THE REPUBLIC OF UGANDA

THE CENTRE FOR ARBITRATION AND DISPUTE RESOLUTION

(CADER)

CAD/ARB/NO.25 OF 2012

DOTT SERVICES LTD …………………..……………………………………………. APPLICANT

Versus

ATTORNEY GENERAL ………………………………………………………….. RESPONDENT

RULING

The Chamber Summons Application was filed before CADER on 22nd August 2012.

The matter was set for hearing at 10.00a.m., on 3^rd September 2012.

The Respondent did not file any Affidavit in Reply.  I am compelled to note that the Attorney General’s office has lately taken to this trend of not filing any Affidavits in Reply!

Worse still, the Attorney General was not represented in the hearing of this Application, which commenced 15 (fifteen) minutes later, in a bid to await the Attorney General’s counsel.

Mr. Enos Tumusiime, counsel for the Applicant, appeared together with Mr. Maheswara Reddy (Managing Director), Mr. Jameson Olonya (In-Charge Contracts) and Aretha Uwera (law intern).

The matter then proceeded ex parte.

Mr. Enos Tumusiime submitted as follows: -

1. The Application was supported by an Affidavit deposed by Mr. Maheswara Reddy, which evidenced the following: -
   1. Dott Services Ltd executed a contract with the National Authorizing Officer of the European Development Fund in Uganda, Ministry of Finance, Planning and Economic Development for Backlog Roads Maintenance Programme (BRMP) in Uganda: Package No.2 Roads.

2. The Applicant executed the contract maintenance works and has not been paid a sum so far totaling Ushs.14,297,219,754/=.

3. The Respondent has ignored the 20^th July 2011 request to settle the matter amicably.

4. The respondent has ignored the 9^th August 2012 request to concede to the appointment of an arbitrator.

5. That consequently Art.68 Special Conditions of Contract (SCC) provided for amicable resolution of any dispute arising.  In the same vein, that failure of the amicable resolution process would then dictate arbitration proceedings.

6. That Art.68(5)(b)(ii) General Conditions of Contract (GCC) would then commencement of arbitration proceedings.
7. That the Respondent had ignored the Applicant’s request to set up an arbitral tribunal pursuant to the 9^th August 2012 communication.

The pertinent dispute resolution clauses read as follows:-

SPECIAL CONDITIONS

These Special Conditions amplify and, if necessary, supplement the General Conditions.  Unless the Special Conditions provide otherwise, the General Conditions remain fully applicable.

ARTICLE 68: DISPUTE SETTLEMENT

68.2  The arrangements referred to in Article 68.2 of the GC shall be as follows:

1. The amicable dispute-settlement procedure shall be initiated when one party notified the other of the dispute and proposes that it be settled amicably by arrangements to be agreed by the parties in accordance with the provisions of this Article and Article 68 of the GC.
2. The time-limit for implementing the amicable settlement is 30 days after the notification referred to in Article 68.2.a.

The maximum time limit for reaching such a settlement shall be 60 days after notification.  The parties may agree to extend this time limit by a maximum of 60 days.

3. The time limit referred to in Article 68.2.c of the GC for responding to a request shall be eight days from the receipt of that request.  If this time limit is not met, a reminder shall be sent by the party that lodged the request.  If there is no response to this reminder within eight days of receipt of the reminder, the amicable dispute-settlement procedure shall be deemed to have failed.

GENERAL CONDITIONS FOR WORKS

ARTICLE 68: SETTLEMENT OF DISPUTES

68.5 In the absence of an amicable settlement or settlement by conciliation within the maximum time limits specified, the dispute shall:

1. In the case of a national contract, be settled in accordance with the national legislation of the State of the contracting authority; and
2. In the case of a transnational contract, be settled, either:
   1. If the parties to the contract so agree, in accordance with the national legislation of the State of the contracting authority or its established international practices; or
   2. By arbitration in accordance with the procedural rules adopted in accordance with the Convention.

We have to study this contract in detail in order to resolve whether this Application is merited.

The contract [No.EU/HW/C002] is founded on a partnership between the Ministry of Finance, Planning and Economic Development in partnership with the European Union.

I have noted that the then Minister E. Suruma signed as the National Authorizing Officer (NAO) of the European Development Fund in Uganda from the Ministry of Finance, Planning and Economic Development.

The contract was also endorsed for financing by the then Head of Delegation (HoD) of the European Commission Mr. Vincent De Visscher.

Who is the HoD?  Why was the HoD’s endorsement necessary?

The answer to this question is set out in the Agreement between the African, Caribbean and Pacific (ACP) states and the European Community and its member states.  This Agreement is referred to as the Cotonou Agreement, having being signed on 23^rd June 2000 at Contonou (see also SCC definitions section); the revised version can be downloaded from the website link http://ec.europa.eu/europeaid/where/acp/overview/documents/cotonou-consolidated-fin-ap-2012_en.pdf.  The revisions are set out here as underlined text, in this Ruling.

The spirit to the Cotonou Agreement is traced in Articles 21, which states as follows:

TITLE I

DEVELOPMENT

STRATEGIES

CHAPTER 2

AREAS OF SUPPORT

SECTION 1

ECONOMIC DEVELOPMENT

ARTICLE 21

Investment and private sector development

1. Cooperation shall support the necessary economic and institutional reforms and policies at national and/or regional level, aiming at creating a favourable environment for investment, and the development of a dynamic, viable and competitive private sector.  Cooperation shall further support:

a) the promotion of public-private sector dialogue and cooperation;

b) the development of entrepreneurial skills and business culture;

c) privatisation and enterprise reform; and

d) development and modernisation of mediation and arbitration systems.

