Maputo says it is protecting Mozambican interests in dispute with Galp

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Maputo says it is protecting Mozambican interests in dispute with Galp

3:22 CAT | 08 Oct 2025

File photo: Lusa

The Government of Mozambique considers Galp’s recourse to an arbitration tribunal to be normal, saying it is only defending the country’s interests in the dispute over the taxation of the sale of the Portuguese oil company’s stake in a gas project.

“What must be guaranteed is that Mozambique secures all the benefits to which it is entitled in any exploitation project, in any activity that necessarily produces gain or involves the extraction of any resource or the exploitation of any asset that belongs to Mozambicans,” said cabinet spokesperson Inocêncio Impissa.

“That Mozambicans also obtain or observe the gains to which they are legally entitled. That is all. There is nothing exaggerated so far, in our view,” he added in remarks to journalists after the weekly Council of Ministers meeting on Tuesday in Maputo.

The Portuguese energy company Galp announced on Tuesday that it had formally taken the first step to resolve the dispute with Mozambique’s tax authority through an international arbitration tribunal, in a process concerning the amount of capital gains tax.

“Galp will seek an assessment of the conduct of the Mozambican State with regard to the dispute over capital gains tax arising from the sale of Galp’s stake in Area 4 of Mozambique; this notification marks the first step towards the start of the arbitration process,” the company said in a statement sent to the Portuguese Securities Market Commission. The statement did not disclose the amounts involved.

“Going to arbitration does not mean that one side will necessarily win or lose. It is, in fact, another forum in which the rights of the parties can be discussed. I think there is no problem at all,” the cabinet spokesperson commented.

Inocêncio Impissa recalled that “any party has the prerogative to resort to arbitration”, but he stressed that “the most important thing is that each party fulfils its obligations in full”, adding, “And what I can assure you is that Mozambique is merely positioning itself on the basis of the signed agreement and within the framework of what is permitted by law.”

Galp said it “has shown full willingness to comply with all tax obligations and to find a way to reach an agreement”, adding that “resorting to legal mechanisms, both national and international, is a step the company feels compelled to take, although it has always sought to avoid it, favouring constructive dialogue with the Mozambican authorities in order to clarify the matter”.

The Centre for Public Integrity, a Mozambican civil society organisation, described the dispute on 8 August as a “test” of Mozambique’s economic sovereignty. The organisation quantified the dispute at 162 million euros and noted that it lies between the Tax Authority and Galp.

The dispute concerns the fiscal claim that followed the sale, in March, of Galp’s 10 per cent stake in Area 4 of the Rovuma Basin in the north of the country to the Abu Dhabi National Oil Company (ADNOC). According to the Centre for Public Integrity, the case “tests Mozambique’s economic sovereignty and the responsibilities of one of the country’s largest foreign investors”.

In its analysis of the dispute, the Centre for Public Integrity notes that the Tax Authority notified Galp of a capital gains tax demand of 162 million euros, equivalent to 12 billion meticais.

“This amount results from the application of an effective rate of 17.6 per cent, provided for in Mozambique’s petroleum tax regime, to a capital gain estimated by the Tax Authority at around 920 million euros. In stark contrast, Galp contests the assessment, claiming a taxable gain of only 26 million euros, a figure 35 times lower than that calculated by the Tax Authority,” the Centre’s report says.

The civil society organisation, founded in 2005 to monitor and promote integrity and transparency in public institutions, adds that Galp’s position is even more questionable because, in the same period, the company reported to its shareholders an accounting gain of 147 million euros from the same transaction, revealing a glaring inconsistency between what it declares to the tax authorities and what it communicates to investors.

The Centre for Public Integrity adds that Galp’s decision to resort to international arbitration at ICSID, the World Bank’s International Centre for Settlement of Investment Disputes, likely relying on a stabilisation clause in the 2007 Concession Contract, represents a tactic known as “a war of attrition”.

The objective, CIP says, is to exploit the deep asymmetry in financial power between the company and the Mozambican State, forcing the country to accept an unfavourable settlement to avoid exorbitant legal costs, conservatively estimated at between 6 and 8 million US dollars. These costs represent between 3.4 per cent and 4.6 per cent of the total tax bill, it adds.

Source: Lusa