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Commercial Court case backlog locks up Shs85t
The Commercial Court building in Kampala. On average, the court receives about 2,000 cases annually with only half of these going up to disposal. Photo/File
What you need to know:
- Records at the court as of July 1, 2023, which this publication has seen, reveal that cases involving corporate disputes account for the lion’s share of the monies in dispute, reflected at more than Shs44 trillion, followed by banking at Shs10.5 trillion.
Up to Shs85 trillion is stuck in litigation at the Commercial Division of the High Court, a Monitor look through the court’s own audit has found.
The figure is almost twice the national budget for the Financial Year 2023/24, which stands at Shs52.4 trillion, excepting supplementary budget additions.
Records at the court as of July 1, 2023, which this publication has seen, reveal that cases involving corporate disputes account for the lion’s share of the monies in dispute, reflected at more than Shs44 trillion, followed by banking at Shs10.5 trillion.
The case categories usually heard at the Commercial Court include appeals, banking, construction, corporation, insolvency petitions, loans, insurance, intellectual property and trade disputes, among others. The court’s records also show that the money stuck in litigation is in different currencies. For example, a total of Shs12 trillion is in Ugandan currency; then there is $6.7b (about Shs24.7 trillion); AED220,000 (about Shs222m) and £10.3b (about Shs45 trillion).
Why the audit?
Outgoing deputy registrar of the court, Ms Juliet Hatanga, in an interview with this publication on September 4, 2023, revealed that about two years ago when the court came under the new leadership of Justice Stephen Mubiru, it was decided that a check be run to find out just how much money was tied up in the court system.
She explained that this was informed by the realisation that while the judges were churning out so many decisions, there appeared to be very little impact in terms of caseload.
“The judges were working so hard but we seem not to be making headway. We then decided under the leadership of Justice Mubiru to do a case clustering. A case clustering exercise was meant to totally empty the chamber into the library and then you go through all the cases; page by page,” she said.
“We also looked at it as a great opportunity to document the case values…
“So, we started to document what was the case value through a case audit. With that, we were able to appreciate the caseload. We also discovered over 1,934 cases that were non-starters (those are cases that had kind of lost position) or cases that were partially heard but not concluded.”
Ms Hatanga revealed that when the first total case value audit returned showing that about Shs11 trillion was stuck in litigation at the court, the revelation sent shock waves through the Judiciary’s top brass.
“At that time, we realised that we had cases with a monetary value of Shs11 trillion. We also did other currencies and found out that we had over $6 billion and about 12 million Pound Sterling!”
“Of course, these numbers can be a bit shocking so I went back into the cases, to identify what was causing this. There was the case of a former MP from Busoga region (Isaac Musumba) that involved mining and went to UK for arbitration. It involved lots of money. The HAM case, Patrick Bitature, which are all high-value cases,” she said.
“We were able to confirm that these case values were correct. We, therefore, projected that if that was the trend, then by December, then there would be about Shs12 trillion and that is exactly what happened. In quarter two, we hit Shs12 trillion. That is when we confirmed we were on course,” she added.
At the end of the previous financial year (2022/23), she said the monetary value of the cases had hit about Shs85 trillion.
Statistics obtained from court records show that non-payment of mortgages is among the top two areas where money is mostly held up.
Explaining why this is an area of most concern for the court, Ms Hatanga reasoned that most businesses depend on loans that end up in liquidation.
Corporation disputes are the other area of business litigation where a lot of money is stuck, with most of it held in Pound Sterling equivalent to Shs44 trillion.
In the recent past, Chief Justice Alfonse Owiny-Dollo, Justice Minister Norbert Mao, and even President Museveni have raised concerns about the issue of trillions of shillings being stuck in Commercial Court.
The Chief Justice has always a new case file should not stay in the court system for more than a year, only if the number of judges in this division of the High Court was increased from the current nine to 19.
“If I’m given 10 extra judges in the commercial court, I can promise you that a case that will be filed on January 1 of a given year, should be out of the system latest December 31,” the Chief Justice said.
In a follow-up interview with the head of the Judiciary on September 13, 2023, Chief Justice Owiny-Dollo said besides the need for more judges, the bench needed to embrace Alternative Dispute Resolution (ADR) mechanisms like mediation and plea bargaining to speed up dispute resolution.
Overall, the current case backlog in the Judiciary stands at over 46,000 cases. A case enters into backlog when it stays in the court system for more than two years without being resolved.
Chief Justice Owiny-Dollo’s point of contention is that the current argumentative/confrontational system of hearing cases is responsible for the persistent cancer of case backlog – and may to a great extent explain why all of Shs85 trillion is sitting in Commercial Court.
In June 2023, President Museveni told the High-Level National Summit on Alternative Dispute Resolution in Kampala that his government would support the Judiciary to increasingly use ADR in the courts
According to Mr Museveni, traditional conflict resolution techniques such as mediation, adjudication, reconciliation, and negotiation, which Africans employed in the past, offered greater prospects for peaceful co-existence and harmonious relationships in post-conflict periods.
“Government will support the Judiciary to expand the use of alternative dispute resolution. This will help to rejuvenate the traditional systems of dispute resolution,” Mr Museveni said in his remarks read out by Vice President Jessica Alupo.
In the meantime, Ms Hatanga said the court started hearing cases on a day-to-day basis as one of the ways of clearing the huge case backlog -- which would in turn unlock the trillions, releasing them into the economy.
“Previously, cases were heard based on the cause list; the judge would adjourn cases in a laissez-faire manner, [but we decided] that since this is Commercial Court, we needed to have daily hearings,” Ms Hatanga said.
The registrar observed that “the efficiency of daily hearings is that lawyers become more serious, pay more attention to the cases”.
