High Court has clarified that the FIA does not prohibit persons in Uganda from borrowing from foreign entities, so long as those entities are not operating deposit-taking or regulated “financial ...

Waboga David
Jul 29
18 min read

Introduction

The law on foreign lending and syndicated loans in Uganda is governed by the domestic financial regulation, mainly the Financial Institutions Act, international commercial practice, and cross-border private contracting.

As Uganda continues to attract foreign capital for infrastructure, hospitality, and industrial projects, questions have arisen regarding the legality of foreign lenders extending credit to Ugandan commercial entities without being licensed by the Bank of Uganda (BoU). These concerns are especially acute in syndicated lending arrangements, where multiple lenders—often across jurisdictions—participate in structured financing facilitated by local banks.

Foreign lending typically involves a non-resident financial institution or investor providing credit to a Ugandan borrower, often in hard currency and under international commercial terms.

Syndicated lending, on the other hand, refers to a coordinated financing structure where multiple lenders contribute to a large loan facility, usually managed by an “arranger” or “agent bank,” which in Uganda is often a locally licensed bank.

While such arrangements are standard in international finance, their compatibility with Uganda’s Financial Institutions Act (FIA) has been a point of legal contention—particularly around licensing obligations and what constitutes "conducting financial institution business" in Uganda.

In its recent decision, the High Court has now clarified that the FIA does not prohibit Ugandan persons or entities from borrowing from foreign lenders, so long as those lenders are not operating deposit-taking or regulated financial institution business within Uganda. This clarification rests on a purposive reading of the FIA—both before and after its 2016 amendment—and aligns with broader jurisprudence from the Supreme Court in Ham Enterprises Ltd v DTB (U) Ltd & Another, SCCA No. 13 of 2021.

The Court further confirmed that foreign financial institutions are not required to be licensed under Ugandan law to extend credit to Ugandan borrowers, particularly in syndicated loan structures where the local arranger (usually a licensed bank) coordinates the financing and security arrangements. The Court drew support from a 2020 policy position issued by the Bank of Uganda, which affirmed that foreign lenders not accepting deposits from the Ugandan public do not fall within the licensing scope of the FIA.

This decision not only settles long-standing uncertainties over the legality of cross-border credit facilities but also reinforces Uganda’s openness to international capital flows, provided such transactions are structured in compliance with existing financial laws. It highlights that foreign lending and syndicated finance remain lawful and enforceable mechanisms of commercial credit, so long as parties comply with principles of contractual clarity, regulatory transparency, and lawful execution of security. The Court’s decision sends a reassuring message to international investors and lenders that Uganda’s legal system supports modern commercial finance, even across borders.

Brief Facts

On 20th August 2012, the Plaintiff (the Borrower) obtained a loan facility totaling USD 6,000,000 from the 1st and 2nd Defendants. This facility (“Initial Facility”) comprised USD 3,500,000 from the 1st Defendant and USD 2,500,000 from the 2nd Defendant. The loan was granted for a period of forty quarters (excluding a nine-month moratorium) and disbursed into the Plaintiff’s bank accounts held with the 1st Defendant.

The stated purpose of the loan was to finance the construction of a hotel on land comprised in Kyadondo Plot 95, Block 237 at Mutungo and Luzira Road, and to assume an existing facility with Shelter Afrique. The Initial Facility was secured by a set of instruments including:

A first-ranking legal charge over LRV 2220 Folio 3 Plot 2 Lumumba Avenue;
A corporate guarantee by Mutungo Executive Hotel Ltd;
A combined fixed and floating debenture over all current and future assets of the Borrower and related companies;
Personal guarantees and indemnities from the Borrower’s directors; and
A deed of assignment of rental income from the aforementioned property.

Subsequently, on 6th August 2013, the Plaintiff obtained an additional USD 770,000 from the 1st Defendant as a development loan to complete construction of the Mutungo Executive Hotel. On 26th August 2014, the Plaintiff secured a further USD 450,000 loan to fund construction works and fittings for Afrique Suites Hotel on Plot 95, Block 237, Mutungo. Both loans were to be repaid over 120 months and were secured by the same initial securities.

