WHY TANZANIA NEEDS A NEW ARBITRATION LAW: VOLUME II; AREAS OF REFORMS

• The 85 year old law needs desperate revision and possibly repealing.
• The rules of evidence, injunctive reliefs and other technical issues need to correspond to the current prevailing international commercial arbitration standards/models.
• Court interference factor needs to be specifically minimized to achieve the objective of “alternative dispute resolution”.
• A look into celebrated literature and instruments on international commercial arbitration on the lex arbitri (law of the place of arbitration) concept.
  

1. 0 Introduction

In the previous volume (Volume I) to this Article, our experts in Litigation and Arbitration underscored the base argument for the overhaul of the Arbitration Law in Tanzania.  We outlined, albeit briefly, the manner in which the said Act is outdated. But even in the subtlest hint of presumptiveness, we would not begin to suggest an overhaul of the law, if there were no actual changes or factors which have come to be, in between the enactment date and the current date.

Now with the awareness of a multitude of new principles, concepts and practices in arbitration law worldwide, and having traversed through the past 25 years of a visible revolution in arbitration practice globally, there arises issues which are alien to our law but prominent to the actual international commercial arbitration practice in the world. We, as a country venturing into international trade competitiveness, have no option than play catch-up with the supposedly, best arbitration practices in the world to matter, and to actually have a say in the commercial world.

Herein below, Breakthrough Attorneys’ arbitration experts endeavor to summarily pinpoint a few areas, certainly not exhaustive, of the factors and matters which should take the center stage in our proposal for the review of the law on arbitration in Tanzania.

2.0 What issues needs to be addressed by the Arbitration law, if reviewed

2.1 Pre-Arbitration Requirements, Waivers etc.

As the modern arbitration proceedings go, these are necessary procedures that parties may put as a buffer before embarking to actual arbitration proceedings. The aim may be to actually try and avoid costly arbitration proceedings. In comparison, the Kenyan Arbitration Act (See Section 5) features this aspect and it helps in sieving out unnecessary vexatious and frivolous claims or mediating the same. It states;-

“A party who knows that any provision of this Act from which the parties may derogate or any requirement under the arbitration agreement has not been complied with and yet proceeds with the arbitration without stating his objection to such non-compliance without undue delay or, if a time limit is prescribed, within such period of time, is deemed to have waived the right to object.”

The relevance here is that the law will provide a legal backing and framework of pre-arbitration matters such as notices, appointment etiquettes, negotiations rules, interim orders and conciliation if any and related matters. In contrast to what is on the ground, drawing reference from a heavily contentious dispute as regards to pre-arbitration procedures, the High Court of Tanzania^[1] had to use discretion rather than law.

On the side of the international law on arbitration this feature has grown so much that other institutions have even created special pre-arbitration procedural rules, such as the ICC’s “Pre-Arbitral Referee Procedure”^[2]in place.

2.2 Arbitrators’ Qualifications, Experience and conduct

It is largely known that considering Arbitrator’s qualifications and experience should be the parties’ autonomy in action. The Kenyan Act is largely applauded for recognizing this fact as the majority of the sections begin with “Unless otherwise agreed by the parties…” However not many countries’ statutes have embodied terms regarding qualifications of the arbitrators. Likewise, the terms may only be found in institutional arbitrations and never in ad-hoc arbitrations. In order to advocate, foster and strengthen the practice, the Tanzanian laws can be coached in a manner that lays out basic qualifications of people who can qualify as arbitrators. As it is largely a technical field, it is a shame for the same to be wildly overseen by non-technical persons.

Tanzanian institutional rules though, such the Tanzania Institute of Arbitrators Rules and The National Construction Council Arbitration Rules, can be applauded for championing Arbitrators’ qualifications through pushing for choices of arbitrators. The Rules usually dictate a list of accredited Arbitrators who are members of either Institute after thorough qualification process and recurring continued arbitration knowledge. Breakthrough Attorneys’ experts, being seasoned in prosecuting arbitration proceedings in both tribunals, have enjoyed the choice of testing and assessing arbitrators and their qualifications before proceedings and their pools of arbitrators have always been vast.

