Practice of Commercial Arbitration in Tanzania

4470 words (18 pages) Essay in Commercial Law

02/02/18 Commercial Law Reference this

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This chapter examines the practice of commercial arbitration in relation to the relevant laws governing commercial arbitration in Tanzania. This will entail the review of the development of arbitration laws in Tanzania and features of arbitration. Arbitral institutes and the rules governing the conduct arbitration of proceedings through the institutes will be analyzed. The role of court in relation to arbitration matters will also be discussed in this part. Finally, the relevance of Tanzanian law in relation to international arbitration regime will be reviewed.

4.2. 0.Development of Arbitration Laws in Tanzania.

Tanzania like any other former colonial states in Africa, Its law relating to arbitration can be traced back from the former colonial regime. With this respect the Tanzanian arbitration law is originated from the English Arbitration Act. [1]

The British legislature enacted the Tanzania Arbitration Ordinance Cap 15 which was similar to English Arbitration Act of 1889. As discussed in the previous chapter the motive behind of enacting this statute was to facilitate the settlement of commercial disputes in Tanzania (Tanganyika by then) on one hand and ensure smooth utilization of resources on the other hand.

Since then the Arbitration Ordinance continued to apply as a main legislation governing arbitration matters in Tanzania supplemented with Arbitration Rules of Civil Procedure (Arbitration) Rules of 1957 which were amended by Government Notice No.422 of 1994.

Apart from Arbitration Ordinance and the Civil Procedure Rules, there are also institutional rules governing the conduct of arbitral proceedings administered by the said institutes. These include; the Tanzania Arbitration Institute Rules of 2008 and the National Construction Council Arbitration Rules of 2001.

4.3.0. Qualification of Arbitrators

Arbitration is a private means of dispute resolution and a person acting as an arbitrator should possess qualification to deal with the subject matter. In Tanzania for a person to be arbitrator must attend a two weeks course on arbitration conducted by the either the Tanzania Institute of Arbitration or the National Construction Council and pass the exam after the course. Most of the arbitrators are experts in the field of law, engineering and quantity survey. The number of arbitrators has been increasing year after year; up to July 2009 about 60 people were approved as arbitrators Tanzania. [2]

4.4. 0.Key elements of Arbitration in Tanzania.

The field of arbitration in Tanzania is mainly enshrined with four important elements which includes; agreement to arbitrate, confidentiality, choice of arbitrators and binding of an award.

4.4.1. Agreement to arbitrate

Like the practice of other jurisdiction, agreement to arbitrate is a key requirement for arbitration in Tanzania and according to section 1 (2) of the Civil Procedure Arbitration Rules such agreement must be in writing. However, the law is silent as to what qualifies agreement in writing within the meaning of the Tanzanian law, there is gap regarding this area which create double standard in practice. In practice a valid written agreement has been considered as an agreement signed by both parties. But with the coming into force of the new proposed Bill of Arbitration Act, this problem will be solved since the law provides in a broader way as to what qualify agreement in writing. [3]

4.4.2. Confidentiality

As many parties select arbitration as alternative dispute resolution that is precise to secure confidentiality [4] , in Tanzanian law there is no express provision regarding confidentiality, the duty of confidentiality in arbitration is regarded as implied one. In practice, the evidence, pleadings proceedings and award are kept as confidential unless otherwise parties agree to the contrary. [5] But most of the time parties are always advised to incorporate expressly confidentiality provision in order to guarantee confidentiality for arbitral proceedings. [6]

4.4.3. Choice of Arbitrators

According to section 2 of the Civil Procedure Arbitration Rules parties are free to appoint the arbitrators in manner agreed between them or subject to the Institution which there are subjected. Unlike court litigation choice of the arbitrators in arbitration guarantee principle of party autonomy.

4.4.4. Binding of award

Like the practice of other jurisdictions, the award rendered by the arbitrator in Tanzania is final and binding between the parties whom it was made [7] . Unlike court litigation, once the award made its final and binding there is no opportunity for appeal, the only remedy available to the aggrieved party is challenge of the award.

