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Understanding an arbitration agreement

Friday, August 5th, 2022

understanding the arbitration agreement

In the past weeks, we have been discussing Alternative Dispute Resolution and why it would be the perfect option for aggrieved parties who would desire to resolve a conflict or a case.

Though ADR is the most desirable path for parties to take, it is not one that one can just stumble into. Our law provides for three major avenues through which prospective disputants might find themselves in arbitration proceedings. Of course, to establish we must first understand which cases can be brought to court for arbitration. 

Credit: differencebetween

Abritration is justice blended with charity

Nachman of Breslov

What can be arbitrated?

The Arbitration and Conciliation Act does not expressly state which matters can be arbitrated and those that cannot. By implication, however, only matters that fit the requirements for arbitration can be arbitrated, and therefore all other matters that do not meet the requirements are not competent for arbitration. 

For this to happen, there must be a valid arbitration agreement. This means that the arbitration agreement must first and foremost meet all the requirements of a valid contract. An arbitration agreement must be in writing, and this includes other means of telecommunication that provides a record of the agreement. 

According to the Act, the reference in a contract to a document containing an arbitration clause shall constitute an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract. In that case, the dispute in question must relate to those matters in the contract that the parties have agreed to refer to arbitration. 

An arbitration agreement creates contractual obligations and is governed by the very rules that govern the law of contract. It, therefore, has the same binding and enforceable effect as any other contract. The act provides that arbitration may be challenged if, inter alia, a judge finds that the arbitration agreement is null and void, inoperative or incapable of being performed. The same tests and standards applied to challenge contracts would be used to determine the validity of any arbitration agreement. 

In the case of Tullow Oil Vs Uganda Revenue Authority, an oil and gas agreement existed between Tullow oil and Uganda, it provided for arbitration in case of a dispute. A dispute arose concerning taxes owed to Uganda Revenue Authority. Tullow oil attempted to refer this dispute to arbitration in London as per the contract however, the Ugandan courts disagreed stating that in principle, there can be a contract relating to tax obligations between parties because tax obligations are imposed by law and are not negotiated by parties. Therefore there cannot be a valid arbitration agreement concerning a matter determined by law. 

After a case has been submitted for arbitration given a valid arbitration agreement, an arbitration award is issued to the parties. An arbitration award carries the same effect as a decree of court as it is enforceable as though it were an order of the court. The successful party is to apply to the court for enforcement and furnish proof of a valid arbitration agreement and the original arbitral award or a duly authenticated copy of it.

The following are the arbitration avenues available under Ugandan Law:

1. Before a case commences, during scheduling. 

This procedure is a scheduling conference. This step is mandatory as it demands both lawyers for the prospective litigants to meet before a judicial officer to agree on what questions they will present to the court, not forgetting the facts of said case and the evidence they intend to furnish during said proceedings. The purpose of this is to reduce the backlog that may come with pursuing court proceedings. We have mentioned how much court proceedings are a tedious affair. Under this procedure, the judicial officer will determine beforehand, if the case is suitable for arbitration. 

For a judicial officer to come to this conclusion, it must be established that there are no questions of law involved or that both parties are guilty in some respect and cannot agree on who takes more blame. The court will refer the matter to arbitration even before it is set down for hearing. 

2. Court Referral:

Under this procedure, a court hearing a case, at any time during the proceedings, refer the case to arbitration, if the court deems that the case can best be concluded by arbitration. A party to ongoing court proceedings may make also make a formal application to the presiding judge for the case to be referred to arbitration. However, the court may in the exercise of its discretion refer a case to arbitration even without application from either party. 

The perfect example of this is in domestic cases or other cases where the court determines that it is in the interest of the parties that their relationship is preserved. Similar to the first procedure, parties are free to appoint their arbitrator, but if they cannot, then the court appoints one for them. 

3. By Nomination:

Parties to a dispute may decide on arbitration as a preferred form of dispute resolution concerning disputes that arise out of a legal relationship between them. This is voluntary, and all that is required is the existence of a valid arbitration agreement. In this instance, parties nominate their preferred arbitrator, the rules applicable, the seat of arbitration and even the procedures to be followed as long as the procedure does not derogate the minimums guaranteed by the law like the right to be heard or to be represented by counsel of one’s choice.

What is the role of the courts in arbitration?

The Arbitration and Conciliation Act expressly forbids the intervention of courts except as permitted under the act. A court’s role is limited to the following:

  1. The enforcement of awards
  1. Determination of questions of law that may arise only if parties so elect
  1. Taking evidence where required
  1. Hearing appeals and challenges to awards
  1. Provision of interim measures.