Court name
Commercial Court of Uganda
Case number
Miscellaneous Application-2008/1
Judgment date
11 January 2008

Aya Investments (U) Ltd v Mugoya Construction & Engineering (U) Ltd (Miscellaneous Application-2008/1) [2008] UGCommC 3 (11 January 2008);

Cite this case
[2008] UGCommC 3

THE REPUBLIC OF UGANDA

 

THE CENTRE FOR ARBITRATION AND DISPUTE RESOLUTION

 

MISC. APPLICATION NO.1 OF 2008

(ARISING OUT OF MISC. CAUSE NO.12 OF 2007)

 

AYA INVESTMENTS (U) LTD …………………………………………….. APPLICANT

 

VERSUS

 

MUGOYA CONSTRUCTION & ENGINEERING (U) LTD ………….. RESPONDENT

 

RULING

 

The Applicant seeks orders that:-

 

  1.  The Appointing Authority lacks jurisdiction to entertain the matter, and
  2. Costs be provided in its favour.

 

The Application is brought under Section 16(2) and Rule 13, First Schedule Arbitration and Conciliation Act (A.C.A).

 

The background to this Application is as follows.  On 14th September 2006, the parties entered into a written agreement for the supply of wet concrete; I shall refer to this as the original contract.

 

The original contract has the following arbitration clause,

 

43. Arbitration.

Any dispute or claim arising out of or relating to this Agreement or the breach, termination or invalidity thereof which is not settled under the terms of Clause 43, shall be settled by arbitration in accordance with the Rules stipulated in Part II in force at the effective date of this Agreement.

 

The parties agree to comply with the awards resulting from arbitration and waive their rights to any form of appeal insofar as such waiver can validly be made.”

 

On 2nd February 2007 the parties entered into a new agreement – I shall refer to this as “the new agreement”.  The penultimate paragraph of the new agreement read as follows:-

 

The endorsement of these minutes represents a new arrangement between Aya Investments and Mugoya Construction.”.

 

Counsel Kamugisha Vincent submitted that it was immaterial that the new agreement was titled “minutes” because in essence it still is a contract between the parties.  The new agreement had no arbitration clause.  Therefore it would be improper to imply an arbitration clause to the new agreement.  The new agreement did not state that it was subject to any other existing contract.  In effect the new agreement extinguished the original contract.  For this reason, the Respondent erroneously referred the matter to arbitration, when it applied for the compulsory appointment of an arbitrator - Mugoya Construction & Engineering (U) Ltd v. Aya Investments Ltd, Arbitration Cause No.12 of 2007.

 

Counsel Kamugisha Vincent further submitted that, though the Applicant was required to file its statement of defence in Cader by 14th December 2007, it filed this Application on 11th December 2007, well before the submission of the Statement of Defence.

 

Counsel also submitted that, the Respondent was misconceived to depone it is the Affidavit in Reply deponed to by one Laban Roland Tendet Ndiema, that,

 

4.  That I am further advised by the respondent’s said advocates which advise I verily believe to be true that this Application lacks the locus stand (sic) as the decision of the centre for Arbitration and Dispute Resolution in appointing an Arbitrator is not challengeable and as such the application is in a wrong forum.

 

6.  That the Arbitrator in this matter was appointed well after the applicant had declined to consent to the request for appointment of an arbitrator and when it failed to appear and defend the application for the compulsory appointment of an arbitrator.

 

8.  That had the applicant been kin to challenge the Jurisdiction of the appointing authority, it ought to have done it so at the time when the application for the appointment of an Arbitrator was heard but only chose not to participate despite the fact that it was served with the proceedings.”

 

The law and proper procedure was not followed.  By this Counsel Kamugisha Vincent meant that the parties must submit themselves to arbitration, only when they have expressly consented.  Further in the event that the nominated arbitrator was not available, then the parties would have to come up with other nominations.  For this reason the Ruling delivered by CADER in Mugoya Construction & Engineering (U) Ltd v. Aya Investments Ltd, Arbitration Cause No.12 of 2007, was imposed on the Applicant.

