Democratic Governance Facility v Centre for Constitutional Governance & 2 Others (Civil Suit 953 of 2020) [2023] UGCommC 279 (28 August 2023)

Full Case Text

## THE REPUBLIC OF UGANDA

# IN THE HIGH COURT OF UGANDA AT KAMPALA [COMMERCIAL DIVISION]

## HIGH COURT CIVIL SUIT NO. 953 OF 2020

# DEMOCRATIC GOVERNANCE FACILITY ::::::::::::::::::::::::: PLAINTIFF Suing through The Royal Danish Embassy

#### **VERSUS**

# 1. CENTRE FOR CONSTITUTIONAL GOVERNANCE

## 2. RABWONI OKWIRI

3. KAKWANZI HELLEN::::::::::::::::::::::::::::::::::

## **BEFORE: HON. LADY JUSTICE ANNA B. MUGENYI RULING**

This is a ruling on three preliminary points of law raised by Counsel for the Defendants on the competence of the suit on the following grounds:

- 1. The Plaintiff does not have locus standi to institute the suit due to lack of corporate personality. - 2. Arbitration clause in the agreement upon which the suit is premised. - 3. The Plaint does not disclose a cause of action.

The background of the preliminary objections is that the Plaintiff filed Civil Suit No. 953 of 2020 against the Defendants for payment of UGX 109,893,700/

Dup

$8 - 32$

allegedly arising from breach of partnership agreements by the 1st Defendant, handover of all assets procured under the partnership, general damages, interest and costs. When the matter came up for a scheduling conference to take place, the 1st Defendant raised these preliminary points of law and the parties agreed to file written submissions in that regard which have been considered in this Ruling.

### **REPRESENTATION**

The Plaintiff was represented by M/s S & L Advocates whereas the 1st Defendant was jointly represented by M/s JByamukama & Co. Advocates and M/s Karungi & Partners Advocates and Solicitors.

# RESOLUTION OF PRELIMINARY OBJECTIONS.

1. Lack of locus standi to institute the suit due to lack of corporate personality.

Counsel for the 1st Defendant submitted that the Democratic Governance Facility (DGF) is a multi-donor funding mechanism as stated in paragraph 1 of the plaint and not a legal person, and therefore lacks locus standi to bring this suit. He added that the Royal Danish Embassy through which the suit is instituted is equally not a corporate body that can sue or be sued. He further submitted that a legal person can only be created by Acts of Parliament and not by the agreement of the parties, and added that there is no law conferring legal personality on either of them. He cited the case of Crane Bank Ltd (in receivership) V Sudhir Ruparelia & Another CACA No. 252 of 2019 to the effect that an embassy enjoys immunity therefore it cannot be sued and therefore is prohibited from suing.

In reply, Counsel for the Plaintiff submitted that DGF's legal personality is not derived from national law but international law and cited the case of *Democratic*

SMB

Governance Facility (Suing through the Royal Danish Embassy) V Uganda Youth Network & Others where a similar objection was raised and Justice Mubiru dismissed the same. He added that the Defendant's argument disregards Uganda's status as a subject of international law. He prayed that this Court disregards the Royal Danish Embassy and maintains DGF in its own capacity under international law to initiate a suit in Uganda, and that it can be rectified by amendment.

In rejoinder, Counsel submitted that the Plaintiff erroneously interpreted the decision of Hon. Justice Mubiru because Section 6 of the Vienna Convention of 1969 on the Law of Treaties is on the capacity of states to conclude treaties; and since DGF is not a state and it cannot have corporate personality. He added that suing through a non-existent party is no suit at law and suffers the fate of dismissal. He also added that the decision of Hon. Justice Mubiru is not binding on this Court and that this Court can depart from it. He also pointed out Order 6 Rule 7 of the Civil Procedure Rules that parties are bound by their pleadings and that the Plaintiff had pointed out that the Royal Danish Embassy had legal capacity whereas not. He cited Article 1 of the Vienna Convention on the Law of Treaties on the definition of a treaty to mean international agreement concluded between two states.