After defaulting on these loans, the Plaintiff on 16th November 2017 obtained a Bridge Loan Facility of USD 10,000,000 from the 3rd Defendant to refinance existing obligations with Equity Bank Uganda Ltd (USD 7.9 million) and to complete construction at Afrique Suites Hotel. This facility was secured by an irrevocable and unconditional Standby Letter of Credit (SBLC) from Equity Bank Kenya (2nd Defendant), covering the loan principal and three months’ interest.

To effect the refinancing, the Plaintiff entered a further loan agreement with the 1st Defendant, comprising:

Facility One: The SBLC-backed facility for USD 10,000,000 to enable disbursement from Bank One and repay previous loans;
Facility Two: A Post-Import Finance Loan of USD 10,000,000 to settle any amounts unpaid under Facility One.

Collectively, these arrangements were referred to as the Disputed Facility.

The Plaintiff defaulted on repayment under the Bridge Loan, prompting the 3rd Defendant to call on the SBLC, which was honored by the 2nd Defendant. This triggered the activation of Facility Two with the 1st Defendant.

Following further default on the Post-Import Finance Loan, the 1st Defendant exercised its remedies under the mortgage by selling the secured properties through public auction.

The Plaintiff subsequently filed this suit challenging the entire loan and mortgage process on grounds of fraud, misrepresentation, illegality, and unethical conduct by the Defendants.

Representation

For the Plaintiff
Mr. Ebert Byenkya and Mr. Anthony Bazira of M/s Byenkya, Kihika & Co. Advocates and Mr. Gad Wilson of Gad & Co. Advocates.
For the 1st and 2nd Defendants
Mr. Fredrick Mpanga and Mr. Apollo Katumba of M/s AF Mpanga Advocates, and Mr. Sim K. Katende of M/s Katende, Ssempebwa & Co. Advocates.
For the 3rd Defendant
Mr. Patrick Turinawe of M/s ENS Africa Advocates.

Issues

(a) Whether the Financial Institutions Act, 2004 forbids persons in Uganda from borrowing from entities or institutions outside Uganda.

(b) Whether the 2nd and 3rd Defendants conducted financial institutions business in Uganda.

(d) Whether the post-import finance loan facility of USD 10,066,904.12 between the Plaintiff and the 1st Defendant was lawful.

(e) Whether the loan facility of USD 10,000,000 between the Plaintiff and the 1st Defendant was procured by the Defendants by means of undue influence, fraudulent misrepresentation, illegality, breach of fiduciary duty, and unethical conduct.

(f) Whether the financing arrangement between the Plaintiff and the Defendants that started in November 2017 is valid and enforceable.

(g) Whether there was any security taken in respect of the financing arrangement above and, if so, whether it was valid and effective.

(h) What remedies are available to the parties?

Holding

Issue 1: Whether the Financial Institutions Act, 2004 forbids persons in Uganda from borrowing from entities or institutions situated outside Uganda

⚖️ Submissions by the Parties

During the hearing, the Plaintiff’s counsel abandoned arguments regarding the 2017 Bridge Loan Facility obtained from the 3rd Defendant, acknowledging that the 2016 amendment to the Financial Institutions Act (FIA), 2004 rendered it compliant. Instead, the Plaintiff focused on discrediting a 2012 Initial Facility Agreement (PEX.1) between the Plaintiff and the 1st and 2nd Defendants.

The Plaintiff contended that the 2nd Defendant—who extended credit prior to the 2016 amendment—should have been licensed under Section 4(1) of the FIA, 2004, since at the time, such lending constituted “financial institution business” under Ugandan law. Counsel further argued that this unlicensed activity tainted the subsequent refinancing loan of USD 10,000,000.

