
IF YOU CHOOSE TO GO TO CAESAR, YOU TAKE CAESAR’S JUDGMENT: THE IMPORTANCE OF APPOINTING THE RIGHT ARBITRATOR
Introduction
The bedrock of arbitration is the principle of party autonomy which, among others, allows parties to appoint an arbitrator or arbitral tribunal of their choice. This principle is deeply embedded within Uganda’s Arbitration and Conciliation Act Cap. 4. Equally central to arbitration is the principle that an arbitral award is final. Once a duly appointed arbitrator delivers an arbitral award, that award is final and binding on the parties. Uganda is a pro-arbitration state and the law only allows an arbitral award to be set aside on limited grounds.
Choosing the right arbitrator is something parties in arbitration should therefore never take lightly. Scrutton, LJ, in the case of African and Eastern (Malaya) Ltd vs. White, Palmer & Co. Ltd[1] stated; “If the arbitrator whom you choose makes a mistake in law, that is your look-out for choosing the wrong arbitrator; if you choose to go to Caesar, you take Caesar’s judgment.”
This article interrogates the position of the law on appointing arbitrators in Uganda and how it is done. It then discusses the principle of finality of an arbitral award with an emphasis on its implications for arbitration. Thereafter, the article considers the law on challenging an arbitral award in Uganda and it concludes by outlining some factors parties can consider when appointing an arbitrator.
- Law on appointment of an arbitrator
Parties in arbitration have wide autonomy to appoint an arbitrator. They can appoint any person of their choice from any field of practice or industry. According to the Arbitration and Conciliation Act, a person is not to be precluded from acting as arbitrator because of his or her nationality unless the parties agree otherwise.[2] Generally, Arbitrators are contractually empowered to provide the parties with a definitive interpretation of their agreement.
Under the Arbitration and Conciliation Act, parties are free to determine the number of arbitrators to handle their dispute.[3] If they fail to agree on the number, there shall be one arbitrator.[4] Parties are equally free to agree on the procedure for appointing the arbitrator or arbitrators.[5] In practice, parties usually include in their dispute resolution clause or arbitration agreement the procedure for appointing the arbitrator. How it will be conducted is determined by how the dispute resolution clause is worded.
Where the parties have no written agreement as to the appointment of an arbitrator or arbitrators, they can agree on the person to be appointed as arbitrator if they want a sole arbitrator to handle the dispute.[6] Where they want the dispute to be handled by a panel of three (3) arbitrators and they have no written agreement to that effect, the Arbitration and Conciliation Act provides that each party shall appoint an arbitrator and the two appointed arbitrators shall then be required to appoint the third arbitrator.[7] In practice, this third arbitrator often chairs the arbitral tribunal.[8]
Be that as it may, where the parties choose that a panel of three arbitrators should handle their dispute, the Arbitration and Conciliation Act gives the party upon whom a request to make such appointment has been served thirty (30) days to appoint an arbitrator. Should the 30 days elapse without the party making such an appointment, the innocent party can apply to the appointing authority to make the appointment.[9] The same applies to a situation where each party has appointed an arbitrator but the arbitrators appointed fail to appoint a third arbitrator within 30 days.[10]
Likewise, where the parties agree that the dispute should be handled by a sole arbitrator but fail to agree on an arbitrator, either party may apply to the appointing authority to make the appointment.[11] An ‘appointing authority’ is any institution, body or person appointed by the Minister for Justice and Constitutional Affairs to perform the functions of appointing arbitrators.[12]
It should be noted that any decision made by the appointing authority in respect of appointing an arbitrator in any of the foregoing situations is final and not subject to any appeal.[13]
According to Justice Stephen Mubiru, Head of the Commercial Division of the High Court of Uganda, save for specified circumstances, parties take their arbitrator for better or worse both as to the decision of law or decision of fact.[14] In arbitration, it is the position that once the arbitrator makes an arbitral award, the award is not only binding on the parties but is also final. As soon as it is delivered, the parties are bound by it and are obliged to abide by and comply with it.[15]
- Implications of the finality of the award
The finality of an arbitral award means that the award can only be set aside on procedural grounds. An arbitral award conclusively determines the subject matter which leaves nothing to be done except as to execution and carrying out the terms of the award.[16] The substantive issues which the arbitral tribunal determines cannot be subject to review by the courts and the award is not subject to appeal or any other remedy except those provided under the Arbitration and Conciliation Act Cap. 4.[17]
It follows, therefore, that an arbitrator’s determination on the points of law or fact is conclusive and cannot be subjected to court’s review, except in very narrow circumstances. In the case of Roko Construction Ltd vs. Kobusingye Janet,[18] Justice Stephen Mubiru stated that if the arbitrator has acted within his or her jurisdiction, has not been corrupt and has not denied the parties a fair hearing, then the court should accept his or her reading as the definitive interpretation of the contract even if the court might have read the contract differently.
