THE REPUBLIC OF UGANDA
IN THE HIGH COURT OF UGANDA AT KAMPALA
(COMMERCIAL DIVISION)
MISCELLANEOUS APPLICATION NO. 0702 OF 2008
{ARISING FROM ARBITRATION NO. 3008 OF 2008}
ATTORNEY GENERAL ::::::::::::::::::::::::::::::::::::::::::::::::APPLICANT
VERSUS
1. KILEMBE MINES LTD }
2. UGANDA GOLD MINING LTD }:::::::::::::::::::::::::::RESPONDENTS
BEFORE: HON. LADY JUSTICE IRENE MULYAGONJA KAKOOZA
RULING
This application was brought under s.34 (2) (b) (ii) of the Arbitration and Conciliation Act, rule 13 of the Arbitration Rules, s.33 and 39(2) of the Judicature Act and s.98 of the Civil Procedure Act. The applicant who was not a party to the arbitral award between the respondents sought to have the award entered by the two by consent set aside in the whole. He also sought for an order that the dispute be referred back to the arbitrator for disposal on its merits.
The grounds of the application were that the 1st respondent acted irregularly and in contravention of the Public Enterprises Reform and Divesture Act (the “PERD Act”), when she entered the arbitral award on terms agreed with the 2nd respondent, in disregard of the decision of the Divesture and Reform Implementation Committee (DRIC) and against the express instructions of the Director of the Privatisation Unit not to do so. Secondly, that the said award entered by consent was against public policy and ought to be set aside.
The application was supported by an affidavit deposed by David Sebabi, the Director of the Privatisation Unit dated 24/12/2008. The 1st respondent filed an affidavit in reply deposed by Cornelius Mukiibi, an advocate who represented that party in the arbitration proceedings, dated 10/02/2009. The 2nd respondent’s affidavit in reply was deposed by Apollo Makubuya, an advocate with the firm of Makubuya, Adriko, Karugaba & Sekatawa, Advocates (MAKKS, Advocates) and dated 24/02/2009. The applicant did not file an affidavit in rejoinder but purported to file a supplementary affidavit on 1/04/2011, without leave of court and after counsel for the 2nd respondent raised a preliminary objection on 23/03/2011.
Although this application was filed on 20/12/2008, it took a long time to come to this stage because on the three occasions when it was called for hearing counsel for the applicant impressed it upon court that the Attorney General was making arrangements to settle the dispute and that negotiations were under way. However, the negotiations seemed to be stalling, a fact which may have forced Mr. Masembe Kanyerezi to proceed in the manner that he did on 23/03/2011.
When the application was called on for hearing on that day, Ms. Patricia Mutesi for the Attorney General talked of a failure to get information from the Commissioner for Geological Surveys and Mines as to whether he consented to the consent arbitral award. She then informed court that since the Attorney General’s Chambers had failed to get the relevant information from their client, she had instructions to proceed in the application. But she could not proceed on that day because the Attorney General had instructed her to go to Arusha and deal with a matter in the East African Court of Justice. She therefore requested for an adjournment. Mr. Masembe objected to the application and sought to raise preliminary points of law in objection to the application which the court allowed him to do. Counsel for the applicant was allowed to file written submissions in reply, which she did on 4/04/2011.
Mr. Masembe raised two preliminary points of law in objection to the application. The first was that though the application was stated to be under s.34 of the Arbitration & Conciliation Act (hereinafter “the Act”) the applicant though a shareholder in Kilembe Mines (the 1st applicant) had no locus to bring the application because she was not a party to the arbitration proceedings. He relied on the provisions of s. 2 (i) of the Act for the definition of the term “party.” He then submitted that a stranger to the arbitration such as the applicant here could not originate the current application because she was not a party to the proceedings wherein the award was made. That the 1st respondent was a duly incorporated limited liability company in Uganda that had the right to enter into agreements independently.
The second preliminary point of law was that applications to set aside arbitral awards under s.34 of the Act had to be brought within the period of one month, according to s.34 (3) of the Act. He went on to state the instant application was brought about 2 months after the communication of the award to the parties. He argued that the communication of the award was on the date when it was signed because the award was entered by consent of the parties. He argued that the Attorney General ought to have moved the 1st respondent to bring the application and not moved court himself. He thus prayed that the application be dismissed with costs to the respondents.
In her written submissions in reply, Ms. Mutesi argued that s.32 (a) could be distinguished from s.34 (2) (b) of the Arbitration and Conciliation Act. That while s.34 (2) (a) required the applicant for setting aside an arbitral award to be a party to the arbitral proceedings, s.34 (2) (b) of the Act did not. The while s.34 (2) (a) provided that a party seeking to set aside an award under it had to prove the contents of paragraphs (i) to (vii) there under, a person who seeks to set aside an award need not be a party to the award because s. 34(2) (b) of the Act provides that in the circumstances of that provision the court will set aside an award if the applicant proves facts that the subject matter of the dispute is not capable of settlement by arbitration under the laws of Uganda, or that the award is in conflict with the public policy of Uganda. She went on to submit that while s.34 (2) (a) of the Act was meant to apply to parties to the arbitration, the intent of s.34(2) (b) thereof was broader in that it was intended to ensure conformity with the laws of Uganda and public policy. She relied on the decision in Oil & Natural Gas Corporation Ltd. v. SAW Pipes Ltd.; Supreme Court of India C/A 749 of 2001 for the submission that public policy is meant to embrace anything in the public interest. That as a result, s.34 (2) (b) of the Act was neutral, it did not require any particular person to move court for any person could move court in the public interest, and the Attorney General was the best person to do so.