4.5. 0. Institutional Arbitration and Ad Hoc Arbitration in Tanzania

In Tanzania dispute resolution by arbitration are administered either by institutions or ad hoc. Institutional arbitration is administered by two Institutional namely; the Tanzania Institute of Arbitration and the National Construction Council.

4.5.1. The National Constructions Council

This is an organization established through the Act of Parliament of the United Republic of Tanzania No. 20 of 1979 and become operational in 1981 through the Government Notice, No. 95/1981. Initially the establishment of the Council was prompted by the need to promote the development of construction industry in Tanzania.

But it was found difficult to fulfill the purpose of the Council because of endless disputes which were instituted in the court of law and lasted for a couple of years, then it become necessary to find alternative means of resolving disputes arising from construction industry. It’s from this point of time the National Construction Council was vested with power of resolving dispute arising from construction industry by arbitration.

In 1984 the NCC formulated Arbitration rules which it were intended for resolving disputes of domestic nature, all disputes arising from international contract were referred to international institute of arbitration such as ICC and LCIA.

After ten years of experience in arbitration and following the involvement of foreign contractors and foreign donor agencies financing infrastructure projects which obviously involved the issue of international contracts. This situation attract for confidential, effective and neutral venue of resolving dispute. [8] Thus, in 2001 the NCC Rules were revised to accommodate disputes arising from international contracts. It is worth noting that the NCC Revised Rules based on the UNCITRAL Mode Law.

4.5.2. The Tanzania Institute of Arbitration

This is a nongovernmental institution which was established in 1996 aimed at conducting commercial arbitration. The institute has its own rules which governing arbitration proceedings which referred as Tanzania Institute of Arbitrators – Arbitration Rules of 2008. These rules are designed for both dispute arising under domestic contracts and international contracts.

Although the rules aimed at resolving disputes arising from both domestic and international s, in practice most of the disputes conducted by this institute are of domestic nature involving sale of goods. So far the Institute is not active due to lack of funds; its operation depends for funds from the sponsors.

Both the National Construction Council and the Tanzania Institute of Arbitrators have similar rules which have adopted the UNCITRAL Model Law on International Commercial Arbitration save that the Tanzania National Construction Council specialized on commercial disputes arising from construction Industry whereas the Tanzania Institute of Arbitration deals with all kinds of commercial disputes.

In practice, the parties who wish to have their disputes to be determined by either the Tanzania Institute of Arbitration or the National Construction Council has to specify so in their arbitration agreement. This implies that there are subjected to the administrative procedures and rules of these institutes. Since these rules are closely related this discussion will base on the rules of the National Construction Council Rules as the institute which is more active in the practice of arbitration compared to the Tanzania Institute of Arbitration.

4.6.0. Conduct of Arbitral Proceedings under the National Construction Rules.

The conduct of arbitration under the National Construction Council is governed by two general principles which; are impartiality of the tribunal and principle of parties autonomy which are also found in the UNCITRAL Model Law on international Commercial Arbitration. [9]

4.6.1. Commencement of Arbitral Proceedings

Arbitration under the NCC Rules can be commenced by request or notification of arbitration to NCC made by one the parties to arbitration agreement. The notification or request to NCC must be accompanied by the following requirements, name and address of the parties to arbitration, a brief statement of the nature of the dispute, arbitration agreement and copies of contractual documents under which the arbitration arises.

