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Court of Appeal rules Aya must pay Shs614b in loans and arrears borrowed from South Africa firm to set up Pearl of Africa Hotel

Matooke Republic by Matooke Republic
September 17, 2023
in Business
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The Court of Appeal has dismissed an application in which Aya Investment Uganda Ltd had sought to block the payment of $165,043,605 (about Shs614b) in an arbitral award to Industrial Development Corporation (IDC) of South Africa Limited.

The background of the case indicates that between 2007 and 2017, Aya and IDC entered into multiple financial credit agreements to finance the construction Pearl of Africa Hotel in Nakasero.

According to court documents, the initial sum lent under these agreements was $81,765,318 (about Shs305b). However, by September 13, 2017, this amount had accrued to $118,817,012 (about Shs444b) due to accumulated interest.

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Aya defaulted on the loan, which prompted IDC to initiate recovery procedures. An arbitral tribunal in South Africa, led by Bruce Collins QC, ordered Aya to pay IDC the outstanding amount of Shs614b as part of the arbitral award. However, Aya declined to participate in the arbitration proceedings.

Following this arbitration decision, IDC sought to have the award registered as a decree of the High Court in Uganda, which would allow them to enforce it. Aya attempted to block the execution of the arbitral award by filing an application in the Court of Appeal, but this application has now been dismissed.

The Court of Appeal judge, Christopher Gashirabake, on September 13, ruled that the court had limited jurisdiction to intervene in arbitral awards and that recourse to the court against such awards could only be by way of an application for setting aside the award, as per section 34 of the Arbitration and Conciliation Act. Since Aya had not provided evidence of substantial loss or other compelling reasons to grant a stay of execution, the court ruled in favor of IDC.

The ruling means the Court of Appeal has upheld the arbitral award in favour of IDC, allowing them to recover Shs614b from Aya.

Aya’s Pearl of Africa Hotel has not had any smooth sailing since its opening. In January 2017, AYA signed a management deal with a Belgium-based hotel company, Carlson Rezidor Hotel Group (now Radisson Hospitality) but this was short-lived as it Aya entered a short-term arrangement with South African hotel brand, Sovereign Hotels to oversee the opening of the hotel in September the same year.

Aya then entered into contract with Wyndham Hotels, and Resorts and American hospitality firm to run the hotel in 2018 but this relationship didn’t last long. Since February this year, the business has been operating as WIN 5 Hotel & Spa amidst reports that the Libyan foreign investment firm, LAICO has taken the majority holding of the hotel.

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