Transparency of the Regulatory System
On paper, Uganda’s legal and regulatory systems are generally transparent and non-discriminatory, and in accordance with international norms. In practice, bureaucratic hurdles and corruption significantly affect all investors, but with disproportionate effect on foreigners learning to navigate a parallel informal system. While Ugandan law requires open and transparent competition on government project tenders, U.S. investors have alleged that endemic corruption means that competitors not subject to the Foreign Corrupt Practices Act can pay bribes to win awards.
Ugandan law allows the banking, insurance, and media sectors to establish self-regulatory processes through private associations. The government continues to regulate these sectors, however, and the self-regulatory practices generally do not discriminate against foreign investors.
Potential investors must be aware of local, national, and supra-national regulatory requirements in Uganda. For example, international EAC rules on free movement of goods and services would affect an investor planning to export to the regional market. Similarly, regulations issued by local governments regarding operational hours or the location of factories would affect an investor’s decision at a local level only. Foreign investors should liaise with relevant ministries to understand regulations in the proposed sector for investment.
Uganda’s accounting procedures are broadly transparent and consistent with international norms, though full implementation remains a challenge. Publicly listed companies must comply with accounting procedures consistent with the International Auditing and Assurance Standards Board.
Governmental agencies making regulations typically engage in only limited public consultation. Draft bills similarly are subject to limited public consultation and review. Local media typically cover public comment only on more controversial bills. Although the government publishes laws and regulations in full in the Uganda Gazette, the gazette is not available online and can only be accessed through purchase of hard copies at the Uganda Printing and Publishing Corporation offices. The Uganda Legal Information Institute also publishes all enacted laws on its website (https://ulii.org/ ).
Uganda’s court system and Inspector General of Government ensure governmental adherence to the administrative process, although anecdotal reports suggest that corruption significantly undermines the judiciary’s oversight role.
Public finances are generally transparent and budget documents are available online. However, the government’s significant use of supplementary and classified budget accounts undermines parliamentary and public oversight of public finances. Some analysts believe that Uganda’s growing public debt burden is higher than official government reports indicate.
International Regulatory Considerations
Per treaty, Uganda’s regulatory systems must conform to the below supranational regulatory systems. In practice, domestication of supranational legislation remains imperfect:
- African, Caribbean, and Pacific Group of States (ACP)
- African Union (AU)
- Common Market for Eastern and Southern Africa (COMESA)
- Commonwealth of Nations
- East African Community (EAC)
Uganda is a member of the WTO and notifies the WTO Committee on Technical Barriers to Trade (TBT) of all draft technical regulations through the Ugandan Ministry of Trade’s National TBT Coordination Committee.
Legal System and Judicial Independence
Uganda’s legal system is based on English Common Law. The courts are responsible for enforcing contracts. Litigants must first submit commercial disputes for mediation either within the court system or to the government-run Center of Arbitration for Dispute Resolution (CADER). Uganda does not have a singular commercial law; multiple statutes touch on commercial and contractual law. A specialized commercial court adjudicates commercial disputes. Approximately 80 percent of commercial disputes are resolved through mediation. Litigants may appeal commercial court decisions and regulatory and enforcement actions through the regular national court system.
While in theory independent, in practice there are credible reports that the executive may attempt to influence the courts in high-profile cases. More importantly for most investors, endemic corruption and significant backlogs hamper the judiciary’s impartiality and efficacy.
Laws and Regulations on Foreign Direct Investment
The Constitution and new ICA regulate FDI. The UIA provides an online “one stop shop” for investors (www.ugandainvest.go.ug ).
Competition and Anti-Trust Laws
Uganda does not have any specialized laws or institutions dedicated to competition-related concerns, although the regular courts occasionally handle disputes with competition elements.
Expropriation and Compensation
The 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. In March 2019, the government announced plans to table a new land amendment bill to facilitate large infrastructure projects while respecting the constitutionally protected rights of landowners. Details and the timeline for passage of the controversial bill remain unclear. Some observers considered the government’s pressure in early 2019 on telecoms giant MTN to sell at least 20 per cent of its equity to Ugandans to be a form of expropriation.
ICSID Convention and New York Convention
Uganda is a party to both the ICSID Convention and the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards. The domestic Arbitration and Conciliation Act incorporates the 1958 New York Convention.
Investor-State Dispute Settlement
Pursuant to the Arbitration and Conciliation Act, the courts and government in theory accept binding arbitration with foreign investors and between private parties. In practice, the overall challenges of the judiciary are likely to impede full enforcement. There is no recent history of prominent extrajudicial action against foreign investors. Uganda has not been involved in any investment disputes with a U.S person in the last ten years; however, U.S. firms do complain about serious corruption in the award of government tenders.
International Commercial Arbitration and Foreign Courts
Ugandan law provides for arbitration and mediation of civil disputes. The legal framework on arbitration includes the Arbitration and Conciliation Act and Commercial Court Division Mediation Rules. Litigants must first submit all civil disputes to mediation before a court-appointed mediator. CADER is a statutory institution that facilitates the mediation and operates based on the UNCITRAL Arbitration rules.
Most investment disputes in Uganda are resolved through unrecorded private arbitration. The Foreign Judgments Reciprocal Enforcement Act enables the recognition and enforcement of judgments and awards made by foreign courts.
There is no evidence that Ugandan courts favor state owned enterprises when arbitrating or adjudicating disputes.
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. Uganda ranked 112 out of 190 countries for resolving insolvency in the 2019 World Bank Doing Business Report. Uganda averages 39.3 cents on the dollar for recoveries, well above the sub-Saharan average of 20 cents per dollar. Bankruptcy is not criminalized.