Activists demand openness in Uganda's tax dispute with oil firm

* Oil firm, government in arbitration over $404 mln tax dispute

* Campaigners want public access to London proceedings

* Heritage sold its assets to Tullow Oil in 2010

By Elias Biryabarema

KAMPALA, Aug 28 (Reuters) - Campaigners called on Tuesday for Britain to press explorer Heritage Oil and the Ugandan government to allow public access to arbitration proceedings over a $404 million tax dispute.

Heritage and the Ugandan government went into arbitration after the Britain-based oil firm disputed the tax bill from the sale of its assets in the east African nation, where oil was found in 2006, to Tullow Oil for $1.45 billion in 2010.

The proceedings, which are closed to the public, resumed in London on Tuesday. More than 100 campaign groups said in a statement they had written to the government and Heritage asking them to grant public access, but had not yet received a response.

"If Heritage Oil wins this case and avoids paying tax, there will be a deep sense of injustice in Uganda for many years to come," said George Boden, a Campaigner at Global Witness, one of the groups that issued the statement.

He said that Britain was a major donor to Uganda, providing 84 million pounds ($132.97 million) last year alone, thus giving it the right to demand a transparent process.

"It (Britain) needs to question the hypocrisy of a London arbitration process which deprives Ugandan civil society of the ability to hold their own government to account on vast public assets," Boden said.

Campaigners have in the past criticised the government's refusal to disclose terms of oil deals it has signed with petroleum companies.

"Oil could be a blessing or a curse for Uganda. But the sector has been marred by secrecy, close executive control and corruption allegations from the start," said Henry Bazira, chairman of the Civil Society Coalition on Oil, another of the groups that issued the statement.

Heritage has already lost a case over the same tax dispute in a Ugandan court and some pressure groups have criticised the government for agreeing to the London proceedings.

The oil explorer, which argues its earnings were not subject to capital gains tax because the transaction in question was executed outside Uganda, said the terms of its licences with the country stated any arbitration should take place in London.

When asked by Reuters why the public was not allowed access to the proceedings, Uganda's junior energy minister Simon D'ujanga said the issue involved the confidentiality clauses in the production sharing agreements between Heritage and the government, without elaborating further.

The campaign groups' statement also said Uganda's parliament should change the law to guarantee any future dispute arbitration proceedings take place in an open court to help public oversight of the oil sector.

($1 = 0.6317 British pounds) (Editing by Duncan Miriri and Pravin Char)