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August 8, 2014 / Magelahpeter

Let’s stop this Anti Homosexuality drama series

My friend Godfrey says if you are looking for free drama and entertainment in Kampala, go to Parliament with pop con and you will have a fun day. He insists that if he had a chance to brand the present parliament, he would give them a slogan “parliament of Uganda, where drama never stops”.

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Pigs used during a demonstration at Parliament of Uganda. – Some citizens have take the drama to the house. BBC Photo

 

Looking at the events in the august house in recent years one will understand Godfrey’s reasoning. Indeed parliament of Uganda seems to give more drama than legislation and oversight on the executive. The latest in the series of this drama is the Anti-Homosexual Act which was ruled unconstitutional by the constitutional court in Uganda. The drama serries began in 2009, when Honourable Bahati David, MP Ndorwa West introduced a private member’s Bill that sought to punish persons engaged in homosexual acts. I must state that many Ugandans support this law because it has been hinged against African culture and the debate that such acts are foreign being promoted by the west. The irony (and part of the drama) though has been religious leaders (mainly Christians) who claim homosexuality is an importation for the western world and should not be accepted in Africa. These have ignored the fact that Christianity and the bible on which they base their arguments was imported from the same western world and to a great extent is against several African cultures.

 

The Bill had broad provisions that one can read anger in the draft of some provisions including a clause on punishing the act of homosexuality and a clause requiring every Ugandan who suspects a homosexual act being committed to report to police within 48 hours or else that person who did not report commits a crime! Drama would be expecting a parent to report his/her child to police for an offence where the parent knows the child will be imprisoned for life, more drama is arresting and imprisoning such a parent for not reporting his/her child! Or expecting a health worker or a lawyer to go against his professional principles and report his clients to police.

 

The whole debate on the Anti-Homosexuality Bill was full of drama and attempts by our politicians to gain political capital from the Ugandan public. Prior to passing this highly controversial Act, the Speaker of parliament of Uganda had promised Ugandans a Christmas present in which she would ensure the law is passed. The speaker telling Ugandans (including her voters) that she is giving them a present by debating and passing a law for which she was elected (employed) to do, is like me telling my employer that am giving him a present by going to work every day and meeting my targets.

 

The drama did not end there, nearly 90% of the members of parliament seemed to support the law and pledge support to this Bill in what they claimed was “protecting African culture”. Sadly when the time to debate and pass the law, these MPs did not show up and there was no quorum and the Hon. Prime minister’s plea to look into the quorum issue fell on deaf ears as the speaker ignored it and went ahead with parliament to pass the law.  

 

After several issues of “show off” including consulting doctors and assuring the western world how Uganda is an independent country that can survive without western aid, president Museveni signed the law before international media. This was possibly the first law signed before the media where Ugandans were assured of their “independence” against the western world and the western world was told to go to hell with their “immoral behaviour” (and Aid).

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President Museveni signing the Anti-Homosexuality Bill into law before foreign press. Photo by Reuters

 

As expected the law was challenged in the constitutional court where the petitioners challenged the process of passing the law (quorum) and its legality in line with Uganda constitutional provisions on discrimination, fair hearing among others. Last week the constitutional court ruled the law unconstitutional basing on the fact that it was passed without Quorum. I must say I was personally disappointed with the ruling because the court should have gone ahead to discuss the substantive issues in the law and put this homosexuality issue to rest. The fact that court did not address itself to the substantive issues gave a chance for more drama in parliament on the same law.

 

In the latest series of this drama members of parliament are gathering signatures to table the law. What makes this piece of drama interesting (and wasting time for Ugandans) is the members of parliament signing the petition are well aware of the fact that parliamentary process require a law to be tabled as a Bill in parliament and for that Bill to go through the different stages (readings) as well as having a certificate of financial implication in cases of a private member’s Bill. In simple these MPs are busy flouting their own procedure in proposing the Bill even when court ruled that a law which has not followed procedure cannot be law in Uganda.