4.6.2. Appointment of Arbitrators

Upon accepting the request, the NCC submit to the claimant the list of approved arbitrators in which the claimant is required to appoint three names from the list and submit it to the NCC within 14 days. After 14 days the NCC submit the list of arbitrators selected by the claimant to the respondent who is required to select one out of three names submitted to him. The respondent is also required to make appointment within 14 days. But if the respondent does not agree with the selection made, the parties have to request the NCC to appoint an arbitrator out of the proposed names. [10]

However, in practice number of arbitrators depends on the nature of the dispute, in case of complicated matter each party nominates one arbitrator from the approved list of the NCC and the NCC appoints an umpire. [11] In case the arbitrator or umpire dies or refuses the appointment the NCC may appointment another arbitrator or umpire upon the request of the parties. [12]

In addition to that, all matters that do not exceed Tshs 5,000,000/= are determined by one arbitrator appointed by the NCC by informal hearing attended by all of the parties. [13]

4.6.3. Communication Between the parties and arbitrator

In order to comply with the principle of natural justice all parties are required to communicate directly with the arbitrator otherwise the NCC on behalf of the arbitrators ensures that any document send to one party also each party receives a copy of such document. [14]

4.6.4. Powers conferred on the arbitrators

In the course of the conduct of arbitral proceedings the tribunal has power under the rules to determine any question as to validity of the contract between the parties, order for correction or amend any such contract, and of arbitration agreement, submission or reference, but only where there is a manifest of error such as mistake or omission which appears to be common to all of the parties; [15] determining any question of law arising in the arbitration; [16] determining the validity of the arbitration agreement; [17] as well as determining any question regarding jurisdiction of the arbitrators. [18]

4.6.5. Submission of written statements

The date for submission of written statements of claim and defense is fixed by the arbitrator, in the absence of such time fixed by the arbitrator the respondent or respondents upon receiving the statement of the case is required to send to arbitrator within 21 days his defense and counter claim if any and should be combined in the statement of defense. [19]

Upon receipt of the statement of defense, the claimant sends the arbitrator a statement of reply but where there is a counterclaim, the claimant have to send the arbitrator a statement of defense within 7 days of its receipt in which the respondent is required to respond within 7 days. [20]

4.6.6. Meetings and Hearing

After submission of all the documents the arbitrator sets a date, time and place of meetings and hearing of arbitration and give notice to all parties regarding the dates set out for the proceedings. [21] Experience shows that hearing for simple matters takes 3- 4 weeks while complicated matters might take 6 month to two years. Like a practice in other jurisdictions, hearing for arbitration matters in Tanzania is also conducted in a private way. [22] Parties are allowed to be represented at any meeting by a legal counsel or other professional practitioner. [23] However, the Rules is silent regarding procedure adopted for examination of witnesses, but in practice the main factors considered at the hearing is that parties are given equal opportunities throughout the hearing. [24]

4.6.7. The Award

After closing of hearing the arbitrator makes his award setting out for reasons of the award, the arbitrator is required to make an award within 14 days from the date of the final hearing and submit it to the NCC. [25] But where there is more than one arbitrator and the parties have agreed to have an umpire the award shall be made by the arbitrators unless they disagree. In the event that the arbitrators disagree, the umpire replaces the arbitrators with power to make award as if were a sole arbitrator. [26]

At the request of any of the parties, or any person who have claim under the any of the parties, the arbitrator or umpire files an application for enforcement of an award in the court subject to payment of the fees and charges due in respect of the arbitration, award and charges of filling the award. [27] With respect to award relating to commercial arbitration the “court” under this discussion refers to the High Court of Tanzania Commercial Division established under G.N. No.141 of 1999.

Once filed the award have the same effect as decree of the court and be enforceable in the same manner as a judgment to the same effect. [28]

4.6.8. Challenge of the Award

Unlike the new Proposed Bill of Arbitration Act where the law provides for various grounds for challenge of arbitral awards, misconduct of arbitrator or improper procurement of award are only grounds provided under the Arbitration Ordinance [29] . The Ordinance, however does not state as to what constitutes misconduct or under which circumstances an award can be said to have been wrongly procured. [30]

Challenge of an award may be made only on application by the aggrieved party for setting aside such award rendered by the tribunal. In practice application is made by way of petition to the High Court. Once the court is satisfied with the ground advanced by the party the court may either set aside the whole or part of the award, or remit the award to the tribunal in whole or part for reconsideration; or declare the award to be of no effect in whole or part. [31]

4.7.0. Ad Hoc Arbitration in Tanzania

In addition to institutional arbitrations administered in Tanzania by the Tanzania Institute of Arbitration and the National Construction Council, some of disputes of commercial transaction are settled by means of an ad hoc arbitration by lawyers who offer ad hoc arbitration. But still most the disputes arising from construction industry are referred to institutional arbitration.

