VERBATIM: BoU: We Used a Neutral Law to Resolve Defunct Banks  

Parliament has continued to question Bank of Uganda (BoU) officials on the resolution of several defunct banks.

They include Greenland Bank, Teefe Bank, Global Trust, ICB, Uganda Cooperative Bank and Crane Bank.

Owned by controversial businessman Sudhir Ruparelia, Crane Bank was recently taken over by BoU over insider lending, fraud, money laundering and falsification of information to mislead the regulator.

Bank of Uganda officials led by Governor Emmanuel Tumusiime-Mutebile have for the last few weeks been meeting with the Committee of Commissions, Statutory Authorities State Enterprises (COSASE).

On Wednesday, BoU explained how Nile River Acquisition Company bought debts of three defunct banks. Excerpts:

Medard Sseggona (Busiro East): Did Nile River company have license to conduct money lending business in Uganda? Bank of Uganda operating under FIS (Financial Institutions Statute) ousted laws of Uganda including the constitution. But when you read the agreement between BOU and Nile River you say laws applicable were of England. Waiver, I want to learn the wisdom behind these provisions.

Michael Tusiime (Mbarara Municipality): Date at purchase and transfer agreement, one of the deliverables was legal opinion which isn’t attached to know what it entails.

Abdu Katuntu:  You had actually ousted the applicability of using the Uganda constitution. Why did you choose the law under which law the agreement should be interpreted. We want you to explain the basis under which you took that decision.


Margret Kaggwa (BOU Legal): I am going to clarify the law governing this agreement with regard to any disagreement was stated to be the laws of England, it isn’t the law that would govern the collection of debts.

This clause 9:10 and 9:11 should be read together.

Sseggona: May she even read them together.

Katuntu: In the agreement there is a clause which talks about which law would govern the agreement.

Sseggona: This agreement shall be governed in effect to the choice.

Resolution of disputes, even as mediating, you are talking about English laws. I am happy how she used the two together.

Katuntu: I don’t know if these are the things (provisions for) institutions to oust Ugandan laws when engaging with other parties.

Kaggwa: We felt uncomfortable with them saying the laws should be Mauritius and US, and also felt uncomfortable using Uganda laws. This agreement didn’t mean that debt collection would be done in accordance with laws of England. The mortgage was collected.

Katuntu: Whatever you are trying to explain is outside the agreement, even the mortgages, even the liquidation process was done in in the way you make some of us who make these laws look a bit funny. What is superior about the laws of England.

Anita Among (Bukedea): Did you call for expression of interest?

Col. Francis Takirwa (UPDF): Was Bank of Uganda so desperate that they couldn’t wait for another arrangement rather than take of this company that had to bring its laws?

Margaret Babadiri (Koboko Woman): How can you use one law for signing and another one for implementing. The property is ours, how did you use somebody’s law.

Odonga Otto: This character isn’t a new thing; it is a behavior of dealers. They go and sign in (another) jurisdiction. Let us take that the law of England was applicable. USD5.2M you are negotiating on behalf of ordinary Ugandans that is a lie.

The purchase price, then be reduced to sum equal to percentage. Did you have any situation where the buying company disputed this figure, if so, by how much? Were there any kind of disputes in relation to these laws?

MOSES KASIBANTE (Rubaga North): The highest banking institution was compelled to accept an agreement based on English law. Even that something else could have disputes and that is the basis this is toppling of Uganda constitution. It isn’t proper to deny Ugandans having their own laws applicable to something that is theirs.

Joseph Ssewungu (Kalungu West): By application of foreign law, whose interest were you protecting?

Katuntu: Choice of the law is actually appropriate but there should be a good reason why you should do it. Why did you oust our laws in a transaction of this nature? There is nothing complicated about this. What was this so complicated that was lacking in our laws for you to take a decision to opt for an English law. We make these laws so they so they govern how to conduct such transactions because this is what makes us a sovereign nation.

Moses Nagwomu (Bunyole County East): At the end of the agreement, you don’t see the names, there are just signatures. I want to be educated. Is that the way UK laws operate?

Katuntu: They were so much in a hurry that they forgot to put their names. Bank of Uganda with all professionals they have, why did you treat it so casually?

