Court endorses sh614b award against Aya

The Court of Appeal has dismissed an application in which Aya Investment Uganda Ltd sought to block payment of $165,043,605 (about shillings 614 billion) in arbitral award, to a South African Company.

This was after Court of Appeal judge Christopher Gashirabake dismissed an application in which Aya sought to stay execution of the arbitral award granted to Industrial Development Corporation (IDC) of South Africa Limited.

This means IDC can now recover the money from Aya. The South African company had applied to the Commercial Court to have the award registered as a decree of the High Court in Uganda.

On September 11, 2021, Bruce Collins QC tribunal of South Africa ordered Aya to pay IDC shillings 614 billion in arbitral award, comprising the unpaid principal sum (sh305b), lent to Aya for a period of 10 years. Aya declined to participate in the arbitration proceedings.

“Having found that this court has limited jurisdiction to intervene in arbitral awards, which has an effect on the likelihood of the success of the appeal, the preliminary objection is upheld. The application for stay of execution is not granted,” he ruled.

The judge added: “Where the jurisdiction of court is questionable, it casts doubt on the possibility of the success of the intended appeal. Lack of jurisdiction is lack of everything”.

According to the judge, section 34 of the Arbitration and Conciliation Act provides that recourse to Court against an arbitral award can only be by way of an application for setting aside the award.

Gashirabake made the ruling in the presence of lawyer representing Aya, Gibson Munanura. Also in court was the lawyers representing the respondents Timothy Lugayizi, Hussein Gulamu, Emmanuel Ankunda and Nzuza Nzuza, senior legal advisor to the South African Company.

The applicant’s managing director, Mohammed Hamid, was also present in court.

However, the judge ruled that the applicant did not adduce any evidence of substantial loss and that it cannot be quantified in damages or that the South African firm did not have the capacity to pay the same.

“In the absence of such evidence, court cannot stop the respondent from enjoying the fruits of their judgment or award,” he noted.

In his affidavit, Abdul Latif Hamid stated that the applicant would suffer irreparable loss if the application was not granted.

The judge disagreed with Aya’s submission that one of the considerations for grant of stay of execution is whether the appeal has a likelihood of success because it casts doubt on the likelihood of success of the appeal the applicant is seeking.

Background 

Court documents indicate that between 2007 and 2017, Aya and IDC entered into various financial credit agreements to finance the construction of a hotel known as the Pearl of Africa Hotel (now Win 5 Hotels and Spa).

The hotel is located on land comprised in Plots 7A1-9A1 and 10 Lugard Road and M32, Hill Road situated at Nakasero Hill, in Kampala.

According to court documents, the total sum lent on various dates under the six financial credit agreements was $81,765,318 (about shillings 305 billion). However, the loan stood at $118,817,012 (about shillings 444 billion) in accumulated interest, as of September 13, 2017.

The parties also executed various security agreements that were collateral to the financial credit agreements during that period. However, Aya defaulted on the loan, prompting IDC to start recovery procedures under the laws of Uganda.