WHY TANZANIA NEEDS A NEW ARBITRATION LAW: VOLUME II

Kheri R. Mbiro

Partner at Breakthrough Attorneys | Tanzania | Litigation and Arbitration

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

Introduction
In the previous volume (Volume I) to this Article, I underscored the base argument for the overhauling of the Arbitration Law in Tanzania. I outlined, albeit briefly, the manner in which the said Act is outdated. But even in the subtlest hint of presumptiveness, I 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, begging for a change of the legal regime. 

Currently 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. 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. 

Herein below, I endeavor to summarily pinpoint a few areas, certainly not exhaustive, of the factors and matters which should take the center stage in our suggested review of the law on arbitration in Tanzania. You will forgive my overbearing reference to the Kenyan Arbitration Act, which I draw a benchmark stature to it, having been drafted contemplating the current international commercial arbitration principles.

In this Volume I will not discuss one other factor, that is, the enforceability of foreign awards which was extensively covered in Volume I regarding the international instruments we are a part of and the etiquette of domesticating the same. In essence therefore, I will go straight to other factors associated:-

What issues needs to be addressed by the Arbitration law, if reviewed
i.                    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 and it helps in sieving unnecessary 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 a heavily contentious situation, 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. 

ii.                  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.

A quick look at the Arbitration Rules of Tanzania Institute of Arbitrators (Rule 5.0) reveals an implied presence of “a list of arbitrators” which presupposes commercial arbitration of a competitive niche must boast a constituted panel of very qualified individuals. Rule 5.4[3] states as follows;

“If the arbitration is complicated in nature, then each [party] shall nominate one arbitrator from the approved list and the Tanzania Institute Arbitrators shall appoint an umpire ”

Of course, one may argue that institutions may have a bigger need for qualified credentials of arbitrators for purposes of keeping up reputation. However, since commercial arbitrations are woven in a manner that sooner or later they may find their way into Court for reviews or enforcement. My argument is that, if more unqualified persons are left to arbitrate, then we are increasing the probabilities of many arbitration cases finding their way to Courts for reviews which in return is a leeway into defeating the cardinal principle of finality to arbitration awards. In short, the more qualified the arbitrator, the stronger and more resonating the award and subsequently, the lesser the likelihood of post award proceedings.  

iii.                Arbitrability and Challenge of Arbitrators, including procedures
Other jurisdictions, such as Kenya and Germany, section 17 and Section 1040 respectively, have incorporated what is widely known as the kompetenz-kompetenz principle. This golden principle of arbitration 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 of the adjudicator 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. [4] ”

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[5].”

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 challenge grounds, 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.

The lawmaker can even draw inference from the Tanzania Institute of Arbitrators’ Arbitration Rules and the NCC’s Arbitration Rules which have provided for the power of the arbitrator (includes an arbitral tribunal) to adjudicate on whether he/it has the jurisdiction to arbitrate the matter or not.[6]

iv.                Interim Measures (Orders)  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[7] 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.

In arbitration, the question of time is very crucial. Parties prefer arbitration because it promises to serve time that a normal litigation case would otherwise take. Now with such practical deficiencies such as inability or vagueness of Arbitrators power to make interim orders including preservation orders, execution orders and so forth, one is left wondering whether the law as it is, helps a person secure status quo when in need, without the necessity of resorting to Court again. The answer is simple. With the Act throwing a lot of powers to “The Court”, the arbitrator, who was originally intended to be free and unbound, is left at the behest of the Court in an age where arbitration community is working to curtail the court’s extent of interference with arbitration proceedings. 

v.                  Costs, Expenses and Interests
Costs adjudication is a very important matter in Arbitration, and disputes resolution generally. 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. It is actually one of the key factors litigants look at before litigating. 

The Tanzanian Arbitration Act on costs has endeavoured to assume powers of taxing are impliedly given to the Arbitrators, hence inviting controversy where there are contrary intentions or contended implied contrary intentions. This is the case since under paragraph 9 of the First Schedule to the Act (made under section 4 on implied matters by submission to arbitration) it is provided that the Arbitrator(s)/umpire shall have the powers to tax costs of reference and award.