The Latin phrase locus standi was defined in Osborn's Concise Law Dictionary 11th Edition, Sweet and Maxwell as "a place of standing. It has been explained by the The Black's Law Dictionary, 8th Edition, page 2754, as 'the right to bring an action or be heard in a specific forum.' In Chombe & 2 Others v Kaya & Another Civil Appeal No. 15 of 2010, Hon. Justice Mubiru held:

"Where judicial redress is sought of a legal injury or legal wrong suffered by a person or class of persons, in order to invoke the jurisdiction of the Court, the

person invoking must not only have an enforceable personal right or interest in the matter, but must also the capacity to initiate the action. At common law, a corporation sole, a corporation aggregate and an individual or individuals are the only entities with the capacity to sue or be sued, or those associations of individuals which are neither corporations nor partnerships, upon whom the Legislature has conferred such a status."

I take cognisance of the fact this Court is not bound by the decision of a High Court as the Defendant Counsel argued but there is not much on the legal personality of such international non-state actors. Before I look at the decision of my learned brother in a matter where a similar objection was raised involving the same Plaintiff, I will briefly look at the developments on international legal personality over time. It is not in dispute that international law is a body of general principles and rules binding upon the members of the international community or states in their mutual relations. It follows, therefore, that states are considered sovereign with the power to create or accept to abide by legally binding rules usually in the form of treaties or conventions.

Whereas only sovereign states were considered to have international legal personality by the beginning of the 18th Century, over time individuals, International Organisations and other non-state actors have been found to have international legal capacity. It is for this reason that individuals are tried by international tribunals for violations they have committed or cases are filed by international organisations and non-state actors. The International Court of Justice in its Advisory Opinion of 11th April 1949 held that basing on the nature of important tasks conferred on the United Nations as an organisation, it possesses rights and obligations as well as 'a large measure of international personality and the capacity to operate upon the international plane, although it is not a super-

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Dut

state.' The Court added that those powers which are essential to the performance of the functions of the organisation, must be regarded as a necessary implication arising from the Charter therefore the Organisation finds it necessary to entrust its agents with important missions to be performed in distributed parts of the world meaning these agents must be protected in order to satisfactorily carry out their duties. The Court concluded that the Organisation has capacity to exercise functional protection in respect of its agents.

From the above holding, the Organisation was found to have the capacity to bring a claim and to give it the character of an international action for reparation for the damage that had been caused to it. The Court further explained that the Organisation can claim reparation not only in respect of damage caused to itself, but also in respect of damage suffered by the victim or persons entitled through him. They also added that although, according to the traditional rule, diplomatic protection had to be exercised by the national State, the Organization should be regarded in international law as possessing the powers which, even if they are not expressly stated in the Charter, are conferred upon the Organization as being essential to the discharge of its functions.

In the case of Democratic Governance Facility (Suing through the Royal Danish Embassy) V Uganda Youth Network & Others (supra) Hon. Justice Mubiru elaborated on who can file suits; either human persons or non-human persons and he went on to say that while human (natural) persons acquire legal personality by birth, non-humans (artificial persons) have theirs conferred on them by some legal process. The honourable Judge went on to distinguish international legal personality which is equivalent to membership in the international community from domestic legal personality which is personality that is effective in a specific state. In specific answer to whether the Plaintiff was created by an international

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instrument that gives it legal personality, he said that it was established by eight development partners under a government-to-government agreement signed on 5th July 2011 with the Government of Uganda; and that it partners with Ugandan state and non-state institutions.

The honourable Judge added that the Memorandum of Understanding signed between the development partners is a treaty pursuant to the definition of a treaty under Article 2 (1) (a) of The Vienna Convention on the Law of Treaties 1969, therefore that Democratic Governance Facility is an institution built under Public International Law rules. That in order for it to have legal personality, it must have an autonomous will deduced from the intention of the States that created it; and he referred to Clause 2 of the Memorandum of Understanding which defined the facility as 'a joint programme management unit' and that Denmark had accepted to let the unit act by proxy for the embassy of Denmark to administer and manage its programmes. He argued that if the Organisation did not have its own legal personality on the international plane, the potential responsibility would be a collective one shared by all the State Parties. In this case, he said Clause 3 of the Memorandum spells out the collective commitment of the signatories.

In concluding that DGF had international legal personality, the honourable Judge held:

"The Democratic Governance Facility and States Parties that set it up constitute separate legal persons. The Sovereign States Parties set up the DGF to act in their stead. It is an entity which was set up by means of a treaty concluded by States to engage in cooperation in a particular field and which has its own organs that are responsible for engaging in independent activities. I therefore find that the

Democratic Governance Facility has an international legal personality separate from that of its States Parties."