 

At the end of the day Ugandan taxpayers will foot the Bill for the drama actors called MPs, the will also pay the Bills for the court that will sit to rule the same law unconstitutional (for the second time) and possible the costs to lawyers who will be challenging this law as it comes. I think it is time we stopped this wasteful drama and concentrated on things that add value to the country

July 29, 2014 / Magelahpeter

Increase parliament’s oversight in managing public finances

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Entrance to Parliament of Uganda. Chimpreports Photo

Parliament of Uganda is debating the Public Finance Bill, 2012 (PFB). The Bill is aimed at reforming the public finance and accountability sector while at the same time provide for the management of oil revenues in Uganda. The Public Finance Bill Aims at reforming the public finance, budget and accountability sectors in Uganda as well as provide for the management of oil revenues. The Bill merges (and repeals) the present Public Finance and Accountability Act, the Budget Act on top of amending the Bank of Uganda Act, the Income Tax Act and the National Audit Act.

Whereas the Bill has some good reforms for the management of the public finance sector in Uganda, it skips important provisions mainly the powers of parliament and the relationship between the executive and parliament.

Some members of parliament have opposed the repealing of the Budget Act mainly because it gave parliament oversight powers over the executive a move that saw the World Bank and the IMF praise and recommend Uganda’s public finance regime for several developing countries. In response, the ministry incorporated nearly all the sections of the Budget Act into the PFB. However the provision that gave parliament powers to hold public officers accountable for mismanagement of funds has been left out. S. 18 of the budget Act gave powers to parliament to compel a minister or any public official to explain to parliament the circumstances leading to failure in management of public resources. Using powers under this section, the Public Accountability Committee of Parliament (PAC) has been able to compel ministers and different accounting officers to explain and in some cases PAC has recommended punitive action against those found culpable.

The same section provided that a government official shall be personally liable for causing loss to government or a government institution. Liability of such officers would then be enforced through courts of law or recommendations to the public service in cases where such liability does not amount to a crime. Leaving out S. 18 of the Budget Act in the new Public Finance law will not only curtail parliament’s powers to hold public officers accountable but also will make it easy for officers who cannot be charged in courts of law to go scot-free.

Another important provision that has been left out in the Bill is S. 44 of the Public Finance and Accountability Act which is the other law to be repealed. The section gives parliament powers to annul any statutory instrument made by the minister, where in the view of parliament, such an instrument has lost relevancy or where annulling it is in public interest. In practice not everything can be legislated by parliament, the minister is therefore given powers to make subsidiary legislation to enforce aspects that parliament that did not provide for. However such subsidiary legislation should be in line with the parent law made by parliament. In the case of public finance subsidiary legislation is used mainly in creating special funds, rules of disbursement and accountability of funds and for the case of the PFB it will also be used to describe which local governments get a share of royalties from oil.

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Direction to Oil wells in Buliisa, Managing Oil revenues requires better transparency and accountability mechanisms. Photo from Global Witness

The importance of parliament having such powers can be seen in its control over the creation of special funds. Special funds are created under statutory instruments by the minister, however as seen from several Auditor General reports, there has been mismanagement of public resources through special funds and sometimes the special funds do not serve their intended purposes. In this case parliament would have powers to annul the special fund where they find it is not necessary or has been abused hence saving public funds.

As parliament debates the PFB, it is important that they include the above provisions which will make it easy for parliament to carry out its oversight function within the realms of the law.

Note: A version of this article was first published in the Daily Monitor newspaper

January 19, 2014 / Magelahpeter

Curtailing media freedoms in the name of anti-homosexuality and anti-pyrography Bills

Recently Uganda Parliament passed the Anti-Homosexuality and the Anti-Pornography Bills, the two Bills purport to be aimed at protecting Uganda’s societal morals, however what seems not to be in the debate is the fact that the two Bills will result into great media censure and we may see media houses closing or journalists, reporters, producers imprisoned because of the content of what their publish.

 

For example clause 13 of the Anti-Homosexuality Bill provides that;

Any person who participates in production, procuring, marketing, broadcasting, disseminating, publishing pornographic materials for purposes of promoting homosexuality commits an offence and is liable to imprisonment for seven years and where that person is a cooperate body, that body shall be deregistered!

 

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A headline in one of the Kampala dailies, such a headline can easily be interpreted to be “promoting” homosexuality. The editor and publisher of this material could also be liable for not having reported to police within 24 hours

The Bill does not define what amounts to “promoting homosexuality” making it possible for any form of publication, broadcast e.t.c. with gay content to be considered as such. For example publishing pictures of gay marriages in Uganda could be considered as promoting homosexuality; the same can be said of pictures of demonstrations by gay people, or a film whose lead actors are gay. A big target for this would be the tabloid newspapers who recently pushed several stories and photos purporting to be of gay people having sex.

