Recently, a friend of mine was in court and observed a litigant’s case thrown out because the dispute resolution clause under the contract that gave rise to her cause of action provided that disputes shall be resolved by arbitration conducted in New South Wales. As can be expected, the litigant was flabbergasted as she clearly did not know this nor understand how this came to be much less how to proceed next. Of course, the court in doing this was following the mandatory provision under Section 5 of the Arbitration and Conciliation Act Cap 4, which instructs judicial officers to stay judicial proceedings if there is a valid arbitration agreement between the parties. This made me wonder about the multitudes of people who do not understand arbitration but draft it in their contracts without realizing what it would mean in the event of a dispute.
Arbitration in Uganda is still a virgin area that has yet to be exhaustively explored as many people even after the passing of the Arbitration and Conciliation Act in 2006 are still not aware of its existence or practice. Many Ugandans therefore still choose to have their disputes resolved under litigation which is the primary method or other alternative dispute resolution mechanisms for example mediation and conciliation.
When drafting arbitration contracts or clauses for that matter, parties must first of all determine the location where the arbitration would be held as it can prove futile if arbitration is based in a country which parties cannot easily access due to a limitation in their finances. Each matter comes with different undertakings in regards to the costs and procedures which may be limiting for some litigants. This may cause some parties to abandon their matters because they cannot afford the arbitration process.
Arbitration in Uganda is governed by the Arbitration and Conciliation Act of 2006 and administered by the Center for Dispute Resolution (CADER). Fairly and recently in April, 2019, the International Centre for Arbitration and Mediation in Kampala (ICAMEK) was launched to supplement the existing institution so parties can choose to arbitrate under either institution.
Parties also have a wide array of choices at their disposal under which they can exercise their rights to arbitration. They can also opt for international centers especially when executing contracts with parties who are not resident in Uganda for example the International Chamber of Commerce Court of Arbitration Rules (ICC) rules, United Nations Commission on International Trade Law Arbitration Rules (UNICTRAL) Arbitration Rules of 2013 and many more.
Any awards given by these institutions can still be enforced under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards also known as the New York Convention which Uganda is signatory to.
The advantages of choosing arbitration as a dispute resolution mechanism are proven as it leads to a faster conclusion and resolution of disputes seeing as disputes are to be resolved within months, it can be administered in any country outside of the country where the subject matter of the dispute arose, arbitration is flexible as the proceedings are not controlled by statutory and legislative rules and parties are given the opportunity to determine their own rules that will apply to the arbitration and finally the right of appeal is limited as arbitral awards are final and binding. Parties also have the benefit of choosing a qualified individual with experience in the industry thereby providing a greater level of expertise than a normal judge to hear and determine their matter.
The drawbacks of choosing arbitration as a dispute resolution mechanism are however also grave and should give any litigant pause before embarking on the process. Arbitration can be expensive as the arbitrators chosen can command a high price for their services.
Furthermore, arbitral awards are final therefore leaving no room for appeal in case a party is dissatisfied with the award that has been granted. This is termed as the principle of finality which was created in order to prevent a multiplicity of pleadings and also to protect the discretion of the arbitrator. It implies that no higher instance or court in this matter will have the authority to review an arbitral award based on the merits of the case. Arbitral awards therefore cannot be challenged on substantive grounds in order to ensure that minimum standards of objectivity, fairness and justice of the arbitrator are maintained.
There are only a few instances under which parties can appeal an award that has been granted by arbitrator. An arbitral award can be challenged under Section 34 of the Arbitration Act and the grounds are violation of the parties’ instructions, the law and other procedural issues. Arbitral awards can therefore be challenged if they are not valid under the law or if the award was procured by corruption, fraud or undue means or if there was evident partiality on the part of the arbitrator.
It should be understood that it is not easy to challenge an arbitral award especially on grounds of partiality unless the parties have substantive proof of their claims. The courts are usually very hesitant to interfere in these matters because of the arbitrator’s discretion when it comes to making an award which must be protected at all costs. Courts have no right to re-examine the evidence that was placed before the arbitrator and which helped him or her make the decision that they did. (See Chevron Kenya Ltd Versus Daqare Transports Ltd HCMA No.490 of 2008)
Arbitration is still the preferred method for dispute resolution in commercial transactions because of their complexity. It is therefore important that the person in charge of resolving the dispute between the parties is someone well versed with the industry and practices from which the dispute arose as they can be better placed to understand with ease the origins and intricacies of the matter. It is very dangerous to choose an arbitrator who does not understand the complexity of the dispute as he or she may end up misinterpreting the law or worse ignoring it in favour of what he believes is right.
In conclusion therefore, arbitration is still a growing area of practice in Uganda and a lot of work has to be done before it can be effective. It is a very necessary dispute resolution mechanism and because of its benefits, it may be the best solution for the right parties and they should not hesitate to consider it as so. Parties should instead have sufficient information before undertaking it in order to avoid the down side of arbitration.
Disclaimer
This article provides general information only. It is not intended to provide advice with respect to any specific set of facts, nor is it intended to be relied on as legal advice.
About the Author;
Joanita Pauline Nanteza is a commercial lawyer and is an Associate with M/s TARA Advocates. For comments and inquiries contact her at joan@tadvocates.com or +256702966722 or for other services by the firm check out the firm’s website on www.tadvocates.com