 

To support the proposition that CADER can revisit it’s Ruling, Counsel Kamugisha Vincent relied on S.16(2) A.C.A, which reads as follows,

 

16 (2).

A plea that the arbitral tribunal does not have jurisdiction shall be raised not later than the submission of the statement of defence; but a party is not precluded from raising such a plea because he or she has appointed or participated in the appointment of an arbitrator.”

 

Counsel Vincent Kamugisha then argued in the alternative that it was not true that the applicant declined to consent to the request of the proposed arbitrator when approached.  The respondent and the Appointing Authority were formally notified in a letter served on the day when Misc. Application No. 12/2007 (by which he meant Mugoya Construction & Engineering (U) Ltd v. Aya Investments Ltd, Arbitration Cause No.12 of 2007 came up for hearing.  That the Applicant had no objection to the proposed arbitrator whom the respondent had specifically applied for.  So there was no lack of co-operation on the applicant’s part as alleged on the other hand the arbitrator imposed on it was different from the one agreed upon.

Respondent’s Counsel Oine Ronald submitted as follows.  He objected to Annexes A, B and C, which Counsel Kamugisha Vincent had attached to his written submissions.

 

He submitted that the entire application was null and void in law because S.16(2) and Rule 13 First Schedule, A.C.A., relate to the challenge of jurisdiction of the arbitral tribunal, which CADER is not.  CADER he submitted is only an appointing authority.  The Application was thus submitted before a wrong forum.

 

Counsel Oine Ronald, further submitted that if the application were right, then the subject matter was res judicata, given that S.11(5) A.C.A. provided that the decision of the appointing authority shall be final and not subject to appeal.  Therefore the statutory appointment of the arbitral tribunal by CADER was final and could not be challenged.

 

He observed that the Applicant was served with the proceedings for the compulsory appointment of an arbitrator, but it chose not to participate.  Thus the Applicant had no locus standi to challenge the compulsory appointment, given that it had failed to submit to the jurisdiction of the Appointing Authority.

 

He contested the Applicant’s submission that the new agreement extinguished the original contract because there were clear clauses on the termination of the contract.  It was impossible in light of the termination clauses to extinguish the contract by mere minutes. 

 

In any event, even if a contract were to be null and void, Counsel Oine Ronald submitted that the arbitration clause would still be independent of the contract.  Further that well after the termination of the original agreement, the Respondent filed an application in the High Court for interim protective orders, Mugoya Construction & Engineering (U) Ltd v. Aya Investments Ltd, High Court, Civil Division, Misc. Cause No.50/2007

 

The result of this Application was a Consent Order, issued by the High Court, which contained an undertaking to continue the arbitration proceedings.

 

Therefore CADER had to take judicial notice of this Court Order, it was submitted.  Moreover the Applicant had submitted to the arbitral process by filing the Statement of Defence and sending in various correspondences, which indicated they recognized the arbitral tribunal which was instituted by CADER.  This conduct clawed-back the essence of this Application.

 

In conclusion, the question whether or not the new agreement extinguished the original contract was a matter to be decided by the arbitrator.

 

In his brief reply, Mr. Kamugisha Vincent restated his written submissions.

 

To resolve this Application we have to take into account the flow of events, which I now proceed to outline below.

 

  1. On 14th September 2006 Aya Investments (U) Ltd and Mugoya Construction and Engineering (U) Ltd, signed the agreement for supply of wet concrete.

 

  1. On 2nd April 2007 Mugoya Construction & Engineering (U) Ltd sent the Notice for Reference to Arbitration giving Aya Investments Ltd, 48 hours from the date to concur in the appointment of the arbitrator.

 

  1. On 28th May 2007, the parties signed a Consent Order in Mugoya Construction & Engineering (U) Ltd v. Aya Investments (U) Ltd, High Court of Uganda, Civil Division, M.A. No.50/2007, dated 28th May 2007. 

 

  1. On 2nd October 2007 Mugoya Construction & Engineering (U) Ltd filed the Application Mugoya Construction & Engineering (U) Ltd v. Aya Investments (U) Ltd, No.12/2007, for the compulsory appointment of an arbitrator by CADER.