 

The two Bill provide that where an organization is involved in publication of gay or pornographic content, that organization will be deregistered on top of staff of that organization facing imprisonment. This targeting the staff and the organization directly defeats the legal principle of vicarious liability where an employee is should not be punished for the acts done on behalf of his employer. The same provisions will result into double jeopardy a principle that is against the provisions of the Uganda constitution.

 

The Anti-Homosexuality Bill will also kill investigative journalism especially in relation to homosexual acts. The Bill obliges any person with knowledge that acts of homosexuality are being committed to report to police within 24 hours failure of which is an offence. Whereas ordinarily media houses investigate and publish their findings for the authorities to take action, this time a media house will be under obligation to report to police as opposed to publishing their findings. It should also be noted that such investigations normally take longer than the stipulated 24 hours.

 

Clause 6 provides that matters of investigating and prosecuting homosexuality should be confidential. It provides in part that any editor or publisher, reporter e.t.c., who publishes the names and personal circumstances or information tending to establish the victim’s identity without authority of court, commits an offence. Whereas there is an attempt to separate a victim from an offender, this will be difficult where the acts of homosexuality among two consenting adults. It will thus make it easy to target anyone publishing such information.

 

On the other hand the Anti-Pornography Bill (the Miniskirt Bill) focuses on publication and distribution of pornographic materials. It defines pornography to mean any cultural practice, radio or television programme, writing, publication, advertisement, broadcast, upload on internet, display, entertainment, music, dance, picture, audio or video recording, e.t.c. that depicts a person engaged in explicit sexual activities or conduct, sexual parts of a person such as breasts, thighs, buttocks or genetalia or any indecent act of behaviour tending to corrupt morals.

 

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An extract from Bukedde newspaper describing one’s sex life.

The above definition is very broad and can cover a lot of publications and kind of media. Whereas tabloid media in Uganda is the major target for this Bill other media can easily be affected because of the broad nature of the definition. For example playing a song/video with sexual content however small can be said to be pornography and a commission of an offence.

 

Clause 13 makes it an offence to produce, publish or broadcast pornographic material. The clause is widely worded to cover everyone along the value chain of publication from editor to customer. It targets the editor/producer, vendor and anyone who takes part in distribution of material whose content can be said to be pornographic.

 

The Anti Pornography Bill gives police powers to direct a newspapers, or broadcasters e.t.c. to stop publication or distribution of pornographic materials. This in effect gives police/government powers to determine the editorial content by directing what and what not to publish.

 

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A lot of newspapers cover sex content in their publications. The title and photos on this front page would fall under what is restricted under the Anti Pornography Bill

On the other hand the Bill requires an internet service provider to monitor internet content and remove any pornographic material posted on. This could be in form of pictures, videos, words e.t.c. in simple the Bill provides for internet servilice by internet service providers to be able to detect and remove pornographic content. One wonders if this will apply to emails and other personal communications.

 This article was first published in The Independent Magazine 

December 17, 2013 / Magelahpeter

Local content in oil and gas, legal issues around “Ugandan companies”

Uganda recently passed two laws relating to petroleum exploration and development, the Petroleum (Exploration, Development and Production) Act, 2013 dealing with upstream activities came into force in April 2013, this was followed by the Petroleum (Refining, Conversion, Transmission and Midstream Storage) Act, 2013 that deals with midstream activities came into force in July 2013. One of the major provisions for the two laws and of interest to citizens is the provision on local content.

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Kigogole Oil Well in Buliisa district. This well has been sold 3 times in 4 years, Ugandan companies should be able to take part in such transfers. Daily Monitor Photo

Local content as it has come to be known in the industry are basically efforts aimed at building the local (national) capacities to engage in the extractives sector of a country. Most such efforts focus on development of skills, transfer of technology, training and employment of citizens in the extractives (oil, gas or mining) sector. 

A look at Uganda’s upstream and midstream laws on petroleum sector reveals a rather confusing and shallow provision on local content that will be a challenge for legal practitioners and those engaged in local content issues in the oil and gas sector. The provisions of the two laws relating to local content are not only different but vague in as far as defining key issues are concerned.

For example, the upstream law provides that (S. 125)

(1)The licensee, its contractors and subcontractors shall give preference to goods which are produced or available in Uganda and services which are rendered by Ugandan citizens and companies.

