Transparency of the Regulatory System
Uganda’s legal and regulatory systems are broadly consistent with international standards although bureaucratic hurdles hamper efficiency. The Public Procurement and Disposal Act (PPDA) (2003) and the Petroleum Exploration Development and Production Act (2013) establish a legal and institutional framework to foster competition on project tenders on a non-discriminatory basis. In practice, however, U.S. investors have alleged that endemic corruption in Uganda’s government undermines the public procurement process. While U.S. firms are subject to the Foreign Corrupt Practices Act, foreign competitors often bribe GOU officials to steer contracts towards their companies as well as engage in smear campaigns against potential U.S.-based competitors.
According to the ICA, any authorized ministry, department, or regulatory agency can make subsidiary legislation (regulations, by-laws, and standards). For instance, under the ICA, the finance minister can make regulations on investment while under the Kampala City Council Authority Act, Kampala City Council Authority (KCCA) can make regulations regarding taxes charged on businesses in Kampala. Regulations of all levels (local, national, and supra-national) affect foreign investors. For example, international EAC rules on free movement of goods and services would affect an investor planning to export to the regional market. On the other end of the spectrum, regulations issued by KCCA and other local governments regarding operational hours or the location of factories would affect an investor’s decision at a local level only. Ministries internally discuss any regulations and their revisions, outside of public review. Uganda does not have informal regulatory procedures, only the relevant GOU agency can create and revise regulations.
Uganda’s accounting procedures are broadly transparent and consistent with international norms. According to the Capital Markets Authority Act, 1996, all public listed companies are required to observe accounting standards in-line with the International Auditing and Assurance Standards Board, as well as Corporate Governance standards as stipulated in the Capital Markets Authority regulations.
Draft bills on investment undergo a consultative process led by the relevant GOU agency, which convenes stakeholder meetings with private and public interests affected by the bill. Following consultations, the ministry presents the draft bill to parliament and cabinet for approval. Draft bills presented to parliament are available online for public comment and consultation. Public commentary is generally presented in written submissions or oral presentations to the relevant parliamentary committee. Proceedings before the committee are generally covered by local media. After a successful vote, parliament enacts laws that authorize the relevant Minister (or other government official) to make regulations that are more specific. The Minister, in consultation with the Uganda Investment Authority, makes regulations, which are published in the Uganda Gazette.
Uganda does not provide a centralized online location for published regulations. However, foreign investors can access all laws and regulations by getting copies of the Uganda Gazette from the Uganda Printing and Publishing Corporation (located in Entebbe). In addition, foreign investors can get information regarding sector-specific regulations by visiting the website of the relevant ministry. For example, an investor looking for regulations on mining or petroleum exploration would visit the website of the Ministry of Energy and Mineral Development. The Uganda Law Reform Commission (ULRC) makes available principal legislation (the Acts), but not the regulations.
Uganda’s court system (through litigation and judicial review of administrative action) provides the main mechanism for ensuring governmental adherence to the administrative process, although anecdotal reports from lawyers and litigants suggest that corruption undermines judicial processes. Litigants often bribe judges to rule in their favor in commercial disputes. For example, in January 2017, the judiciary announced that it was considering allegations of corruption against a High Court judge. The inquiry is still ongoing.
The courts review administrative actions and help ensure governmental adherence to the administrative process. The enforcement process is reviewable through the judicial system. The Ombudsman’s office (known in Uganda as the Inspector General of Government) also ensures compliance with the administrative process. The Inspector General is responsible for eliminating corruption and abuse of public office and authority. The inspectorate is independent when undertaking its functions and is only answerable to Parliament. There have been no changes to these enforcement mechanisms since the last Investment Climate Statement (ICS).
Proposed amendments to the Investment Code Act under the Investment Code Bill 2017 currently remain pending before parliament.
International Regulatory Considerations
The EAC’s regulatory systems must be “domesticated” through national legislation, after which they become part of Ugandan law.
Uganda has ratified the WTO agreement and the related sub-agreements (GATT, GATS, TRIPS, TRIMS, etc.). Uganda has also ratified the treaty establishing the East African Community (EAC) and the COMESA.
