Thursday 23rd February 2012

Sebalu & Lule obtains favourable results in East African Court of Justice reference

ALCON V STANCHART & AG.pdf  

Sebalu & Lule Advocates has obtained successful results in a reference (see .pdf copy above) filed against Standard Chartered Bank Uganda and the Attorney General of Uganda by Alcon International before the East African Court of Justice (EACJ) in Arusha, Tanzania.

The firm, acting as legal representatives for Standard Chartered Bank, was led by Managing Partner Barnabas R. Tumusingize and Associate Brenda K. Ntambirweki. The ruling was delivered on 24th August 2011.

Background:
The reference instituted by Alcon flowed from a long-running dispute between the claimant and the National Social Security Fund (NSSF) over the aborted contract for the construction of Worker’s House in Kampala, Uganda. Alcon secured an arbitral award of US$ 8,858,469.57 for breach of contract which NSSF challenged unsuccessfully before the Commercial Court and Court of Appeal in Uganda. NSSF has since lodged an appeal to the Supreme Court. At one stage, the rightful beneficiary of the contract and arbitral award was also a point of dispute in separate proceedings before the Court of Appeal.

Standard Chartered Bank’s involvement in the dispute is with respect to a guarantee the bank issued on 30th of October 2003, on application by NSSF, in favour of the Registrar of the High Court of Uganda at Kampala for US$ 8,858,469.97. The guarantee was to be paid in full in the event that Alcon International Limited as judgment creditor became entitled to immediate payment of the decretal sum, full interest and taxed costs upon determination of the appeal lodged in the Court of Appeal. Alcon succeeded but the enforcement of the guarantee (as well as other forms of execution) was stayed by the Supreme Court pending the disposal of the final appeal lodged by NSSF.

Reference before the EACJ:
In 2010, Alcon International instituted a reference against the respondents under Articles 27(2) and 151 of the Treaty for the Establishment of the East Africa Community and Article 54(2) of the Protocol on the Establishment of the East African Community Common Market. In the main, Alcon sought orders to the effect that:

  • A declaration that the signing of the Protocol on the Establishment of the East African Community Common Market and the coming into force of the Protocol on 1st July 2010 enhanced the jurisdiction of the East African Court of Justice under Article 27(2) of the Treaty as a competent judicial authority for the determination of cross-border trade disputes between persons from the partner states of the East African Community (EAC).
  • A declaration that the EACJ has the jurisdiction to enforce a statutory/legal duty owed to a person from a different partner state where a public official in the home state fails to honour such duty.
  • The EACJ orders the Standard Chartered Bank to pay the sum owing under the guarantee

Sebalu & Lule raised a number of preliminary points of law on behalf of the respondents. Summarily, it was argued that:

  • Under Article 30 of the Treaty, references must be brought only as against a Partner state or an institution of the EAC.
  • Settlement of disputes under the Protocol is by competent institutions in the Partner states.
  • No Protocol has been passed, as is required, to operationalise the extended jurisdiction of the EACJ to provide for original, appellate, human rights and other jurisdictions pursuant to Article 27 (2) of the Treaty.
  • In view of the fact that there is an appeal lodged by NSSF in the Supreme Court, local remedies for settlement of the dispute had not yet been fully exhausted. 

Ruling:
The EACJ ruled in favour of the respondents on the solitary point of the absurdity of having parallel proceedings in Uganda and before the EACJ. Accordingly, the reference was adjudged to be improperly instituted and struck out with costs.

The EACJ made no finding on the questions as to whether Standard Chartered Bank, as a private party, could be joined/impleaded to a reference before the EACJ and whether the Common Market Protocol could possibly enhance the jurisdiction of the EACJ without an enabling instrument.