The Court of Appeal has ruled that the East African Development Bank (EADB) does not enjoy absolute immunity from being sued in Ugandan courts, in a long-running dispute over mortgaged land in Kampala.
A panel of three judges held that the bank’s immunity is “qualified and functional,” meaning the institution can, in some circumstances, face legal action.
The dispute started in 1995 and involves Edward Mugalu, a prominent Kampala businessman who was gunned down in broad daylight in 1992 along Wankoko Road. He was also a staunch supporter of the Democratic Party (DP).
Before his death, Mugalu gave powers of attorney to Steelex Products Uganda Ltd to obtain a loan facility from the EADB.
The loan was secured using land in Kyadondo, Kawempe. The mortgage was signed on August 4, 1995, and registered on May 16, 1996.
However, Steelex Products later defaulted on repaying the loan. As a result, the bank moved to sell the mortgaged properties to recover its money.
That triggered a legal fight by Dr George Fenekansi Sembeguya, who was acting as administrator of Mugalu’s estate. Sembeguya went to the High Court seeking to redeem the land before it was sold.
The bank responded by filing a separate suit in which it argued that Ugandan courts had no jurisdiction to hear the case because the bank enjoyed immunity from legal proceedings.
On January 18, 2018, High Court judge, Justice Anna Mugenyi, rejected the bank’s argument and ruled that the court had jurisdiction to hear the matter on its merits.
EADB appealed that ruling to the Court of Appeal.
The appeal was heard by Justices Geoffrey Kiryabwire, Moses Kazibwe Kawumi, and Dr Asa Mugenyi.
In the Court of Appeal, EADB was represented by lawyer Andrew Munanura, while Idah Musoke appeared for Sembeguya.
The bank argued that under Article 44 of the East African Development Bank Act, it enjoyed immunity “from every form of legal process” unless it expressly waived that immunity in writing.
The bank insisted Parliament had intentionally granted the institution broad protection because it is an international organisation created by treaty.
The bank further argued that the High Court had no power to question the constitutionality of the law because constitutional interpretation belongs to the Constitutional Court.
Sembeguya’s lawyer, Musoke, argued that Uganda’s Constitution gives the High Court unlimited jurisdiction and that no ordinary law can completely block citizens from accessing courts.
The lawyer also argued that EADB could not enter into contracts, acquire property, and sue others while at the same time shielding itself entirely from legal action.
The three judges who heard the case first interpreted the law governing immunity.
Justice Asa Mugenyi explained the difference between sovereign immunity enjoyed by states and institutional immunity enjoyed by international organisations.
“International organisations, however, are neither sovereign nor states. They have institutional immunity,” Justice Mugenyi said
He added that modern international law increasingly limits immunity where organisations engage in commercial transactions.
Justice Mugenyi, who led the panel, noted that courts around the world are moving away from blanket immunity and are instead distinguishing between official acts and commercial activities.
“Immunity, being a defence, operates as a shield and not as a sword,” he ruled.
In analysing the bank’s charter, the judges found that the immunity clause itself allowed the bank to waive immunity in writing.
Because immunity could be waived, the judges concluded that it could not legally be described as absolute immunity.
The judges also faulted the bank for failing to place important mortgage and loan documents before the court.
According to the judgment, the court could not determine whether the bank had waived immunity because the relevant agreements were never attached to the appeal record.
The judges said the dispute arose from a written mortgage arrangement and that the exact wording of the agreements mattered.
“Without those writings, this court cannot determine whether immunity was waived,” they ruled.
Although the bank succeeded on two technical grounds, the appeal substantially failed.
The court agreed with the bank that immunity under the law extends not only to member states but also to third parties such as Sembeguya. The judges also agreed that the immunity provisions in the law were not unconstitutional.
However, they rejected the bank’s broader claim that it enjoyed complete protection from court proceedings.
In the final orders, the court ruled: “On the whole, the appeal fails.”
The judges then sent the matter back to the High Court for a full hearing and determination and awarded Sembeguya one-half of the costs of the appeal.
