Transparency of the Regulatory System
Uganda’s legal and regulatory systems are broadly consistent with international standards even though bureaucratic hurdles severely affect 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.
According to the Investment Act, the national parliament enacts principal legislation on investment while the Finance minister, and as well as Kampala City Council Authority (KCCA) and other local governments, make subsidiary legislation, otherwise known as regulations. Similarly, under the KCCA Act, KCCA is authorized to make regulations regarding taxes charged on businesses in Kampala. Regulations of all levels (local, national, and supra-national) affect foreign investors. For example, supra-national 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 regarding operational hours or the location of factories would affect an investor’s decision at a local level only.
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.
Draft bills undergo a consultative process led by the relevant government ministry or 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 for public comment and consultation. 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) website at www.ulrc.go.ug , makes available principal legislation (the Acts), but not the regulations.
Uganda’s court system (through judicial review of administrative action) provides the main mechanism for ensuring governmental adherence to the administrative process. 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 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.
Although Uganda has not adopted any new investment regulations since the 2016 Investment Climate Statement, amendments to the Investment Code Act are ongoing and Cabinet recently approved the Investment Code Bill 2017. The Bill is now before Parliament, which forwarded it to the First Parliamentary Counsel at the Ministry of Justice for review before Parliament approves it as law.
International Regulatory Considerations
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 that Ugandan regulations must conform to 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)
Uganda’s regulatory system incorporates the WTO (GATT, GATS, TRIPS, TRIMS, etc.), the World Bank/IMF, and the East African Community standards. The Government of Uganda notifies the WTO Committee on Technical Barriers to Trade (TBT) of all draft technical regulations through the Ugandan Ministry of Trade’s National TBT/SPS Coordination Committee.
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. In 2014, the commercial court handled more than 220 commercial cases. 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. The court is attempting to increase transparency and efficiency by creating an “e-court environment” – a process still ongoing in 2017. In addition to digitizing its records, the court also digitally records court proceedings, enabling cases to be heard from remote parts of the country. 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 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 commercial legal process is perceived to favor politically connected companies that deploy pressure to disrupt and delay outcomes. Uganda’s judiciary has been implicated in corruption. 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 laws affecting portfolio or foreign direct investment are the Capital Markets Authority Act, 1996 (amended in 2015), the Companies Act, 2012, and the Investment Code Act, 1991. The Investment Code Act, 1991, allows foreign participation in any industrial sector except those touching on national security or requiring the ownership of land. Licensing from the UIA requires a commitment to invest over $100,000 over three years (See “Performance Requirements and Incentives” below). Most foreign investors establish themselves as limited liability companies. Ugandan law also permits foreign investors to acquire domestic enterprises or establish green field investments.
The Companies Act allows for the creation of single-person companies, permits the registration of companies incorporated outside of Uganda, and regulates share capital allotments and transfers.
The Capital Markets Authority Act establishes the Capital Markets Authority, which is responsible for licensing brokers, dealers and overseeing the Uganda Securities Exchange. Uganda’s stock exchange was inaugurated in June 1997 and contains 18 companies. Market capitalization of the exchange rose to USD 9.79 billion in 2015. Foreign-owned businesses are allowed to trade on the Ugandan stock exchange.
Uganda has four systems of land tenure: freehold, traditional freehold land referred as “mailo,” leasehold, and customary. The Land Act, allows foreigners to acquire a lease not exceeding 99 years. Foreigners cannot hold or acquire mailo or freehold land. The Uganda Investment Code Act prevents foreigners from investing in crop or animal production. Foreign investors can create a Ugandan-based firm to invest in crops and animal production.
Competition and Anti-Trust Laws
Uganda does not review transactions for competition-related concerns.
Expropriation and Compensation
The Ugandan Constitution states that the interests of a licensed investor may only be expropriated when it “is necessary for public use or in the interest of defense, public safety, public order, public morality or public health…” and guarantees any person who has an interest or right over expropriated property access to a court of law.
Uganda’s Investment Code Act stipulates “compensation in respect of the fair market value of the enterprise specified in the enterprise or an interest or right over property forming that enterprise shall be paid within a period not exceeding twelve months from the date of taking possession or acquisition.”
In the 1970’s, Idi Amin’s regime expropriated on a mass-scale Asian-owned and operated properties without compensation. With the passage of the Expropriated Properties Act of 1982, the Government began to right this historical wrong, and by 1997 approximately 4,000 properties had been returned to their owners, and 1,500 others were sold off and the former owners compensated. There have been no incidents of expropriation of foreign investments without compensation since President Museveni came to power in 1986. 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.
Pursuant to Section 73 of the Arbitration and Conciliation Act, the Government accepts binding arbitration with foreign investors. The act, which incorporates the 1958 New York Convention, also authorizes binding arbitration between private parties. Uganda does not yet have a Bilateral Investment Treaty (BIT) or Free Trade Agreement (FTA) with an investment chapter with the United States.
Investor-State Dispute Settlement
Uganda is a signatory to the ICSID Convention, but does not have a Bilateral Investment Treaty (BIT) with the US. Most investment disputes in Uganda are resolved through unrecorded private arbitration. Uganda has legislation providing for the recognition of foreign arbitral awards. Uganda is also a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.
International Commercial Arbitration and Foreign Courts
The Judicature (Commercial Court Division) (Mediation) Rules, 2007 require that all commercial disputes be subjected to arbitration before they are listed for adjudication by the Commercial Court. CADER can assist in mediating disputes. CADER’s website is available here: http://www.arbitration-adr.org/adrdir/servprov/spuganda.htm .
Uganda has legislation providing for the recognition of arbitral awards. The country is also a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Uganda also has legislation (Foreign Judgments (Reciprocal Enforcement) Act 1961) which enables the recognition and enforcement of judgments and awards made by foreign courts. For example, on February 8, 2013, the Uganda Supreme Court overturned an earlier ruling in favor of a Kenyan construction firm following a contractual dispute with Uganda’s National Social Security Fund (NSSF). There was no evidence of discrimination or corruption affecting the ruling.
The Insolvency Act of 2011, as well as bankruptcy regulations, 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.”
Uganda ranked 111 out of 190 countries for resolving insolvency in the 2017 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.