In response, counsel for the 1st and 2nd Defendants argued that no Ugandan law prohibits borrowing from foreign entities. They relied on a Bank of Uganda statement (DE.23) confirming that a foreign entity need not establish a representative office in Uganda to offer non-deposit-taking services like lending. They further cited the Supreme Court’s decision in Ham Enterprises Ltd v DTB (U) Ltd & Another, SCCA No. 13 of 2021, in which the Court recognized that foreign financial institutions can legally extend credit to Ugandans.

While the 3rd Defendant did not submit on this issue.

🧑‍⚖️ Court’s Determination

The High Court treated this issue as purely legal, not requiring evidential proof. It undertook a historical and purposive analysis of the Financial Institutions Act both before and after its 2016 amendment, now codified as Cap. 57 of the Laws of Uganda (2023 Revision).

🔹 Before the 2016 Amendment

The court noted that under Section 4(1) of the FIA, 2004, no person could conduct “financial institution business” without a license from the Bank of Uganda. Lending was included in the statutory definition of such business. Violation attracted penalties under Section 11(1). The Court noted the mandatory nature of the provision, guided by judicial authorities such as Edward Katumba v Daniel Kiwalabye Musoke and Sitenda Sebalu v Sam Njuba.

However, the Court clarified that the FIA, 2004 applied to financial institutions licensed and regulated by the Central Bank—i.e., those operating in Uganda and seeking deposits. Therefore, foreign entities that do not operate deposit-taking businesses in Uganda were never subject to this licensing requirement, nor were they barred from lending to Ugandans. The law was never meant to criminalize borrowing by Ugandans from foreign lenders.

🔹 After the 2016 Amendment

The Financial Institutions (Amendment) Act, 2016 refined the definition of “financial institution business,” now requiring that the credit extended be derived from "money held on deposit." This interpretation was affirmed by the Supreme Court in Ham Enterprises Ltd v DTB. Lending not based on deposits does not qualify as “financial institution business” under the FIA.

The Court adopted a purposive and holistic interpretation, emphasizing that:

“If Parliament had intended to restrict or forbid such foreign transactions, it would have done so expressly.”

The Court also referenced a 2020 Bank of Uganda statement (DE.23), confirming that foreign lenders not accepting deposits from the Ugandan public are not regulated under the FIA. These foreign lenders operate under the laws of their home countries and international contractual principles—not the Ugandan FIA.

Therefore, the Court held that there is no law in Uganda forbidding persons from borrowing from entities or institutions outside Uganda, and that such a restriction would be unreasonable, impractical, and disruptive to international trade.

Issue 2: Whether the 2nd and 3rd Defendants conducted Financial Institutions business in Uganda

Parties’ Submissions

The Plaintiff argued that three loans—USD 2,500,000, USD 770,000, and USD 625,520 (the so-called "Kenya loans")—were issued prior to the 2016 amendment to Uganda’s banking laws.

It was contended that even before the new regime, any foreign entity lending to a Ugandan company and seeking repayment in Uganda was engaging in financial institution business, which required licensing by the BoU. Counsel pointed to a scheme where loans were disbursed through Kenyan accounts, allegedly in a manner designed to circumvent Ugandan regulations. The Plaintiff argued this violated the FIA and constituted unlawful lending activity.

For the 1st and 2nd Defendants

The Defendants submitted that the Plaintiff had abandoned this issue during trial, particularly in cross-examination where it was admitted that BoU had, in 2020, clarified that foreign lenders need not register in Uganda to lend to Ugandans.

The defense argued the Plaintiff could not raise the issue of illegality in final submissions without proper pleading. They invoked the principle of approbation and reprobation, asserting that the Plaintiff had benefitted from the loans and could not now reject their legality.

Several authorities were cited in support, including Simbamanyo Estates v Equity Bank and Ham Enterprises v DTB, which upheld syndicated lending and dismissed claims of illegality where foreign banks participated under local coordination.

The Defendants further contended that the 2012 loan claim was time-barred under Section 3(1) of the Limitation Act, and any benefits taken precluded the Plaintiff from repudiating the transactions.

