THE CENTRE FOR ARBITRATION AND DISPUTE RESOLUTION
ARBITRATION CAUSE NO.10 OF 2007
ROKO CONSTRUCTION LTD ……………………… APPLICANT
VERSUS
AYA BAKERY (U) LTD ………………...………… RESPONDENT
RULING
This Application was lodged by Roko Construction Ltd on 28th September 2007 against Aya Bakery (U) Ltd., for the compulsory appointment of an arbitrator under Section 11(4)(c) and Rule 13 First Schedule of the Arbitration and Conciliation Act (hereinafter referred to as the A.C.A). The Application is supported by an Affidavit sworn by one Mark Koehler, the Applicant’s Chief Administrator. There is a further Affidavit of Service sworn by one Musisi Stephen to prove service of the Summons which was extracted by the Applicant in this matter.
At the hearing which was set for 4.00p.m., 2nd October 2007, the Applicant was represented Counsel Enos K. Tumusiime and the Company Secretary Mr. Acali Manzi. The Defendant was not represented.
This application emanates from the building contract, bearing Serial No.1336, executed between the Applicant Roko Construction Limited and Aya Bakery (U) Ltd, for the construction of a “Bisqiut factory…” amongst other works, at Plot 62 Bombo Road, Kawempe, Kampala. This Agreement is attached to the Application as Annex A.
Paragraph 4 of the Applicant’s Affidavit states that upon failure of the Respondent to pay the sum of Ushs.710,689,130/= for the works carried out, a termination notice dated 16th July 2007 was duly issued to the Respondent, indicated in Annex B.
The Applicant served the Respondent with a Notice for the Appointment of an arbitrator on 6th August 2007 (Annex C), which the Respondent refused or failed to reply to.
The Applicant in Paragraph 6 of the Affidavit states that the matter was then referred to the President East African Institute of Architects (E.A.I.A) on 22nd August 2007 pursuant to Clause 36 of the Building Contract, as evidenced by Annex D. On 25th September 2007, the Applicant gave a final reminder to the President E.A.I.A, that the Applicant would file an Application with CADER for the compulsory appointment of an arbitrator, if no action was taken by 10.00a.m., 28th September 2007 – as evidenced by the second part of Annex D.
Against this background the Applicant prayed that CADER appoints an arbitrator pursuant to S.11(4)(c) Arbitration and Conciliation Act (A.C.A).
The arbitration clause in the Agreement set out in Clause 36(1) reads as follows:-
“36. ARBITRATION
- Provided always that in case any dispute shall arise between the Employer or the Architect on his behalf and the Contractor,…then such dispute or difference shall be and is hereby referred to arbitration and final decision of a person to be agreed between the parties, or, failing agreement within 14 days after either party has given to the other a written request to concur in the appointment of an Arbitrator, a person to be appointed on the request of either party by the Chairman or a Vice Chairman for the time being of the East Africa Institute of Architects who will when appropriate delegate such appointment to be made by the Chairman or Vice Chairman of the local (National) Society of Architects.”
Paragraph 5 of the Affidavit in Support of the Application, states that the Respondent refused or failed, to concur the proposed arbitrator listed in the communication dated 6th August 2007.
To activate the second part of the Arbitration Clause.36, the Applicant, through their Advocates, Tumusiime, Kabega & Co. Advocates, then communicated to the President East African Institute of Architects, on 22nd August 2007, the relevant portions to this Application which are contained in Paragraphs 4-5 state as follows,
“In view of the above differences and/or dispute, out (sic) Client invited the employer to submit to Arbitration in accordance with Clause 36 of the Agreement. A copy of the Notice is attached hereto as Annexture “B”. The employer has failed or refused to concur to the appointment of the Arbitrator.
This is therefore to request you to appoint an Arbitrator to hear and resolve the differences/dispute between our Client and the employer. We wish to propose one of the following as the Arbitrator:-
- Hon. Justice (Retired) Samuel Wako Wambuzi, (former Chief Justice of Uganda).
OR
- Hon. Justice (Retired) Alfred Karokora (former Justice of the Supreme Court).”
