THE REPUBLIC OF UGANDA
THE CENTRE FOR ARBITRATION AND DISPUTE RESOLUTION
PLINTH TECHNICAL WORKS LTD ---------------------------- APPLICANT
FORT PORTAL MUNICIPAL
LOCAL GOVERNMENT COUNCIL ------------------------- RESPONDENT
Applicant Counsel Respondent Counsel
Kagoro Friday Roberts Kyamanywa Edward Cooper
Muwema & Co. Advocates. Kaahwa, Kafuzi, Bwiruka & Co.Advocates
- The parties executed an Agreement for construction of the Nyakana and Kagote Roads on 18th February 2015.
- The Applicant reports that a dispute has arisen regarding outstanding payments.
- The Applicant requested the President Uganda Institute of Professional Engineers to appoint an adjudicator; no adjudicator has ever been appointed.
- The Applicant now prays that an arbitrator be appointed.
- The common ground between the parties is that the contract was terminated.
The Applicant’s version goes as follows,
“Application Ground 3
The Applicant performed its contractual obligations up to the time the parties mutually disengaged.
Application Ground 4
Upon disengagement, a final Certificate was submitted by the Applicant to the Respondent for payment but to date the same has not been paid.
Babiha Richardson Affidavit
That shortly thereafter, the Applicant commenced works on the project until when the parties decided to mutually disengage.
Babiha Richardson Affidavit
That upon disengagement, the applicant prepared a final account and/or certificate for payment.
Babiha Richardson Affidavit
That however, since then, the Respondent has refused and/or neglected to pay to the Applicant the verified sums despite repeated demands from the Applicant and promises to do so by the Respondent.”
The Respondent’s version goes as follows,
“Tumusiime Leonard Affidavit
That I am a male adult Ugandan of sound mind, the Town Clerk of the respondent herein and well conversant with the dispute at hand in which capacity I swear this Affidavit.
Tumusiime Leonard Affidavit
That the applicant did not complete the works in the agreed time coupled with other breaches of contract terms and the contract was terminated.
Tumusiime Leonard Affidavit
That I communicated to the applicant on 14th September 2017 the entitlements of the parties after termination and a letter is attached as Annexture A.”
- The Respondent’s letter evidence in the reply Affidavit reads as follows,
“It is recalled that we had an initial position to have an amicable disengagement with you the Contractor for the reference project as set out in the draft Memorandum of Understanding (MoU) – Annex A.
Please note that the following have transpired since then:
- Solicitor General’s guidance/approval was sought before the MoU would be enforced (Annex B);
- The MoU was declared by the Solicitor General as illegal and not enforceable (Annex C).”.
- The dispute resolution clause states as follows,
“General Conditions of Contract for the Procurement of Works
If the Contractor believes that a decision taken by the Project Manager was either outside the authority given to the Project Manager by the Contract or that the decision was wrongly taken, the decision shall be referred to any Adjudicator appointed under the contract within 14 days of the notification of the Project Manager’s decision.
25. Procedure for Disputes.
Unless otherwise specified in the SCC, the procedure for disputes shall be as specified in GCC 25.2 to 25.4.
Any Adjudicator appointed under the contract shall give a decision in writing within 28 days of receipt of a notification of a dispute, providing that he is in receipt of all the information required to give a decision.
Any Adjudicator appointed under the contract shall be paid by the hour at the rate specified in the SCC, together with reimbursable expenses of the types specified in the SCC, and the cost shall be divided equally between the Employer and Contractor, whatever decision is reached by the Adjudicator. Either party may refer a decision of the Adjudicator to an Arbitrator within 28 days of the Adjudicator’s written decision. If neither party refers the dispute to arbitration within the above 28 days, the Adjudicator’s decision will be final and binding.
Any arbitration shall be conducted in accordance with the Arbitration law of Uganda, or such other formal mechanism specified in the SCC, and in the place shown in the SCC.
Special Conditions of Contract
Clause Reference Special Conditions
GCC 25.1 The procedure for disputes
shall be as specified in GCC 25.2 to 25.4.
GCC 25.4 The arbitration shall be conducted in accordance with the Arbitration Law of Uganda.
