KAMPALA
Kampala International University (KIU) has lost a legal battle to block the payment of shillings 46.8 billion to Housing Finance Bank, following a ruling by the Commercial Division of the High Court in Uganda.
The university had contested the enforcement of an arbitral award issued in Kenya, arguing that the arbitration process was flawed and that enforcing it in Uganda would violate public policy. However, in a ruling dated March 10, 2025, Justice Stephen Mubiru determined that the bank is entitled to recover the awarded amount.
“The bank having met the statutory requirements for enforcement of the foreign award, and the objections to its recognition and enforcement having been dismissed, this court allows Arbitration Cause No. 38 of 2024, with costs,” Justice Mubiru ruled.
The court further held that public policy considerations cannot be used to deny enforcement unless the arbitral award is fundamentally unjust.
Background
According to court documents, KIU launched an expansion project in 2010 to develop its campus in Kitengela, Kajiado County, Kenya. The plan included upgrading 15 existing facilities and constructing new lecture halls, administration blocks, hostels, dining facilities, a library, and staff housing.
To partially finance the project, KIU secured $15 million (approximately shillings 55 billion) from the Housing Finance Company of Kenya. However, the lender was only able to provide $10 million (shillings 36.6 billion). The company initially proposed bringing in another financial institution to cover the remaining $5 million (shillings 18.3 billion), but later persuaded KIU to scale down the project to match the available funds.
The loan was secured by a first charge over KIU’s immovable property—62 acres in Kajiado/Kaputiei, Kenya—as well as an escrow account for university income and various guarantees.
Following a dispute over the loan, an arbitral tribunal in Nairobi, presided over by Collins Namachanjo, ruled in favor of Housing Finance Bank on September 17, 2019. The ruling required KIU to pay $12,767,503 (approximately shillings 48.8 billion) within 30 days of enforcement, with an annual interest rate of 9.5%, calculated from January 16, 2018, until full repayment.
Citing Section 36 of the Arbitration and Conciliation Act, Justice Mubiru noted that since the timeframe for challenging the arbitral award had expired and no valid challenge had been sustained, the award must be enforced as a court decree.
Loan Disbursement and Repayment Terms
Court documents reveal that the loan disbursement was tied to project progress, with payments made directly to contractors and service providers upon submission of completion certificates. The construction phase was set for 18 months, with a 21-month grace period before loan repayment began. After this grace period, the loan was structured to convert into a 15-year long-term facility.
With the latest ruling, KIU is now required to fulfill its financial obligations to Housing Finance Bank, marking the end of a prolonged legal battle.