Court’s Determination

The Court rejected the argument that the 2nd Defendant had engaged in unlicensed financial institution business in Uganda.

Key findings included:

Concession on 2017 Loans
The Court acknowledged that the Plaintiff had abandoned contestation of the 2017 loan transactions after BoU’s guidance clarified the legality of foreign lending. However, the Plaintiff continued to challenge pre-2016 transactions (2012–2015).
Appropriation and Reprobation Not Applicable
The Court clarified that approbation and reprobation requires a deliberate election and enjoyment of benefit from a claim before repudiation. Since the Plaintiff had not made an election with respect to the earlier transactions, the doctrine did not apply. The benefit must follow—not precede—an election, which had not occurred.
Fraud Overrides Limitation
Though the defense argued that the 2012 claim was statute-barred, the Court held that Section 25(1)(a) of the Limitation Act removes time limitations where fraud is pleaded. The Plaintiff’s allegations of fraud preserved her right to bring the claim.
Syndicated Lending Not Financial Institution Business
The 2012 and subsequent loans were found to be part of a syndicated lending arrangement. The 1st Defendant (a licensed Ugandan bank) arranged the loan, and the 2nd Defendant (a Kenyan entity) participated to avoid exceeding the 25% credit exposure limit set by Regulation 6(1) of the 2005 Regulations.

The 1st Defendant acted as both arranger and agent. In light of Ugandan and international banking law—citing Paget’s Law of Banking and G. Fuller’s Corporate Borrowing—this syndicate structure was held to be lawful and standard practice.
Definition of “Financial Institution” Not Met by 2nd Defendant
The Court found that the 2nd Defendant did not fall within the statutory definitions of a financial institution either before or after the 2016 amendments to the FIA. Therefore, its conduct did not amount to carrying on financial institution business in Uganda.\

Holding

The Court held that neither the 2nd nor the 3rd Defendant conducted financial institution business in Uganda within the meaning of the FIA. The second issue was answered in the negative.

Issues 3, 4 and 6

Whether the loan facility of USD 10,000,000 between the Plaintiff and the 3rd Defendant was lawful
Whether the post import finance loan facility of USD 10,066,904.12 between the Plaintiff and the 1st Defendant was lawful.

6. Whether the financing arrangement between the Plaintiff and the Defendants starting in November 2017 is valid and enforceable

Issue 3: Lawfulness of the USD 10 Million Facility from the 3rd Defendant

The Plaintiff conceded the lawfulness of this facility, and both counsels for the Defendants concurred. The court, having earlier determined that the 2nd and 3rd Defendants were not restricted from lending in Uganda, found the issue redundant.

Issues 4 and 6: Lawfulness and Enforceability of Post Import Loan

Plaintiff’s Submissions:

The 1st Defendant was never properly designated as a lender for the post import loan (Facility II).

Key contractual steps such as a utilization request and agreed lender proportions under Clause 5 of the Facilities Agreement were never followed.

There was no assignment or transfer of lending obligations from the 2nd to the 1st Defendant under Clause 23 of the Agreement.

The Plaintiff was not issued any demand notice when the SBLC was called upon.

No evidence existed to show the 1st Defendant reimbursed the 2nd Defendant—rendering the Post Import Loan fictitious.

Defendants’ Submissions:

Clauses 1.8, 4.8, and 5.4 of the Facility Agreements and Offer Letters allowed either the 1st or 2nd Defendant to finance the post import loan.

The utilization request was optional under Clause 5.1 (“may”), not mandatory.

Upon the SBLC being encashed, Facility II was automatically triggered, and notice was not contractually required.

No formal assignment was needed between the two lenders (1st and 2nd Defendants) under Clause 23, as both were original lenders.

The Plaintiff’s benefit from the facility and subsequent challenge was barred by the doctrine of approbation and reprobation.

