Court name
Commercial Court of Uganda
Judgment date
11 November 2008

Uganda Telecom Ltd v Rodrigo Chacon t/a Andes Alpes Trading (Miscellaneous Application-2008/337) [2008] UGCommC 77 (11 November 2008);

Cite this case
[2008] UGCommC 77


THE REPUBLIC OF UGANDA

IN THE HIGH COURT OF UGANDA AT KAMPALA

[COMMERCIAL COURT]

MISC. APPLICATION 337/08

(Arising out of H.C.C.S No. 644/07)

UGA

NDA TELECOM LTD::::::::::::::::::::APPLICANT /DEFNDANT

VERSUS

RODRIGO CHACON t/a ANDES
ALPES TRAD
ING::::::::::::RESPONDENT/PLAINTIFF


 

BEFORE: HON LADY JUSTICE M.S ARACH-AMOKO

Ruling
This is an application by chamber summons under O.9 r 3(1)(g) and 2 of the CPR and S. 98 of the CPA for orders declaring that:
1)      
This honorable court has no jurisdiction over the Defendant in respect of the subject matter of the claim in H.C.C.S No. 644 of 2007.
2)       H.C.C.S No. 644 of 2007 be dismissed with costs.
3)       Costs of the application be provided for.

The grounds of the application are set out in the affidavits of Donald Nyakairu and Prossy Kembabazi, the applicant’s legal officers but briefly are that in the agreement which is the subject matter of the suit, the parties chose the exclusive jurisdiction of the English Courts. This court has no jurisdiction to adjudicate over it. The suit should be dismissed with costs.

The respondent opposed the application and relied on the affidavits of David Sempala and Caesar Obonyo his Advocates. Oral arguments were made before me by Peter Kawuma and Mulema Mukasa on behalf of the applicant and respondent respectively. Several authorities were also cited to me which I have found extremely useful in reaching my conclusion in this matter.

The applicant based its application in Order 9 rule 3(1) (g) of the C.P.R which provides that a defendant who wishes to dispute the jurisdiction of the court, may apply to the court for:-
“(g) a declaration that in the circumstances of the case, the court has no jurisdiction over the defendant in respect of the subject matter of the claim or relief or remedy sought in the action”

Jurisdiction is defined in Mulla’s on the Code of Civil Procedure 14th edition at page 225 in the following words:-
“By jurisdiction is meant the authority which a court has to decide matters that are litigated before or to congnisance of matters presented in a formal way for its decision. The limits of this statute, charter or commission under which the court is instituted and may be extended or restricted by like means. If no restriction or limits is imposed the jurisdiction is unlimited”.

The jurisdiction of the High Court is found in article 139(1) of the Constitution which reads:-
“139. Jurisdiction of the High Court
1)      

The High Court shall subject to the provisions of this constitution, have unlimited original jurisdiction in all matters and such appellate jurisdiction as may be conferred on it by this Constitution or other law”
 
This article is repeated verbatim in section 14(1) of the Judicature Act (Cap 13).

Quite often, parties to a contract stipulate in their contract what law should apply and the forum for litigation in case of a dispute. Halsbury’s Laws of England 3rd edition, Vol 7 page 73 states that:-

“138. Law Chosen by parties.
Where the parties expressly stipulate that the contract shall be governed by a particular law, that law will be the proper law of contract, provided the selection is bona fide and there is no objection on the ground of public policy”

The same author states at page 75 that:-
but a stipulation that the parties agree to be bound in all things by the jurisdiction and decision of the courts of a particular country has been held decisive.

The cases referred to in that paragraph under (U) are Royal Exchange Assurance Corporation-vs-Sjotorsakrings Aktiebolaget Vega [1902] 2 KB 384, and C.A at p. 394 and Kirchener & Co-Vs-Gruban [1909], ch.413.
 


The position in the United States is given in a text book entiled International Business Law And Its Environment 5th edition by Richard Schaffer, Beverly Earle and Filiberto Agusti page 81-83.

Historically, any attempt by private parties to control or oust jurisdiction was viewed with hostility by the Courts as an attempt to usurp their authority. The realities of the international market place, however, and the recognition of the importance of reducing uncertainty, and thereby lessening risk and cost, have persuaded many courts to accept choice of law and forum clauses. The choice of forum clauses fix in advance where a case will be heard, thus reducing the forum shopping by parties lawyers. Choice of law clauses stipulates in advance what law the parties have selected to apply to the transaction.