 

  1. 8th October 2007 was set as the date of hearing for the application for the compulsory appointment of an arbitrator.

 

  1. On 8th October 2007 the Applicant Mugoya Construction & Engineering (U) Ltd, was represented by Counsel Oine Ronald.  The respondent Aya Investments Ltd, was not represented by any party or Counsel.

 

  1. The record before CADER at the time of hearing the application consisted of:-
    1. The Chamber Summons Application.

 

  1. The Affidavit deponed by one Lwanga Gayira Asuman in favour of the Application.

 

  1. The Documents attached to the Lwanga’s Affidavit were,
    1. Annex A - Contract Agreement No. SC/06/003 dated 14th September 2006.
    2. Annex B – Schedule of Equipment on Hilton Kampala site.
    3. Annex C – Notice of termination of contract dated 2nd April 2007.
    4. Annex D- Notice of reference to arbitration dated 2nd April 2007.

                       

There was no Affidavit in Reply from the Respondent.

 

  1. The record indicates that hearing commenced at 2.24p.m., though the matter was set for 2.00p.m.  I delayed hearing to this time as we awaited the appearance of representatives for the Respondent, Aya Investments Ltd.  The Hearing commenced without any representatives appearing for Aya Investments Ltd.  The Applicant’s Counsel Mr. Oine Ronald, then applied to proceed ex parte, which prayer I granted.

 

  1. Sometime after the close of the hearing, a letter dated 8th October 2007 addressed to the Registrar CADER , was delivered to CADER.

 

  1. The ruling which was delivered on 10th October 2007.
  2. On 11th December 2007 Aya Investments Ltd filed the Chamber Summons seeking to rescind the decision to appoint an arbitrator, basing itself on the new agreement dated 2nd February 2007; this was attached as Annex B to the Affidavit sworn by Ester Semakula the Legal Officer and Administrator of the Applicant. 

 

  1. On 9th January 2008 Counsel Oine Ronald, in arguing this application, presented the Consent Order in Mugoya Construction & Engineering (U) Ltd [Applicant] v. Aya Investments (U) Ltd [Respondent], High Court of Uganda, Civil Division, M.A. No.50/2007, dated 28th May 2007. 

This Consent Order states in Para.2,

That all other issue and/or matters arising or connected thereto shall be determined in the arbitration already commenced by the Applicant.

           

The signatories to this Consent Order are Ronald Oine for the Applicant and Vincent Kamugisha for the Respondent.  When the Consent Order was presented during the hearing, Applicant Counsel’s did not make any submission regarding the same.

 

Ground 1 of the Application states that “The Appointing Authority lacks jurisdiction to entertain the matter”.

 

The emphatic point is that the new agreement had no arbitration clause.

 

Esther Semakula’s Affidavit reads in part as follows,

 

“5. That the new agreement arrived at in the meeting on 02/02/3007 never had an arbitration clause and therefore any decision to refer any matter arising out of it had to be consensual.

 

6.  That since no such consent was ever sought and/or obtained from the Applicant, the application and the appointment of an arbitrator were premature and the applicant does not submit to the proceedings.

 

8. That I affirm in support of the applicant’s application challenging the Appointing Authority’s jurisdiction in the matter.”

 

The written submission by Counsel Kamugisha Vincent reads in part as follows,

 

“In the premises, the arbitral tribunal was misled on its jurisdiction in the matter because the parties’ new contract never had any clause which could remotely be referred to, as falling under S. 3(4) Arbitration and Conciliation Act.  The appointing authority therefore has no locus in absence of the applicant’s consent and or submission to arbitration.  Consequently the proceedings are invalid for want of jurisdiction.

 

It is our humble submission that the arbitral tribunal/appointing authority disqualifies itself from entertaining the matter for want of jurisdiction principally due to lack of an arbitration agreement between the parties, and pray for costs to the applicant.” (emphasis mine).

 

There appears to be confusion as to which entity is vested with jurisdiction to entertain an application for the compulsory appointment of an arbitrator.  There is also some confusion as to whether CADER is distinct from the arbitral tribunal.  This is seen in the conflict reflected within the written submissions and Esther Semakula’s Affidavit.