(2) Where the goods and services required by the contactor or licensee are not available in Uganda, they shall be provided by a company which has entered into a joint venture with a Ugandan company provided that the Ugandan company has a share capital of at least forty eight percent in the joint venture.

The framing of the above section creates confusion on issues of local content names

  1. Should goods and services be procured only from companies (and not any other business entity?
  2. What is a Ugandan company?
  3. Do Ugandan companies have the required capacity?

Generally speaking business entities are can be more than just a company. They can include sole proprietorship, partnerships, cooperatives, not for profit organizations (NGOs, Clubs, Trusteeship), individuals e.t.c. a strict interpretation of S. 125 would therefore be leaving out other business entities in favour of companies. In comparison the midstream law gives a relatively clearer definition. It provides under S. 53(1) that;

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Halliburton, one of the Key players in Uganda’s oil and gas. The law should be clear on whether such companies can be termed as Ugandan companies, if registered in Uganda. Crudereports Photo

 

The licensee, its contractors and subcontractors shall give priority to citizens of Uganda and registered entities owned by Ugandans in the provision of goods and services.

 

Emphasis is placed on “registered entities” as opposed to “companies”. This means other business entities are considered under the midstream law as opposed to the upstream law that restricts itself to companies.

 

Another difference between the two laws is the issue of a “Ugandan Company” (or registered entity as the case might be). The upstream law is vague in as far as it provides that preference should be given to “Ugandan companies” but does not go ahead to define what a Uganda Company means. At common law (against which the present Company law is shaped in Uganda) a company is a citizen of a country where it was incorporated. Since a company is a person separate and distinct from its promoters, it can acquire a separate citizenship from its promoters. This means a company incorporated in Uganda by non-Ugandan citizens can be a citizen of Uganda, hence may acquire privileges provided for under the local content provisions. The reserve is true for a company which is fully owned by Ugandan citizens but incorporated in another country. This would possibly go against the intent of the law which is to provide employment and participation of Ugandans in the oil and gas sector.

 

The above provision is made worse by the midstream law which puts emphasis on “Ugandan registered entity”. This could possibly mean any entity registered in Uganda is a Ugandan business. Uganda’s Companies Act (2012) provides that all foreign companies with businesses in Uganda must be registered with the registrar of companies. The absurdity created by the midstream law is making all companies registered in Uganda Ugandan companies. It thus fails to make a distinction between “company registration” which is a requirement for every foreign company and “company incorporation” which is a process of creating the company.

 

The two laws provide that the Ugandan Company must have capacity and resources to take part in the sector. Such capacity will be determined by the minister through regulations (the midstream law seems to add an extra approval by the Petroleum Authority). Whether Ugandan companies can actually have such capacity is another thing. At present, there is very limited capacity in the oil and gas sector.

 

The way forward

To avoid the above ambiguity, Uganda needs to either amend the two laws to not only bring them in tandem, but also remove ambiguity or provide for clarity in regulations to be made by the minister under the two laws. The regulations should provide a clear definition of local business entity. Some of the existing laws can guide in determining/defining Ugandan businesses. For example the Public Procurement and Disposal of Public Assets Act, 2003 in bid to avoid ambiguity on local business entities provides for services and goods provided by a “national provider” who is defined as an entity registered in Uganda and wholly owned and controlled by Ugandans.

 

The Land Act on the other hand provides that a foreign corporation is (S. 40)

  1. a corporate body in which the controlling interest lies with noncitizens;
  2. in the case of bodies where shares are not applicable, where the body’s decision making lies with noncitizens;
  3. a company in which the shares are held in trust for noncitizens;
  4. a company incorporated in Uganda whose articles of association do not contain a provision restricting transfer or issue of shares to noncitizens.

The above is a bit comprehensive and should be adopted with modifications in determining Ugandan company in line with local content in oil and gas.

November 30, 2013 / Magelahpeter

Lord Mayor Vs. KCCA case: let’s understand injunctions

Police Manhandle Lukwago's lawyer as he delivers an Interim court order. Photo by Red Pepper Uganda

Police Manhandle Lukwago’s lawyer as he delivers an Interim court order. Photo by Red Pepper Uganda

Over the last weeks there have been several developments at the Kampala City Council Authority (KCCA) in relation to the removal of the lord mayor. Naturally events relating to removal of a political head of a capital city would result in debates and arguments on who is right or wrong. However a lot of wrong information and misconceptions has been shared in this debate.

