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FRED MUWEMA: Why I still insist that bank notes signed by the deceased Central Bank Governor are no longer legal tender

Fred Muwema

The response to my opinion questioning the validity of Bank notes signed by the late Governor, Professor Tumusiime Mutebile which was made by Dr. James Akampumuza on the 11th February, 2022, demonstrated a limited appreciation of the intricacies around the legal nature of paper money. What my colleague and others of his persuasion need to know is that the acceptance of money as signed legal tender was the subject of a lot of litigation in the United States of America, under what came to be known as the legal tender cases which included Knox Vs Lee 79.US 457(1870).

Those cases caused a lot of controversy back then because private banks among others, used to issue their own bank notes until the Federal Reserve Act 1913 was enacted to create the Federal reserve system to by which issuance of paper currency was regulated under one central authority. Since then, it became a requirement that bank notes operating as legal tender should bear the signature of living persons. I will not delve deeper into the legal history of money as legal tender as I must keep the discussion intimate to the local context of the Ugandan bank notes.

Although my colleague has done better than many people who have a preponderance to hurriedly comment without any prior encounter with any knowledge on the subject, he failed to draw a distinction between the process of issuing money as legal tender and the company law principles of perpetual succession. This failure of distinction has driven his opinion outside the acceptable realms of jurisprudence on the money subject.

Any legal practitioner with a sufficient grasp of company law should certainly know that under the principle of perpetual succession there is a presumption of continuity of the business of the company.

As such, contracts signed by an officer of a company continue to bind the company even after the demise of the official. I explained this in my earlier opinion when I stated that the late Governor’s signature on any BOU contract would continue to convey proprietary rights by and against the Bank. I added however that the same signature on the bank notes would not convey proprietary rights to the bank or users, when the maker passes on. I will explain again that money is a sovereign legal instrument to which the rules applicable to other fungible goods exchanged in the market cannot be applied by the stretch of any academic argument.

At the risk of repetition, I must emphasize that the principle of perpetual succession does not apply to bank notes which must be duly signed and authenticated at the material time they are tendered. If this principle were applicable, then we would still have bank notes signed by former Governors like Leo Kibirango (1981-1986), Suleman Kiggundu (1986-1990) and Charles Kikonyogo (1990-2000). There would be no rationale for issuing new Bank notes signed by a new Governor, if it was possible to retain previously signed bank notes.

We cannot ignore the common best practice of withdrawing bank notes signed by former Governors from circulation by the central bank. This practice which is worldwide, gives effect to the law. For those in doubt, this practice must be viewed as a fundamental extrinsic aid in arriving at the correct statutory interpretation of the BOU Act in relation to issuance of money as legal tender.

The reason why BOU has always replaced bank notes signed by a governor or bank secretary who is no longer in office is because the term- legal tender, is used in a present continuous tense. There is no room for a past Governor or Bank Secretary to sign a bank note which qualifies to be legal tender today when they are not physically present in office.

S.3 of the BOU Act which mandates the Governor to sign and authenticate bank notes, also provides for the deputy Governor to sign in his absence. It should be understood that a reference to the holder of an office under S.3 Interpretation Act Cap 15 is construed to mean the person for the time being lawfully holding, acting or performing the functions of that office. In that sense, therefore, a bank note can only be treated as legal tender if it is signed by the Governor lawfully holding, acting or performing the functions of that office. As we all know, the late Tumusiime Mutebile like any other former Governors is no longer the Governor of the central bank and therefore he cannot otherwise issue any legal tender today or at all.

It is surprising that my colleague did not even attempt to explain why the law would provide for another person to sign for the Governor in his absence if indeed his signature is supposed to stand in perpetuity.

Moreover, as I stated earlier (and to which no rebuttal was given), the late Governor’s signature on the bank notes is an electronic signature which is liable to be revoked under S.69 Electronic Signatures Act 2011.So on what basis can anyone claim that his electronic signature can be held in perpetuity. This claim of perpetuity, rather than my opinion, is the real absurdity.

I wish to end by stating that our continued use of the bank notes signed by the late Governor does not make them legal tender. We are all using these illegal bank notes under a state of compulsion because we don’t have any other mode of exchange available. Whereas all Ugandans who continue to use these illegal Bank notes under such compulsion are excused from any form of liability, it is incumbent upon us as a country to cause the redemption of our currency by calling for appointment of a new Governor to sign on new Bank notes without delay.

Our national currency is the life blood of our economy, we cannot afford to saddle it with avoidable legal uncertainties for this long.

Fred Muwema is a Managing Partner-
Muwema & Co. Advocates and Director Legal & Corporate Affairs Anti-Counterfeit Network Africa

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