Import and export

Eden International School Ltd v East African Development Bank Ltd (HCCS NO. 271 OF 2015) [2017] UGCOMMC 81 (7 February 2017);


Headnote and Holding: 

The first issue was whether the defendant was immune from suit. The court established from legislation that protection applied against legislative and executive actions of member states and did not extend to private parties bringing a suit. It reasoned that fairness and public policy demanded for individual parties contracting with the defendant to have recourse when there is breach. Third parties could therefore sue. 

The second question was whether interest rate revisions made without notice were unlawful and amounted to breach. The court observed there was no evidence of formal service of written notification for the revised rates. It also reasoned that the subsequent service would not amount to a retrospective application of the rates. It thus concluded that the interest rates prior to the notification were unlawful and in breach and, to compensate for the unlawful deprivation, ordered the refund of the unlawfully paid amounts plus general damages and interest costs.

Finally, the court had to decide whether the interest upon default penalty imposed on the applicant were harsh and unconscionable and therefore unlawful. From assessing legislation and case law the court found that generally interest upon penalty is considered legitimate to compensate better for pre-estimated damages from default. However, it is required that it be genuine and reasonably relative to the legitimate enforcement of the primary obligation so as to not impose a disproportionate detriment to the defaulter. Since the plaintiff had failed to prove unreasonableness and harshness of interest rates, the court could not find reason to declare them unconscionable.  


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