THE REPUBLIC OF UGANDA

THE CENTRE FOR ARBITRATION AND DISPUTE RESOLUTION

CAD-ARB-19-2011

1. DR. G. KIBUUKA-KISUULE
2. KINYERA JULIUS PETER
3. MERCY MATENDE
4. DAVID NKOJJO
5. KAYAAYO ALES                                                  ::::::::::::: APPLICANTS
6. KWIZERA EMMANUEL

The Trustees of Uganda Communications

Employee Contributory Pensions Scheme

v.

POST BANK UGANDA LTD …………………………………….. RESPONDENT

RULING

This matter appears to have been originally filed before the High Court, Commercial Court Division.  It was later transferred to CADER on 13^th September 2011.

Respondent’s counsel opposed the application on the following grounds:-

1. The Application was inelegantly drafted.  It did not refer to any particular section.  Respondent counsel was therefore forced to assume, that the Application, was possibly drafted with S.11(4)(a) Arbitration and Conciliation Act[1], Cap.4 Laws of Uganda, in mind.

1. If so Respondent did not breach of the Trust Deed, Clause 29, since the Applicant had not invoked the UNCITRAL Arbitration Rules (revised in 2010).

Counsel in this case insisted the UNCITRAL Arbitration Rules applied to this dispute.

1.  Therefore the appointing authority in this case was one designated by the Secretary General Permanent Court of Arbitration at the Hague, under Art.6 UNCITRAL Arbitration Rules. 

The party at fault therefore was the Applicant, who failed to comply with Art.6 UNCITRAL Arbitration Rules.

I have not cited the Applicants’ submissions because they predictably argue that the application has merits.

The contract which gives rise to the dispute between the parties was signed on 27^th September 2004.

The arbitration clause in issue reads as follows:-

“29. Arbitration

Save where by this Deed or the Rules the decision of the Founder, Participating Employers or the Trustees is made final, if at any time hereafter any dispute, difference or question shall arise between the Founder, Participating Employer, the Trustees, the Members, Dependants, Pensioners or other persons or their personal representatives or any of them respectively touching the construction, meaning or effect of this Deed or the Rules or any Clause or thing herein contained or the right or liability of the said parties respectively or any of them under this Deed or the Rules or otherwise howsoever in relation to the Scheme, then every such dispute or question which cannot be amicably settled within thirty (30) days after receipt by one party of the other party’s request for such amicable settlement shall be submitted by either party to Arbitration in accordance with UNCITRAL Arbitration Rules.  The place of arbitration shall be Kampala, Uganda and the language to be used shall be English.”

To begin with, I concur with the Respondent’s counsel, that it is the UNCITRAL Arbitration Rules, which apply in this instance.

Art.6 UNCITRAL Arbitration Rules, which I was referred to, reads as follows,

“Designating and appointing authorities

Article 6

1. Unless the parties have already agreed on the choice of an appointing authority, a party may at any time propose the name or names of one or more institutions or persons, including the Secretary-General of the Permanent Court of Arbitration at The Hague (hereinafter called the “PCA”), one of whom would serve as appointing authority.

1. If all parties have not agreed on the choice of an appointing authority within 30 days after a proposal made in accordance with paragraph 1 has been received by all other parties, any party may request the Secretary-General of the PCA to designate the appointing authority.

1. Where these Rules provide for a period of time within which a party must refer a matter to an appointing authority and no appointing authority has been agreed on or designated, the period is suspended from the date on which a party initiates the procedure for agreeing on or designating an appointing authority until the date of such agreement or designation.

1. Except as referred to in article 41, paragraph 4, if the appointing authority refuses to act, or if it fails to appoint an arbitrator within 30 days after it receives a party’s request to do so, fails to act within any other period provided by these Rules, or fails to decide on a challenge to an arbitrator within a reasonable time after receiving a party’s request to do so, any party may request the Secretary- General of the PCA to designate a substitute appointing authority.

1. In exercising their functions under these Rules, the appointing authority and the Secretary-General of the PCA may require from any party and the arbitrators the information they deem necessary and they shall give the parties and, where appropriate, the arbitrators, an opportunity to present their views in any manner they consider appropriate. All such communications to and from the appointing authority and the Secretary-General of the PCA shall also be provided by the sender to all other parties.

1. When the appointing authority is requested to appoint an arbitrator pursuant to articles 8, 9, 10 or 14, the party making the request shall send to the appointing authority copies of the notice of arbitration and, if it exists, any response to the notice of arbitration.

1. The appointing authority shall have regard to such considerations as are likely to secure the appointment of an independent and impartial arbitrator and shall take into account the advisability of appointing an arbitrator of a nationality other than the nationalities of the parties.”

Close scrutiny, however reveals, that of Article 6 is restricted to the designation and appointment of appointing authorities.  It is not relevant to the Application at hand.

The Applicants in this case seek the compulsory appointment of an arbitrator, against the background of perceived failure on the part of the Respondent to breathe life into the arbitration clause.

Applicants’ Counsel served the Respondent with a demand notice, dated 20^th June 2011, Ref:HNW/GEN/2011/W1 and titled “Demand and Notice of Intention to Sue”.

