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.
With that background, Mr Byabagambi wrote: “CCECC has shown unwillingness to resolve any differences with the government amicably even before signing formal contracts for the projects. Instead the company has resorted to threats of court action.”
He said given its conduct, CCECC would not be a reliable partner in the execution of the projects with government. He gave them three months’ notice to terminate the MoU.
Solicitor General briefs AG
As the row continued, Mr Christopher Gashirabake, the Solicitor General, on April 14, wrote to Attorney General Peter Nyombi, summarising his concerns about the issue and how it evolved.
In his briefing, he told Mr Nyombi ministry of Works and Transport did not reply to his demand for details of the said “differences” between government and CCECC.
Mr Gashirabake said thereafter a letter from President Museveni, on February 19, to the minister of Works and Transport directed that CCECC and CHEC should be engaged in the standard gauge railway construction.
“Thereafter I advised that since the President had directed the way he did, it was not prudent to terminate the MoU yet we are contemplating having an engagement with CCECC. The said advice has been blatantly ignored and all I am seeing is notice of intention to terminate the MoU. What does Ministry of Works and Transport intends to achieve? They are not able to explain this,” Mr Gashirabake wrote to Nyombi.
“It is this office to defend and not the Ministry of Works and Transport. We are in a better position to advise on whether to terminate or not, for we know the consequences,” Mr Gashirabake added.
Court ruling shakes minister
The court action by CCECC seems to have taken Mr Byabagambi by surprise. On June 16, he wrote to the Attorney General that he had discussed the issue with the Chinese Ambassador to Uganda who advised him that CCECC could not take government to court because the ambassador was not aware and had not authorised such action.
He said that being a Chinese government company, CCECC needed the clearance of the ambassador to take the government of Uganda to court.
Sunday Monitor was unable to establish whether the company eventually got the ambassador’s clearance or Mr Byabagambi had got such “assurance” from the ambassador at all.
After the ruling, Mr Byabagambi engaged a private law firm, Agaba Muhairwe and Co Advocates, for legal advice.
On July 23, the law firm advised government to appeal the ruling and take certain steps as the appeal was going on.
The lawyer, Mr Edgar Agaba told Sunday Monitor, however, that government had abandoned the option to appeal.
“The firm is to be called for negotiations next week to see how best to proceed. We got approval to engage in negotiations and not to appeal,” Mr Agaba said on Friday.
It is not clear why Ministry of Works and Transport decided to engage a private law firm instead of consulting the Attorney General, the government’s chief legal advisor.
Officials of CCECC declined to comment on the matter and Mr Byabagambi’s known mobile phone number remained unavailable for two days of calling.
The Solicitor General, Mr Christopher Gashirabake, had advised ministry of Works against terminating CCECC’s contract. On February 5, Works and Transport Permanent Secretary Alex Okello wrote to the Solicitor General seeking advice on “how” to terminate CCECC’s contract.
“In recent developments in the infrastructure area, government has joined together in a tripartite agreement with Kenya and Rwanda to develop the standard gauge railway in the region. Subsequently, the arrangements for the development of the standard gauge railway now involve all the states and this MoU between Government of Uganda and CCECC has to be terminated to give way for the regional negotiations. The purpose of this letter is to seek your legal guidance in executing the same as soon as possible,” Mr Okello wrote to the Solicitor General.
On February 26, the Solicitor General wrote back telling the ministry that there was “no clear reason why you want to terminate the MoU with CCECC, since it does not hinder any arrangements by government in its desire to fast-track the SGR construction.”
He warned that the ministry’s intended action would expose government to unnecessary litigation and costs which include delay in the implementation of the project.
CCECC appealed to the Attorney General Peter Nyombi about Mr Byabagambi’s decision.
Mr Nyombi wrote to Mr Byabagambi thus: “You intimated (in a letter to Karugire and Kiwanuka Advocates) that CCECC had shown unwillingness to resolve any difference with the government of Uganda amicably.” Nyombi asked Byabagambi to specify the said “differences” but Mr Byabagambi did not respond to Mr Nyombi’s demand.