 

The Affidavit refers to the appointing authority.  The written submissions refer in one instance to the appointing authority.  In another instance they refer to the arbitral tribunal and appointing authority synonymously.  Thus the written submissions are in conflict with the Affidavit. 

The confusion seems to recur in the written submissions, where it is stated that the “applicant according to the schedule of proceedings, was required to file its statement of defence in Cader by 14/12/2007 and this application was filed on 11/12/2007 which is before the submission of the statement of defence…”.  

 

Counsel Kamugisha Vincent concluded by praying that the arbitral tribunal/appointing authority disqualifies itself from entertaining the matter for want of jurisdiction principally due to lack of an arbitration agreement between the parties and prayed for costs.

 

The A.C.A is drawn to a large extent from the UNCITRAL Model Law on International Commercial Arbitration - United Nations document A/40/17, Annex I - as adopted by the United Nations Commission on International Trade Law on 21 June 1985.  I shall refer to it hereafter as the Model Arbitration Law. 

 

It is available on the internet address http://www.uncitral.org/pdf/english/texts/arbitration/ml-arb/06-54671_E….

 

Article 6 Model Arbitration Law states as follows,

“Article 6. Court or other authority for certain functions of arbitration assistance and supervision

The functions referred to in articles 11(3), 11(4), 13(3), 14, 16(3) and 34(2) shall be performed by ... [Each State enacting this model law specifies the court, courts or, where referred to therein, other authority competent to perform these functions.]”.

 

Article 6 Model Arbitration Law, thus left it to the adapting country to designate such entities as it deemed fit to perform the functions in the target Articles 11(3), 11(4), 13(3), 14, 16(3) and 34(2).

 

 

Uganda in adapting the 1985 Model Arbitration Law, designated the Article 6 roles as follows:-

 

 

UNCITRAL Model Law on International Commercial Arbitration 1985

Art.11(3)

Compulsory Appointment of Arbitrators upon Party Failure to Appoint

Art.11(4)

Compulsory Appointment of Arbitrators upon Procedural Failure to Appoint

Art.13(3)

Challenge of Arbitrator upon Appointment

Art.14

Challenge of Arbitrator for Failure or Impossibility to perform functions

Art.16(3)

Challenge of Arbitral Tribunal on preliminary assumption of Jurisdiction

Art.34(2)

Setting Aside

Uganda

Chapter 4 Laws of Uganda

S.11(2)

CADER – S.68(a)

&

Appointing Authority

S.11(4)

CADER – S.68(a)

&

Appointing Authority

S.13(2)

CADER – S.68(a)

&

Appointing Authority

S.14

CADER

S.16

High Court

S.34(2)

High Court

 

 

This tabulation shows that Uganda did exercise its mind to the issue of division of labour which was suggested by Article 6, Model Law on International Commercial Arbitration, by specifically mentioning other entities in addition to the Courts.

 

Under the Article 6 dispensation, the A.C.A creates three entities, charged with responsibility for administering various the Article 6 Model Arbitration Law functions in Uganda.  These are CADER, the Courts, and the Appointing Authorities sanctioned by the Minister.

 

The roles of the arbitral tribunal laid out in Articles 13, 16, 19-20, 22-33, and 34(4) Model Arbitration Law were not tinkered with by the Ugandan legislature.  Article 17 was supplemented upon by the Ugandan legislature.

The explanatory note by the UNCITRAL Secretariat on the Model Law on International Commercial Arbitration has the following background notes which shed some light on the provisions tabulated and elaborated above, as follows:-

 

“b. Delimitation of court assistance and supervision

14. As evidenced by recent amendments to arbitration laws, there exists a trend in favour of limiting court involvement in international commercial arbitration. This seems justified in view of the fact that the parties to an arbitration agreement make a conscious decision to exclude court jurisdiction and, in particular in commercial cases, prefer expediency and finality to protracted battles in court.

