Katuntu: Unfortunately because we had re-scheduled the meeting with the AG, it was not possible to get the officers from other departments who were supposed to be here yesterday (Monday) because it was going to be short notice. So I asked the Clerk to inform you that we meet today. The AG you are most welcome. We did invite you for an interaction on a subject which you could be well versed with but for purposes of the record, let me introduce it formally.
Sometime back, Parliament adopted a motion to investigate the circumstances under which rewards were made to 42 public officers who participated or handled the matter in the Arbitration Tribunal involving URA, AG chambers and thereafter Shs6b was advanced to them by government as a reward commonly known these days as a handshake.
Parliament later alone on a motion moved by Hon Michael Tusiime adopted that motion and it became a subject of investigation by this Parliament.
The matter was referred to this Committee purposely because URA from which this money was paid is under our jurisdiction as a Parliamentary committee. We have eight terms of references and I hope that when they were writing to you, they forwarded the terms of references formally. However, for the record, I will read them. I know it is boring but it’s okay (Chairman reads the eight terms of references) .
We are supposed to report back in two months. We no longer have the 60 days offcourse.That will be the subject of our conversation today. I wish to point out that this is not a general discussion. All the responses and clarifications we would require from you will be related to the terms of reference. I need to emphasise that. We are not here on a general inquiry. I also know that, I don’t know whether the Clerk has forwarded to you the submissions which had been made by the petitioners because in the written submissions there are allegations which are made to which you may require to answer.
We do not mind if you have a written submission, we will receive them but at the same time, these submissions are oral. Secondly, we may have one or more meetings depending on how this meeting goes. If we can conclude today, well and good. The only thing we need is to be conscious of is that we a timeline and we no longer have the 60 days. So the learned Attorney General you are most welcome together with your colleagues. The learned AG, we need to give you a chance if you have and if you have written communication, this is the time to give it to the Committee.
Byaruhanga: To recognise that we appreciate the fact the group has been called to answer to the questions they relate to them. This is in line with the well-known constitutional privilege of allowing both sides to be heard. We are pleased with that. The second remark I want to make is that simply because it touches on this inquiry, this is no way to cloud whichever areas you are going to rise with the colleagues. It’s just that as an incoming Attorney General, when this matter came up, I had a discussion with the President about this particular matter to ask his stake. I am not sure whether at some point you will be able to have discussions with him. But just for the record, he told me he knows about the handshake and that he initiated it. I told him that there are questions about it.
Katuntu: I think lets cross that bridge when we get there. I would like to comfort you that we are going to have a meeting with the President and I don’t want to go into an area where the President says: ‘Did I say that’. I think that would be awkward. Let us restrict ourselves to the terms of reference as they are here and the individual officers’ participation. As to the President, we are going to have an opportunity because we already have written communication about this matter which has been laid before this Committee.
Byaruhanga: I thank you. I am duty bound to tell you. It does not preclude you from having discussions with him. Also that my team knows that I did make the remarks about what my discussion was. Having said that, because you did ask whether we have written remarks which we actually do, do we present them and then the oral session starts?
Katuntu: Off course. Though ordinarily if you had sent a copy in advance, it would have been better because the members would gave read them before and then the interaction would have been more useful. But now that you have it, please lay it on table. If it is not a long one, we may allow you to go through it.You may not read it verbatim because it’s laid on table but then you can have some talking points.
Byaruhanga: It is not long. It is about five pages.
Katuntu: Five, they can read it it. So can I have copies? You have only one copy? Some of you are very senior officers, you have been MPs and you know how we work here. We know this Ministry has been appearing before Parliament for many years including these people here and you know you are coming to meet 30 people and you come with only 1 copy.
Beatrice Anywar: It is just sad that one of the witnesses would say that they do not have copies for this Committee and reason being that there is no power. On a point of procedure because we need these documents, wouldn’t be prudent that maybe one of their own is sent to bring copies. Because without copies, how are we going to proceed?
Katuntu: I need a solution to what shouldn’t be a problem but officers are making it a problem. I am going to suspend this meeting for 15 minutes. Mr Kagolo (the Clerk) go and photocopy for the members.
Katuntu: This document which you have is signed by the secretariat and I do not think we will accept it. Somebody has to own it. Whose document is it? And I am very happy that I am talking to lawyers? Who owns this document? And we will confirm from individual members on whether they own this document? Who owns this document? And everybody who owns it should be able to confirm that that is my document.
Atoke: The document was prepared by the Secretariat of Justice Ministry and it is headed by Harriet Lwabi.
Katuntu: I thought I had guided. Who owns this document? I do not know of anything called Secretariat at Ministry of Justice. Let me start with Atoke, the SG, Do you own this document?
All the officials agree to own the document
Katuntu: Whoever has been invited here should be able to speak for himself. Because whatever you speak here has to be associated with somebody. And this Committee might come up with personal responsibility or exonerate somebody. So if you made a document for other officers, let them say so. And we know that this is for the SG and senior officers and we know that the other officers are not party to the document. Is that fine?