Choice of law clauses are another way parties attempt to fix in advance and control the laws that are applied to the dispute. In general, at common law and in many civil law jurisdictions, the choice of law is upheld as long as “a reasonable relation” between the transaction and the jurisdiction can be made”.

The learned authors give the case of Bremen –vs- Zapata Off-Shore Co. 407 U.S.1(1972) as an illustration of the U.S. Supreme Court view on a choice of forum clause at p. 85. In that case, in 1967, Zapata, a Houston based corporation entered into a contract with Unterweser, a German Corporation, to tow Zapata’s drilling rig from Louisiana to Ravena, Italy. The contract the parties signed contained the clause
“Any dispute arising must be heard before the London Court of Justice”.

During a storm, the rig was damaged, and Zapata instructed Unterwesser’s tug, the Bremen, to tow instead to Tampa, Florida, the nearest port. Immediately Zapata filed a suit in the federal district court in Tampa, Florida on the basis of the admiralty jurisdiction seeking damages against Unterwesser and Bremen.

Unterweser moved to dismiss the suit for lack of jurisdiction on the basis of the forum clause. The US district court and the Court of Appeals denied the motion and allowed the case to proceed in the U.S despite the forum selection clause. Unterwesser petitioned the Supreme Court. The Supreme Court vacated the Court of Appeal’s judgment stating that:

Forum-selection clauses have historically not been favoured by American courts. Many courts, federal and state, have declined to enforce such clauses on the ground that they werecontrary to public policy”, or that their effect was to “oust the jurisdiction “of the court. Although this view apparently still has considerable acceptance, other courts are tending to adopt a more hospitable attitude toward forum-selection clauses. This view, advanced in the well-reasoned dissenting opinion in the instant case, is that such clauses are prima facie valid and should be enforced unless enforcement is shown by the resisting party to be ”unreasonable” under the circumstances. We believe this is the correct doctrine to be followed by federal district courts sitting in admiralty.

This approach is substantially what is followed in other common-law countries including England. It is the view advanced by noted scholars and that adopted by the Restatement of the Conflict of Laws. It accords with ancient concepts of freedom of contract and reflects an appreciation of the expanding horizons of American contractors who seek business in all parts of the world….The choice of that forum was made in an arm’s length negotiation by experienced and sophisticated businessmen, and absent some compelling and countervailing reason it should be honoured by the parties and enforced by the courts.

The elimination of all such uncertainties by agreeing in advance on a forum acceptable to both parties is an indispensable element in international trade, commerce, and contracting. There is strong evidence that the forum clause was a vital part of the agreement, and it would be unrealistic to think that the parties did not conduct their negations, including fixing the monetary terms, with the consequences of the forum clause figuring prominently in their calculations.

Thus, in the light of present-day commercial realities and expanding international trade we conclude that the forum clause should control absent a strong showing that it should be set aside. ….
………………………………………..

The correct approach would have been to enforce the, forum clause specifically unless Zapata could clearly show that enforcement would be unreasonable and unjust or that the clause was invalid for such reasons as fraud or overreaching. Accordingly, the case must be remanded for reconsideration.”

In their comments at page 86, the learned authors stated thus:
“The Court noted the possible reasons that a forum selection clause could be unenforceable: (1) if it contravenes strong public policy and (2) if the forum is seriously inconvenient. The reasons still hold today. Other reasons forum selection clauses may be ignored by the courts are because the parties are of an unequal bargaining power, counsel was not consulted, the clause was written in a foreign language, the clause violates federal law, changed circumstances such as hostility between the forum site and the party’s country. Many other countries also support the validity of forum selection clauses, including Austria, England, France, Germany, Italy and many Latin American and Scandinavian countries”

The authority aforementioned may not be binding on this court, but I find it relevant and it is persuasive.

Here in Uganda, the Court of Appeal has given us clear guideline in the case of Larco Concrete Products Ltd-vs-Transair Ltd reported in [1987] and [1988-90] HCB at page 40 and 80, respectively, cited by both learned counsels.

In that case, the contract was for hire of the appellant’s aircraft. It was drafted and signed in England with the clause that “This agreement shall be governed and construed in accordance with the English Law and each of the parties hereby irrevocably submits to the non exclusive jurisdiction of the High Court of England………

The aircraft was delivered to Uganda. Unfortunately, it crashed in Moyo, in Northern Uganda. The appellant sued the respondent in the High Court for damages for negligence and breach of contract.

The main issue was what construction to place on the phrase “non – exclusive jurisdiction of the High Court of England”

It was contended on behalf of the respondent in the lower court as well as on appeal that the word ”non” was a slip of the pen and that it was superfluous and introduced a contradiction and absurdity and should be ignored. It was also the respondent’s submission that the intention of the parties was to confer exclusive jurisdiction to the High Court of England, and therefore the High Court of Uganda has no jurisdiction.