It should be noted that prior compliance with the arbitration clause on the part of the Applicant, was evidenced by the attachment of the nomination notice, to the communication addressed to the President E.A.I.A.
In a further letter dated 25th September 2007 (second part of Annex D), the Applicant’s Advocate wrote a reminder to the President East African Institute of Architects, stating as follows in Paragraph 2,
“This is to inform you that unless you appoint an Arbitrator in the said dispute by the 28th September 2007, before 10.00a.m., we will proceed to move the Centre for Arbitration and Dispute Resolution (CADER) for a compulsory appointment of an Arbitrator under the Arbitration and Conciliation Act.”
In Paragraph 7, Mark Koehler states that up to the time of filing the Application with CADER, the Chairman (President) of the East African Institute of Architects had failed to appoint an arbitrator to the prejudice of the Applicant’s rights.
The respondent’s failure to co-operate, in the appointment of the arbitrator does not augur well, in light of the dual obligation, imposed upon all parties under the arbitration clause, which was wisely expounded by Lord MacMillan sixty five years ago, in the House of Lords, in Heyman v Darwins, [1942]All E.R. 337, 347D as follows,
“I venture to think that not enough attention has been directed to the true nature and function of an arbitration clause in a contract. It is quite distinct from the other clauses. The other clauses set out the obligations which the parties undertake to each other hinc inde; but the arbitration clause does not impose on one of the parties an obligation in favour of the other. It embodies the agreement of both parties that, if any dispute arises with regard to the obligations which one the one party has undertaken to the other, such dispute shall be settled by a tribunal of their own constitution.”
Thus the Respondent’s silence or failure to co-operate in the appointment of an arbitrator amounts to forfeiture of the right to participate in constituting the arbitral tribunal.
Clause 36 recognizes that parties may fail to agree on an arbitrator and therefore provides a secondary route to enable the constitution of an arbitral tribunal by vesting appointment powers in the Chairman or Vice Chairman of the East African Institute of Architects.
The parties’ delegation of their role to appoint an arbitrator is recognized by Section 2(2) A.C.A, which states that,
“Where a provision to this Act, except section 30, leaves the parties free to determine a certain issue, that freedom includes the right of the parties to authorize a third party, including an institution, to make that determination.”
In this case both procedures for the appointment of an arbitrator did not take effect.
In the first instance, the Respondent, neither concurred or objected to the Applicant’s nominee nor counter-proposed an alternative arbitrator. In the second instance the President E.A.I.A, did not appoint any arbitrator, even when issued with a deadline, by the Applicant, within which to appoint the arbitrator.
The failure by the President E.A.I.A., to appoint an arbitrator is strange given that the delegation of the powers by the parties, in Clause 36, is one sanctioned by the S. 2(2) ACA, resulting in frustration of the contract per se and further hindering performance of the sagacious statutory function. Inevitably, the failure by a third party or institution, vested with the powers to appoint an arbitrator, is sacrilegious affront to the trust invested by the parties and the arbitral law of Uganda, which guarantees expedited and fortified support to arbitration.
The inaction of the President East African Institute of Architects, is the evil which Section 11(4)(c) A.C.A, sought to cure by enabling an aggrieved party to apply to CADER to order such necessary measures that will ensure establishment of the arbitral tribunal.
I find merit in the Applicant’s prayer that an Arbitrator be appointed by CADER, in light of the failure of the procedural measures agreed upon by the parties.
As a result, I appoint Mr. Precious Ngabirano as arbitrator in this matter.
Should Mr. Precious Ngabirano decline to handle this matter under Section 12(1) A.C.A owing to circumstances which he perceives might give rise to his impartiality or independence, I appoint Stephen Musisi and the Retired Justice Seth Manyindo. These two are to be approached in the sequential order listed.
The arbitrator is reminded to sign the Declaration of Impartiality, Party Undertaking Agreement and return the file to CADER for archiving purposes upon completion of the case.
Costs of this Application shall be borne by the Respondent.
Delivered on 4th October 2007.
………………………………………………………….
JIMMY MUYANJA,
EXECUTIVE DIRECTOR