The relevant part of the letter, to these proceedings, reads in part as follows,

“TAKE NOTICE therefore that your continued neglect and or refusal to honor the provisions of the Trust Deed and Rules of the scheme as a participating employer has been left our client no option but to declare the same a dispute which shall in accordance with Clause 29 of the Trust Deed and Rules of the Scheme be referred to Arbitration if no acceptable proposal to settle this matter out of court is received by us from you immediately.”

The Respondent’s reply dated 1^st July 2011, Ref:PBU/CS/30/11, addressed the dispute alleged by the Applicants as follows,

“Be informed that from the time of its withdrawal from the Scheme, Postbank ceased having any obligations towards UCECPS under Clause 4(a) and (b) of the Trust Deed except the payment of arrears as stated hereinabove.  Thus, the claim of contributions for the years 2009 and 2010 is unsustainable.”

It is an inescapable conclusion that the draftsmanship of this Application leaves a lot to be desired.  The pleadings are extremely circumlocutory with no effort spared to avoid any hint of conciseness.  I am left with no choice but to observe that the pleadings on the whole, leave it to CADER, to decipher what the Applicants seek.  If CADER does not decipher the application then technicalities will prevail over substantive justice [see Art.126(2)(e) Constitution].

I am also compelled to observe that Respondents’ counsel are at fault to assume that the duty, to establish the arbitral tribunal, lay solely with the Applicant.

The duty to establish the arbitral tribunal is a mutual obligation resting equally of the shoulders of both parties, once a dispute has been declared.

The arbitration clause is the forum choice clause, between the parties outlining where differences arising between them shall be referred to, for resolution.  This is what the parties agreed to on 27^th September 2004.

The parties’ forum choice agreement, is also protected by S.16(1)(a) ACA, which stipulates that the arbitration clause must be treated as an agreement independent of the other terms of the contract.   Further under S.16(1)(b) ACA a decision by the arbitral tribunal that the contract is null and void shall not itself invalidate the arbitration clause.

What course of action should the respondent have taken upon receipt of the Applicants’ 20^th June 2011 demand letter?

In B.M. Steels v. Kilembe Mines, CAD/ARB/10/2004, Catherine Muganga set out the normative behavior in relation communication on the appointment of arbitrators, as follows,

“It is prudent to point out at this stage three possible courses of action which could have been taken by the Respondent:

1. First the Respondent would have consented to the Arbitrator suggested by the Applicant with a view of having a one-person arbitral panel.
2. Secondly the Respondent would oppose the Applicant’s nomination by indicating another Nominee Arbitrator whilst inviting the Applicant to consent to the Respondent’s nomination with a view to having a one-person arbitral panel.
3. Thirdly the Respondent would oppose or consent to the Applicant’s nomination.  Nevertheless the Respondent would then proceed to indicate another Nominee chosen by the Respondent and invite the Applicant to consent to the second nomination person with a view of having a two person tribunal.”

From the above we see that the Respondent should have given, a specific reply, one way or the other, addressing itself to formation of the arbitration tribunal.

It was futile for the Respondent to observe that the Applicants’ claims are unsustainable.  It is this difference of opinion, which the parties had contemplated should be referred to arbitration.  Effort should therefore have been spent by the Respondent’s reply working out which option to suggest to the Applicants, in a concerted effort to set up the arbitral tribunal.

In Roko Construction Ltd v. Aya Bakery (U) Ltd, CAD/ARB/10/2007, I observed that,

“The Respondent’s failure to co-operate, in the appointment of the arbitrator, does not augur well, in light of the dual obligation, imposed upon all parties under the arbitration clause, which was wisely expounded by Lord MacMillan sixty five years, in the House of Lords, in Heyman v. Darwins, [1942] All E.R. 337, 347D as follows,

“I venture to think that not enough attention has been directed to the true nature and function of an arbitration clause in a contract.  It is quite distinct from the other clauses.  The other clauses set out the obligations which the parties undertake to each other hinc inde; but the arbitration clause does not impose on one of the parties an obligation in favour of the other.  It embodies the agreement of both parties that, if any dispute arises with regard to the obligations which one the one party has undertaken to the other, such dispute shall be settled by a tribunal of their own constitution.”

That said I find that the Respondent erred in failing to co-operate in formulation of the arbitral tribunal.

As it is both parties have lost the opportunity to focus on other vital aspects in setting up the arbitral tribunal.  For example, they did not address their minds or me on the question of the skill set required of the arbitrator.

The arbitration clause is silent on the number of arbitrators.  I am therefore bound by S.10(2) Arbitration and Conciliation Act, Cap.4, to appoint only one arbitrator.

I hereby appoint Mr. James Nangwala as the arbitrator over this matter.

Should Mr. James Nangwala not take up the appointment, for unforeseen reasons, I then appoint Philip Odoki or Godfrey Lule as the alternative arbitrators; they can only be approached in the sequential order listed.

I have already observed that the pleadings were very much below the expected standard. 

I am not ready to rule out that concise pleadings would have focused the Respondent to perform its part in formation of the arbitral tribunal.   For this reason I direct that the Applicants should bear the Respondent’s costs of this Application.

Dated at Kampala on the 19^th day of October 2011.

……………………………………………………

Jimmy M Muyanja

Executive Director, CADER.