Uganda’s Protection of Sovereignty Act, 2026 introduces a regulatory framework for political interference through foreign funding and activities that compromise Uganda’s national interests. Passed by Parliament on 5^th May 2026 and assented to on 17^th May 2026, the Act attracted controversy, particularly over its potential business implications. 

The Act aims to safeguard the country’s sovereignty and national interests from foreign interference, with the Department of Peace and Security in the Ministry of Internal Affairs, responsible for its implementation. It is based on principles of self-determination and territorial sovereignty outlined in the Constitution and international conventions. The article analyzes key provisions of the Act that influence commerce, investment, and banking in Uganda, assessing its overall implications for the business environment.

Who does the Act apply to? 

The Act applies to an agent of a foreigner, defined as an individual or entity that formally and knowingly acts on behalf of foreign interests to influence national politics and/or government policy in a manner contrary to the interests of Uganda^[1].This definition extends to companies, NGOs, multinational corporations (whether registered in Uganda or not), foreign governments, consulates, high commissions, embassies and other diplomatic missions that engage in activities aimed at influencing Uganda’s political or governmental affairs.

Who does the Act NOT apply to? 

The Act explicitly states that it does not apply to foreign funds received^[2]: –

• As foreign direct investment, portfolio investment, diaspora remittances, export proceeds, trade finance, commercial loans, humanitarian assistance, technical assistance, grants, concessional financing, development assistance, or any other lawful foreign exchange inflow or outflow, and related activities  
• By persons for commercial or domestic use
• By institutions under the supervision of a statutory regulatory body; 
• By health facilities for undertaking lawful activities; 
• By academic or research institutions, faith-based organizations for purposes of their faith-based mission. 

It is critical to note that the Act is primarily concerned with regulating foreign interference in Uganda’s political and governance affairs. Accordingly, legitimate commercial activities and funds transfers undertaken by foreign persons, or by Ugandans residing in the diaspora, would not, in themselves, fall within the Act’s regulatory scope.

Registration requirement for agents of foreigners 

Subject to the exceptions in the preceding section, an agent of a foreigner (to whom the Act applies) must be registered by the Department of Peace & Safety under the Ministry of Internal Affairs, failing which, such person commits a criminal offence and is liable to a fine of up to Ugx 1 Billion (approx. USD 269,000) and/or imprisonment for up to 10 years^[3].

The registration process involves submitting information about personal identity, nationality and addresses, nature and methods of business being undertaken as well as financial information and bio-data of every foreigner being acted for; and beneficial ownership, directorship and shareholding information for corporate bodies among others^[4].

N.B: For avoidance of doubt, individuals and entities conducting legitimate business as or with foreigners, or on their behalf; which does not interfere with Uganda’s governance and politics, or prejudice Uganda’s national interests are not required to register as foreign agents, since the Act does not apply to them. 

Funding restrictions and declaration of sources by Foreign Agents

Agents of foreigners are required to declare their sources of funds to the Minister. They are further required to specifically declare any financial support received which exceeds Ugx 400 Million (approx. USD 107,600) within a 12-month period, failing which, they risk criminal liability and forfeiture of such funds to the state[5]. 

Restrictions on interference with government Policy  

The Act prohibits and criminalizes an agent of a foreigner from influencing, developing or implementing government policy except with Cabinet approval, through the relevant government ministry, department or agency^[6]. All foreign persons or entities interested in shaping Uganda’s governance policy, including economic policy, are required to channel their proposals through the relevant ministry or risk criminal liability. The business community in the diaspora, as a key stakeholder in Uganda’s governance, must, therefore, tread cautiously, being keen to adhere to statutory guidelines for policy engagement, which are yet to be enacted[7].

These restrictions may indirectly affect policy engagement, economic commentary and market analysis. If businesses become reluctant to openly discuss economic risks or policy concerns, market transparency may suffer.