2.3  Arbitrability and Challenge of Arbitrators, including procedures

It has been established in the earlier Volume 1, that other countries, such as Kenya and Germany, section 17 and Section 1040 respectively, have incorporated what is widely known as the kompetenz-kompetenz principle, which presupposes the power of the arbitral tribunal to determine its own jurisdiction. As far as Tanzanian law is concerned, this concept is alien and is applicable by discretion and inference rather than express law. An example of a section on this subject reads;

 “The arbitral tribunal may rule on its own jurisdiction and in this connection on the existence or validity of the arbitration agreement. For that purpose, an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract.^[3]”

 The German Act cited above is similar to the UNCITRAL Model Law as well, which provides that

“the arbitral tribunal shall have the power to 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 that forms part of a contract shall be treated as an agreement independent of the other terms of the contract. A decision by the arbitral tribunal that the contract is null shall not entail automatically the invalidity of the arbitration clause^[4].”

In that regard, some parties may wish to challenge arbitrator’s powers. The law should be unambiguous and explicit in providing for such matters. The grounds for challenging, as well as procedure must be clearly set out and outlined for parties and practitioners to understand. Section 13 and 14 of the Kenyan Arbitration Act can be a good example of the same.

2.4 Interim Measures during arbitration

All the major international instruments today include the power of arbitral tribunals to make interim orders explicitly. The two Acts cited in the previous discussions, Kenyan and Germany, both strongly feature the said power. Section 18 of the Kenyan Arbitration Act empowers the arbitral tribunal forthrightly to exercise various powers in ordering interim measures. Looking at Article 26 of the UNCITRAL Arbitration Rules^[5] quite exhaustively, measures that a party may need in preservation of status quo or subject matter and the checks and balances of granting such measures are provided.

2. 5 Costs, Expenses and Interests

Costing is a very important matter in Arbitration. Parties may have opted for arbitration knowing it is costly but with a belief that, were they to victor, their costs will be reimbursed timely and effectively. There is a need to offload the veiled power (in the First Schedule) of the Act and expound it widely in the letter of the law. The law can specifically too, look into providing, explicitly that is, on matters of expenses, wholly on reference, proceedings, and award. In the same vein, issue of interest should be rested at the hands of the arbitral tribunal.

2.6 Civil Procedural Mush-up – Discoveries, Interrogatories

As a matter of procedure, and discretion, Tanzanian Arbitrators would at time order Discoveries and Interrogatories. These powers are devoid of a proper legal standpoint as far as the Arbitration law in Tanzania is concerned. The Kenyan Act provides that the parties may agree to rule on the procedures of the Arbitration, failure of which the Arbitral tribunal will elect a way forward^[6]. Despite the fact that Arbitral Tribunals mentioned before have their rules to allow such procedures, the lack of a clear guidance leaves the arbitration field void, especially on those ad-hoc arbitrations and court originating arbitration proceedings.

2.7 Summary Dispositions

In today’s world, time is of the essence. Most parties would choose Arbitration for its renowned ability to save time. It is in this basis that more advanced arbitration systems and jurisdictions have devised more ways of saving time like summary dispositions. This entails the art of adducing evidence by way of written representation in the exclusion of oral evidence, memorandum of agreed facts and documents, etc. Of course, it is our utmost opinion that the couching of the statute in these aspects must always leave the choice to the parties. To highlight on this, the Kenyan Arbitration Act^[7] for example provides;

“..Subject to any agreement to the contrary by the hearing parties, the arbitral tribunal shall decide whether to hold hearing for the presentation of evidence or for oral argument, or whether the proceedings shall be conducted on the basis of documents and other materials furnished under section 24 (Pleadings which are also specified”

This position is also shared in the German Act^[8] as it provides “subject to agreement by the parties, the arbitral tribunal shall decide whether to hold oral hearings or whether the proceedings shall be conducted on the basis of documents and other materials”. The UNCITRAL Model law does not expressly provide as such but clearly implies the same by stating that “…in the event of an oral hearing, the arbitral tribunal shall give the parties adequate advance notice of the date, time and place thereof”. In that regard, the implication that the arbitral tribunal may conduct proceedings and hearing using documentary disposition is inferred. The developed arbitral systems have also devised other ways of expediting arbitration proceedings via admission and use of electronic evidences in emails, video conferencing and so forth.

