Arbitration Is Not As Scary As We Once Believed

The Alternative Dispute Resolution (widely known as ADR) is a move to address and appreciate global commercial developments by introducing dispute resolution mechanisms that are not only efficient and accessible but also faster and cheaper. Arbitration is used both in the first instance when it arises from contractual clauses and in the second instance, when parties agree to divert a matter before court to arbitration. It has been described as “soft technology” and a form of conflict resolution purportedly based on a “harmonic” as opposed to an “adversarial” approach and often seen as a way to advocate a “blending of western and local law.”

Internationally, Arbitration has been the most favored method for settlement of commercial and other disputes because resolving international commercial disputes through domestic courts of law is more expensive. As such, business entities view the disadvantages in domestic arbitration as outweighing its advantages.

Arbitration should not be as scary as we once thought it to be as its objectives are aimed at creating the reconciliation “principle of give and take” or “win-win” situation and determine adequate compensation for wrongs. It is also aimed at maintaining not only business relations between the parties but also personal relations which would otherwise have been destroyed by the “digging” of “destroying” evidence against parties which would most likely end in enmity. ADR has also been championed as having the ability to decongest the court systems, alleviating the case-load pressure and allowing greater access to justice as a whole. Therefore, arbitration is geared mostly towards protecting community and public interests to ensure harmonious living amongst the parties who enter contractual relations in the day to day practices.

The Centre for Arbitration and Dispute Resolution (CADER) was established in Uganda to mainly ensure realization of the goal of increased party autonomy and provision of appropriate and user-friendly rules of procedure to guide parties; the institution makes available to individuals and their legal counsel pre-drafted model arbitration clauses for inclusion in their contracts, at no charge. It also has a detailed fee structure that can be relied upon when charging for various services including fees that are charged by the individual CADER registered arbitrators and mediators. To encourage pursuit of justice through arbitration, the arbitration tribunal has discretion to opt to follow considerations of justice and fairness without being bound by rules of law. The existence of an ongoing court case where a similar matter is brought before an arbitrator does not render such matter as res judicata.

CADER’s value is recognized by the courts and it is governed by statute, which empowers arbitrators and regulates the process. The Civil Procedure Rules and the Judicature Act introduce both domestic and international arbitration and provide for Court-annexed Arbitration which is arbitration under the Order of Court. These statutory provisions focus on the principal basis of arbitration being the maintenance of mutual respect for each other’s interests between the parties and creating consensus on key matters. Where the parties have opted for arbitration but fail to agree on the arbitrator, the Court shall appoint one.

Our laws are significant because they incorporate the provisions of the United Nations Commission on International Trade (UNCITRAL) Model Law on International Commercial Arbitration and provide for situations when matters can be referred to a special referee or arbitrator to handle any cause or matter other than a criminal proceeding. Both the Magistrates Court and High Court have jurisdiction over arbitration-related court proceedings and can enforce arbitration clauses and stay court proceedings. In practice, Ugandan courts will enforce arbitration clauses, upon application by either of the parties or on its own motion. Just like mediation, there is a tendency as a preliminary matter to decide whether or not a dispute is suitable for arbitration.

Most importantly, courts follow and carry out the intention of the parties. Where the case is for arbitration pursuant to an agreement to that effect, appointment of an arbitrator follows as a mutual consideration and not for only one party to decide. When the contract upon which the arbitration clause is based is rendered null and void, this decision by the arbitral tribunal does not itself invalidate the arbitration clause. The law empowers the tribunal to rule on its jurisdiction as well as on any objections with respect to the existence or validity of an agreement, and the arbitration clause which forms part of the contract is treated as an agreement independent of any other terms of the contract. This principle is known as “kompetenz–Kompetenz.”

Additionally, a foreign arbitral award is readily recognized and enforced in three-quarters of the world, as long as they are a party to the Conventions. When an award holder seeks to have an award recognized or enforced, it is assumed that the arbitral legislation of the country concerned dealt with the matter sufficiently and the foreign award is deemed to be a decree of court and it is treated as binding for all purposes on the persons as between whom it was made.

Conclusively, arbitration is gradually becoming a preferred method of dispute resolution by business owners as opposed to conventional Court litigation particularly because their interests and business reputation are much more protected, and business relationships maintained. There is now elaborate legislation in place and what remains is the need for a change in attitude to embrace ADR as part of the available menu in resolving disputes in Uganda. Following the creation of CADER there has been an increase in the activity of arbitration but as rightly stated by Justice Lindley in Verner v Gen and Commercial Invest Trust, a proceeding may be perfectly legal and yet opposed to sound commercial principles. There is still more to be done, especially because litigation has been the more known solution, but with more sensitization, we are headed in the right direction.

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