15. In this spirit, the Model Law envisages court involvement in the following instances. A first group comprises appointment, challenge and termination of the mandate of an arbitrator (articles 11, 13 and 14), jurisdiction of the arbitral tribunal (article 16) and setting aside of the arbitral award (article 34). These instances are listed in article 6 as functions which should be entrusted, for the sake of centralization, specialization and acceleration, to a specially designated court or, as regards articles 11, 13 and 14, possibly to another authority (e.g. arbitral institution, chamber of commerce). A second group comprises court assistance in taking evidence (article 27), recognition of the arbitration agreement, including its compatibility with court-ordered interim measures of protection (articles 8 and 9), and recognition and enforcement of arbitral awards (articles 35 and 36). (emphasis mine).”

 

S.16(2) A.C.A which the Applicant has relied upon is a duo-provision which enables any aggrieved party to raise the question of want of jurisdiction on the part of the arbitral tribunal  no later than submission of the statement of defence.  It further enables the aggrieved party to raise this challenge by assuring the aggrieved party that participation in the appointment of an arbitrator does not preclude it from raising the challenge.

 

The A.C.A distinctly defines appointing authority and arbitral tribunal, as follows:-

 

S.2(a) “appointing authority” means an institution, body or person appointed by the Minister to perform the functions of appointing arbitrators and conciliators;

 

S.2(e) “arbitral tribunal” means a sole arbitrator or a panel of arbitrators, and includes an umpire;”

 

It is only an arbitral tribunal which is vested with jurisdiction to entertain a jurisdiction challenge under S.16(2) A.C.A.

 

It is also not true to state that the statement of defence was filed in Cader, rather pursuant to the schedule of proceedings issued by the arbitrator, it was filed before the arbitral tribunal.

 

It was therefore erroneous for the Applicant’s counsel to file an application under S.16(2) A.C.A., before CADER, in the mistaken belief that this provision vested CADER with the power to revisit a Ruling delivered under S.11 A.C.A.

 

The S.11 A.C.A. jurisdiction is exercised whenever,

  1. the parties fail to agree on the arbitrator [S.11(3)(b) A.C.A.],
  2. the parties fail to act under the agreed procedure [S.11(4)(a) A.C.A.],
  3. the parties or arbitrator fail to reach the agreement expected of them under the procedure [S.11(4)(b) A.C.A], or
  4. a third party or institutions fails to perform the functions vested in it by the agreed procedure [S.11(4)(c) A.C.A].

 

Whichever is the case, a party’s failure to effect the appointment of an arbitrator is what the compulsory appointment provision in S.11 A.C.A seeks to cure.  The application will not be successful when the opposing party proves that the arbitration agreement has been revoked by the parties, later legislation renders arbitration of the subject matter illegal, or other justifiable circumstances exist.

 

Counsel Kamugisha Vincent submitted that since execution of the new agreement, “[t]he appointing authority therefore had no locus in absence of the applicant’s consent and or submission to arbitration”.   In effect S.11 A.C.A, powers were wrongly invoked by CADER, because the consent was not sought from the Respondent Aya Investments (U) Ltd.

 

Appointing authorities are obligated by S.11(6) A.C.A to take into account the qualifications set out by the parties and other considerations which will secure the appointment of an independent and impartial arbitrator.    There is no provision in the A.C.A which stipulates that the consent of all the parties is required before CADER can effect compulsory appointment of an arbitrator.

 

I now turn to consider the alternative argument that it is not true that the applicant had declined to consent to the appointment of an arbitrator when approached.

 

Event No.2 shows that the Notice of Reference to arbitration required Aya Investments Ltd to respond within 48 hours, from the date of the communication 2nd April 2007, by confirming either of the proposed nominees.  There was no evidence of response by Aya Investments, within the proposed 48 hours, in Mugoya Construction & Engineering (U) Ltd v. Aya Investments (U) Ltd, CADER CADER Arb. Cause No.12/2007

 

The letter dated 8th October 2007, which Counsel Kamugisha Vincent, has relied upon in the alternative in his submissions, to evidence the fact that the Applicant did agree to the nomination and appointment of Mr. Precious Ngabirano was written 189 days the stipulated 48 hours deadline which Mugoya Construction & Engineering (U) Ltd had stipulated.

 

It should be noted that the arbitration clause set out in Clause 43 of the original contract, does not indicate the number of arbitrators.

