The influence of judicial decisions on foreign direct investment in Uganda

Abstract

This study examines the influence of judicial decisions on foreign direct investment (FDI) in Uganda. It emphasises the impact of judicial decisions on investor confidence and the overall business climate. It recognizes the importance of judicial independence, legal certainty, and the efficiency of contract enforcement as essential elements influencing foreign direct investment inflows. Based on the principles of Legal Certainty Theory, this research contends that a reliable and uniform legal framework is crucial for promoting economic growth via foreign direct investment. The study addresses the influence of judicial decisions on FDI by analysing key court cases in Uganda and comparing them with decisions from jurisdictions such as Kenya and South Africa. Notable Ugandan cases, including Ham Enterprises Ltd v. Diamond Trust Bank and Heritage Oil & Gas Ltd v. Uganda Revenue Authority, highlight the impact of judicial decisions on contract enforcement, regulatory compliance, and investor confidence. Comparative insights are drawn from Kenya's Cortec Mining Kenya Limited v. Republic of Kenya and South Africa's Piero Foresti, Laura de Carli and others v. Republic of South Africa, which underscore the benefits of specialised tribunals and efficient dispute resolution systems. The findings show that although judicial decisions in Uganda influence FDI, their impact is not as significant as first believed. The patterns of FDI flows are greatly influenced by several factors including political stability, macroeconomic policies, market size, infrastructure development, and the regulatory environment. However, it was identified that major challenges include judicial delays, contradictions, and apparent prejudice. On the other hand, reforms designed to improve judicial independence and efficiency have shown a beneficial effect on investor confidence. The study recommends case management systems should be improved, financial resources allocated to the judiciary increased, and specialised tribunals tailored to address investment-related disputes be created. As strategic means to lower risks and deftly negotiate Uganda's legal system, foreign investors could add arbitration clauses and make use of bilateral investment treaties. This analysis determines that although Uganda's Judiciary has achieved certain advancements, additional reforms are essential to ensure compliance with international best practices and to remain competitive within the region. Strengthening legal predictability and fostering trust in judicial outcomes are pivotal for creating a conducive environment for FDI. These findings offer valuable insights for policy makers, legal practitioners, and investors, emphasising the judiciary’s role alongside broader economic and political factors in shaping Uganda’s investment climate.