Court’s Determination

1. On the Doctrine of Approbation and Reprobation

The court clarified that the Plaintiff’s election not to contest the legality of the 3rd Defendant’s loan did not extend to waiving her right to challenge other aspects of the lending arrangement. The doctrine was inapplicable because her benefit (receipt of funds) occurred before she elected not to contest that particular loan’s legality.

2. On Utilization Request and Loan Activation

Clause 5.1 of the Facilities Agreement used the term “may,” making utilization requests optional. The Post Import Loan was designed to activate automatically once the SBLC was encashed. This was consistent with DE.5 and DE.13, which contemplated an internal conversion mechanism upon crystallization of Facility I.

3. On Designation of Lenders

The court found that both the 1st and 2nd Defendants were original lenders under DE.13 and DE.5. Clause 1.8 of DE.5 and Schedule 2 of DE.13 identified both entities as “financiers.” Therefore, the 1st Defendant did not need a formal designation or assignment from the 2nd Defendant.

4. On Assignment and Clause 23

Clause 23 only applied to transfers to third parties. Since no transfer occurred to a new lender (outside the 1st and 2nd Defendants), no breach of the assignment clause arose.

5. On Demand Notices and SBLC Nature

The court held that the SBLC was a self-executing instrument, independent of the underlying loan contracts. It did not require notice to the Plaintiff before it could be encashed, and the communications clause (Clause 31.1 of DE.13) allowed multiple modes of communication, including non-written ones. DW2 testified the Plaintiff was generally aware of the facility timeline and risks.

6. On Disbursement and Loan Fiction

The court rejected the claim that the Post Import Loan was fictitious. It noted that under DE.22, the 1st Defendant had informed the Plaintiff that Facility I had expired and that Facility II had been triggered to pay the SBLC. Clause 4.8.2 of DE.5 confirmed that an equivalent amount would be drawn down under Facility II to settle the SBLC.

The Plaintiff could not claim non-disbursement on behalf of the 2nd Defendant without evidence, and none was provided.

Holding

The post import finance loan facility between the Plaintiff and the 1st Defendant was lawful.

The financing arrangements between the Plaintiff and the 1st and 2nd Defendants initiated in November 2017 were valid and enforceable.

Issue 5: Whether the loan facility of USD 10,000,000 between the Plaintiff and the 1st Defendant was procured by the Defendants by means of undue influence, fraudulent misrepresentation, illegality, breach of fiduciary duty, and unethical conduct

Submissions

The Plaintiff contended that a syndicated loan facility worth USD 10,000,000—arranged through the 3rd Defendant (a foreign lender)—was unlawfully procured by the 1st and 2nd Defendants using fraudulent misrepresentation, undue influence, breach of fiduciary duty, and unethical conduct.

The Plaintiff alleged that it had been misled into believing that the facility would be split into two tranches: USD 7.9 million to settle an existing loan with the 1st and 2nd Defendants and USD 2.1 million to complete construction of a hotel project.

The Plaintiff submitted that due to unauthorized diversions and misrepresentations, the USD 2.1 million portion was never received, defeating the purpose of the loan.

In rebuttal, the 1st and 2nd Defendants argued that:

The proposal letter (DE.3), allegedly containing the misrepresented loan structure, was authored by the Plaintiff, not them.

The outstanding loan was more than USD 7.9M at the time of disbursement due to accrued and penal interest, and this was known to the Plaintiff.

The Plaintiff was aware of deductions (processing fees, commissions, and interest) and had not proven that any statement made by the Defendants induced reliance or constituted actionable misrepresentation.

The Defendants had no obligation to supervise the Plaintiff’s use of funds, provided repayment obligations were met.

On the issue of undue influence, the Plaintiff invoked Section 13 of the Contracts Act and argued that:

The 1st and 2nd Defendants were in a fiduciary position due to their banker-customer relationship.

They benefited disproportionately from the loan, including receiving fees from the USD 2.1M component and introducing NISK Capital, a broker paid USD 800,000.