Pursuant to Uganda ratifying the Treaty for the Establishment of the East African Community, which entered into force July 2000 (and was amended 2006 and 2007), and the East African Customs Management Act, enacted by the East African Legislative Assembly, Uganda’s regulatory systems must conform to standards prescribed in the regional system. The list of supra-national organizations to which Ugandan regulations must conform include:
- African, Caribbean, and Pacific Group of States (ACP)
- African Development Bank Group (AfDB)
- African Union/United Nations Hybrid operation in Darfur (UNAMID)
- African Union (AU)
- Common Market for Eastern and Southern Africa (COMESA)
- Commonwealth of Nations
- East African Community (EAC)
- East African Development Bank (EADB)
- Food and Agriculture Organization (FAO)
- Group of 77 (G77)
- Inter-Governmental Authority on Development (IGAD)
- International Atomic Energy Agency (IAEA)
- International Bank for Reconstruction and Development (IBRD)
- International Civil Aviation Organization (ICAO)
- International Criminal Court (ICC)
- International Criminal Police Organization (Interpol)
- International Development Association (IDA)
- International Federation of Red Cross and Red Crescent Societies (IFRCS)
- International Finance Corporation (IFC)
- International Fund for Agricultural Development (IFAD)
- International Labor Organization (ILO)
- International Monetary Fund (IMF)
- International Olympic Committee (IOC)
- International Organization for Migration (IOM)
- International Organization for Standardization (ISO) (correspondent)
- International Red Cross and Red Crescent Movement (ICRM)
- World Trade Organization (WTO)
- United Nations Conference on Trade and Development (UNCTAD)
The Government of Uganda notifies the WTO Committee on TBT of all draft technical regulations through the Ugandan Ministry of Trade’s National TBT/SPS Coordination Committee.
Although Uganda has not yet ratified the Trade Facilitation Agreement (TFA), it has signaled its intention to do so. Under the EAC framework, Uganda has already embarked on measures aimed at easing the flow of trade and eliminating tariff and non-tariff barriers. For example, it established one-stop-border posts, which have reduced the time to transport goods across Uganda’s land borders through speedy clearance of goods and passengers. The Ugandan ministry of trade has established a committee and guidelines to help the country comply with TFA requirements.
Legal System and Judicial Independence
Uganda’s legal system is based on English Common Law and contracts are enforced in commercial courts. All commercial disputes are required to go through mediation to reduce backlogs in the court system and the Center of Arbitration for Dispute Resolution (CADER) can assist in mediating disputes. Property ownership is enforced through civil and commercial courts.
Uganda began the commercial court system in 1996 to adjudicate commercial disputes. The commercial court has four judges and two deputy registrars. The commercial court has 17 mediators, which settle 80 percent of disputes out of court through pre-trial conferences. The commercial court engages regularly with the private sector through the “Court Users Committee,” which includes representatives from banks, insurance companies and the manufacturing sector. Through this forum, the court has worked with Uganda’s tax authority to reduce litigation in tax cases and has persuaded banks to opt for loan restructuring in default cases that were previously ending up in court.
Uganda’s courts are digitizing records and digitally recording court proceedings, enabling rural regions remote access to proceedings in Uganda’s judiciary. Judgments in foreign courts are recognized and enforced under Ugandan law. Disputes with foreign investments go through the same process as domestic disputes.
Uganda’s commercial laws include: The Companies Act, The Employment Act, The Limitations Act, The Contract Act, The Bulk Sales Act, The Sale of Goods Act, The Partnership Act, and The Business Names Registration Act.
Uganda’s business community perceives the commercial legal process as favoring politically connected companies that deploy political pressure and bribery to disrupt and delay outcomes. For example, investigative journalistic reports feature anecdotal accounts of judges at the Commercial Court demanding bribes in order to rule favorably in some cases. Regulations and enforcement actions are appealable and adjudicated in the national court system.
Laws and Regulations on Foreign Direct Investment
Uganda’s legal framework on investment is encapsulated in the Constitution (specifically articles 26, 40, 123, 237, 242, and 244), and the Uganda Investment Code Act (UICA) (1991). The UICA creates an agency – the Uganda Investment Authority – which is responsible for enforcing the UICA, granting investment licenses and facilitating the establishment of investments in Uganda. The UICA also stipulates the procedure by which investors may acquire licenses as well as the rights and duties of such investors.
There have not been any new laws, regulations, or judicial decisions relating to foreign investment in the past year.
Competition and Anti-Trust Laws
Uganda does not review transactions for competition-related concerns.
Expropriation and Compensation
The Ugandan Constitution guarantees the right to property for all persons, domestic and foreign. It also prohibits the expropriation of property, except when in the “National Interest” as eminent domain, and preceded by compensation to the owner at fair market value.
However, due to the requirement of paying a land owner prior to expropriation and disputes over the value of land acquired under eminent domain, various infrastructure projects in Uganda have faced cost overruns and delays.