In the last week, two injunctions to stop KCCA Council actions were made, however politicians for political reasons took it upon them to interpret the court decisions including ignoring them, based on what they (the politicians) interpreted the injunctions or the processes to be. This could have been aimed at justifying their actions however wrong they could be. Unfortunately the general debate focused on the interpretations of views of politicians without understanding how the injunctions work.

The injunctions came from a court petition filed by the Lord Mayor who was challenging recommendations by the KCCA tribunal, that recommended among other things found that he was capable of incompetence and abuse of office.

The background to the tribunal is that sometime mid this year, some KCCA councillors petitioned the Minister in Charge of Kampala to have the Lord Mayor impeached. As required by law, the minister set up a tribunal which according to the KCCA Act is required to establish whether a prema facie case can be proved against the Lord Mayor and recommend action. The tribunal found a prema facie case was proved against the lord mayor and recommended specific actions. The lord Mayor challenged the tribunal findings, and it is against this challenge that the two injunctions were issued.

The first misreporting on the issue were the big headlines screaming that tribunal had found the Lord Mayor “guilty”! The fact that the words “prema facie” case are used in the KCCA Act means the tribunal only needed to find a likelihood that the lord mayor is liable. In simple the tribunal need to (and actually did) find the Lord Mayor Culpable. This is less than a guilty verdict that most media interpreted it to be. The duty of finding him guilty (or not) lay with the Council.

An Interim Injunction was issued by the registrar requesting the Attorney General (AG) and the Minister for Kampala not to go ahead with the planned impeachment process of The Lord Mayor until court determines whether a temporary injunction can be issued until the case filled by the Lord Mayor is determined. There were several claims as to the authenticity of the injunction, service of the court papers, time and place of issue and its effects generally.

Basically interim injunctions are issued when there is a danger of irreparable or permanent damage to the subject matter and the court wants to reserve the subject matter until it reaches an interim decision. In simple an interim injunction is issued as a matter of urgency and there is no time for technicalities. It is normally issued exparte (without hearing the other party) and the party that was not heard is required to attend court on a specified time so that he/she can be heard in determining a temporary injunction and or any other orders. The effect of an interim injunction is to (very) temporarily suspend the activity until court listens to the other party.

Take an example where a building is a subject of a court dispute, and one of the parties has hired a tractor to raze down the house. The other party may seek an immediate court order requiring the second party to suspend razing down the building until court hears the matter. In such a situation there is no time for court to hear the views of the other party because of the urgency of the matter and court will order that party, it’s agent or any person to halt razing the house till another order is made. The person who is given this order can serve (give) the order to the one claiming the house and the operator of the tractor who is expected to follow the order. The operator of the tractor cannot refuse merely because he/she is not a party to the suit. This is because the operator of the tractor is treated as an agent of the defendant in the suit.

In the Lukwago/KCCA case, the minister became an agent of the AG by the fact that he was the one in charge of government business at that material time.

Since an interim injunction is issued as a matter of urgency, a judicial officer can issue it from anywhere at any time. In fact technicalities such as service, delivery of documents e.t.c. are not considered. These are considered when handling a temporary injunction where all parties to the suit are required to give their views.

After damage to the subject matter is prevented, the parties to the suit will then go to court to determine the matter. At this stage court can issue a temporary injunction (please note the difference), whose effect is to stay any further action until the matter is heard. This kind of injunction is what court in the Lukwago/KCCA case issued later to stay any further action till Lukwago’s claims are disposed of. In simple, the injunction issued at about 8:00am on Monday was provisional aimed at maintaining the status quo until the AG & KCCA is heard on the matter.
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November 12, 2013 / Magelahpeter

Petroleum exploration in Uganda: let’s get the facts right

A lot has been written about the petroleum sector in Uganda and the progress so far made, however managing citizens’ expectations remains a major challenge. Lack of proper information to citizens on the petroleum sector, how they can participate, and the likely impact of the sector e.t.c. is important for effective governance of the oil and gas sector in any country. Over-hyped citizens’ expectations can result in disagreements and unrealistic demands while little information about the sector results into lack of transparency, lack of citizen participation and breads abuse. Deliberate efforts to explain to citizens about the sector need to be taken to avoid possible negative reactions to the sector.

