Equity Bank Uganda has been ordered by the High Court’s Commercial Division to pay more than USD 54,000 following a finding of negligence in the handling of international trade documents, in a case that underscores growing judicial scrutiny of banking practices in cross-border transactions.
In a judgment delivered on March 30, 2026, Justice Stephen Mubiru ruled in favour of Sanstar Bio-Polymers Limited, an Indian exporter, awarding the company USD 31,200—the value of goods supplied to a Ugandan buyer—along with interest at 8% per annum from November 2016 until full payment.
The total liability, now estimated at over USD 54,600, arises from Equity Bank’s role as a collecting bank in a documentary collection transaction. The court found that the bank’s staff released critical shipping documents to the buyer’s agent without first securing payment, contrary to explicit instructions.
Under the agreed “cash against documents” arrangement, the buyer was only entitled to receive shipping documents—and consequently access the goods—after making full payment. However, the bank’s failure to adhere to these terms enabled the buyer to take possession of the goods without settling the invoice, leaving the exporter uncompensated.
Negligence
While the court clarified that no direct contractual relationship existed between the exporter and Equity Bank under international rules governing such transactions, it held that the bank’s conduct amounted to negligence. By receiving and acting on the documents without rejecting the role, the bank was deemed to have accepted responsibility and was therefore obligated to exercise due care.
“The defendant failed to act as an ordinary, honest and reasonable banker,” the court noted, emphasizing that releasing documents without payment constituted a breach of standard banking practice.
Ignored Presidential Directives in UGX34b Debt Push Emin Pasha Owner Toward Crisis as Equity Bank Again Targets Charged Properties and Puts Radisson Hotel Project at RiskThe ruling reinforces a critical principle in trade finance: although banks in documentary collections do not guarantee payment, they must strictly follow instructions and act with reasonable care. Failure to do so can expose them to liability—not only to their counterpart banks but also to third-party exporters.
The court also awarded costs of the suit to Sanstar but declined to grant general damages, reasoning that the interest awarded sufficiently compensated the financial loss.
Compliance standards
The decision is expected to have wider implications for Uganda’s banking sector, particularly in strengthening compliance standards in trade finance operations and reinforcing accountability in handling international commercial transactions.
Notably, while Mukwano Industrial Suppliers Limited—the Ugandan buyer in the transaction—received the goods, the judgment does not make any legal determination against it, as it was not a party to the suit. However, the facts of the case indicate that the buyer obtained the goods without making payment, a situation made possible by the premature release of shipping documents by the bank. The ruling therefore leaves open the question of Mukwano’s contractual liability to the exporter, which may be pursued separately.
