Giving EADB assets immunity – Uganda lagging behind, yet to approve ammendment

Published 5 years ago -

On the mention of the word, East African Development Bank (EADB), many think of a bank responsible for controlling and regulating the national banks in the East Africa. Although it may play such functions, its primary roles are spelt out under Article 21 of the Treaty for East African Co-operation of 6th June, 1967. However  the treaty which is no longer operative was adopted by 3 then members states of the East African Community.

In 1980 another treaty was signed. In the treaty signed on the 23rd July, 1980, state parties agreed to amend and reenact the charter of the EADB. It was incumbent and expedient to every member state to make provisions for giving legal effect to certain provisions of the charter and fulfill their obligations to enable the bank perform its functions efficiently.

The EADB head offices as seen in Kampala, Uganda

The functions of the bank include; offering development finance lending and related services to its member states; giving out loans to medium and large scale enterprises in various sectors, such as manufacturing, agro-processing, tourism, and construction and mining, and to start-ups that are involved in the manufacture of consumer and intermediate goods; and credit to national and regional development finance institutions, micro finance institutions, and local banks. And also financing businesses involved in construction, transport, and agriculture sectors to acquire equipment among others.
But of recent the bank has faced some challenges in the performance of its functions. For instance in 2012 a private company in Tanzania in the names of Blueline which borrowed money from EADB to finance its transport business made an attempt to attack the bank’s assets. As a result of this a dispute arose between the two parties after Blueline defaulted on its repayment obligations. When EADB exercised its right to appoint a receiver-manager to enforce the debenture, Blueline petitioned for the submission of the dispute to arbitration and managed to obtain an ex parte order restraining the bank and the receiver-manager from taking over its business.

The EADB re-submitted to arbitration before Mr. A. T. H. Mwakyusa, albeit under protest. He delivered a ruling in which Blueline was awarded in damages for losses allegedly occasioned by the bank in the sum of US$61,386,853, with no award made in respect of the bank’s claim for the outstanding loans and interest due from Blueline.

The bank was only saved by the Court of Appeal of Tanzania which affirmed a seminal judgment it delivered on 28 December 2011 that examined the law on the privileges and immunity that international organizations enjoy under international law by rejecting an application by Blueline to review the decision of the court in Civil Appeal No 110 of 2009: East African Development Bank vs Blueline Enterprises Limited.
It is upon this background that the governing council at its 43rd meeting held on 15th march 2012 approved the proposed amendments to various articles among which include 45- judicial proceedings and article 46- immunity of assets- to give immunity to the bank assets (fixed and liquid) against any form of legal process except in cases arising out of the exercise of the Bank’s borrowing powers to reflect the international law on privileges of international organization.

These two articles had provided protection to the Bank against certain judicial proceedings and actions against assets of the bank for example requisition, by the executive or legislative action. However, the protection provided was found inadequate by the governing council thereby approving the proposed amendment of the charter to enhance the protection and to confer the bank immunity from every form of legal process with necessary exceptions. Indeed other member states of EADB (Tanzania, Rwanda and Kenya) have already approved the amendments only Uganda remaining.
Therefore in order to provide giving effect to the charter approved at the summit of the East African Heads of State meeting on 15th march 2012 in Nairobi which approved the proposed amendment to various articles among which include 45 and 46, the government of Uganda tabled in parliament the EADB amendment bill 2013.While appearing before the Parliamentary Committee on Finance, to present the ministry’s views on the EADB Amendment Bill 2013,the Minister of State for Finance (General Duties) Fred Omach informed the committee that the EADB Act as it stands now, only protects the Bank from legislative and executive action other than individuals and private companies.

However, some members of the committee on finance are objecting to this amendment, because to them there is always a contractual relationship between the individual or private company and the bank then why protect the bank from its customers in case it fails to meet its contractual obligations. They are optimistic that this is most likely to cause inefficiency.

With the Uganda’s crucial role in the continuity of the bank, housing the headquarters  and the need to protect its assets, the committee has to handle the matter expeditiously although compliance by member states in form of capitalization to the bank still remains an issue of debate.



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