The East African Community (EAC) represents a market of over 300 million people and a combined GDP exceeding USD 300 billion. For businesses operating across EAC partner states—Uganda, Kenya, Tanzania, Rwanda, Burundi, South Sudan, and the Democratic Republic of the Congo—cross-border contracts are the backbone of regional supply chains. Yet differences in legal systems, commercial practices, and enforcement mechanisms create real risks that require careful contractual structuring.
This article examines key considerations for drafting and negotiating cross-border supply chain contracts within the EAC, with practical guidance on choice of law, dispute resolution, payment security, and regulatory compliance.
Choice of Law and Jurisdiction
One of the most critical decisions in any cross-border contract is the governing law and jurisdiction. Within the EAC, partner states follow either common law (Uganda, Kenya, Tanzania, South Sudan) or civil law traditions (Rwanda, Burundi, DRC). This divergence has practical implications for contract interpretation, implied terms, and remedies.
We generally recommend that cross-border supply contracts within the EAC be governed by the laws of one of the common law jurisdictions—typically Uganda or Kenya—given the more developed body of commercial case law and the availability of specialised commercial courts. However, if the contract involves significant assets or operations in a civil law jurisdiction, parties may consider the laws of that jurisdiction or a neutral framework such as the UNIDROIT Principles of International Commercial Contracts.
Jurisdiction clauses should be drafted with care. Exclusive jurisdiction clauses, which require disputes to be heard in a specified court, offer predictability but may create enforcement challenges if the selected court's judgment must be recognised and enforced in another EAC state. The EAC has made progress toward mutual recognition of judgments, but enforcement remains slower and less certain than within a single jurisdiction.
Consider including an arbitration clause with a seated tribunal in a neutral venue (such as the Kampala International Arbitration Centre or the Nairobi Centre for International Arbitration). Arbitration awards under the New York Convention are enforceable across all EAC partner states, offering a significant advantage over court judgments.
Payment and Currency Risk
Cross-border transactions within the EAC involve multiple currencies—the Ugandan shilling, Kenyan shilling, Tanzanian shilling, Rwandan franc, and others. Currency volatility and convertibility restrictions are material risks that supply contracts must address.
Key contractual provisions to consider include: denomination of payment in a stable currency (USD is commonly used, though the EAC Monetary Union protocol envisions a single currency in the future); indexing mechanisms that adjust payment amounts based on exchange rate fluctuations beyond an agreed band; payment timing clauses that account for cross-border settlement delays; and clear allocation of foreign exchange costs and conversion spreads.
Additionally, parties should verify that the payment method contemplated (letter of credit, bank transfer, mobile money) is legally permitted and commercially feasible in both the payer's and payee's jurisdictions. Some EAC states maintain exchange control restrictions that require central bank approval for certain cross-border payments.
Delivery, Risk and Insurance
International commercial terms—Incoterms 2020—should be incorporated by reference into all cross-border supply contracts. The appropriate Incoterm (FOB, CIF, DAP, etc.) determines when risk transfers from seller to buyer, who bears transport and insurance costs, and where delivery occurs for purposes of customs clearance.
Within the EAC, road transport is the dominant mode of freight movement. The Northern Corridor (Mombasa to Kampala, Kigali, Goma, and Juba) and the Central Corridor (Dar es Salaam to Kigali, Bujumbura, and Kampala) are the primary trade routes. Delays at border crossings, road conditions, and theft are common risks that should be addressed through allocation of risk in the contract and appropriate insurance coverage.
Regulatory Compliance
Cross-border supply chains within the EAC are subject to a layered regulatory framework that includes: EAC Customs Union rules, including the Common External Tariff and rules of origin; partner state-specific import and export licensing requirements; sanitary and phytosanitary (SPS) measures for agricultural goods; standards and quality assurance requirements enforced by national bureaus of standards; and transit bond and customs guarantee requirements.
Contracts should include clear obligations on each party regarding compliance with applicable regulatory requirements, allocation of customs duties and taxes, and cooperation in the event of regulatory inspections or seizures.
Dispute Resolution and Enforcement
Despite best efforts in contract drafting, disputes will arise. Within the EAC, parties have several options for dispute resolution: litigation in national courts (with the challenges of cross-border enforcement noted above); arbitration under institutional rules (such as the Kampala International Arbitration Centre, Nairobi Centre for International Arbitration, or the EAC Court of Justice for treaty-based disputes); mediation, which is increasingly encouraged by EAC commercial courts; and expert determination for technical or valuation disputes.
We recommend a multi-tiered dispute resolution clause that requires negotiation or mediation before arbitration or litigation. This approach often resolves disputes more quickly and cost-effectively, preserving commercial relationships in the process.
Our Transaction Advisory practice at Jamani Advocates regularly advises on the structuring, negotiation, and documentation of cross-border supply chain contracts across the EAC. Contact our team for practical guidance on protecting your regional supply chain.