Here are the brief facts
The Petitioner, Peter Ssajjabi was investigated from September to November 2012, for the suspected commission of offenses including among others, illicit enrichment, conspiracy to defraud, and causing financial loss with regard to the much-publicized corruption scandal involving payment of money to questionable beneficiaries of the East African Community who were entitled to pension by the Ministry of Public Service. He was eventually charged and tried in connection with some offenses related to the said scandal but up to today he has not been acquitted nor convicted. Pursuant to a court order of 7th November 2013, a freezing order was placed on the property of Peter Ssajjabi and Swift Commercial Establishment Limited, a company in which he is a shareholder.
The Petitioners, Peter Ssajjabi and Swift Commercial Establishment Limited, subsequently challenged filed a Constitutional Petition challenging the constitutionality of the freezing order. They contended inter alia that the creation of the Anti-Corruption Division of the High Court was unconstitutional, S. 34 of the Anti-Corruption Act, and S. 118 of the Financial Institutions Act are unconstitutional as they violate the right to property and the right to a fair hearing.
The petitioners argued that the creation of the Anti-Corruption Division of the High Court (ACD), was unconstitutional as it was a special court established by the Chief Justice and not the Parliament of Uganda. The petitioners contend that section 34 of the ACA, which permits a competent court on the application of the DPP, to make orders for confiscation of property belonging to a person suspected of committing a corruption-related offense, is unconstitutional as it violates the right to property.
The Petitioners further contended that Section 118 of the FIA which allows the Bank of Uganda to direct the freezing by financial institutions of bank accounts on suspicion that monies held on such accounts are proceeds of crime is unconstitutional as it violates the right to a fair hearing and amounts to compulsory acquisition of property without compensation.
In reply, the Bank of Uganda made a flat denial stating that the creation of the Anti-Corruption Court (ACD) was established in accordance with the Constitution. Bank of Uganda offered a general denial stating that Section 118 of the FIA does not prevent access to courts by those aggrieved by the acts of the respondent in ordering the freezing of bank accounts with money suspected to be proceeds of crime.
On 26th August 2021, the Constitutional Court delivered its ruling following the lead judgment of Justice Cheborion Barishaki and partly allowed the Petition.
The Court first ruled that the Anti-Corruption Division was established by the Chief Justice as an administrative division of the High Court and not as a special court envisaged under Article 232 (2) (e) of the Constitution as asserted by counsel for the 10 petitioners. The creation of the division was, therefore, done in accordance with the Constitution.
The court found that Section 34 of the ACA which gives the relevant authorities the right to make an application to the Court for an order placing restrictions on the enjoyment of property suspected to be related to a suspected criminal was constitutional. That Section 34 of the ACA was necessary for ensuring that those who are suspected and later convicted of corruption do not hide property considered to be proceeds of crime. The Court reasoned that the right to property is not absolute and the legal regime provided under section 34 of the ACA is, therefore, permissible under Article 43 of the Constitution which in appropriate circumstances allows limitation on the enjoyment of rights under the Constitution
Notwithstanding the above, the Court declared that the continued existence of a court order placing restrictions on the use of the property of the petitioners, over a period of 7 years from when such orders were made was unconstitutional. A freezing order for over 7 years represents an unreasonable restraint on the petitioners' right to property as enshrined in the Constitution. A declaration is hereby issued to that effect.
Court further considered the constitutionality of S.118 of the Financial Institutions Act which empowers the Bank of Uganda (BOU) to direct financial institutions under its supervision to freeze bank accounts with suspected proceeds of crime. Court held that Section 118 of the FIA, is part of the legal framework aimed at deterring suspected criminals from benefitting from proceeds of their Crime.
However, Court went further and considered Section 124 of the FIA which provides that “No suit or other legal proceedings shall lie against the Central Bank or any officer, employee or agent of the Central Bank for anything which is done or is intended to be done in good faith under this Act."
The Constitutional Court declared that sections 118 and 124 of the FIA when read together have an unconstitutional effect in that the provisions empower the BOU to make directives for the freezing of bank accounts yet subsequently such directives cannot be subject to Court scrutiny for purposes of determining whether they are justified. This is unconstitutional in that it denies the account holders access to court and shields the BOU from scrutiny in Court proceedings. The Court clearly stated that S. 124 which insulates the Bank of Uganda from any legal proceedings by arguing that its directives were made in good faith so that no legal proceedings can be determined against it, gives unjustified and arbitrary protection to the BOU, which is contrary to Article 21 (1) of the Constitution.
The Constitutional Court thus stated that everyone including the Bank of Uganda can be sued. To quote verbatim, “The general principle of law is that a party must be given an opportunity to be heard before his rights are prejudiced or affected by another's decision. No one, not even the BOU can be shielded from being answerable to the dictates of justice. Unfortunately, Section 124 of the FIA does just that and gives section 118 of the FIA that undesirable effect.”
Effect of the ruling.
The ruling by the Constitutional Court could have far-reaching effects with regard to challenging decisions of the Bank of Uganda beyond freezing orders. This is because of the Court’s interpretation of Section 124 of the FIA which is a general section under the Act and applies to every action of the Central Bank. Bank of Uganda can no longer hide under the said provision to seek immunity from legal proceedings for acts done under the FIA.
Several times, questions have arisen as to the discretion enjoyed by the Central Bank in controversially closing financial institutions and yet the FIA makes the Central Bank untouchable. For example, a confidential report by the Auditor General submitted to Parliament queried BoU officials on the flaws in the closure of Teefe Bank (1993), International Credit Bank Ltd (1998), Greenland Bank (1999), The Co-operative Bank (1999), National Bank of Commerce (2012), Global Trust Bank (2014) and the sale of Crane Bank Ltd (CBL) to DFCU (2016).
However, in all these cases, the Central Bank could not be sued by shareholders or customers of the Banks since the Central Bank enjoyed immunity under the FIA. For example, a suit filed against Bank of Uganda by NICOZ Uganda Limited Civil Suit-2009/372) .with respect to Greenland Bank Ltd (In Liquidation) was struck out for want of cause of action on the ground that the FIA protects the Central Bank from legal proceedings for anything done or is intended to be done in good faith pursuant to the provisions of the Act. Also, the Court of Appeal set aside the High Court ruling against the Bank of Uganda for freezing its accounts without being accorded a fair hearing in Bank of Uganda v Caring for Orphans, Widows & Elderly Ltd (Civil Appeal-2007/35)  UGCA 36. The Court of Appeal relied on S. 124 FIA and held that the Application for judicial review was incompetent because BOU was immune from litigation under the FIA unless COWI pleaded or proved that BOU had acted in bad faith.
The ruling by the Constitution Court implies that the Bank of Uganda can now be sued for all actions taken under the FIA whether relating to taking over, placing under receivership and closure of banks, or freezing accounts of customers as it was in the instant petition.
In the nutshell, the ruling gives hope to shareholders and customers of Banks against the arbitrary exercise of power and abuse by officials of Bank of Uganda who have been hitherto unquestionable since no proceedings could be instituted against them in Court. Following this ruling, the Bank of Uganda or its officials must act in accordance with the Constitution and ensure that they respect the fundamental rights of the people of Uganda, for their immunity is no more unless the said ruling is stayed and/or set aside by the Supreme Court.
The Writer FERDINAND TUMUHAISE, Legal Associate At Kampala Associated Advocates (KAA), LLM Harvard Law School (Tax).