Atoke: That’s the information I was volunteering.
Katuntu: But why don’t you tell them so? Why don’t you hear it from them?
Atoke: It is not normal practice for office attendants to make legal documents.
Katuntu: Can I get the names of the officers from Ministry of Justoce who are not party to this documents.
Veronicah Namuwenge,office attendant; Juliet Nambwayo, Stereographer Secretary; Nakibirango Sylivia, Office Attendant; Lauben Tumwine, Senior Accountant;
Katuntu: You are also not party to this document?
Tumwine: No sir.
Nyombi: Mr chairman, I have just received the document.
Ruhindi: I have just received the document, I would like to interrogate it.
Byaruhanga: I thank Mr chairman. I thank you that this matter has been properly guided. I was not in the Ministry of Justice at the time of these events and, therefore, I am going to request that you allow the Solicitor General, who participated in all the proceedings to be the one to take us through this document.
Katuntu: We thank you for leading the team but now that you were not in office when these incidents took place, I do not know how useful you will be to this Committee. Your officers who participated are here. Of course the two Attorney General’s (Ruhindi and Nyombi) have not looked at this document. It was prepared by the current office holders.
Byaruhanga: I am leading the team because I am the current Attorney General. However, I agree with you that in terms of value addition vis-à-vis the facts that happened at that time and also considering that the AG’s chambers are more or less empty because all the senior officers are here. I would respectfully take leave since all the people on this side are lawyers and they can look after themselves.
Katuramu Hood: I appreciate the response by the AG but as the incumbent, I thought he may pick some lessons by hearing what is happening in his docket.
Katuntu: We are investigating something that happened in the past and the officers who participated are here. If we need him, we will require him to come. I do not want to keep officers here who are doing nothing. Two officers who were manning the Chambers are here. The document can be presented by the SG and we can take it up from here. But as you realise, your two senior colleagues were not party to the preparation of this document and we may have to ask them on whether they agree with it. Hon AG,you may leave at leisure. Can we have the SG Francis Atoke?
Atoke: These are our responses. There is a background which I do not need to bore the members withbecause I am sure it has been repeated here. It is about Heritage. It is about $434m URA taxed Heritage and it went to arbitration, notices were filed.
Heritage’s core tax claim were for the declaration that no tax is payable for the transfer of the interests and the PSAs to Tullow. For damages on the grounds that GoU breached the arbitration clause by failing to take to Arbitration as stipulated by Article 26.1 and that.
In addition to the core tax claims, Heritage also made claims that government unreasonably withheld or delayed the consent to make transfers to Heritage and Tullow. And that the imposition of the taxes on Heritage is tantamount to a change in law within the meaning of Article 42.2. At the procedural hearing that took place in London on 18th October 2011, Counsel for the AG objected on the issue of jurisdiction. The issue was that the Tribunal did not have jurisdiction and therefore applied for bifurcation which was granted. This was also attended by MPs of the 9th Parliament. Hon Steven Tashobya, Bakka Mugabi, Gerald Karuhanga, Florence Namayanja and Werikhe. That was in London. Church House, Westminster. The government objections to the Tribunal were based on the following grounds:
That the tax claims are non-arbitrable. This is a matter for a sovereign state.
That the tax claims are outside the scope of the Arbitration agreement.
That the Tax Appeals Tribunal and the High Court had adjudicated on the matter and the decisions are therefore binding on Heritage and cannot be re-opened in arbitration.
That the claimants waives his right to arbitrate the tax dispute.
That the additional claims raised by Heritage relate to the tax claims and should be dismissed.
The hearing of the jurisdiction stage was held in 2012 at Church House and it was attended by the same MPs of the 9th Parliament. On the April 3, 2013, the Tribunal delivered the award on jurisdiction and it held that it had no jurisdiction over the core tax claims of Heritage. In effect dismissing the claim.
But it held that it had jurisdiction on the unreasonable delay by government to consent to the change in law. The case progressed to the merits phase. The Tribunal reserved the decision on costs occasioned by the jurisdictional hearing to the merits stage.
The effect was to dismiss the claims in which Heritage challenged the assessment of CGT and confirming government’s position that the issue of taxability of the transaction was not a matter of arbitration but for the Tax Appeals Tribunal which is a competent authority under Ugandan law to handle the matter. The award saved us $434m.At the merit stage, Heritage claimed a total of $506m which comprised damage for breach of article 32,33.2 and 24.1 of the PSA, it also claimed cost and interest and for the rate to be determined by the Tribunal. The hearing for the Merits phase took place between July 14 and 18 at Church House in London. The final award was delivered on Feb 24, 2015 in which Heritage lost on both claims of change in law and unreasonable delay by government to consent to the transfer. Government was awarded costs of $4m.