 

Therefore under S.10(1) A.C.A, the arbitral tribunal shall be constituted on a one-person panel, until the parties agree otherwise.

 

The implication of this is that Mugoya Construction & Engineering (U) Ltd, was well within it’s rights to lodge the application from the 5th April 2007, after the 48 hours notice had expired.

 

Mugoya Construction & Engineering (U) Ltd v. Aya Investments (U) Ltd, CADER Arb. Cause No.12/2007, was lodged by Mugoya Construction & Engineering (U) Ltd on 8th October 2007, 185 days after the 48 hour deadline had expired.

 

In the case of appointment of a three-person arbitral tribunal, the application for the compulsory appointment of an arbitrator can only be lodged after the expiry of 30 days – S.11(3)(a) A.C.A.

 

Therefore CADER must take into account the statutory passage of time, whenever dealing with applications for the compulsory appointment of arbitrators.  Whenever one arbitrator is to be appointed, CADER need only consider the deadline, set by the Applicant, if any.  In the absence of a deadline being set, the Applicant is nevertheless still free to apply to CADER, given the absence of a statutory time line within which the recalcitrant party must respond positively to the appointment of an arbitrator.

 

Therefore the silence by Aya Investments (U) Ltd to respond to the Reference to Arbitration dated 2nd April 2007 (Annex D – Lwanga Gayira Asuman Affidavit Mugoya Construction & Engineering (U) Ltd v. Aya Investments (U) Ltd, CADER Arb. Cause No.12/2007) precluded it since 5th April 2007 from stating that it had complied with the requirement to participate in the appointment of an arbitrator.

 

Once the Application Mugoya Construction & Engineering (U) Ltd v. Aya Investments (U) Ltd, CADER Arb. Cause No.12/2007, was lodged on 8th October 2007, Aya Investments (U) Ltd was under obligation to reply by Affidavit.  CADER in considering Mugoya Construction & Engineering (U) Ltd v. Aya Investments (U) Ltd, CADER Arb. Cause No.12/2007, could only rely on the Affidavit evidence before it.

 

Counsel for Mugoya Construction & Engineering (U) Ltd, seems not to have been aware of the Aya Investments (U) Ltd communication dated 8th October 2007, otherwise he would not have appeared before CADER, neither would he have prayed to proceed ex parte.

Indeed the Flow of Events 5-6 indicate that at the time of the hearing this communication was not available the file Mugoya Construction & Engineering (U) Ltd v. Aya Investments (U) Ltd, CADER Arb. Cause No.12/2007. Moreover this communication is not the main basis of this application.  It is not in Esther Semakula’s Affidavit in support of the Application.  Aya Investments (U) Ltd also did not exploit the opportunity to refer to this communication by filing an Affidavit in Rejoinder to that deponed by Laban Roland Tendet Ndiema for the Respondent in this Application.  This is the communication which Counsel Oine Ronald objected to as submission of evidence from the Bar, without legal basis; the same would have been proper if submitted through any Affidavit presented by the Applicant.

 

Esther Semakula’s Affidavit evidences the new agreement dated 2nd February 2007, which bears no arbitration clause.  It is this Agreement which Counsel Kamugisha Vincent submitted extinguished the original agreement.  Consequently, this renders CADER’s decision on 10th October 2007 in Mugoya Construction & Engineering (U) Ltd v. Aya Investments (U) Ltd, CADER Arb. Cause No.12/2007, null and void, because there was no arbitration agreement; hence the prayer in this Application to vacate the Ruling decision.

 

Assuming for a moment that this is correct then, this Application is in essence an appeal against the Ruling delivered in Mugoya Construction & Engineering (U) Ltd v. Aya Investments (U) Ltd, CADER Arb. Cause No.12/2007.  The grounds raised here, are such grounds it may be argued, on the assumption they were tenable, which ought to have been raised in opposing Mugoya Construction & Engineering (U) Ltd v. Aya Investments (U) Ltd, CADER Arb. Cause No.12/2007.

 

An appeal or review in the simplest definition in English is a second judicial re-examination of a prior decision.