In practice ad hoc arbitration is conducted under the rules of procedure that are adopted for the purpose of the arbitration when the dispute arose. Ad hoc arbitration of domestic nature in Tanzania is regulated by the Arbitration Ordinance of 1931 supplemented by Civil Procedure Rules of Arbitration of 1957.

4.8.0. Arbitration under the Direction of the Courts

This is another form of arbitration which takes place in Tanzania. According to Section 17 of the Civil Procedure Rules of Arbitration of Tanzania the court may refer the matter to arbitration during the proceedings before the judgment. In practice, once the parties agree to refer the matter to the arbitration files application to the court. Upon filing the application the court direct notice to the other parties other than the applicant requiring them to show cause as to why the agreement to arbitrate should not be filed. [32]

According to subsection 4 of the Civil Procedure Arbitration Rules where no sufficient cause has been shown, the court makes the order that the agreement to be filed and order for notification to the arbitrator appointed in accordance of the provisions of the agreement. In the absence such provision the court appoints the arbitrator.

Since arbitration proceeding guarantee confidentiality, this kind of arbitration which began in court are likely to infringe on the confidentiality of the parties to the dispute when the matter referred to arbitration. [33]

4.9. 0. Role of Court in arbitration

Arbitration as private means of dispute resolution pursuant to agreement of the parties, it guarantees freedom of the parties with minimum intervention of court.

However, this does not mean that the court has nothing to do with arbitration. Courts in Tanzania like the practice of other jurisdictions have been involved in supporting arbitration mainly in four aspects; firstly, staying of litigation where there is a valid agreement to arbitrate as provided under section 18 of the Civil Procedure Arbitration Rules.

The court always exercises this power where there is a valid agreement to arbitrate. For example, the case in Ashak Kabani & Africak on LINE (T) LTD vs. Ayisi Makatani &others. [34] The Court granted an order for stay of proceedings after being satisfied that there was a valid arbitration clause in the Joint Venture Agreement signed between the parties.

Secondly, on matters relating to appointment, challenge and replacement of the arbitrators as provided under section 17 of the Arbitration Ordinance and Section 5 of the Civil Procedure Arbitration Rules. The Court may under Section 17 remove the appointed arbitrator where there acts of misconduct. However, the law is silent as to what amounts to misconduct. Under section 5 the Court has power to appoint the arbitrator on the following grounds; where the parties cannot agree within a reasonable time with respect to the appointment of an arbitrator, or where the person appointed refuses to accept the office; or where the arbitrator dies; or where the arbitrator leaves Tanzania in circumstance showing that he will probably not return at earlier date.

Thirdly, on matters relating to enforcement of arbitral award. This area covers two scenarios of enforcement of awards, domestic and foreign of arbitral awards. The only difference in this part is the law applicable in the process of enforcement. Matters related to domestic arbitration are governed by the Civil Procedure Arbitration Rules and the Government Notice No. 491 of 1999 where as the enforcement of foreign arbitral awards are governed by the New York Convention of Enforcement of Foreign Arbitral Awards of which Tanzania is a party. In practice application for enforcement of arbitral awards are filed at the High of Tanzania Commercial Division.

