The Constitutional Court has stripped Bank of Uganda (BoU) of the immunity which essentially insulated it from being sued for actions done in good faith.
The development means that — barring a successful appeal in the Supreme Court — an aggrieved member of the public can now institute legal proceedings against the Central Bank.
Prior to this landmark decision, Section 124 and 118 of the Financial Institutions Act (FIA), had insulated BoU from legal proceedings.
Section 124 of FIA states that no suit or other legal proceedings shall lie against the Central Bank or any officer, employee or agent of the bank for anything which is done or is intended to be done in good faith under this Act.
Likewise, section 118 states that the Central Bank shall if it has reason to believe that any account held in any financial institution has funds on account which are the proceeds of crime, direct in writing the financial institution at which the account is maintained to freeze the account in accordance with the direction.
A panel of five justices on August 26, however, unanimously held that those protective provisions are unconstitutional since all persons and institutions — BoU inclusive — are equal before the supreme law.
Only a sitting President is insulated from legal proceedings in Uganda.
“When read together, Sections 118 and 124 of the FIA, make it impossible for a person aggrieved by the acts of BoU directing the freezing of his bank accounts to bring an action challenging the propriety of the freezing order. This is potentially problematic,” Justice Cheborion Barishaki, who wrote the lead decision, held.
He further contended that the FIA provisions give “unjustified and arbitrary protection to BoU, which is contrary to Article 21 (1) of the Constitution.”
The other Justices include Irene Mulyagonja, Fredrick Egonda-Ntende, Elizabeth Musoke and Muzamiru Mutangula Kibeedi.
The Justices observed that the general principles of the law are that each party must be given an opportunity to be heard before one’s rights are 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,” Justice Barishaki held.
The judgment arose from a petition filed by a suspect in the pensions scam case, Mr Peter Ssajjabi. The case involved payment of money to the ghost beneficiaries of the East African Community, who were entitled to pension by the Ministry of Public Service.
Mr Ssajjabi had, among others, sought the Constitutional Court’s orders declaring that it was unconstitutional for BoU to hide under sections 124 and 118 of the FIA to direct his bankers to freeze his bank accounts for more than seven years.
The Justices also observed that the existence of a court freezing order based on the directives of BoU for more than seven years amounts to unjustifiably protracted interference with Mr Ssajjabi’s right to own property in a free and democratic society.
“In my view, regardless of the merits, a freezing order should never last for close to eight years as it has in the present case. This situation would have been avoided if regulations had been put in place to limit among others the time the freezing orders can subsist,” the court held.
It added: “Accordingly, I would order that the bank account freezing orders placed on the respective petitioner’s bank accounts on directives of the second respondent (BoU), be discharged.”
Ms Charity Mugumya, the director of communications at BoU, said the Central Bank will comment about the landmark decision once it digests the judgment.
Mr Isaac Kimaze Ssemakadde, the Chief Executive Officer of Legal Brains Trust, however, welcomed the court’s decision, saying BoU had been using the quashed provisions to promote impunity as evidenced during the Parliament’s Committee on Commissions, Statutory Authorities and State Enterprises probe (COSASE).
“Abuse of power at BoU has been endemic, and that clause promoted impunity, of which Ugandans saw but a glimpse in the COSASE “defunct banks” probe, which revealed skeletons in the cupboard, smoking guns and the whodunit at BoU, but the CID, DPP and IGG, etc are still sleeping on the job,” Kimaze said yesterday, adding, “The nullification of this “immunity clause” is therefore a ripe moment for the commencement of civic activism to restore the sanctity of the Central Bank.”