I do not hold a separate reasoning with the above reasoning, and in addition, I also hold the same view that DGF was able to enter into all the different agreements with developments partners like the Defendant because it had legal personality to do so. The honourable Judge also held that a person's capacity to sue is interlinked to the ability to demonstrate to the Court sufficient connection to and harm from the law; and that judicial redress is available to such persons. Similarly, I find that Democratic Governance Facility has international personality and is aggrieved, therefore has locus standi to sue. The first objection is overruled.

#### 2. Arbitration clause in the agreement

Counsel for the Defendants submitted that the relationship between his client and the Plaintiff was governed by an arbitration clause in paragraph 11 of the Partnership Agreement. He added that this suit was incompetent and premature as no recourse to arbitration was made.

In reply, Counsel for the Plaintiff submitted that the said Clause 11 is not mandatory and allows the parties to either commence arbitration or seek other remedies, specifically Clause 4.9 in regard to recovery of misused funds, which is the basis of this suit which was brought under Clause 4.9 (c) of the partnership agreement.

In rejoinder, Counsel for the Defendant cited Section 5 of the Arbitration and Conciliation Act Cap 4 to the effect that Courts shall stay proceedings in a suit where there is an arbitration clause in the dispute agreement before Court. He said since paragraph 11 has an arbitration clause, the suit was brought prematurely.

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I have looked at the submissions by both Counsel and hold as follows. Section 5 of the Arbitration and Conciliation Act Cap 4 which Counsel for the Defendant cited provides:

"A judge or magistrate before whom proceedings are being brought in a matter which is the subject of an arbitration agreement shall, if a party so applies after the filing of a statement of defence and both parties having been given a hearing, refer the matter back to the arbitration unless he or *she finds—*

- a. that the arbitration agreement is null and void, inoperative or incapable *of being performed; or* - b. that there is not in fact any dispute between the parties with regard to the *matters agreed to be referred to arbitration.*"

Whereas Clause 11 of the Partnership Agreement provides for settlement of disputes arising by way of arbitration, the word 'may' used suggests that it was not mandatory. For the avoidance of doubt Clause 11 above-mentioned is replicated below and provides that:

"Any controversy or claim arising out of or relating to this agreement, or the breach thereof, may be settled by arbitration administered by a party agreed to by both contracting parties in accordance with the laws of Uganda. This clause shall not preclude parties from seeking other provisional remedies."

In addition to the optional or advisory provision above on arbitration, the Partnership Agreement specifically provided for other remedies in Clause 4.9 with specific reference to sub paragraph c of the said Clause.

I therefore find that arbitration was not mandatory in the Partnership Agreement between the parties and the suit will not be sent back for arbitration under Section 5 of the Arbitration and Conciliation Act.

This objection has no merit and equally is overruled.

#### 3. Cause of action

Counsel for the Defendants submitted that since the Partnership Agreement giving rise to this suit is unenforceable for want of capacity to contract, the Plaint discloses no cause of action and ought to be rejected pursuant to Order 7 rule 11 (a) of the Civil Procedure Rules.

In reply, Counsel for the Plaintiff submitted that since the Plaintiff had international legal personality, they also had capacity to enter into the respective partnership agreements and is therefore entitled to enforce its rights. He also pleaded estoppel as the Defendants had without any misrepresentation took benefit of the funds disbursed and even misused them.

In rejoinder, Counsel for the Defendants reiterated their earlier prayers and added that no Court should enforce an illegal contract. He cited case law and said the Plaintiff did not have capacity from the beginning.

I have considered the submissions and looked at pleadings, and find that in view of my holding on the first objection, the Plaintiff not only has international legal personality that allowed it to enter into the Partnership Agreement with the Defendants but they also have locus standi as the claim is on breach and recovery of misused funds. It follows, therefore, that the Partnership Agreement is not illegal as claimed by the Defendants.

Subsequently, this objection equally has no merit and is hereby overruled too.

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Following that all the 3 preliminary objections have been overruled, I direct that the main suit is scheduled for hearing at the earliest and will be heard on its merits.

Costs shall abide the cause.

Muhahé

HON. LADY JUSTICE ANNA B. MUGENYI DATED...................................