She went on to argue that the applicant could not have moved the 1st respondent to bring the application because the circumstances where peculiar in that it was the 1st respondent that consented to the award. That as a result, none of the parties to it could be expected to move court to set it aside because it favoured their interest. That in addition, the 1st respondent was a body corporate which could have ignored the proposition of the applicant to apply to set aside the award.
Turning to the objection that the application was not brought within the time specified by the Act, Ms. Mutesi submitted that there is no specific limitation in s.34 (2) (b) of the Act regarding persons bringing applications to set aside awards for being in conflict with the public interest and the law, and that it could not be legally implied. She went on to state that this was a lacuna in the law. That in addition, a copy of the award was received by the Privatisation Unit on 28/11/2008, a month after it was entered.
She then went on to argue that the circumstances of the case presented by the applicant in this application were such that there was no specific practice or procedure to govern it. That as a result s.14 (11) of the Judicature Act had to be applied to the situation; the principles of justice, equity and good conscience applied to the situation. She relied on the provisions of s. 39 (2) of the Judicature Act for the submission that where there is no procedure provided for a particular situation under law or by practice, the court may at its discretion adopt a procedure that is justifiable in the circumstances. She thus prayed that the court have recourse to the stated provisions of the Judicature Act and s.98 of the Civil Procedure Act to find that the time limit stated in s.34(3) of the Act should only apply to the applicant from the time that it became aware of the award.
Ms. Mutesi went on to submit that the court should consider that the allegation that the award violated public policy was a weighty matter. that the applicant also stated in the affidavits in support that the award violated provisions of the Constitution in Article 119 (5) thereof; that the award is also patently illegal because it purports to allow a party to resume the performance of an agreement that had been terminated; that the consent award also purported to allow parties to renegotiate an agreement that had been terminated and finally that the award is illegal because it purports to allowed resumed performance, revision and renegotiation of a contract whose time frame of 3 years had come to an end.
She concluded with the submission that once an illegality is brought to the attention of the court it overrides all questions of pleadings and courts are bound to veto illegal contracts. That since the applicant raised issues that touched on the illegality of the award the court ought not to be bound by technicalities of procedure but should dispose of the application on its merits in the terms of Article 126 (2) (e) of the Constitution of the Republic. She prayed that the objections be overruled.
Regarding whether the applicant had the locus to bring this application, s.34 of the Arbitration and Conciliation Act provides that recourse to court against an arbitral award may be made only by an application for setting aside the award under subsections (2) and (3) thereof. And according to s. 34 (2) (a) of the Act, an award may be set aside only if the party making the application furnishes proof that a party to the arbitration agreement was under some incapacity; the arbitration agreement is not valid under the law to which it was subject or the law of Uganda; the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was unable to present his or her case, among others. According to s.34 (2) (b) of the Act, the award may be set aside if the court finds that the subject matter of the dispute is not capable of settlement by arbitration under the law of Uganda; or the award is in conflict with the public policy of Uganda.
I carefully considered the submissions of counsel for the applicant in response to the objections but they were not very useful in settling them. I then turned to the rejoinder filed by counsel for the 2nd respondent wherein he stated that though Kilembe Mines is a private limited company, it is fully owned by the applicant. It was also asserted that the applicant fully controls the Board of Directors of Kilembe Mines as its only shareholder. Now, the applicant brought this application claiming that the impugned award is against the public policy of Uganda because it is alleged that by compromising the award, the 1st respondent acted irregularly and in contravention of the Public Enterprises Reform and Divesture Act, and in total disregard of the DRIC and the express instructions of the Director of the Privatization Unit.
Section 2 (1) (i) of the Act provides that the term “party” in the Act means a party to an arbitration agreement and includes a person claiming through or under a party. The affidavits filed by the applicant herein show that the Attorney General brought this action as a claimant under Kilembe Mines. The applicant thus had the locus standi to bring this application under the provisions of the Arbitration and Conciliation Act stated therein. What is confusing though is that Kilembe Mines under whom he claims is also a respondent to the action. To me this confirms that there is a disagreement between the applicant and the managers of the 1st respondent on the matters that led to this application. The first objection is therefore hereby overruled.
Going on to the objection that the application was filed out of time, s.34 of the Arbitration and Conciliation Act provides as follows:-
“(3) An application for setting aside the arbitral award may not be made after one month has elapsed from the date on which the party making that application had received the arbitral award, or if a request had been made under section 33, from the date on which that request had been disposed of by the arbitral award.”
In paragraph 12 of his affidavit in support of the application, Mr. Sebabi deposed that he got to know that the arbitral award had been entered by consent at a meeting held on 27/11/2008. He further deposed in paragraph 16 thereof that the Chairman of the Board of Directors of the 1st respondent belatedly wrote to him to formally communicate about the occurrence and send a copy of the arbitral award on 28/11/2008. A copy of the letter from the Chairman was attached to the affidavit as Annexure “D” and it had a stamp to show that it was received in the office of the Privatisation and Utility Sector Reform Project on 29/11/2008.
I therefore take it that the Ministry of Finance (Privatisation Unit) received notice of the award on 29/11/2008 and that is when time began to run for the Attorney General. This application was filed on 29/12/2008, as is indicated on the record. It was therefore filed in time within the meaning of s. 34 (3) of the Act. The second preliminary objection therefore also fails.
In conclusion, both objections are overruled and the costs shall abide the conclusion of the application which should now proceed.
Irene Mulyagonja Kakooza
JUDGE
17/06/2011