To address this, on July 13, 2017, the Deputy Attorney General presented a bill to parliament to amend Uganda’s constitution to allow the GOU to expropriate property before agreeing on the value of compensation for the owner.
Uganda is a member of the Multilateral Investment Guarantee Agency (MIGA) and the International Centre for the Settlement of Investment Disputes (ICSID).
ICSID Convention and New York Convention
Uganda is a party to both the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID) and the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards. In 2000, Uganda also adopted legislation consistent with the United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration. For example, a dispute between a U.K. firm and the Government of Uganda was resolved in February 2015 under UNCITRAL arbitration. Pursuant to the Reciprocal Enforcement of Judgment Act, judgments of foreign courts are accepted and enforced by Ugandan courts where those foreign courts accept and enforce the judgments of Ugandan courts. Monetary judgments are generally made in local currency, although in some cases penalties are not a sufficient deterrent due to currency depreciation.
Investor-State Dispute Settlement
Uganda is a party to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID).
Uganda does not yet have a Bilateral Investment Treaty (BIT) or Free Trade Agreement (FTA) with an investment chapter with the United States.
Uganda has not been involved in any investment disputes with a U.S person in the last 10 years; however, U.S. firms do complain about corruption on government tenders. U.S. firms allege that third country firms are willing to bribe GOU officials to steer tenders away from U.S. companies.
Pursuant to Section 73 of the Arbitration and Conciliation Act, the courts and Government accept binding arbitration with foreign investors. The Act, which incorporates the 1958 New York Convention, also authorizes binding arbitration between private parties.
As stated above, in the 1970’s, Idi Amin’s regime expropriated on a mass-scale Asian-owned and operated properties without compensation. There have been no incidents of expropriation of foreign investments without compensation or other extrajudicial action against foreign investors since President Museveni came to power in 1986.
International Commercial Arbitration and Foreign Courts
Ugandan law provides for arbitration and mediation (“alternative Dispute Resolution) of civil disputes. The legal framework includes the Arbitration and Conciliation Act, (2000) (available at https://www.ulii.org/node/23792 ), Judicature (Commercial Court Division) (Mediation) Rules (2007) (available at https://www.ulii.org/ug/legislation/statutory-instrument/2007/55 ) and the Judicature Mediation Rules (2013) (available at https://www.jlos.go.ug/index.php/document-centre/mediation ). Pursuant to the above laws, all civil disputes before Ugandan courts must, as a preliminary step, be subjected to mediation (before a court-appointed mediator). Only disputes which defy resolution through such mediation will be submitted to formal adjudication by a judge.
CADER is a statutory institution that facilitates the mediation and operates on the basis of the UNCITRAL Arbitration rules.
As a party to the New York Convention, Uganda recognizes foreign arbitral awards. Most investment disputes in Uganda are resolved through unrecorded private arbitration. The Foreign Judgments Reciprocal Enforcement Act (1961) enables the recognition and enforcement of judgments and awards made by foreign courts.
Ugandan courts do not favor state owned enterprises when arbitrating or adjudicating disputes. In February 2013, for instance, the Supreme Court overturned an earlier ruling in favor of a Kenyan construction firm following a contractual dispute with Uganda’s state-owned National Social Security Fund (NSSF). There was, however, no evidence or suggestion that the ruling was influenced by discrimination or corruption.
The Bankruptcy Act of 1931, the Insolvency Act of 2011, as well as the Insolvency Regulations of 2013 generally align Uganda’s legal framework on insolvency with international standards. The law and regulations largely accord to creditors, equity holders, and other claimants the same rights accorded under the laws of most countries, including rights related to creditor meetings during bankruptcy, declaration and distribution of a bankrupt estate, as well as declaration and distribution of dividends. It also provides for cross-border insolvency and entitles creditors (including foreigners) to petition court for a receiving order, which effectively declares a debtor bankrupt. The receiving order paves the way for the appointment of an official receiver who manages the debtor’s property and assets for purposes of paying off creditors. Monetary judgments and awards are made in Ugandan currency, and the courts generally follow the constitutional requirement that payment be “fair and adequate.” Ugandan law does not criminalize bankruptcy. However, Uganda ranked 113 out of 190 countries for resolving insolvency in the 2018 World Bank Doing Business Report. Uganda averages 38 cents on the dollar for recoveries—well above the sub-Saharan average of 20 cents per dollar.
While there is no statutory (national) Credit Reference Bureau (CRB), the Financial Institutions (Credit Reference Bureaus) Regulations of 2005 allow the establishment of private CRBs. The first such CRB (Compuscan International) was established in 2008 while the second (Metropol Corporation) was established in 2015.