Fourthly, on granting interim orders, courts exercise the same power applicable to legal proceedings unless otherwise the parties agreed otherwise. Experience shows that interim injunction and appointment of the receiver are commonly applied in the course of arbitral proceedings. [35]

4.10.0. International Arbitration regime

The main legislation governing arbitration in Tanzania does not have special provision which deals with the settlement of international arbitral disputes with exceptional to the Enforcement of foreign arbitral award. Section 29 and 30 of the Arbitration Ordinance which reads together with the provision of the Geneva Convention on the Execution of Foreign Enforcement of Award of 1923 reproduced in the Fourth schedule gives effect to the enforcement foreign award. [36]

In the same line with the Geneva Convention, Tanzania is also a party to the New York Convention on the Enforcement of Foreign Arbitral Awards of 1958, therefore this also guarantees on the enforcement of foreign award.

However, this does not imply that disputes arising from international commercial contracts are not settled; apparently the Tanzania Institute of Arbitration Rules and the Tanzania Construction Council Rules are preferable rules that accommodate the settlement of international commercial arbitral disputes in Tanzania since these rules based on the UNCITRAL Model on International Commercial Arbitration.

Along with these rules, the new Tanzania Proposed Bill of Arbitration Act discussed in the previous chapter will create conducive environment in future for the settlement of international commercial disputes as the law reflects to the practice of model law of international commercial arbitration.

4.11.0. Recognition and Enforcement of Foreign Arbitral Awards in Tanzania

According to section 28 (1) of the Arbitration Ordinance (Cap 15) foreign award is enforceable subject to the filing application in the High Court of Tanzania. It is further provided under subsection (2) that any award which is enforceable under this act shall be binding between the parties to whom it was made and thus may be relied on those parties by way of defense.

A party seeking to enforce foreign arbitral award he is required under section 30 of the Ordinance to produce the original award or a certified copy and the evidence that the award has become final. Final is defined under section 31 of the Ordinance as award whose validity is not being contested by any person.

In addition to that, the foreign award enforceable in Tanzania if complies with the six conditions stipulated under section 29 (1); firstly, if it has been made in pursuance of an agreement for arbitration which was valid under the law by which it is governed; secondly, If it has been made by the tribunal provided for in the agreement of the parties or constituted in a manner agreed by the parties; thirdly, if the award has been made in conformity with the law governing the arbitration procedure; fourthly, if the award has become final in the country which it was made; fifth, if the award is unarbitrable under the law of Tanzania and finally if it is not contrary to the public policy or law of the Tanzania.

4.12.0. Grounds for Refusal of recognition and Enforcement of Foreign arbitral awards in Tanzania

Apart from recognition and enforcement of foreign arbitral awards, courts in Tanzania shall refuse to enforce foreign arbitral awards if it is satisfied with the grounds provided under section 28 (2) of the Ordinance that; the award has been annulled in the country in which it was made; or where there is lack of due process; or where the award does not deal with all the questions referred or contains the decision on matters which is beyond the scope of the arbitration.

4.13.0. Summary and conclusion

Arbitration is the preferred mode of settlement of commercial disputes in almost all parts of the world; still the practice of arbitration in Tanzania is not much availed in particular for international regime. Current main laws governing arbitration in Tanzania is one of the hindrance for the development of commercial arbitration regime,

the laws are not favorable for solving commercial disputes since does not reflect the modern system of solving commercial disputes.

In the light of arbitral institutes, the Tanzania Institute of Arbitration still is not well established due to lack of fund, most of its resources depend from the sponsors. Therefore, it has been difficult to gain experience and popularity in the practice of commercial arbitration. Apparently the institute deals much with the settlement of domestic commercial disputes.

The National Construction Council of Tanzania is active institute of arbitration in Tanzania suited for both domestic and international commercial arbitration but specialized only in commercial disputes arising from construction industry. Therefore, does not suffice for the settlement of commercial disputes arising out of construction industry. With these shortcomings, it can be pointed out that the practice of commercial arbitration in Tanzania does not keep pace with the modern trends in the field of commercial arbitration.

Despite of the shortcoming pointed out, the coming into force of the new Proposed Bill of Arbitration Act will bring a positive impact in the field of the commercial arbitration in future since the Bill reflects the modern practice of both domestic and international system of solving commercial disputes.

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