- Court’s persuasive guidance on cross border financial services.
Persuasive guidance can be sought from Justice Richard Buteera’s obiter dictum. According to the learned justice, there is no law that makes it illegal for a Ugandan citizen or foreigner resident in Uganda to borrow or pay back money borrowed from a foreigner or foreign institution or bank unless if the transaction involves the perpetuation of a criminal offence.
The key determinant on enforceability of a loan agreement with a foreigner or foreign entity whether entered into in Uganda or outside Uganda is per the terms of the agreement, the governing law of the agreement etc.
We note however that the Court of Appeal ordered that the matter be remitted back to the High Court commercial division to be tried on its merits and this time round it shall be before another judge. This therefore means that the position could change after trial of the matter or even following the disposal of the subsequent appeal by Ham Enterprises to the Supreme Court.
- Relevance of this decision to cross border financial services.
The trial court decision raised concerns to a wide section of international lenders/investors who, following the said ruling had considered lending to Uganda or Ugandan entities very risky.
Apart from setting aside the decision of the high court, the Court Appeal did not delve into the issues raised in relation to the legality of foreigners lending to Ugandans in view of the cited provisions of the FIA.
Accordingly at present, cross border financial services will continue to be regulated by the BoU guidelines on the subject as at the 14th October 2020. The obiter dictum of Hon. Justice Richard Buteera will also be considered for persuasion on the current regulatory regime on cross border financial services.
What we have at the moment could be construed as an interim position pending final determination of the case to its conclusion.