BoU used British laws as demanded by buyer to sell off assets of local banks

PARLIAMENT | Nile River Acquisition Company (NRAC), the Mauritius-based firm to which Bank of Uganda (BoU) sold assets and liabilities of three local commercial banks that were liquidated in the 1990s demanded to use British laws in the trading a decade ago.

BoU sidestepped local laws, including the Constitution, to fulfill the wishes of NRAC.

The revelation came to light when the officials of the central bank appeared before the Committee of Commissions Statutory Authorities and State Enterprises (Cosase) that is probing findings in the special audit reports that highlighted grievances in the way the Banks were closed.

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During Wednesday’s session, MP Medard Sseggona (Busiro East) asked the central bank officials why they chose to rely on UK laws in an agreement they signed with NRAC for the sell of assets and liabilities of International Credit Bank, Greenland Bank and Cooperative Bank.

Margaret Kaggwa, legal counsel of Bank of Uganda, told the committee that it was NRAC that asked to have the agreement executed based on UK laws.

Noticing how damaging the admission was before the committee, Kaggwa hastened to explain that the UK laws were only to apply in case of any disputes but not on debt collections.

The damage was done and Cosase chairperson Abdu Katuntu seized on this: “You had actually ousted the applicability of using the Uganda Constitution. Why did you choose the law under which law the agreement should be interpreted? We want you to explain the basis under which you took that decision.”

Francis Takirwa, UPDF representative, also asked: “Was Bank of Uganda so desperate that they couldn’t wait for another arrangement rather than take of this company that had to bring its laws?”

The central bank officials had no immediate explanations but asked to seek informed decisions from concerned parties before they could respond further.

According to the Auditor General’s special audit report on the liquidation of the seven commercial banks, the total loan portfolio of the three banks sold to NRAC stood at Shs135 billion, comprising secured loans of Shs34.5 billion which had valid, legal or equitable mortgage on the real property.

According to Eagle Online, a local portal, NRAC is registered in Mauritius, a tax haven, is non-existent in Uganda, even though records show the company was incorporated in that country on September 26, 2007 as a global business, the same year BoU officials sold the assets of the three banks.

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