Government of Uganda has put in place systems to share information about the oil and gas sector, however this has been slow and very little information has reached citizens. This lack of information has given way to misinformation and wrong facts given to the public and sometimes false expectations among citizens. Here are some of the often misreported facts about petroleum in Uganda.

It is common to see reports on petroleum discoveries and the whole resource as being in “western Uganda” or in Bunyoro Kingdom. Many Ugandans tend to treat petroleum resources as a regional thing as opposed to a national resource. In West Nile for example leaders have questioned why there are more dry wells in West Nile and not the west and others think there could be foul play. The truth of the matter is discovery of petroleum is based on typically scientific data that has nothing to do with ethnicity. Secondly petroleum exploration in Uganda is being conducted in the Albertine Rift which runs from Koboko in West Nile near the border with Southern Sudan to Kanungu-Rukungiri area in South Western, however discoveries have been made in Bunyoro region (Buliisa and Hoima districts) and in Acholi (mid north) in Nwoya district which holds the biggest oil wells in the country. Tagging petroleum to Bunyoro or western Uganda gives a false impression about the ownership and existence of the resource.

Map of Albertine Graben. Courtesy of Petroleum Department

Map of Albertine Graben. Courtesy of Petroleum Department


It is also common to read about arguments that petroleum will solve employment problems in Uganda. At present youth unemployment in Uganda is estimated at 67% (about 1.2 Million youths) this can never be solved by the oil industry. The petroleum industry is highly mechanised and highly skilled and only a handful of skilled Ugandans will find jobs in the sector. The structure of the industry is such that exploration activities and setting up infrastructure will require a relatively high number of people such as technicians, casual labourers, carpenters e.t.c. these will be laid off once production begins. International Labour Organization (ILO) estimates that about 5 Million people are directly employed in the petroleum sector worldwide, it will thus be dreaming to expect the sector to employ the 1.2 million jobless youths in Uganda.
sesismic surveys
Another misconception is the belief that Uganda has abundant resources in the 3.5 Billion barrels so far discovered. Whereas this is a fair amount, the discoveries are very small compared to other oil producing countries. Take an example of oil producers in Africa Nigeria has 37.2 billion barrels, Libya 47 Billion, Angola 19 Billion while Uganda has merely 3.5 Billion. Looked at from level of production Uganda plans to produce 100,000 pdb at peak, Nigeria produces 2.2 Million bpd, Algeria 2.1 Million, Angola 1.9 million bdp, Sudan 486,000 bpd, Congo 300,000 bpd. If Uganda produced at a rate of any top 10 African country, its oil resource will last 4-8 months only. Despite the small resource it is important to note that if properly managed, oil will contribute to the country’s development. Oil revenues should be used as a catalyst to development and not seen as a sign of development in themselves.

November 4, 2013 / Magelahpeter

Petroleum and Mining Contracts in Uganda: What lawyers need to pay attention to

Recently I was asked to talk to a group of lawyer friends who would like to advance their knowledge in the extractive sector. Two of them had been approached by a prospecting company that wants to set up shop in Kampala. From our discussion it was clear that there is general lack of basic knowledge about the industry. Our discussions focused on petroleum and mining contracting and what kind of clauses needed to be included. Many of those in the discussion had little knowledge on Uganda’s mining and petroleum sector generally. From our discussions it was noted that the lack of interest among legal practitioners in the mining and petroleum industry will greatly hinder their role. Presently most petroleum and mining companies use foreign law firms and Ugandan law firms carry out peripheral work in the sector. Our discussions prompted me to blog about a few things for petroleum and mining contracting that often cause confusion. But before I discuss the contracting issues, here is a snap-shot of Uganda’s petroleum and mining sector.

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Uganda has discovered 3.5 Billion Barrels of Oil in the Albertine region, with only 40% of the graben explored so far, more exploration will take place in the next years. The discovery of commercial quantities of oil has resulted in increased interest in the mining sector generally. The government has called for bids for the oil refinery to be constructed in Kabaale, Hoima district, there are also discussions on the construction of a crude oil pipeline to Mombasa while some investors have expressed interest in construction of the Eldoret-Kampala (and later Kigali) pipeline which will transport finished products from the Mombasa refinery. On the other hand in September 2013, Kweri Ltd confirmed the existence of large quantities of aluminous clays in Eastern Uganda whose economic value is greater than the value of petroleum so far discovered. Government has also licenced Tibet Hima Ltd to mine copper in Kilembe Mines that has an estimated 4.5 million tons of copper. There are more prospects for copper discoveries in the Tooro-Buganda belt. Several companies are involved in gold, limestone, phosphate and tin exploration and mining in Karamoja, Kasese, Mubende, Busia, Tororo, Bududa and other parts of the country.