The NAO’s role is stipulated, in part, as follows:

ARTICLE 35

National Authorising Officer

1. The Government of each ACP State shall appoint a National Authorising Officer to represent it in all operations financed from the resources from the multi-annual financial framework of cooperation under this Agreement managed by the Commission and the Bank.

Similarly the HoD’s role is stipulated, in part, as follows:

ARTICLE 36

Head of delegation

1. The Commission shall be represented in each ACP State or in each regional grouping which expressly so requests, by a delegation under the authority of a Head of Delegation, with the approval of the ACP State or States concerned. Appropriate measures shall be taken in any case in which a Head of Delegation is appointed to a group of ACP States. The Head of Delegation shall represent the Commission in all spheres of its competence and in all its activities.

2. The Head of Delegation shall be the main contact for ACP States and bodies or organisations eligible for financial support under the Agreement. He shall cooperate and work in close cooperation with the National Authorising Officer.

ARTICLE 30

Settlement of disputes

Any dispute arising between the authorities of an ACP State or the relevant organisation or body at regional or intra-ACP level and a contractor, supplier or provider of services during the performance of a contract financed by the multi-annual financial framework of cooperation under this Agreement shall:

1. in the case of a national contract, be settled in accordance with the national legislation of the ACP State concerned; and

2. in the case of a transnational contract be settled either:

1. if the Parties to the contract so agree, in accordance with the national legislation of the ACP State concerned or its established international practices; or
2. by arbitration in accordance with the procedural rules which will be adopted by decision of the Council of Ministers at the first meeting following the signing of this Agreement, upon the recommendation of the ACP-EC Development Finance Cooperation Committee.”

Taking the instant contract and the Cotonou Agreement into account, I find as follows: -

1. That the Art.68 SCC is silent on arbitration.

2. That the Art.68 SCC amicable settlement is distinct from conciliation and amicable intervention.  However the arbitration process is provided for by Clause 68.5(b) GCC which affirms this process as a dispute settlement process, either when amicable settlement is absent or has indeed failed.

3. That the Respondent ignored the first request for amicable settlement issued on 20^th July 2011.

4. That the Respondent ignored the 9^th August 2012, notice that it had neglected to attend to the request for amicable settlement.

5. That the Contonou Agreement applies to this contract (also noted in part of the SCC definitions provision).

6. That the Minister of Finance, Republic of Uganda is the NAO for purposes of Art.35 Cotonou Agreement.  In this case the then Minister Mr. E Suruma signed as the NAO.  Mr. Vincent de Visscher signed the contract as the then HoD, which power and function, derived from Art.36 Cotonou Agreement. 

I find the contract is transnational because the respective signatory party acted on the basis mechanism established under the Contonou Agreement.

7. Consequently that this is a transnational contract, given that both the NAO and HoD acted for the respective state entities, under the Cotonou Agreement mechanism, whilst sanctioning award of the contract to the Applicant.

8. That Art.68.5(b)(ii) GCC is therefore the relevant provision, to this Application.

9. In my humble opinion, I find that Applicant’s counsel erred in referring to Art.68.5(a) as the provision empowering CADER to attend to this Application.

10. I find Art.68.5(a) is inapplicable because there is no national legislation which:
    1. sets out the ensuing procedure when both the NAO and Applicant fail to amicably resolve the dispute,
    2. sets out the ensuing procedure regarding contracts signed by NAO or HoD; or
    3. deals with contracts signed by either the NAO or HoD.

11. I find that this Application has merit, since the Respondent ignored the Applicant’s request to co-operate in either the amicable resolution procedure (20-July-2011 notice) or set up an arbitration tribunal (9-Aug-2012) to resolve the outstanding disputes, under the Annex V-Procedural Rules on Conciliation and Arbitration of Contracts Financed by the European Development Fund (EDF) (http://ec.europa.eu/europeaid/work/procedures/legal_affairs/documents/edf_arbitration_en.pdf).

12. I find that the Applicant has forfeited its rights to invoke the right to determine the number of arbitrators constituting the arbitral tribunal, pursuant to Art.7 - Procedural Rules on Conciliation and Arbitration of Contracts Financed by the European Development Fund (EDF), which states,

“Article 7 - Number of arbitrators

If the parties agree, the tribunal shall be constituted by one arbitrator only. Such agreement must be reached by the parties within 15 days after receipt by the respondent of the notics (sic) commencing the arbitration proceedings as provided for in Article 18. If the parties fail to agree to arbitration by one arbitrator within the time specified, or if they otherwise agree, the tribunal shall be constituted by three arbitrators.”

13. I find therefore that Article 7 Procedural Rules on Conciliation and Arbitration of Contracts Financed by the European Development Fund (EDF), commits the parties to have a three-person arbitral tribunal whenever they fail to agree on either the arbitration process or the number of arbitrators.

14. I therefore agree to invoke the remedial powers vested in me by Section 11(4)(a) Arbitration and Conciliation Act, to effect the compulsory appointment of an arbitral tribunal comprised of Mr. Alfred Karokora (Supreme Court Justice emeritus), Ms. Jackie Nakalembe and Mr. James Nangwala.

15. I have always foreseen an event, where the appointed arbitrator declines to take up the appointment.  For this reason I have always listed two other names, whom I have held, can only take up the appointment in the sequential order listed by me.

16. I shall issues this supplementary list in a later decision.

17. Costs of the Application are awarded to the Applicant.

Dated at Kampala on the 4th day of September 2012.

……………………………………………………

Jimmy M Muyanja

Executive Director

CADER.