Government is seeking to make amends after a minister cancelled a railway construction contract awarded to a Chinese company but later had his decision overturned by court.
The development is threatening to delay the upgrading of the Uganda railways network and expose government to heavy financial loss.
Mr John Byabagambi, the state minister for Works, on July 8, wrote a letter terminating an MoU between government and China Civil Engineering Construction Corporation (CCECC), which had been contracted in 2012 to upgrade the Uganda Railways’ eastern line.
According to the tripartite agreement between the Presidents of Uganda, Kenya and Rwanda, the railway network is to be upgraded quickly to standard gauge.
CCECC said it had already spent a lot of time and money studying the route and its feasibility.
Despite several warnings from the Attorney General and the Solicitor General, Mr Byabagambi wanted to award the contract for the eastern railway line to another Chinese company, China Harbour Engineering Corporation (CHEC).
The two companies, according to a directive by President Museveni, were selected to upgrade the railway and CCECC believed they should have been left to continue with the route on which they had already done preparatory work.
According to various correspondences between the parties, Mr Byabagambi and some officials in the ministry of Works argued that terms and needs had changed after the signing of the “tripartite” agreement and that the terms of the earlier MoU with CCECC would be disregarded.
“We are also aware that the Heads of State have not involved themselves in allocation of contracts,” the company’s lawyers Kiwanuka and Karuguire Advocates responded to Mr Byabagambi’s communication.
Mr Byabagambi offered CCECC the western route, which the company rejected as “uncharted territory and threatened legal action if the minister insisted on his decision.
When Mr Byabagambi wrote terminating the MoU, CCECC went to court. On July 23, the High Court overruled Mr Byabagambi’s decision to cancel the CCECC deal.
“I find the minister’s unilateral decision to be irrational, high-handed, arbitrary, unreasonable, clothed in procedural impropriety, ultra vires, and not in public interest,” High Court Judge Lydia Mugambe ruled.
CCECC was also awarded costs of the case.
The eastern railway route includes lines from Malaba to Kampala, Tororo to Gulu and Gulu to Nimule at the South Sudan border. The western route essentially runs from Kampala to Kasese.
The road to court
When Mr Byabagambi wrote to CCECC about his intention to terminate the MoU, the company engaged Kiwanuka and Karugire Advocates to represent them.
On March 24, the lawyers wrote to Mr Byabagambi telling him that their client had done “extensive feasibility studies” on the eastern route and invested a lot of money.
Mr Byabagambi had also said CHEC had already entered an agreement with the government of South Sudan to construct a railway there, making them better candidates to work on the eastern route which connects to South Sudan.
“An MoU with the government of South Sudan (with CHEC) is an immaterial consideration to the project as our client’s (CCECC) remit will stop at Nimule,” the lawyers responded.
In his response on April 8, Mr Byabagambi said it had been agreed in the MoU the agreement was not legally binding and that any disputes would be resolved amicably, without court action.