On the initiation of the reward, what has been termed the golden handshake. The government team, including myself, appeared before Cabinet on November 19, 2014 to provide an update on the arbitration case filed by Tullow. The President on inquiring and being updated on the arbitration case promised to reward the team if they won the arbitration case, if they did. Following the issuance of the final award on merits by the tribunal on February 24, 2015, the Attorney General wrote the President reminding him of his promise to reward the noble team. And then in the meeting held with the President in Rwakitura on May 17, 2015, the President thanked the team for the victory and reiterated his promise to reward the winning team.
He accordingly directed the CG URA to handle the process of the presidential reward. The President also guided that other players who were not part of the core team but contributed to the success of the case should also be included in the reward. The CG, in consultation with the AG’s chambers managed the payment of the reward in consultation with established procedures.
Arrangements under which awards were paid to the public servants. And this is the legal basis of the reward. Under Article 978 and 99 of the Constitution, the President is the fountain of honour and head of the Executive and he is empowered to award exemplary and ethical performance and he exercised that right under those articles. In addition, the standing orders provide for, among other rewards, payment of cash bonuses for public officers who exhibit ethical conduct.
Rewarding individuals who have excelled in their roles is common practice not only in public sector but also the private sector. The President rewarded the team of 42 officials with Shs6b subject to taxation in appreciation of their tireless efforts to the country. The money was distributed to the officers in three categories. The core staff (Shs 200m as gross), non-core staff (Shs100m gross) and support staff (Shs 50m gross).
The money was subjected to the statutory deductions totalling to Shs 2.3b as follows. PAYE of 40 per cent and NSSF 15 per cent which resulted in a net pay of Shs3.5b.
The officers worked as a team and they had specific roles to play. The officers from MeMD provided technical information on oil matters, Justice ministry provided legal advice while URA and Finance provided tax expertise. In summary, the teams together with external legal counsel prepared all the required memorials, statements of defence, claims, counter-claims, and witness summons, statements and attended the hearings.
This is type procedure of how the money was obtained. In accordance with the Public Finance Management Act, the Commissioner General was designated on the May 2, 2016 as the responsible accounting officer to effect the payment. She followed the procedure stipulated in the Act. The followed sections of the PFMA are highlighted as follows. Section 11(2) (g), Section 22, Section 25, Section 25(2).All these procedures were followed. On correspondences and letters, following meeting held on June 2, 2015 to discuss the Settlement deed by Tullow, we were informed by URA about the categorisation of the beneficiaries which was agreed to. No minutes were generated in relation to the categorisation .This one came as a by-the-way.
Katuntu: The record does not show by-the way. Whatever you are saying, there should not be by-theways.Take this meeting seriously.
Atoke: I am telling you what happened.
Katuntu: Look, if we have directed, just tell us what happened. Let’s not go over it.
Atoke: I am sorry I did not mean it. I just said no minutes were generated since the discussion was informal. The meeting agreed on the following. Categorisation of the beneficiaries into core, non-core and support staff. The core team comprised officers who handled the arbitration case from inception to conclusion. The non-core team comprised officers who tremendously contributed the success of the case through provision of relevant information, availing the historical chronology of the case, assistance in document production. This team also comprised officers who participated in the assessment of the tax and who participated in the amicable settlement meetings with Tullow before it filed the arbitration case in London.
This category was also to include members who participated in the jurisdictional phase of the case but did not continue with the merits case for various reasons. The support staff who worked with the team from the four institutions were also supposed to be included in the reward. It was agreed that each institution avails to URA the names of the support staff who worked on the case. It was further agreed that the officers in each category would receive the same amount regardless of rank. The relevant corresponding letters regarding the payment were availed by URA to the Committee. Thank you Mr Chairman.
Continues tomorrow with cross-examination of Mr Atoke.
How the handshake was initiated
The President on inquiring and being updated on the arbitration case promised to reward the team if they won the arbitration case, if they did. Following the issuance of the final award on merits by the tribunal on February 24, 2015, the Attorney General wrote the President reminding him of his promise to reward the noble team. And then in the meeting held with the President in Rwakitura on May 17, 2015, the President thanked the team for the victory and reiterated his promise to reward the winning team. He accordingly directed the CG URA to handle the process of the presidential reward. The President also guided that other players who were not part of the core team but contributed to the success of the case should also be included in the reward. The CG, in consultation with the AG’s chambers managed the payment of the reward in consultation with established procedures. Arrangements under which awards were paid to the public servants. And this is the legal basis of the reward. The President rewarded the team of 42 officials with Shs6b subject to taxation in appreciation of their tireless efforts to the country. The money was distributed to the officers in three categories. The core staff (Shs 200m as gross), non-core staff (Shs100m gross) and support staff (Shs 50m gross). The money was subjected to the statutory deductions totalling to Shs 2.3b as follows. PAYE of 40 per cent and NSSF 15 per cent which resulted in a net pay of Shs3.5b.