Restrictions on promotion of foreign policy 

The Act prohibits and criminalizes the promotion of any foreign policy which is not aligned to Uganda’s governance policies as adopted by Cabinet, through sponsoring, organizing any gatherings, or engaging in disruptive activities[8]. It is important to note that the definition of foreign policy is broad; therefore, it is difficult to determine what falls thereunder. As such, businesses must be cautious about the activities that they promote, for example under their Corporate Social Responsibility (CSR) initiatives, ensuring that they are aligned to Uganda’s interests and government policy.

Restrictions on interference with electoral processes and other government functions 

The Act prohibits and criminalizes interference in Uganda’s electoral processes by an unauthorized foreign agent through influencing voting decisions[9]. It further forbids foreign interference with government operations, which relates to obstructing, impairing, hindering, or preventing a public officer or any other person occupying a public office from performing his or her functions[10]. These provisions underscore the Act’s foremost aim of safeguarding national governance and political affairs from undue foreign influence.

Restrictions on Economic sabotage

The Act prohibits and criminalizes deliberate activity aimed at causing economic damage and disruption through publication of false information or perpetration and/or promotion of any disruptive activity aimed at weakening, undermining or damaging Uganda’s economic system or causing insecurity or instability[11]. A heavy penalty of up to Ugx 2 Billion (approx. USD 538,000) for corporate bodies and up to Ugx 1 Billion (approx. USD 269,000)   and/or up to 10 years’ imprisonment for individuals is imposed in the event of a conviction for economic sabotage. 

The Act, however, does not clearly define what amounts to damaging Uganda’s economic interests, which creates uncertainty for businesses in determining where legal risk begins.

Reporting requirements for supervised institutions 

The Act mandates supervised institutions to submit monthly reports to their regulators regarding funds transferred to agents of foreigners[12]. Additionally, it prohibits the transfer of funds to agents who cannot provide proof of declaration of those funds to the Minister[13].

A supervised institution is defined as any entity licensed under relevant Acts of Parliament to facilitate cross-border money transfers[14]. This definition encompasses various entities, including banks, payment service providers, and money remittance companies. These institutions are now required to: (1) identify which individuals or entities are agents of foreigners and; (2) ensure that these agents have declared their source of funds to the Minister.

However, this new obligation poses practical challenges in identifying foreign agents, especially in the absence of detailed regulations, as the Act does not clarify whether licensed agents of foreigners are publicly disclosed. Failure to report transactions involving agents of foreigners may result in substantial penalties of up to Ugx 4 billion (approximately USD 1,075,833).

What Business Leaders Should Do 

For business leaders, banks and investors, the immediate priority should be understanding their exposure under the Act. This means reviewing ownership structures, funding arrangements, governance frameworks and operational activities to identify whether registration, declarations or approvals may be required. 

Businesses should also strengthen internal compliance systems, particularly around foreign funding, reporting obligations and regulatory approvals. Early legal assessment will be important in avoiding compliance breaches. 

Conclusion:

The Protection of Sovereignty Act, 2026 primarily seeks to address foreign interference and protect Uganda’s sovereignty, rather than restrict legitimate foreign investment, diaspora remittances, trade finance or other lawful cross-border transactions. Nevertheless, its provisions on foreign agents, funding declarations, policy engagement and economic sabotage create important compliance considerations for businesses, investors, banks and other regulated institutions.

The Act’s ultimate impact on Uganda’s business and investment environment will depend largely on how it is implemented and interpreted. Clear and consistent enforcement will be essential to protecting national interests while maintaining investor confidence and regulatory certainty. In the interim, businesses and financial institutions should review their foreign funding arrangements, ownership structures and compliance frameworks to identify and manage potential exposure under the Act.

Timothy Mwesigwa (Senior Associate)

Vivian Ashabahebwa (Associate)

END

[1] Refer to the definition of an agent of a foreigner in Section 1

[2] Section 2 (4) & (5)

[3] Section 14

[4] Section 15 (2)

[5] Sections 21 & 22

[6] Section 7 (3) & (4) & Section 8

[7] Section 7(5) provides that the Minister of Internal Affairs is to develop guidelines regulating formation of government policy

[8] Section 10

[9] Section 11

[10] Section 12

[11] Section 13

[12] Section 25 (2)

[13] Section 25 (1)

[14] Section 1