The United States Supreme Court, in the case of Oxford Health Plans v. Sutter,[19] emphasized that it is the arbitrator’s construction of the contract that was bargained for by the parties and, as long as the arbitrator’s decision concerns his interpretation of the contract, the courts have no business overruling the arbitrator because their interpretation of the contract is different. In the same case, the court remarked: “The arbitrator’s construction holds, however good, bad, or ugly.”
Therefore, if the arbitral tribunal makes a mistake whose remedy is not provided under the Arbitration and Conciliation Act, the parties have to bear with that mistake and its potential consequences. In addition, the parties risk the burden of incurring heavily in legal costs and litigation which they had initially tried to avoid by going for arbitration.
- The Law on Challenging an Arbitral Award in Uganda
An arbitral award can either be set aside or appealed only under very stringent circumstances. The position of the law is that an award can only be challenged on very narrow grounds. The rationale for the existence of limited avenues for challenging an arbitral award is well captured in the Roko case (supra) where the court stated –
For parties, opting-out of court jurisdiction by agreeing to arbitrate is a positive choice. They wish to have their dispute resolved in a different manner to how it might be resolved in the courts. They opt for a neutral decision-maker independent of the courts. Permitting a court to substitute its decision on the merits for that of the tribunal chosen by the parties would undermine those choices. Furthermore, increasing the duration and cost of the arbitration process by permitting an appeal may operate to its detriment.[20]
With regards to setting aside, the award can only be set aside under limited grounds provided for under the Arbitration and Conciliation Act Cap. 4. The award can be set aside if the party making the application proves that—
- He or she was under some incapacity;
- the arbitration agreement is not valid under the law to which the parties have subjected it or, if there is no indication of that law, the law of Uganda;
- He or she was not given proper notice of the appointment of an arbitrator or the arbitral proceedings or was unable to present his or her case;
- The arbitral award deals with a dispute not contemplated by or not falling within the terms of the reference to arbitration or contains decisions on matters beyond the scope of the reference to arbitration; except that if the decisions on matters referred to arbitration can be separated from those not so referred, only that part of the arbitral award which contains decisions on matters not referred to arbitration may be set aside;
- The composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless that agreement was in conflict with a provision of the Act from which the parties cannot derogate, or in the absence of an agreement, was not in accordance with the Act;
- the arbitral award was procured by corruption, fraud or undue means or there was evident partiality or corruption in one or more of the arbitrators; or
- The arbitral award is not in accordance with the Act.[21]
Furthermore, the award may also 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.[22]
It should be noted that the existence of a violation of the Arbitration and Conciliation Act is not enough to set aside an award. It has been held that not every violation will lead to a refusal of enforcement or setting aside the award. The position of the law is that in addition to showing that a violation has taken place, a party seeking to set aside an award must also establish two additional factors: (a) that the violation occurred in connection with the making of the award, that is, there is a casual nexus between the violation and the aspect of the award with which the party is aggrieved, and (b) that the violation caused actual or real prejudice to the party.[23] The High Court has held that though a violation need not show that the prejudice is substantial, the violation must have substance and not be de minimis.[24]
Challenging an arbitral award through an appeal is even harder. Under the Arbitration and Conciliation Act Cap. 4, the only situation when the court may vary or set aside the arbitral award or remit the matter to the arbitrator for reconsideration based on an appeal, is when the parties agree that an appeal will be available to an aggrieved party.[25] In practice, it is uncommon for parties to agree that an aggrieved party will have a right of appeal. In addition, such an appeal, if so agreed to, can only be on a point of law and nothing else.[26]
Therefore, from the above, it is quite clear that challenging an arbitral award is a mammoth task. The Courts in Uganda have emphasized that they will not throw the baby out with the bath water.