Kaggwa: The people we contract with could be foreigners they would say they prefer a neutral law. So every time you are dealing with a foreign contractor, that is likely. It isn’t a small sum and so these people insisted that they choose a neutral law, that doesn’t amount to say you topple the Uganda constitution.

This agreement went back and forth; we always try to insist that the Ugandan law should apply.

Katuntu: We aren’t talking general, we are talking specifically.

Kaggwa: The transactions were falling through.

Katuntu: If there is an agreement prepared for your signature; you should ask questions. If she raises issue of current printing, it is complex. But you are talking about selling land in Uganda and you are saying English law should apply. It doesn’t make legal sense; neither does it make common sense. Government institutions enter into agreement and choose other jurisdiction as if we are desperate especially a loan that is Shs135Bn and you are selling it at Shs8Bn

Sseggona: Were we desperate at any point that in this particular situation we were compelled?

Katuntu: Can we have communication, without which there would be no deal. Was the Solicitor General consulted on this matter? Was the entire sum of USD5.2M paid and on which account?

Kaggwa: The liquidation process had taken a long time. We had devoted almost a law, we go ahead and get a buyer, we could have walked away from two years. These loans, if they fell through, the limitation time was running…

Kaggwa: We have already pointed to the delayed recovery process of recovering these loans, and to walk away from the buyer which never even affected us anyway. What we did was to tie our end.

Katuntu: Give us evidence to show that you had looked for the buyers for the whole portfolio and you failed. Why did you lump them together, wouldn’t you have put them in performing, non-performing and poorly-performing?

Sseggona: By selling the loan to Nile River to collect both principal and interest, we were directing operating a business of money lending and if you gave them license?

Kaggwa: That is why we gave them the power of Attorney.

Katuntu: To do money business, you must be either a bank licensed by BOU if you don’t follow that path you must be a money lender with certificate also licensed appropriately. Anything outside those two is illegal. The power of attorney can’t license somebody. That would certainly be illegal.

As it is here is stationary, what they have sent us is list of name, security, amount. You can’t even audit this. This is what they sold to Nile River but as we talk now, it is with SIL Investment which when we talk now, it is still collecting money. What you sold is a business. The agreement speaks for itself. These guys are collecting security as if they are a bank.

Among: It is documented that the original price was USD10M however there was a proposal sent to Escrow, that reduced the price to USD5.2m. How did you do evaluation of lumped loans, some of them were secured, you could sell them at the value of the loans? What was the criteria used to value if at all you did evaluation? We were aware you were Director Commercial Banking? We expect supervision prior to that. Did you get status report from the agent of the liquidator?

Bagyenda: I don’t have any documentation in my possession to answer these questions. All questions asked are very well documented in the files I left in the Bank. The questions asked about liquidation are (answered) in the files here.

Katuntu: For you to start answering when you haven’t read? We are going to subject these files to scrutiny.

Sseggona: Even when you don’t have those files, refresh your memory. You may have to sit down with the people in your former office, go through the files together and benefit this Committee with your institutional memory. The way you did might be perfect but we don’t know. I find no defence in your absence from your office.

Odonga: We should desist from persons appearing before the Committee choosing the questions to answer. We need to harden here, the big fish is in the house, these are people who caused problems to the young people.

Katuntu: It is no use to be evasive. Let us have BOU as a team, by now they would be whispering. We didn’t invite the three of you. We hadn’t even told you. We don’t have preset questions so don’t have preset answers. Bagyenda, Matovu, Obbo, you were in these offices, you took these decisions talk to your colleagues who were in these offices. Such that when we go tomorrow we go with documents and responses. We don’t want people to come here and are evasive. This is Bank of Uganda so we expect you to work as a team.

Katuntu: SIL Investments will be here by the end of next week. They are going to tell us where we are going to meet Nile River Acquisitions

Among: Article 90 gives this Committee powers of the High Court. It can compel you to produce the documents even when you retire. Whether you want to work together or not, for us we want the documents.

Kasibante: The Governor has confessed before that he never received any report regarding the liquidator.

Ssewungu: She gave evidence against herself that she has been following the proceedings of the Committee, this business of using I am out of Bank of Uganda doesn’t arise. This is not the type of witness that left office and is before the Committee.

Tusiime: We haven’t seen communication from Governor revoking the license of the Bank. If you close the Bank and it retains the license, we want evidence that actually those licenses were revoked. We want details of how much money was collected from the defunct banks.


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