 

I deem this Application an attempt to appeal, because in essence it implores CADER to revisit the Ruling by granting the Order sought that it had no jurisdiction to entertain the matter.

 

S.11(5) A.C.A  states that,

 

“A decision of the appointing authority in respect of a matter under subsection (3) or (4) shall be final and not subject to appeal.”

 

Therefore S.11(5) A.C.A precludes any person or institution from revisiting in any manner the Ruling delivered on 10th October 2007.

 

Can it be held that the new agreement extinguished the original contract?  If yes, did the new agreement also extinguish the arbitration agreement.  Suffice it to say that when the Application Mugoya Construction & Engineering (U) Ltd v. Aya Investments Ltd, Arbitration Cause No.12 of 2007, was lodged before CADER, the original agreement with the arbitration clause was presented.  If the arbitration agreement had been amended or revoked this should have been proved then, which was not the case.

 

It is common ground that an arbitration clause is distinct and separate from the rest of the body of the contract.

 

The distinct nature of an arbitration agreement is set out as follows by the A.C.A:-

 

“S.3(1) An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement.

 

S.16(1)(a) an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the agreement; and (emphasis mine).

 

S.16(1)(b) a decision by the arbitral tribunal that the contract is null and void shall not invalidate the arbitration clause.”

 

Again the UNCITRAL Secretariat on the Model Law on International Commercial Arbitration, explanatory note, sheds some light on separability, as follows:-

 

4. Jurisdiction of arbitral tribunal

a. Competence to rule on own jurisdiction

24. Article 16(1) adopts the two important (not yet generally recognized) principles of "Kompetenz-Kompetenz" and of separability or autonomy of the arbitration clause. The arbitral tribunal may rule on its own jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement. For that purpose, an arbitration clause shall be treated as an agreement independent of the other terms of the contract, and a decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause. (emphasis mine).

 

To this extent the A.C.A is very explicit that an arbitration agreement is severable from the body of the rest of the contract.

 

The severability is fortified by the limited grounds for challenging an arbitration clause which are set out in S.5(a)-(b) A.C.A.

 

What the Applicant should have proved here is that the amendment revoked the arbitration agreement.  Instead what was proved was that there was the new agreement overriding the entire body of the original agreement, so to speak; there was nothing in the new agreement which mentioned revocation of the arbitration agreement.  This revocation of the arbitration agreement is what should have been proved in Mugoya Construction & Engineering (U) Ltd v. Aya Investments Ltd, Arbitration Cause No.12 of 2007.

 

I have considered all grounds presented in support of this Application.  None of them has merit.  In addition I also hold that the subject matter of this Application is res judicata.

 

In the circumstances I dismiss the application with costs awarded to the Respondent.

 

The misconstrued provisions in this Application leave one suspecting that there was an intention to bilk the Applicant. 

 

Under the Advocates (Professional Conduct) Regulations S.I.267-2, advocates in Uganda, are bound to:-

 

  1. advise their clients in their best interest, and not to recklessly continue any litigation [Regulation 12];
  2. desist from exploiting the inexperience or lack of understanding on the part of their clients for their own personal benefit [Regulation 11]; or
  3. not knowingly breach the terms of any undertaking [Regulation 14(b)].

 

The Mugoya Construction & Engineering (U) Ltd v. Aya Investments Ltd, High Court, Civil Division, Misc. Cause No.50/2007, Consent Order, being a position of law ought to have been presented by the Applicant as an existing fact.  If Para.2 of the Consent Order were a new arbitration agreement, it would be an undertaking by the Counsel for the Applicant, that his client would proceed to arbitration.  Aitken v. Batchelor, L.T, Vol. LXVIII, 530 has long resolved the conundrum whether a consent order signed in court by counsel for the parties can constitute and arbitration agreement binding the parties.  By Regulations 11 and 12, Applicant’s Counsel is obligated to advise the client on the niceties of distinct jurisdiction of CADER and the arbitral tribunal.

 

 

Delivered at Kampala on the 11th day of January 2008.

 

 

…………………………………………………………

Jimmy Muyanja – EXECUTIVE DIRECTOR