Banks should embrace private dispute resolution

While speaking at the plenary session of the National Development Policy Forum organised by the National Planning Authority on May 26, the deputy Governor Bank of Uganda, Dr Michael Atingi-Ego, expressed displeasure with Uganda’s ‘tycoons’ for ‘refusing’ to pay back bank loans when they fall due and instead run to the Commercial Court to seek temporary protection against foreclosure of mortgaged properties. 

He stated that collateral worth over Shs7 trillion is tied up in endless disputes in the Commercial Court. 

The deputy governor also challenged the Judiciary to be alert about such conduct. Mr Wilbrod Owor, the executive director Uganda Bankers’ Association (UBA), who asked the judiciary to crack the whip against such business people, echoed his views.

The question that came to my mind when I read the lamentations of these respected leaders is why Uganda Bankers Association has not embraced private dispute resolution mechanisms for defaulting borrowers and lending banks? 

If one was given an opportunity to research the loan agreements signed between UBA’s 25 members and their several borrowers, what percentage of those contracts contain effective alternative dispute resolution clauses? 

We should bear in mind that lenders in Uganda employ some of the most highly intelligent legal minds. What could be the problem? Is it that lenders have instructed their lawyers not to include mediation or arbitration clauses in loan contracts, or is it the lawyers’ reluctance to do so because of our legal training in Uganda which is highly steeped towards litigation? 

The Judiciary Annual Performance Report FY 2020/2021 states that the Commercial Court alone had 6,094 unresolved cases by the end of that financial year worth Shs5 trillion. Commercial Court has only five Judges. An adequate legal and regulatory framework exists in Uganda for mediation and arbitration.

A sufficient number of lawyers and non-lawyers are trained mediators/ arbitrators. 

An award issued by an arbitrator is not inferior to a judgement issued by a Judge of the High Court. If a losing party in an arbitration fails to honour the payment terms of the award, the winner will register the award in the High Court and it will be enforced in the same way as a decision issued by a judicial officer.

The Centre for Arbitration and Dispute Resolution (CADER), established by the Arbitration and Conciliation Act, has as one of its mandates, the training and promotion of the use of alternative dispute resolution among stakeholders. CADER should be capacitated to play its statutory role.

UBA has sufficient clout to champion reform of arbitration laws of Uganda, if this is the reason its members are not embracing and promoting private dispute resolution.

UBA can embrace mediation and arbitration and contribute to the release of the over Shs5 trillion stuck in the Commercial Court back into the economy. 

Olive Zaale Otete, Lawyer and member of Chartered Institute of Arbitrators