What remains an issue is staffing challenges. The few registrars, whose mandate, among others, is to quickly oversee the execution of judgements, are overwhelmed.
“We believe that once we combat that the only challenge will be if we had like 20 judges or so. For example, the division for now has one substantive registrar and one substantive assistant registrar. Then, we have a registrar attached to the small claims and then another deputy registrar for planning, meaning their commitment cannot be 100 percent,” she said.
“So many decisions are made and by statute, things to do with execution are a preserve of the registrars, and yet the numbers of the registrars that we have does not tally with the output of the judges. This mismatch leads to stagnation.”
Juliet Hatanga, Outgoing deputy registrar of the court. Photo/Isaac Kasamani
What stakeholders say
Mr Wilbrod Owor, the executive director of the Bankers Association, said it’s an indictment on the system that such huge sums of money are stuck in litigation at the Commercial Court.
“It’s good you have checked for yourself. This has implications. Remember, for commercial banks, that is depositors’ money. It has an implication on lending because the more loans are not paid, the higher the likelihood of the price of loans being higher,” he said.
Going forward, Mr Owor encouraged those involved in commercial litigation to embrace arbitration, arguing that it brings about a win-win situation for each party involved compared to the traditional adversarial hearing that takes ages for a given case to be concluded. On average, a case in Ugandan courts takes a minimum of three years before it can be resolved.
“Unfortunately, because of that culture, the nature of our lending, you have to give in property and you try to hang onto the property when you fail to repay, you find yourself in litigation. In other countries, there is arbitration; as business people, they sit down and discuss how to settle their debts and at the end of it, all of you win,” Mr Owor said.
He added: “Overall, the culture of paying back loans in Uganda is not where I would love it to be.”
He also advised borrowers to engage their lenders to restructure loans if, along the way, they face challenges.
Likewise, Mr Issa Ssekito, the spokesperson of Kampala City Traders Association, decried the huge sums of money stuck in court, which he said has affected several fellow businessmen.
“Look at the politicians who want us to facilitate them and yet they are not holding the Judiciary accountable to hear our cases. Can you imagine they recently, scheduled to hear their pending election cases which are only three years old in the system. If they could use the same energy to push the Judiciary to hear our cases, we would be very far. A huge portion of our money is not in circulation because of this mess,” Mr Ssekito said.
“Let’s have as many judges at every level as possible. I hear Parliament holds some government entities at ransom if they want them to perform some activities and if they fail, they threaten not to approve their budget. The MPs can threaten the Judiciary about not approving their budget until they clear a substantial number of cases and release this money into the economy.”
For his part, Mr Morrison Rwakakamba, the board chairperson of the Uganda Investment Authority (UIA), said having Shs85 trillion stuck in commercial disputes hurts investment.
“This has an impact on doing business. For us at the UIA, it was a very good step by the government to set up the Commercial Court because that is what investors look at before investing in a given country,” Mr Rwakakamba said in September.
“Our appeal to government is to ensure that the Commercial Court is well facilitated to ensure that cases are resolved quickly such that investment decisions are made quickly.”
On investment, Ms Hatanga agreed with Mr Rwakakamba, observing in an ideal economy, what makes sense to any investor is profitability and how that comes about.
“The investor also wants to know that if I want to enter into a contract, and there is a system in place that facilitates the enforceability of that: How fast and efficient the court is, determines how willing especially foreign direct investment is.”
What Shs85t can do
This amount is Shs33t more than Uganda’s Shs52t current national budget, meaning it is the equivalent value required to run the country for one-and-a-half years.
Uganda’s debt portfolio has grossed Shs90t and the value of total claims before the commercial court would nearly offset the arrears at once.
Economists and specialist institutions, among them Uganda Bankers’ Association, however look at alternative application of the money differently: financing kitty to provide affordable credit to private sector which in turn would lower interest rates and spur economic activity.
The expert view is that Shs85t comprises loans borrowers picked from financial institutions and other lenders – deposits of clients or shareholder resources – and have defaulted to pay while contesting moves to liquidate the mortgaged collateral. Thus, according to them, a faster resolution of the commercial disputes and settlements of arrears would release into circulation significant capital for new or existing investments, with spin-off benefits of jobs and increased economic activity.
About the Shs85t
The Shs85 trillion is not cash stashed in a vault at the Commercial Court headquarters on Kyaggwe Road in central Kampala, or the bank account of the Judiciary. It refers to the monetary value of claims in commercial disputes being adjudicated. Some of it is loans lenders are seeking to recover, or rated value of collateral to be liquated, over which parties differ. Others are values of unfulfilled or disputed contractual obligations, holding up due payments. In some of the cases, courts order parties to deposit on an escrow account money worth a specific percentage of the total claim, which locks up cash outflows. Our analysis shows others monies are in decrees pending execution after resolution of cases through arbitration outside the country.
About the Court
The establishment of the Commercial Court as a division of the High Court was a direct recommendation of the 1995 Justice Platt Commission of Inquiry report on the “delays in the judicial system”.
The concerns of the business community were that the courts at the time could neither fully appreciate specialised commercial disputes nor handle such cases efficiently and expeditiously.
On June 20, 1996, then Chief Justice Samuel Wako Wambuzi issued a Practice Direction, which created the Commercial Division of the High Court.
The court was established with the view of delivering justice to the business community efficiently and expeditiously through cost-effective modes of adjudication of disputes that significantly affect the economic and financial life of the citizens.
The judges currently attached to the court are Stephen Mubiru who is the head, Ms Anna B Mugenyi, Ms Cornelia Sabiiti Kakooza, Ms Susan Abinyo, Ms Patricia Mutesi, Mr Thomas Ocaya Ojele, Ms Patricia K Asiimwe, and Ms Harriet Grace Magala.
