resolving construction disputes through arbitration - an overview of tanzanian legal framework

University of Strathclyde

Law School

RESOLVING CONSTRUCTION DISPUTES THROUGH ARBITRATION:

AN OVERVIEW OF TANZANIAN LEGAL FRAMEWORK

By

George Mandepo

Reg. No. 200957963

Supervisor: Dr. Bryan Clark

Dissertation Submitted for the Degree of LLM in Construction Law, September 2010

George Mandepo Reg. 200957963

i

DECLARATION AND COPYRIGHT

This thesis is the result of the author’s original research. It has been composed by

the author and has not been previously submitted for examination which has led to

the award of a degree.

The copyright of this thesis belongs to the author under the terms of the United

Kingdom Copyright Acts as qualified by University of Strathclyde Regulation 3.50.

Due acknowledgement must always be made of the use of any material contained in,

or derived from, this thesis.

Signed………………………………….

(George Mandepo)

Date:…………………………………….


ii

DEDICATION

This dissertation is dedicated to my parents, my wife Veronica and to

my children Hans and Renée.


iii

ACKNOWLEDGEMENT

I would like to express my gratitude and appreciation to my supervisor, Mr. Bryan

Clark for your useful guidance, suggestion and encouragement that enabled me to

accomplish this study successfully.

Thanks to my employer, the Permanent Secretary, Ministry of Agriculture Food

Security and Cooperative of the United Republic of Tanzania for sponsoring my

studies. To Dr. A. P. Rutabanzibwa and my officemates, I am most grateful for your

support and encouragements during my studies.

My special gratitude to my beloved parents, brothers, sisters and all relatives whose

love and affection is the source of inspiration and support for my studies. Finally yet

importantly, I would like to thank my friend and fellow classmate Donald Sheedy for

your invaluable assistance and encouragement throughout my time at Strathclyde

University.


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ABSTRACT

The complex nature of projects in the construction industry has made disputes

unavoidable. Arbitration as an alternative to litigation has been widely acceptable as

an effective dispute resolution method especially in domestic and international trade

transactions including construction industry.

The main purpose of the study was to examine the effectiveness of arbitration legal

framework in Tanzania in resolving construction disputes. The study involved a

thorough review of the existing legal and institutional framework for arbitration in

Tanzania in comparison with the international arbitration agreements and arbitration

laws of the other common law countries including the UK.

The study has revealed that the resolution of construction disputes through

arbitration in Tanzania is governed by the Arbitration Act, Cap. 15, Civil Procedure

Code and the National Construction Arbitration Rules 2001. However the principal

arbitration law i.e. Arbitration Act is out-dated and not compliant with the

requirements of various International arbitration agreements including the

UNICITRAL Model Law and New York Convention.

It has been observed that there are several inconsistencies in the procedures with

the current arbitration legislation that cannot afford effective resolution of

construction disputes between the parties. The observed shortcomings in the law

include too much power of the courts over the arbitration proceedings, which can

affect parties’ autonomy in the arbitration process and distort the general purpose of

arbitration. In addition, the study has observed that the arbitration system in

Tanzania lacks active and competent arbitration institutions and practitioners to

facilitate arbitration process for the construction disputes.

Based on the findings, the study recommends for the review of the legal and

institutional framework for arbitration in Tanzania with a view of making arbitration

more effective method in resolving of construction disputes in line with requirements

of the international arbitration agreements.


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TABLE OF CONTENTS

DECLARATION AND COPYRIGHT ............................................................................ i

DEDICATION .............................................................................................................. ii

ACKNOWLEDGEMENT ............................................................................................. iii

ABSTRACT ................................................................................................................ iv

ABBREVIATIONS .................................................................................................... viii

TABLE OF CASES ...................................................................................................... i

LIST OF STATUTES .................................................................................................. xi

CHAPTER ONE ......................................................................................................... 1

INTRODUCTION TO RESEARCH ............................................................................. 1

1.0 BACKGROUND ................................................................................................... 1

1.2 PROBLEM STATEMENT ..................................................................................... 2

1.3 AIM AND PURPOSE ............................................................................................ 3

1.4 RATIONALE AND OBJECTIVE ........................................................................... 3

1.5 SIGNIFICANCE OF THE STUDY ........................................................................ 4

1.6 LITERATURE REVIEW ........................................................................................ 4

1.7 HYPOTHESES ..................................................................................................... 6

1.8 RESEARCH METHODOLOGY ............................................................................ 6

1.9 ORGANISANISATION OF STUDY ...................................................................... 7

CHAPTER TWO ......................................................................................................... 8

CONSTRUCTION DISPUTES AND RESOLUTION TECHINIQUES ......................... 8

2.0 INTRODUCTION .................................................................................................. 8

2.1 CONSTRUCTION DISPUTES ............................................................................. 8

2.1.1 Dispute Defined ............................................................................................. 8

2.1.2 Cause of Disputes .......................................................................................... 9

2.1.3 Effects of Disputes in Construction .............................................................. 10

2.2 DISPUTE RESOLUTION METHODS................................................................. 10

CHAPTER THREE ................................................................................................... 13

ARBITRATION IN PRACTICE ................................................................................. 13

3.0 INTRODUCTION ................................................................................................ 13

3.1 ARBITRATION DEFINED .................................................................................. 13

3.2 HISTORICAL PERSPECTIVE ............................................................................ 13

3.3 PRINCIPLES OF ARBITRATION ....................................................................... 14


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3.4 ADVANTAGES AND DISADVANTAGES OF ARBITRATION ............................ 14

