Galp Files ICSID Arbitration Against Mozambique Over €162 Million Rovuma Gas Tax Dispute
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TL;DR
- Galp has filed for ICSID arbitration against Mozambique regarding a €162 million tax dispute.
- The case concerns capital gains tax after Galp sold its Rovuma Basin stake to ADNOC subsidiary XRG.
- The arbitration may impact the timing of an additional $400 million payment to Galp.
- A resolution is expected to take nearly five years.
Overview
Portugal's Galp has initiated arbitration proceedings against Mozambique at the International Centre for Settlement of Investment Disputes (ICSID), challenging a €162 million capital gains tax assessed after its sale of a stake in the Rovuma Basin gas project to ADNOC's subsidiary XRG. The arbitration could affect a $400 million contingent payment and is expected to last several years.
What Happened
Galp sold its 10% interest in Area 4 of Mozambique's offshore Rovuma Basin to ADNOC subsidiary XRG for roughly $881 million in March 2024.
Following the sale, Mozambique's tax authority assessed a €162 million ($175 million) capital gains tax against Galp, citing a 17.6% tax rate under Mozambique's petroleum tax regime.
Galp disputes the tax assessment, arguing that tax requirements were already considered during the sale negotiations.
After unsuccessful negotiations, Galp filed a formal request for arbitration in late June 2026 at ICSID. The process could last nearly five years, according to sector consultancy Augale.
It remains uncertain how much tax, if any, Galp has paid in relation to the transaction, and whether the pending $400 million payment from XRG will be affected by the ongoing arbitration.
Context
The dispute arises from the application of Mozambique's tax law to capital gains realized on major energy transactions. Mozambique claims taxes are owed following the Rovuma Basin stake sale, while Galp argues the tax claim lacks legal basis.
According to Mozambican civil society analysis, the arbitration may pressure the financially weaker government into settling, though local analysts describe Mozambique's legal position as consistent with international tax norms.
Why It Matters
- The arbitration outcome will determine whether Galp is liable for the €162 million tax and could influence the structure of future energy investments in Mozambique.
- The pending tax dispute may affect the timetable and financial structure of the larger Rovuma LNG project.