The legal dispute between defunct Crane Bank and DFCU will now be settled through a trial before the English High Court, according to a decision by the UK's Court of Appeal.
In 2016, the Bank of Uganda (BoU) took over Crane Bank, citing financial instability and mismanagement. It later sold off some of its assets and liabilities to DFCU Bank in 2017. The sale has been a subject of controversy, with some alleging irregularities in the acquisition process.
Crane Bank's owners filed a claim in the English courts in December 2020, challenging the transaction in relation to the sale of assets and assumption of liabilities by BOU.
They argued that the sale was undervalued and part of a scheme orchestrated by BOU using its powers.
In response, DFCU filed an application challenging the jurisdiction of the English Courts to hear the claim, stating that BOU's actions were carried out in pursuit of constitutional and statutory powers.
The English court agreed, ruling that it did not have authority to hear the claim.
Crane Bank appealed to the English Court of Appeal, which ruled on July 26, 2023, that the claim should be determined through a trial rather than a jurisdiction challenge. DFCU has 28 days to appeal the matter.
Angelina Namakula, the Chief Legal Officer of DFCU bank said the Court of Appeal made no decision on the underlying facts or on the merits of the claim as these issues were not before the Court.
"The Appeal concerned technical legal questions raised at the preliminary stage and did not deal with the claim on its merits. The factual allegations will be for the trial judge to determine," she noted.
Speaking to the Nile Post, the Chief Executive Officer of DFCU Charles Mudiwa, stated that despite the ongoing case, there are no threats to the bank stability or any other issues relating to its ability to serve its customers.
He noted that the bank has a strong financial position and complies with regulatory requirements, adding that it is among the top banks which are well capitalized.
"DFCU Bank has a strong financial position with its capital ratios more than 12% which is above the regulatory minimum. placing it firmly among the top five most capitalized banks. DFCU Bank was among the first banks to comply with the revised Bank of Uganda minimum core requirements of Shs 120 billion by December 31 2022," he said.
Last year saw a ruling in favor of DFCU Bank by the High Court in England in a separate case filed by Crane Bank and its directors.
They were seeking compensation for the alleged unlawful seizure and undervaluation of the bank's assets.
DFCU Bank argued that the transaction had no international dimension and that the actions of the Bank of Uganda (BOU) were lawful.
The court rejected the claimants' argument against the application of the foreign act of state doctrine, stating that the principle is well-established in English law.
The court found that BOU's actions were within its powers as a regulatory authority.
In their lawsuit, the claimants alleged that the Bank of Uganda unlawfully seized Crane Bank, grossly undervalued it, and fraudulently sold some of its assets and liabilities to DFCU Bank through a sham bidding.
Lawyers representing DFCU Bank in the High Court argued that the disputed transaction had no international dimension and that the central bank's actions in the takeover and disposal of Crane Bank were lawful.
They stated that, as a result, the court in England had no jurisdiction over the case under the foreign act of state doctrine, which prohibits English courts from scrutinizing sovereign acts by states that are lawful within their territories.
Crane Bank and its former owners requested the court to reject the defendants' invocation of the foreign act of state doctrine, claiming that the principle presents one of the most difficult and perplexing topics for an English judge involved in foreign affairs.
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However, the judge overruled the objection, labeling it as over exaggerated and noting that the cases cited by the claimants to support their argument were decided prior.
Following the preliminary rulings, the court framed three issues for determination: whether the acts complained of by the claimants were performed by the Bank of Uganda as part of Uganda's executive, whether those acts were sovereign in nature, and whether any limitations or exceptions relied upon by the claimants were applicable.
The court determined that the central bank was indeed part of Uganda's executive and its decisions were sovereign in accordance with the Constitution and the Bank of Uganda Act.
The judge rejected the claimants' submissions that the Bank of Uganda is not part of the government of Uganda due to its status as an independent institution not under the control and direction of any individual or entity.