On behalf of the appellant it was submitted that the inclusion of the word “non” in the contentious clause was not a slip of the pen but a deliberate intention of the parties because the agreement was drafted by eminent solicitors. That the word “non” introduced no absurdity or inconsistency in the document since the parties intended to ensure that the High Court of England would always have alternative jurisdiction to entertain actions arising out of the agreement. That in construing words in a document they must be given their natural and ordinary meaning and that if that is done the word “non exclusive” could not be said to confer “exclusive jurisdiction” to the High Court of England to the exclusion of the High Court of Uganda which otherwise had jurisdiction to entertain the suit.

The trial judge decided that the clause in the agreement ousted the jurisdiction of the High Court of Uganda or any court other than the High Court of England in that matter.

On appeal, the Court of Appeal allowed the appeal and held that:
“(1) Section 3 of the Judicature Act, 1967 provides that the High Court, in its Civil and criminal jurisdiction has power over all persons and over all causes and matter in Uganda. Inspite of the fact that the contract was made in England that alone could not oust the jurisdiction of the High Court unless it has been stipulated in the agreement to that effect in no uncertain terms.
 

2. The contentious clause properly looked at, the jurisdiction of the High Court of England did not completely oust the jurisdiction of other countries in which the agreement was to be performed”

In the [1987] edition, holding No. 2 and 3 read:
“2. The law governing the contract is not a decisive factor in determining whether a particular court has or should exercise jurisdiction to entertain disputes arising out of the contract. What matters is whether the parties have unequivocally submitted to the jurisdiction of a foreign court and whether it is proper and just for the court where the proceedings are brought to entertain the action.
 

3. The High Court jealously guards its jurisdiction and therefore any instrument purporting to oust its jurisdiction must do so in clear and uncertain terms. Even where they have conferred exclusive jurisdiction to a foreign court, the High Court has a discretion whether or not to order a stay of action”

In the case before me, under clause 10 on which the application is based, the parties agreed as follows:
“10. Constrain of Agreement
This agreement shall be construed according to English Law and subject to the exclusive jurisdiction of the English Courts

This clause is clear and certain. Under this clause the parties have not only chosen English law to govern their agreement, but have unequivocally submitted to the exclusive jurisdiction of the English Courts.

In the circumstance, I agree with Mr. Nyakairu that the High Court of Uganda has no jurisdiction to adjudicate this dispute, the parties having chosen the exclusive jurisdiction of the English Courts. The fact that the agreement was negotiated, performed and possibly breached in Uganda is immaterial, according to the authorities referred to herein. The case of Sebagala Electronic Centre-vs-Kenya National shipping Lines reported in (1997-01) Uganda Commercial Law Reports page 389, relied on by the respondent is also not applicable. The contract did not contain a clause similar to the one in this case.

The fact that the applicant has filed a written statement of defence is also not material. Order 9 rule 3(5) provides that:
“(5) A defendant who makes an application under sub-rule (1) of this rule shall not be treated as having submitted to the jurisdiction of the court by reason of his or her having filed a defence; and if the court makes no order on the application or dismisses it, the notice shall cease to have effect and in that case, sub-rule 6 of this rule shall apply as if the defendant has not made any such application”

Frankly, I do not see any wisdom of including such a clause in such a contract or economic sense in taking this case to the High Court of England considering the costs that are likely to be incurred by the parties in litigating. There are competent Courts in Uganda to handle such disputes. The agreement was performed in Uganda and most likely the witnesses would be from Uganda. The applicant has not indicated in its application either by affidavit or otherwise, that it will be prejudiced or is will suffer some form of injustice if this case if heard in Uganda. Nevertheless I would like to believe that the applicant’s counsel is acting on the instructions of his client in making this application and is prepared to foot the bill.

In conclusion, however, giving the words in clause 10 of the agreement their natural and ordinary meaning, and in the absence of any reason why the clause should be set aside, I hold that the clause has ousted the jurisdiction of this Court. I accordingly grant the application as prayed, and dismiss the suit, with costs to the applicant.

…………………………………
M.S Arach-Amoko
Judge
12/11/2008.

Ruling delivered in the presence of:
1)      

Mr Mulema for Respondent
2)       Okuni chrles court Clerk.

Absent: Counsel for Applicant and parties.

……………………………
M.S Arach-Amoko
Judge
12/11/2008.