- What to consider when appointing an Arbitrator
From the foregoing discussion, it is clear that although parties have the autonomy to appoint any arbitrator of their choice, choosing the right arbitrator is not something they should take lightly. We provide some factors parties may adopt while considering who to appoint as their arbitrator as follows –
- Expertise of the Arbitrator;
- Experience of the Arbitrator in dispute resolution or arbitration in particular;
- Experience of the Arbitrator in the subject matter of the dispute;
- The Arbitrator’s impartiality or absence of any conflict of interest; and,
- The availability of the Arbitrator to arbitrate.
- Conclusion
Uganda is undoubtedly a pro-arbitration nation. The Courts have made it very clear that challenging an arbitral award is only acceptable in very limited circumstances.
For parties to get the most out of arbitration and to ensure that it not only conclusively determines their dispute but also settles it amicably, it is pertinent that parties appoint the right arbitrator.
This article is to raise general awareness of issues and to stimulate discussion only. It does not constitute legal advice.
[1] (1930) 36 LIL Rep 113 at 114.
[2] Section 11(1), Arbitration and Conciliation Act Cap. 4.
[3] Section 10(1), Arbitration and Conciliation Act Cap. 4.
[4] Section 10(2), Arbitration and Conciliation Act Cap. 4.
[5] Section 11(2), Arbitration and Conciliation Act Cap. 4.
[6] Section 11(2)(b), Arbitration and Conciliation Act Cap. 4.
[7] Section 11(2)(a), Arbitration and Conciliation Act Cap. 4.
[8] Sundra Rajoo, Law, Practice and Procedure of Arbitration (Second Edition, LexisNexis).
[9] Section 11(3)(a), Arbitration and Conciliation Act Cap. 4.
[10] Section 11(3)(a), Arbitration and Conciliation Act Cap. 4.
[11] Section 11(3)(b), Arbitration and Conciliation Act Cap. 4.
[12] Section 2(1)(a), Arbitration and Conciliation Act Cap. 4.
[13] Section 11(5), Arbitration and Conciliation Act Cap. 4.
[14] Great Lakes Energy Company NV vs. MSS XSABO Power Ltd & 4 Ors HCAC No. 0002 & 0005 of 2023.
[15] Roko Construction Ltd vs. Kobusingye Janet HCMC No. 0022 of 2021.
[16] Elisabeth Sundari, ‘The Limitation of Final and Binding Arbitral Awards: How Far in Supporting the Autonomy of Arbitration?’, Proceedings of The 6th International Conference on Research in Behavioral and Social Sciences (Acavent 2019) <https://www.dpublication.com/abstract-of-6th-icrbs/6-f144> accessed 30 August 2023.
[17] Smile Communications Uganda Ltd vs. ATC Uganda Ltd & Anor HCAC No. 0004 of 2022
[18] High Court Miscellaneous Cause No. 0022 of 2021.
[19] 133 S. Ct. 2064 (2013).
[20] High Court Miscellaneous Cause No. 0022 of 2021.
[21] Section 34 (2)(a), Arbitration and Conciliation Act Cap. 4.
[22] Section 34 (2)(b), Arbitration and Conciliation Act Cap. 4.
[23] Roko Construction Ltd vs. Kobusingye Janet High Court Miscellaneous Cause No. 0022 of 2021.
[24] Great Lakes Energy Company NV vs. MSS XSABO Power Ltd & 4 Ors HCAC No. 0002 & 0005 of 2023.
[25] Section 38 (1), Arbitration and Conciliation Act Cap. 4.
[26] Section 38 (1), Arbitration and Conciliation Act Cap. 4.
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