Our experts, in an ongoing case before the NCC Arbitration Tribunal (Breakthrough Attorneys representing an offshore Electrical and Civil Engineering Company), opted for the filing of a common bundle of matters and documents which are not disputed by each side so as to narrow down issues disputed and to allow the tribunal to focus on those, and only go to the common bundle for reference and benchmarking. This practice is good and desirable for the general arbitration field in Tanzania.

2.8 Consent to appeals vis-à-vis waivers to appeals

Generally arbitration is a one stage process that ends by the time the arbitrator(s) delivers the award. The essence of arbitration traditionally is on the finality and binding nature of the award. In practice, the decision is final and binding on the parties unless there is an allegation of misconduct or fraud on the part of the arbitrator(s) in procuring the award, in which case, the Court may interfere by being invoked by an aggrieved party, and set aside the award, upon proof of such misconduct or fraud.

Generally, the intervention of the Courts is very minimal and it comes at the stage beyond the proceedings in the essence of the enforcement of the award or the review of the award strictly on the grounds above mentioned. This precept is also envisioned in our Tanzanian Arbitration Act, Cap 15 R.E. 2002 (See section 16 thereto).

Even so, Arbitration has over the years proven ghastly bitter to parties when it comes to its finality nature. The lack of avenue to question Arbitrator’s decisions (in devoid of misconduct or fraud on the part of arbitrators) has very much rendered arbitration risky and precarious. The impossibility to question the merits of a decision is inevitably a bitter pill to swallow for an unsatisfied arbitration litigant.

On the wake of such a void in the commercial arbitration world, and owing to its consensual submission nature, in instances, parties have mutated the arbitration process to optionally include an appellate procedure. The basis of arbitration process is usually the “agreed procedure, agreed law and agreed arbitrators” among others. With the premiership of the word “agreed” in those key aspects of the arbitration process, parties have further invented a mandate to “…Agree whether the award of the arbitrator(s) they have chosen should be final or subject to optional appeal by an aggrieved party between them”.

In Ad Hoc tribunals, which are characteristically tailored by parties themselves, this practice is neither much heralded nor much authored for. But the essence remains the same, that increasingly, optional appellate arbitration becomes more and more popular. Parties to arbitration usually have a choice regarding the rules of arbitration and composition of the tribunal to preside over the matter.

The first choice is by embarking on Ad Hoc rules and tribunal which presupposes parties’ own tailored rules and own chosen arbitrators. Parties may still control their mandate of Ad Hoc tribunals and invoke rules such as the UNCITRAL Model Rules of Arbitration by the UN. Unfortunately regarding the issue of appellate arbitration the UNCITRAL Model Rules are still behind.

The second choice involves parties subjecting themselves to institutional rules and specialized tribunals formed under such rules. In international commercial arbitration the latter is the most common case. Institutions such as the International Chamber of Commerce (ICC) through its International Court of Arbitration (ICA), London Court of International Arbitration (LCIA), American Arbitration Association (AAA) through its International Centre for Dispute Resolution (ICDR) and many others have been at the forefront in resolving international commercial arbitration disputes. Their rules being paramount in the proceedings falling there-under.

Not many of these institutional rules have embraced the concept of appellate arbitration. Leaders in the subject, the ICC have always been cautious to amend their rules being wary of the adverse effects the same may pose to the underlying principles of arbitration aforementioned, especially the finality of the award aspect. It should be noted that the ICC innovation of the Pre-Arbitral Referee Procedures for settlement of preliminary matters preceding the arbitration process remains a landmark development in the law and practice in arbitration.