The Plaintiff was financially distressed and therefore vulnerable, yet the Defendants facilitated further borrowing.

In response, the Defendants argued that:

No fiduciary duty existed as the Plaintiff had appointed its own legal and financial advisers.

Independent legal advice was sought and received before execution of loan documents.

No coercion or domination of the Plaintiff’s will occurred, and no law prohibits a bank from lending to a distressed borrower who offers sufficient security.

Court’s Determination

On Misrepresentation:

The Court interpreted misrepresentation under Section 2 of the Contracts Act and common law authorities such as Halsbury’s Laws of England and Marz Ltd v Bank of Scotland [2017]. The Court clarified that for misrepresentation to be actionable:

The representation must be made by the defendant.
The statement must be false.
The claimant must have relied on it when entering into the contract.

The Court found that:

The proposal letter (DE.3) relied on by the Plaintiff was authored by the Plaintiff herself and thus could not bind the Defendants.

No certificate of liability from the 1st and 2nd Defendants confirming the USD 7.9M was ever presented.

The loan documentation explicitly used the phrase "around USD 7.9M", excluding interest and penalties, and there was no evidence that any misstatement was made by the Defendants.

The Plaintiff appointed NISK Capital to structure the transaction, and thus the 1st and 2nd Defendants owed no advisory duty.

Conclusion on Misrepresentation

There was no misrepresentation by the Defendants. The Plaintiff self-initiated the transaction and was not induced by any false statement from the Defendants.

On Undue Influence

The Court examined the claim under Sections 13 and 14 of the Contracts Act and applied principles from Royal Bank of Scotland v Etridge, National Westminster Bank v Morgan, and Lloyds Bank v Bundy. The Plaintiff’s claim relied on presumed undue influence stemming from a banker-customer relationship.

The Court held that:

While a banker-customer relationship existed, this alone was insufficient to presume undue influence.

A fiduciary duty must be demonstrated to establish undue influence. Here, there was no fiduciary relationship, as:

1. The Plaintiff independently appointed NISK Capital as its financial adviser.

2. Loan documents were executed with the assistance of multiple independent lawyers.

3. The Plaintiff's directors confirmed on record that they received and relied on this advice.

Conclusion on Undue Influence

The Court found that there was no undue influence. The Plaintiff’s decisions were independently made with full legal and financial advice.

The High Court dismissed the Plaintiff’s claims of undue influence, misrepresentation, illegality, and fiduciary breach. The USD 10 million loan was upheld as valid and voluntarily entered.

Issue 7: Whether there was any security taken in respect to the financing arrangement and if so, if it was valid and effective.

Submissions of the Parties

The Plaintiff submitted that although a Standby Letter of Credit (SBLC) was issued, it never became effective security for the Post Import Loan because:

The 1st Defendant was never designated as the lender;
There was no evidence that the 1st Defendant reimbursed the 2nd Defendant after the SBLC was called;
Therefore, the disbursement of the Post Import Loan was in question and the entire security structure was ineffective.

Counsel for the 1st and 2nd Defendants argued that:

The Plaintiff, through PW1, admitted that the Post Import Loan was secured by an irrevocable and unconditional Standby Letter of Credit issued by the 2nd Defendant;
The SBLC covered the principal amount and three months’ interest and was valid for 25 months;
Referencing Charles Proctor’s treatise on international banking, counsel emphasized the autonomy and enforceability of SBLCs in global financial transactions;
In addition to the SBLC, various other security instruments—including mortgages, guarantees, debentures, and deeds of assignment—were executed and voluntarily submitted by the Plaintiff.

Court's Determination

The Court rejected the Plaintiff's assertion that the security never became effective. Key findings included:

Existence and Voluntariness

The Plaintiff did not contest the existence of the securities and had voluntarily submitted land titles and executed supporting documents including statutory declarations, certificates of independent advice, and consents.

