It may appear a bit unusual to question what is traditionally considered to be a settled rule in commercial contracting. The freedom of contracting parties to choose the forum for settlement of any disputes between them is a standard premise in commercial contracts. However, recent judgments from Uganda’s Commercial Court have cast uncertainty over this position.
The Orthodoxy: Party Autonomy and Enforcement As the Default
Party autonomy is the cornerstone of choice of law in commercial contracting. Even critics of foreign governing law clauses accept that the “hallmark of choice of law in commercial contracts is anchored on … party autonomy,” and that “the general rule is that choice of law clauses … must be obeyed by the contracting parties.” This is the starting point and should also be the finishing point in the typical case, particularly where parties are sophisticated and the clause is freely negotiated.
Ugandan authority aligns with this orthodox position with the High Court repeatedly recognising that where parties clearly bind themselves to a foreign forum and law, courts will ordinarily give effect to that bargain. In Uganda Telecom v Rodrigo Chacon, a clause providing that an agreement “shall be construed in accordance with English law and subject to the exclusive jurisdiction of the English Courts” was treated as clear and certain, and the High Court held that it had no jurisdiction in the face of the parties’ choice. That articulation reflects a broader Ugandan tendency to respect exclusive jurisdiction and governing-law bargains unless displaced by compelling, case-specific reasons.
The principle is further distilled in Maersk Agencies v Derek Munywevu. The case established a presumption in favour of enforcing exclusive forum clauses, holding that the court will stay its proceedings “unless the plaintiff is able to show ‘strong cause’ or ‘strong reasons’ … why he should be allowed to breach his promise.” This formulation drawn from American case law has been adopted in Ugandan decisions. The same logic underpins respect for foreign governing law clauses: the court should not lightly allow a party to escape the law and forum it agreed.
Reconciling Recent Cases: Scope and Exceptional Limits, Not a General Hostility
Rather than signaling a general hostility toward foreign choices of law, recent High Court rulings clarify two key limitations on their enforcement. First, the foreign law or jurisdiction clause must be applicable to the specific dispute. Second, there must be no “strong reasons” justifying non-enforcement. Properly understood, these cases reinforce the principle that enforcement is the norm by defining its exceptions.
The scope boundary has been highlighted in DFI Food v Shares Uganda. There, the applicants relied on purchase contracts and general terms stipulating Dutch law, exclusive Netherlands jurisdiction, and GAFTA arbitration. The court accepted the content of those clauses but found the respondent’s claims did not arise from, nor rely on, those instruments; the claims were pleaded as part of a broader domestic collaboration not founded on the purchase contracts. In the absence of a demonstrated nexus, the court declined to divest itself of jurisdiction, an outcome about scope, not about hostility to party autonomy. Put simply, a party invoking a foreign law/jurisdiction clause must show that the clause reaches the dispute.
Similarly, in Bank One v Simbamanyo, the court identified a "strong reason" not to enforce an exclusive jurisdiction clause where the dispute involved third parties who were not signatories to the agreement. Forcing litigation in the foreign forum would have splintered the proceedings and prejudiced the third parties, justifying a departure from the clause.
Also in TowerCo v Oteyakot, the court reaffirmed that exclusive jurisdiction and governing-law clauses will ordinarily be enforced, but it refused a stay where the plaintiffs pleaded fraud, economic duress, and undue influence in the procurement of the agreements, including the very clauses at issue, warranting judicial investigation into the contracts’ legality. Enforceability was deferred because the validity of the underlying bargain was credibly impugned, not because the court rejected party autonomy as a matter of policy.
The judgment in TowerCo does not articulate a threshold of particularity that the fraud allegations must meet, nor does it engage with whether the allegations were supported by prima facie evidence. The court appears to have treated the mere pleading of fraud as sufficient to constitute "strong reasons", setting a potentially low bar that could encourage tactical pleading to circumvent forum selection clauses.
In Maersk Agencies, the court declined to enforce an asymmetric clause in a standard-form bill of lading, emphasising two features: the applicant had, by conduct, submitted to local jurisdiction, and enforcing the clause would likely result in “manifest injustice” by effectively depriving the respondents of their day in court given disproportionate costs; the court explicitly grounded its decision in access-to-justice and public policy concerns specific to the case. Again, the decision does not reject the default rule; it applies recognised exceptions. Notably, the judgment restates the baseline: effect should ordinarily be given to exclusive jurisdiction agreements unless strong reasons are shown.