However, pioneering institutes such as the AAA/ICDR have widely embraced the practice and did so, by releasing their acclaimed Optional Appellate Arbitration Rules for domestic and international arbitration in November 1^st, 2013. This means that, parties who refer their arbitration disputes to AAA implicitly mandate and empower the application of the appellate procedure after the award of the Arbitrators. That is, unless they specifically specify under their agreement to not invoke that part of the rules. Likewise, other institutions such as the International Institute for Conflict Prevention and Resolution (CPR) have rules catering as such. The sample Clause [9] thereto states;

• The parties to any binding arbitration conducted in the United States, pursuant to CPR Rules for Non-Administered Arbitration (“CPRArbitration Rules”) or otherwise, may agree in writing that a party may file an appeal (the “Appeal”) under the CPR Arbitration Appeal Procedure (the “Appeal Procedure”) from an arbitration award (the “Original Award”).
• The appeal shall be to a CPR Arbitration Appeal Tribunal (the “Tribunal”) chosen from the panel constituted by CPR to hear Appeals (the “Panel”), consisting of former federal judges.
• No appeal may be filed hereunder, unless;
  1. the arbitrator(s) (was) (were) required to reach a decision in compliance with the applicable law and rendered a written decision setting forth the factual and legal bases of the award; and
  2. There is a record (the “Record”) that includes all hearings and all evidence (including exhibits, deposition transcripts, affidavits admitted into evidence) in the arbitration proceeding from which the appeal is taken.

Referring to our earlier article[10] we opine that the case for appellate arbitration is much more convincing and appealing compared to the case against it. Appellate arbitration is simply being conscious with the notion that to err is human and human actions and decisions are prone to mistakes which are not necessarily premeditated by misconduct or fraud. It is pertinent that parties get an avenue to redress these errors when they are due.

A provision can therefore be tailored to introduce this parties’ right and it’s dynamics of application.

3. 0 Conclusion

The case for reforms needed in the Arbitration sector in Tanzania is an inevitable and an undisputed one. We have an archaic law in place, with no procedural rules to match the modern day commercial trends. Neither do we have state of the art institutional setups to support international commercial arbitration to bolster Tanzanian Arbitration stakeholders’ practical dexterity and the economic benefits that comes with the fold.

It is our Breakthrough Attorneys’ reckoning that the list of areas of development in Commercial Arbitration practice that have been highlighted above is not exhaustive but is meant to highlight the gap between Tanzania arbitration practice and the majority of the countries in the commercial world. Moreover, the wheel of aspects of international commercial arbitration keeps on rolling and changing at pace and hence the need for Tanzania to keep up.

 

NOTE:

Kindly be on the lookout for Volume III of this Article on The Current Developing Trends in International Commercial Arbitration.
 If you missed it, you can also catch up with Volume I of this Article on The Argument for reforms;
Also check our other articles on arbitration.

 

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• [1] Mvita Construction Company v. Tanzania Harbours Authority (2006) TLR 26 Court stated that “…if a man does not protest [on jurisdiction and other rights at the beginning of submission], but if, as it is called he submits to the jurisdiction of the arbitrator, he is then bound by the award…the whole essence of the doctrine of this court is that you must protest at once. If you take part in the arbitration you thereby, merely by taking part in it, prima facie make the agreement.”
• [2] The ICC’s Pre-Arbitral Referee Procedure were put in place in the year 1990 for the aim of enhancing the parties to have various options before the commencement of arbitration proceedings.
• [3] German Arbitration Act, Section 1040 (1)
• [4]      Article 23(1) of the UNCITRAL Arbitration Rules
• [5] The UNCITRAL Arbitration Rules, referred as the Model Law is the non-binding United Nations instrument made under its Commission for Trade Law. As revised in the year 2010 the model law is open for adoption by countries, ad-hoc and institutional arbitral tribunals. The aim of the Model Law is to harmonize worldwide arbitration procedures. It is thus very pertinent and logical for a country to embrace terms, and concepts from the said Model Law and incorporate the same in its domestic legislation.
• [6] Section 20. Kenya Arbitration Act
• [7] Section 25 (1)
• [8] Section 1047 (1)
• [9] The ICPR published its Arbitration Appeal Procedure rules since year 1999. They remain a pioneer of change in this concept of appeal in Arbitration.
• [10] www.breakthroughattorneys.com/informationcentre/articles

Important Notice:

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