 

From the discoveries and level of activities so far, it is clear that the extractive sector is going to be the main driver of Uganda’s economy in the coming years. Ugandan lawyers need to up their interest in extractives and demonstrate skill and knowledge in the sector if they are to benefit from the much lucrative extractive business.

 

Whereas in general terms a petroleum or mining contract is governed by the same rules of law of contract, some unique aspects in the industry require understanding to be able to know how to treat them in the contract. A lawyer needs to understand the basics of petroleum exploration or mining, the nature of the resource (oil, gas, mineral) and its associated challenges in exploration, extraction and refining as well as understand the market for the product if he/she is to effectively negotiate a petroleum/mining contract.

 

It should be understood that petroleum and mining contracts differ in form and content. The two are governed by different laws which determine the implied and express terms and conditions and these must be understood before negotiations. The lawyer must also be able to understand the value chain of the resource being negotiated. This should be considered together with the country’s policy in relation to the resource. For example Uganda is looking at engaging in all the three value chain stages of petroleum production (exploration, processing and marketing/distribution). The country has adopted a Production Sharing Model (PSA) for petroleum exploration and development. This means the lawyer must be able to advise a client on how well his/her interests will be catered for along the value chain. It is important to note that each of the stages may require different contracts or renegotiation of existing contracts (and licenses) based on the country’s laws.

 

On the other hand, the value chain for minerals may require different considerations depending on the mineral in question. For example many African countries have been unable to develop infrastructure to add value to minerals, hence the upstream stage is dominant while others like Botswana, Tanzania and South Africa have set up small-scale midstream activities mainly for processing Gold, Diamond and Tanzanite. Most of these involve working with citizens to add value to the minerals. The mining contract should be able to spell out the responsibilities of the company and what role it will play in the mineral value chain as well as governments role.

 

Another important difference in Uganda between petroleum and mining is the fact that Petroleum Exploration is governed under a PSAs while mining is ran through concessions or licensing where companies are taxed based on their returns, nature of investment and the mineral involved. The geological factors such as nature of rock and technology needed, the scale of a mining will determine the nature of the mining contract to be entered into. The lawyer must have a good understanding of these factors to effectively negotiate a contract.

 

The lawyer must be able to understand other associated resources and how to deal with them in the contract. Geologically some mineral resources and petroleum exist with other resources for example oil and gas, copper and cobalt, copper and Malachite, platinum and Gold, copper, Nickel, silver and gold e.t.c.

 

When it comes to oil and gas, there is a tendency for many contracts to treat the two as one and the same. Whereas geologically oil and gas are hydrocarbons and the same processes are used to extract them. The two are governed by very different economic factors hence the need to differentiate them in a contract. The processing, marketing and distribution of oil is different from gas. Oil is processed in many products (petrol, diesel, plastics e.t.c.) hence fetching much more in monitory terms than gas. Marketing of oil is determined by international market and political trends since oil is normally sold to international markets. On the other hand, gas due to difficulties in transporting it, is ordinarily sold to the local market. In many African countries gas is flared off or pumped back to the ground. A PSA should therefore separate the two in case they are discovered.

When it comes to associated minerals it is important to establish the present value of the minerals and the ownership of the minerals/resources. Whereas some resources can be of negligible value, it is important to provide for them in case of change in market, technology or political environment. Problems often arise as to the ownership, disposal, storage or use of the associated minerals in cases where the contract was never specific. For example in 1960s to 80s the value of cobalt was low and many contracts did not consider the distribution of cobalt since it made no economic sense. In 2000s the value of cobalt increased and it became part an important resource for mining companies. In Uganda’s case cobalt from Kilembe Copper mines was dumped in Kasese in the 1960s and in the 2000s the same cobalt was licenced to Kasese Cobalt Company that processed it for several years. This is because the cobalt reverted to government when mining activities ceased in 1970s.

Understanding associated resources and minerals require a great deal of understanding the mining sector, marketing and distribution of minerals as well as the mineral value chain. This will enable to lawyer to know which terms are workable for the associated minerals and which ones to push for during contract negotiation.