To cure this, at the beginning of the arbitration, parties have to readily be aware of raising the issue of the powers of the arbitral tribunal and when they end. For example, some parties would contend that the Arbitrator was only mandated to end his powers on delivering the award and awarding cost but not on actually taxing the costs thereto. The Act

Our Kenyan counterparts have been quite elaborate on the matter of costs in arbitration and leave a few, if any at all, unanswered questions as regards taxation of costs. I am forced to reproduce the entire section as follows;- 

“32B. Costs and expenses
(1)   Unless otherwise agreed by the parties, the costs and expenses of an arbitration, being the legal and other expenses of the parties, the fees and expenses of the arbitral tribunal and any other expenses related to the arbitration, shall be as determined and apportioned by the arbitral tribunal in its award under this section, or any additional award under section 34(5).

(2)   Unless otherwise agreed by the parties, in the absence of an award or additional award determining and apportioning the costs and expenses of the arbitration, each party shall be responsible for the legal and other expenses of that party and for an equal share of the fees and expenses of the arbitral tribunal and any other expenses relating to the arbitration.

(3)   The arbitral tribunal may withhold the delivery of an award to the parties until full payment of the fees and expenses of the arbitral tribunal is received….”

Looking at the wording in this section from the Kenyan law and comparing it to our incumbent obscured provision in Chapter 15 of the Laws of Tanganyika, it is clear that more vice and ambiguity is avoided by our neighbours just at the expense of being elaborative and definitive in their statute. 

There is a need to offload the veiled power (in the First Schedule) of the Act and expound it widely in the cusp of the law. The law can specifically too, look into providing explicitly 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. 

vi.                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. Arbitrators borrow heavily from the Civil Procedure Code, when they do so.

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[8]. This is a common modern manner of determining procedures which is featured in many an international arbitration institutes such as ICC Rules

vii.              Summary Dispositions
Arbitration being a choice of parties needs to underscore the essence that parties are paramount in choosing how the same should be conducted. Whether orally, documents only etc. When the matter is left to the law to decide at the silence of the agreement, it may arise to absurdity due to the lacunae in the law itself, for not having comprehended such matters. 

As is the case, all the major international instruments on Arbitration, readily and expressly provides for parties election on manner of evidence submission to the arbitral tribunal
In today’s world time is of the essence. 

Most parties have chosen Arbitration for its renowned ability to save time. It is with 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. Of course, couching of the statute must leave the choice to the parties. To highlight on this, the Kenyan Arbitration Act[9] 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[10] 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.

Reference is also made to the use of teleconference, video conferences and other electronic media procedures.

viii.                  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(s). The essence of arbitration is 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. In general, 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 world, and owing to its consensual reference 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 presidency 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. 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 1st, 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[11] thereto states;

·     The parties to any binding arbitration conducted in the United States, pursuant to CPR Rules for Non-Administered Arbitration (“CPR Arbitration 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 an earlier article I wrote for Breakthrough Attorneys[12]I made references 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 unnecessarily 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 its dynamics of application.
Conclusion:

The aforesaid covers the assortment of main matters that the lawmaker may wish to consider in our case for the country’s arbitration law review. 

Kheri R. Mbiro is an Advocate and Partner | Litigation and Arbitration at Breakthrough Attorneys.
For further contacts he can be reached at;
Tel; +255 712 106 951 or,
Email via; kmbiro@breakthroughattorneys.com,
Web; www.breakthroughattorneys.com


References:
-         [1]Mvita Construction Company v. Tanzania Harbours Authority(2006) TLR 26Court 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] Rule 5.0 of the National Construction Council Arbitration Rules is coached more or less the same as this Rule.
[4]German Arbitration Act, Section 1040 (1)
[5]    Article 23(1) of the UNCITRAL Arbitration Rules
[6] See Rule 6.2 (c) and Rule 7.2 (e) of the two Rules.
[7]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.
[8]Section 20. Kenya Arbitration Act
[9]Section 25 (1)
[10]Section 1047 (1) - Germany Arbitration Act
[11]The ICPR published its Arbitration Appeal Procedure rules since year 1999. They remain a pioneer of change in this concept of appeal in Arbitration.
[12]www.breakthroughattorneys.com/informationcentre/articles