Uganda: Whoever Signs Our National Interests Away Should Be Brought to Account

(Article was published in the Daily Monitor and New Vision Newspapers of 11 November 2011)


President Museveni’s younger brother, a.k.a Salim Saleh while appearing before the ad hoc parliamentary committee investigating misconduct in the energy sector called for the renationalization of the Uganda Electricity Board’s assets from Umeme on grounds that the privatization of the sector was “not well thought-out”. 

A few months back, there were similar calls but there were arguments that according to the signed agreements between Umeme and the government of Uganda, such an action would attract huge penalties.

   

However, what seems to be of more urgency is whether we as a country are getting better deals in these agreements which are being signed on our behalf by officers’ in the responsible offices.

On 1^st July 2004, Heritage Oil and Gas Limited entered into a Production Sharing Agreement (PSA) with the Republic of Uganda in which, inter-alia, contained clauses providing guidance on how disputes under the agreement will be handled.

In the agreement, there are two interesting clauses namely clause 14 and 26.1. Article 14 stated that: "All taxes, duties, levies or other lawful impositions applicable to licensee shall be paid by the licensee in accordance with the laws of Uganda in a timely fashion."

This otherwise clear and straight clause was followed by a rather controversial clause under Article 26.1 which states that any dispute arising under the Agreement, which cannot be settled amicably within 60 days shall be referred to Arbitration in accordance with the United Nations Commission for Internal Trade Law (UNCITRAL) Arbitration rules. The Arbitration award shall be final and binding on the parties to this Agreement. Apparently, this clause provides Heritage Oil with a base of an argument. A lifeline with no checks and balances.   

In as much as it may have been in the interest of Heritage Oil being a foreign firm to have disputes resolved in accordance with the UNCITRAL, the circumstances under which this clause was to apply should have been detailed. As it is, almost any dispute at the discretion of either party may be filed in the U.K at the expense of local tax payer. By allowing the clause to stand unguided, it inevitably contradicts Article 14 of the agreement under which Uganda Revenue Authority was proceeding to impose a legitimate tax in the laws of Uganda.

      

One wonders why these two Articles were not harmonized well knowing that the rising of a dispute was simply a matter of when and not if. Had they been harmonized, the matter should have been put to rest by the competent Uganda Tax Appeals Tribunal or other Ugandan Courts hence saving the unnecessary expenditure of over $4.4 million on lawyers in the U.K by engaging the U.S-based law firm, Curtis to defend it in the $404m tax dispute.

Taxes are statutorily provided for and any acts to make it contractual are ultra-vires. The exercise of such statutory powers cannot be fattened or overridden by an agreement or mistake. This should have been sufficient to enable government signatories avoid such unnecessary contradictions which apparently are costing us obscene sums of money to try to right what should have not gone wrong in the first instance.

With all these developments, Ugandans find themselves locked in between a hard rock and an island and have to bear with all the consequences simply because someone signed a document on our behalf devoid of protecting our interest.

It is high time that signatories who sign such agreements on behalf of the government of Uganda pay far more attention to the contents of an agreement and ensure that the interest of Uganda are fully protected to the best of their knowledge before they append their signatures and sentence all Ugandans to such embarrassments before the whole world.

Better still, such signatories should be answerable in case they negotiate a deal which does not fully protect the interests of Uganda. Perhaps this will make them more careful as to identify any contradictions and harmonize them in time.