A step forward for the free movement of goods in the EAC

By Richard Bibangambah

The East African Community was established by the Treaty for the Establishment of the East African Community that came into force in July 2000. The Treaty is implemented through its Protocols amongst which are the Protocol on the Establishment of the East African Customs Union and the Protocol on the Establishment of the East African Community Common market.

On March 26, 2019, the East African Court of Justice delivered its judgment in the case of British American Tobacco Uganda Limited versus the Attorney General of Uganda, Reference No 7 of 2017. The reference was inaugural litigation of the provisions relating to free movement of goods and non-discrimination against goods of partner states under the EAC Treaty.

The Reference filed by British American Tobacco Uganda Limited challenged the enactment and implementation of discriminatory provisions in the Excise Duty (Amendment) Act No 1 of 2017 which imposed a higher excise duty rate on British American Tobacco Uganda Limited's cigarettes, deemed as imports from Kenya compared to locally manufactured cigarettes.

Decision of Court

In its judgment, the East African Court of Justice made many important findings briefly as follows:

The Court reaffirmed the position that by accepting to be bound by the EAC Treaty provisions with no reservations, Uganda could no longer apply domestic legislation in ways that make its effects prevail over those of EAC law. The Court noted that it is an obligation on State Parties not to enact or sustain laws that completely negate the purpose for which the EAC Treaty was enacted.

The EACJ noted that it was the intention of the framers of the Treaty and Customs Union Protocol to establish the Community as a single economic area characterised by the free movement of goods, and in which goods from any Partner State were not treated as imports.

The Court further noted that every Treaty in force is binding upon the parties to it and must be performed by them in good faith and the actions of the Respondent acting through the Uganda Revenue Authority are likely to jeopardise the achievement of the Treaty's objectives, thus rolling back the gains of the Customs Union and Common Market that have been realised thus far in the Community.

The EACJ found that the Respondent violated the Treaty and Customs Union Protocol in so far as it sought to implement an administrative measure that discriminated against the Applicant's goods which amounted to a Treaty infringement and is unlawful.

The Court found that though the challenged law, the Excise Duty (Amendment) Act No 1 of 2017, was not in itself in contravention with the provisions of the EAC Treaty and its Protocols, its misconstruction and implementation by the Respondent did contravene and infringe the provisions of the EAC Treaty and its Protocols.

Implications

The decision of the East African Court of Justice shall have far-reaching implications for the business community of East Africa. The decision of Court was a first in which the application of the national laws of a community member in a commercial context was found to be illegal and a commercial dispute was determined by the Court. This will provide clarity for the business community on the jurisdiction of the East African Court of Justice in handling matters of a commercial nature arising from Partner states that raise questions over the implementation of the EAC Treaty.

The decision is a big step forward in implementing the principles of free movement of goods and the removal of tariff barriers in the Community as set out by the EAC Treaty. The EACJ through its decision has provided clarity on the hierarchy of laws in community member states, with state sovereignty becoming subject to the obligations of members states as provided in Community law.

The decision of the EACJ has also interpreted the actions of state organs such as the Revenue Authorities as actions of the member state which are subject to the jurisdiction of the Court. This is likely to lead to further litigation involving actions of state organs within the community.

The revenue authorities in the partner states and other such organs of government have also been placed with a responsibility while applying local legislation, to take into consideration the community law contained in the EAC Treaty and Protocols and obligations created therein.

The decision of the EACJ should lead to more expansive cross-border trade in the East African Community, with more certainty and faith in the implementation of the community law amongst the business community. Players in the trade and business community of East Africa shall take greater faith in the capability of the East African Community legal system to curtail partner states from going against their obligations and the spirit of the formation of the Community and the remedial options available to them. This should attract greater investment in the community to take advantage of access to the greater regional market that should be treated as a single economic area.

Legislatively, the decision of the EACJ shall have serious implications for legislation of laws by the Parliaments of the community states. Member states shall be responsible for ensuring that the obligations created under community law and principles enshrined in the regional treaties such as free movement of goods and non-discrimination against goods of member states, shall be taken into consideration before the enactment of national legislation and its implementation. The Decision of the EACJ shall stand as a firm reminder to all partner states to bring their domestic laws in conformity with their obligations under the Treaty.

In Conclusion, as was rightly noted by the EACJ, the case before it was one that canvassed matters of grave importance to the advancement of Community Law and EAC intra-regional trade and in our opinion is a step forward in achieving the goal of regional integration. The decision of the EACJ shall open the eyes of the business community in the region to remedial options that can be sought through the East African Court of Justice under the EAC Treaty legal regime.

The writer is an advocate with K&K Advocates