However, the court’s reliance in Maersk on United States authorities grounded in federal law and policy is troubling. As Lord Denning famously quipped, “Just as with an English oak, so with the English Common Law, you cannot transplant it… and expect it to retain the tough character which it has in England. … In these far off lands, the people must have a law which they understand, and which they will respect.” The same hesitation applies, to American jurisprudence developed within a distinct constitutional and public policy framework. Comparative jurisprudence may be persuasive, but they are not binding, and they should only be applied where the court demonstrates a principled analogy to Uganda’s legal framework and public policy. Absent that bridge, uncritical citation risks an illegitimate legal transplant rather than a faithful application of Ugandan law.
These decisions cohere around three core propositions that support enforcement as the default rule:
(1) Courts will respect clear and unambiguous foreign law and forum selection clauses;
(2) Such clauses apply only to disputes falling squarely within their defined scope; and
(3) Exceptions require "strong reasons" and are narrowly confined to recognised grounds like procurement through fraud or duress, procedural submission to the local court's jurisdiction, or where enforcement would cause manifest injustice.
Answering Policy Objections: Domestic Regulation Does Not Displace Contractual Choice
Recent commentary has urged that Uganda’s legal system and investment regulation are so closely connected to in-country business that Ugandan law should invariably be the “proper law” of investment agreements. That view conflates mandatory regulatory compliance with choice of law for private rights and obligations. The fact that an investor must comply with local licensing, employment, or tax laws says little about whether the parties’ contract should be construed and governed by a foreign private law chosen by them; mandatory rules of the forum will apply regardless, while the choice-of-law clause addresses the contract’s formation, interpretation, performance, and remedies inter partes.
Indeed, the cases acknowledge that the High Court’s constitutionally broad jurisdiction is jealously guarded but also limited where parties have unequivocally chosen a foreign court and law; the balancing exercise is not policy-abstract but turns on the contractual text and the pleaded dispute. Thus, a wholesale policy hostility to foreign governing law cannot be squared with Ugandan authority that both recognises and enforces such bargains in the ordinary case.
Practical Implications: Drafting and Litigation Strategy to Secure Enforcement
The jurisprudence suggests practical measures for parties who wish their foreign governing law to be applied by Ugandan courts.
First, draft with clarity and asymmetry-avoidance. Clauses that state “this Agreement shall be construed in accordance with [foreign] law and the Courts of [foreign state] shall have exclusive jurisdiction” have been upheld as clear and certain, whereas “hybrid” or asymmetric clauses in standard-form contracts invite scrutiny on fairness and public policy grounds. Balanced, bilateral clauses reduce risk.
Second, secure scope alignment. Ensure that the governing law and jurisdiction clause covers “any dispute arising out of or in connection with this Agreement and the other Transaction Documents,” and that all operative instruments in a wider commercial relationship consistently incorporate the same clause. Absence of a demonstrable nexus between the clause and the pleaded claims will allow a Ugandan court to retain jurisdiction on those claims.
Third, preserve the jurisdictional challenge procedurally. A defendant should give prompt notice of intention to defend and contemporaneously move for a stay or dismissal on jurisdictional grounds; failure to comply may be treated as submission to local jurisdiction.
Fourth, anticipate and neutralise “strong reasons” arguments. Where counterparties may later allege fraud, duress or undue influence, build a record of fair negotiation, independent advice and mutual benefit at formation; where access-to-justice objections might be raised, consider cost-allocation mechanisms, virtual hearing commitments or arbitration with seat and rules that reduce practical burdens. Courts are less likely to find manifest injustice if the clause is even‑handed and the process demonstrably fair.
Finally, litigate on the contract sued upon. If the claimant’s pleadings attempt to ring‑fence a domestic claim away from the instrument containing the foreign law/jurisdiction clause, the defendant must demonstrate the necessary nexus by pointing to integration provisions or the commercial reality that the dispute “arises out of or is connected with” the contract set up. Failing to do so will leave the court free to proceed, as in DFI Food.
Conclusion
Ugandan law does not prohibit foreign choices of law; it honours them. While party autonomy is the default, recent decisions in TowerCo, Maersk, and DFI Food define its principled limits: a clause applies only where the dispute falls within its scope; enforcement may be suspended if the clause’s validity is credibly impugned by fraud, though the low pleading threshold for fraud in TowerCo may invite tactical challenges; and manifest injustice or procedural submission can justify departure in exceptional cases. For parties seeking certainty, the message is clear: enforcement is the norm, and it can be secured through diligent drafting, procedural vigilance, and a demonstrable record of fair dealing.
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