Arbitration shall take place at: Kampala, Uganda
- The Respondent opposes the Application because: -
- the Applicant’s contract was lawfully terminated,
- there is no need to appoint either an adjudicator or arbitrator,
- the arbitration proceedings are too costly,
- the respondent cannot effectively take part in the arbitration proceedings because of long distances of travel to the arbitration venue unilaterally selected by the Applicant, and
- the Applicant has the liberty to litigate in Court, as a result of which counsel pledges the Respondent will not plead any jurisdiction point which bars the case from being considered by the courts.
- The common position of the mutual disengagement has not been attributed in particular to the Project Manager’s decision.
- This of necessity renders consideration of appointment of an adjudicator a moot point, and settles the objection in Para. 8.b) above.
- Clause 25 GCC sets out two types of arbitration.
The first is the GCC Clause 25.3 arbitration, which is the result of the agreed appeal forum from the adjudicator’s decision.
The second is “any arbitration” in GCC Clause 25.4, which applies to other disputes, which arise between the parties.
- That the parties signed the contract bearing the arbitration clause is not in dispute.
The Respondent was later advised the Solicitor General, had declared the contract “illegal and nor enforceable”.
- The Respondent did not venture to show that the Solicitor General’s declaration applied with equal force to the arbitration clause.
- It is instructive to note that the principles governing arbitration clauses are enshrined within the Arbitration and Conciliation Act, Cap.4 [hereafter referred to as the ACA].
The separability principle enshrined in Section 16(1)(a) ACA guarantees the world that the Republic of Uganda holds arbitration clauses, such as this instant one, which forms part of the construction contract shall be treated as an agreement independent of other terms of the contract.
The second consequential guarantee enshrined in Section 16(1)(b) ACA is that the decision by the arbitral tribunal that the contract is null and void shall not invalidate the arbitration clause.
The Respondent ought to have reinforced the Solicitor General’s determination as a bar to arbitration proceedings by securing Section 5(1) ACA court orders.
It seems to me that absence of Section 5 (1) ACA orders, prohibit me from considering that the Solicitor General’s declaration has impacted on the arbitration clause placed before me.
This therefore disposes of the objection raised in Para. 8.a) above.
- The objection as to cost and distance is inapplicable whilst considering the Section 11 ACA application such as this. These issues lie within the control of the parties under the party autonomy principle.
It is expected that the parties have instructed experienced counsel who are conversant with setting up an agreed cost framework so as to prevent the ad hoc determination of fees, which is beyond the parties control under Section 31(9) ACA.
For example, I am aware of instances where experienced counsel have even negotiated pro bono arbitration thereby forestalling reliance on Section 31(9) ACA.
In another instance counsel worked their way past geographical distances by resorting to online witness examination.
The same goes to venue, which is, exceptions arising, managed by the parties under Section 20(1) ACA.
In today’s world the internet is awash with free online lessons for counsel interested in cutting costs – for example the narrative provided by Mark Whittington and Cecelia H Morgan on Controlling Costs in Commercial Arbitrations recommends a carpet bombing cost control strategy (so to speak) which includes party controlling the structure of the award.
The American Arbitration Association website gives the top ten tips for cost reduction as follows:-
1. Pay Attention to Your Arbitration Clause
2. Select Attorneys Experienced in Arbitration
3. Request and Enforce Budgets
4. Choose an Arbitrator with Experience
5. Limit Discovery to What is Essential for the Arbitration
6. Participate in the Preliminary Hearing
7. Limit Motion Practice
8. Remain Open to Settlement
9. Trust the Expertise of the Arbitrator
10. Present the Case Efficiently and Professionally
The point is the world is now a fast learning board on how to resolve issues arising in the course of work, which if researched may have provided leads disposing of the need to raise the fears we have discussed in this part.
These conclusions dispose of the objections raised in Para.8.c)and Para.8.d) above.
- Respondent’s counsel expressed comfort if the reported dispute were instead litigated in Court.
Parties may well agree to revoke the arbitration clause. But this was not the evidence tabled before CADER. In any event, counsel’s discomfort with the arbitration tribunal cannot override the parties agreed arbitral clause.
This submission has the unintended consequence of painting the picture that Ugandan courts do not enforce arbitration agreements. This is far from the truth. The trend is courts on their own motion now investigate existence of dispute resolution clauses and straight away order compliance.
- Having found no merit in the objections, but rather in the Application, I shall proceed to appoint the arbitrator.
- The Applicant is granted costs of the Application.
Dated at Kampala on 16th March 2018.
JIMMY .M. MUYANJA