Nature of SBLCs

The SBLC issued by the 2nd Defendant functioned similarly to a guarantee but operated independently of the main loan agreement. The Court noted that, as per Stair Memorial Encyclopedia, such instruments are enforceable upon simple demand if default occurs.

Structure of Security Arrangement

The Court recognized a structured syndication of the loan in which the 3rd Defendant disbursed the funds, the 2nd Defendant provided a SBLC, and the 1st Defendant acted as agent and security trustee. These roles were recognized under a tripartite facility agreement (DE.5/PE.9).

Comprehensive List of Securities: The securities included:

Legal charges over multiple properties (e.g., Plot 2 Lumumba Avenue; Plots 484, 957, 958 Kyadondo)
Personal and corporate guarantees
Deed of assignment of receivables
Debenture over existing and future assets
Inter-Lender Agreement and Syndicated Facility Agreement
Cross-company indemnities

Registration and Compliance
All security documents were properly registered under Ugandan law. There was no evidence to prove non-registration or failure to pay stamp duty.

Abandoned Contest on Execution
The Plaintiff initially contested execution of security documents but later abandoned expert evidence on signature authenticity, thereby weakening her claim of ineffectiveness.

The Court held that:

“Securities were taken under the financing arrangement as shown in DE.4, DE.5, and DE.13, and these securities were valid and effective.”

The High Court's decision in this case reinforces the legal enforceability of international banking instruments, such as standby letters of credit, and the importance of properly documenting and registering security arrangements in commercial lending

Key Takeaways

SBLCs are valid security under Ugandan law—especially in cross-border lending—provided they meet the contractual terms. There is no legal bar against their use as security.
Multiple layers of security may be created in complex financing arrangements, and as long as they are executed voluntarily and registered properly, they will be upheld.
Agency and trust roles in syndicated loans are enforceable in Uganda where they are contractually created and supported by documentation.
Mootness principle affirmed
Where loans have been repaid and obligations discharged, courts will decline to pronounce on related remedies or disputes for lack of live controversy.
Burden of proof lies on the party alleging non-effectiveness or illegality of securities. A failure to produce evidence—particularly regarding registration or stamp duty—will result in dismissal of such claims.
Misrepresentation must be specific, attributable, and relied upon
Parties alleging misrepresentation must demonstrate that the false statement originated from the opposing party and that they relied on it in entering the transaction.
Fiduciary duty in banking relationships is not automatic
Merely having a banker-customer relationship does not, without more, give rise to a fiduciary duty or presumed undue influence. Independent financial and legal advice weakens claims of coercion or dominance.
Evidence of advice and independent judgment is vital
The presence of legal counsel and financial advisers at every stage significantly undermines allegations of deception or manipulation in complex financial transactions.
Courts uphold contractual autonomy
So long as parties are competent and properly advised, courts are reluctant to invalidate transactions on grounds of disadvantage alone unless clear proof of misconduct is shown
Foreign Lending Clarified
Foreign banks or institutions can legally lend to Ugandan entities without registering or obtaining a license from the BoU, particularly in syndicated loan arrangements.
Syndicated Lending Recognized
Courts recognize syndicated lending as a legitimate and necessary mechanism—especially where credit exposure limits apply under domestic banking regulations.
Appropriation Doctrine Explained
Beneficiaries of financial arrangements cannot challenge their legality after enjoying benefits, unless they did not make an express election between inconsistent claims.
Fraud Trumps Limitation
Allegations of fraud, if properly pleaded, suspend statutory time bars under the Limitation Act.
Licensing Test Narrowed
Merely advancing credit to a Ugandan borrower, even where recovery mechanisms are activated in Uganda, does not amount to doing financial institution business under Ugandan law—absent other elements required by the FIA.

For Legal and Financial Institutions

This ruling provides a strong affirmation of Uganda's openness to foreign credit facilities, within the context of regulated syndication. However, it also emphasizes the importance of clearly defining roles in cross-border lending structures, ensuring that arranging banks are licensed domestically, and understanding the limits of the financial institution definition under the FIA.

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