KAMPALA, Oct 8 (Reuters) - Banks in Uganda plan to appeal a
court ruling issued on Wednesday that has effectively declared
illegal certain syndicated loans - representing at least $1.5
billion worth of debt - an industry body said on Thursday.
The ruling by the Commercial Court was the result of legal
action by Ham Enterprises Uganda Ltd, against Diamond Trust Bank
(DTBK) in neighbouring Kenya along with its Uganda
"The court said the transactions or the credit facilities
that were advanced by DTBK were illegal, null and void and
unenforceable because it did not have a licence to conduct
financial institutional business in Uganda," lawyer for Ham
Enterprises Matthew Kiwumba told Reuters.
Diamond Trust Bank's lawyer, Kiryowa Kiwanuka, told Reuters
it had filed a notice of appeal against the ruling.
"As a result of the judgement and its implications, the
syndicated portfolio currently seated with commercial banks...
is now at risk," Wilbrod Humphrey Owor, executive director of
Uganda Bankers Association, an industry body, said in a
At least $1.5 billion in syndicated credit to private sector
borrowers could be affected by the ruling, the statement said.
Owor also said in the statement chief executives of all 35
financial institutions in the country resolved to join Diamond
Trust Bank and appeal the ruling.
A spokesman for Uganda's judiciary, Solomon Muyita, declined
to provide details of the court ruling.
In a statement late on Thursday the finance ministry said it
had received inquiries from bilateral and multilateral lenders
about the implication of the ruling.
The government, the statement said, will "undertake all its
obligations and duties" on already procured and future
Diamond Trust Bank Kenya and its Uganda subsidiary had put
together credit facilities as syndicated loans for Ham
Enterprises over several years.
Ham and the banks were in dispute over repayments, which
resulted in Ham taking legal action against Diamond Trust Bank
Kenya, alleging it had illegally advanced the loans because it
did not have a Uganda banking licence.
Ugandan banks rely on syndicating big credit lines or loans
with parent banks in bigger markets to serve major customers
like telecoms and manufacturing companies.
Local units of major international banks in Uganda include
ABSA, Standard Bank and Standard Chartered
($1 = 3,697.0000 Ugandan shillings)
(Reporting by Elias Biryabarema. Editing by Jane Merriman,