 6 June 2023, Canadian energy firm Zenith Energy initiated proceedings against Tunisia and the Tunisian National Oil Company (ETAP) with the International Center for Settlement of Investment Disputes (ICSID), claiming $48 million in payment.

Zenith’s claim is related to two oil field permits in Sidi el Kilani and Ezzaouia, which the firm claims have been hindered by bureaucratic challenges. Zenith said in a statement that it had initiated arbitration proceedings after “a series of actions taken by the Tunisian government to materially harm the business interests of investors,” including “unreasonable and arbitrary impediments” to conducting business in Tunisia. 

Zenith initiated international arbitration proceedings to “protect its commercial interests and legal rights.” The firm continues to operate at several other sites in Tunisia despite the ongoing legal issues.

Similarly, an Italian sand producer operating in Tunisia has threatened arbitration due to changes in taxes as part of the 2023 budget. This is likely a continuation of concerns raised in late 2022 as the 2023 budget was released.

Outlook:  

Challenges in the extractives industry have been growing for months, with many international firms rumored to be discussing exits from the Tunisian market.

Much of the frustration centers on Tunisian bureaucracy. Local communities typically welcome foreign investment and opportunities for employment, however, the investment climate is increasingly unwelcoming with labyrinthine administrative processes unfamiliar to foreigners.

The dialogue around Tunisia’s investment climate has become increasingly pessimistic, highlighted by recent acquisitions of promising Tunisian firms that relocated to European countries seeking opportunities for growth. Some efforts are underway to begin addressing the challenges faced by investors, but the system has many deeply engrained challenges to streamlined investing.

If the Tunisian government cannot manage meaningful reform of the public sector, including the mechanisms that manage and oversee foreign investment, international investors will continue to be driven away by bureaucracy, efficiency and, in some cases, corruption.


 

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