3.5 STARTING AN ARBITRATION .......................................................................... 15

3.5.1 Genuine dispute or difference ...................................................................... 16

3.5.2 Arbitration agreement................................................................................... 18

3.5.3 Submission or reference of a specific dispute .............................................. 19

3.6 SEVERABILITY OF ARBITRATION AGREEMENT ........................................... 19

3.7 APPLICABLE LAW AND SEAT OF THE ARBITRATION................................... 20

3.8DUTIES AND POWERS OF ARBITRAL TRIBUNAL........................................... 20

3.9 ENFORCEMENT OF AWARD ........................................................................... 22

3.10 CHALLENGING AN AWARD ........................................................................... 23

3.11 COURTS’ POWERS ON ARBITRATION ......................................................... 23

CHAPTER FOUR ..................................................................................................... 25

LEGAL FRAMEWORK FOR ARBITRATION IN TANZANIA .................................... 25

4.0 INTRODUCTION ................................................................................................ 25

4.1 ARBITRATION ACT (CAP. 15) .......................................................................... 25

4.1.1 Applicability .................................................................................................. 26

4.1.2 Reference to arbitration ................................................................................ 26

4.1.3 Powers of an arbitrator ................................................................................. 27

4.1.4 Effect of arbitration agreement ..................................................................... 27

4.1.5 Court powers in support of arbitral proceedings ........................................... 30

4.1.6 Extension of time for commencement of arbitration ..................................... 31

4.1.7 Appointment of an arbitrator or umpire......................................................... 33

4.1.8 Removal of arbitrator.................................................................................... 33

4.1.9 Procedural and evidential matters ................................................................ 34

4.1.10 Powers of the Arbitrator or Umpire ............................................................. 34

4.1.11 Confidentiality ............................................................................................ 35

4.1.12 The arbitral award ...................................................................................... 35

4.1.13 Challenging an award ................................................................................ 37

4.1.14 Recognition and enforcement of domestic award ...................................... 39

4.1.15 Enforcement of Foreign Arbitral Awards .................................................... 40

4.2 ARBITRATION UNDER THE CIVIL PROCEDURE CODE ................................ 42

4.2.1 Arbitration by order of Court ......................................................................... 42

4.2.2 Agreement to refer to the arbitration ............................................................ 44

4.2.3 Arbitration without the intervention of court .................................................. 44

4.3 COMPARING ARBITRATION UNDER THE ARBITRATION ACT AND CPC .... 44

4.4 ARBITRATION UNDER THE NATIONAL CONSTRUCTION COUNCIL ............ 45

4.4.1 Scope of application ..................................................................................... 46

4.4.2 General principles ........................................................................................ 46

4.4.3 Jurisdiction and powers of the arbitrator ...................................................... 47


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4.4.4 Arbitration costs ........................................................................................... 48 4.4.5 Procedures for enforcement and challenging an award ............................... 48

4.5 ARBITRATION UNDER THE PUBLIC PROCUREMENT .................................. 48

CHAPTER FIVE ....................................................................................................... 51

INSTITUTIONAL CHALLENGES FACING ARBITRATION IN TANZANIA ............... 51

5.0 INTRODUCTION ................................................................................................ 51

5.1 ARBITRATION INSTITUTIONS ......................................................................... 51

5.1.1 Arbitration in Commercial Courts of Tanzania .............................................. 52

5.1.2 Arbitration under NCC .................................................................................. 52

5.1.3 Tanzania Institute of Arbitrators ................................................................... 53

5.1.4 Arbitration Professionals .............................................................................. 54

CHAPTER SIX ......................................................................................................... 55

FINDINGS, CONCLUSION AND RECOMMENDATIONS........................................ 55

6.1 FINDINGS AND CONCLUSION ......................................................................... 55

6.2 RECOMMENDATION ........................................................................................ 57

BIBLIOGRAPHY ...................................................................................................... 58


viii

ABBREVIATIONS

A.C - Appeals Cases

ADR - Alternative Dispute Resolution

ALL MR - All Maharashtra Law Reporter

BLR - Building Law Reports

CA - Court of Appeal

Cap. - Chapter

CPC - Civil Procedure Code

DRB - Dispute Resolution Board

EWHC - High Court of England and Wales

G.N - Government Notice

GCC - General Conditions of Contract

HGCRA - Housing Grants Construction and Regeneration Act

ICE - Institution of Civil Engineers

ICSID - International Centre for Settlement of Investment Disputes

JCT - Joint Contract Tribunal

K.B - Kings Bench

Lloyd’s Rep - Lloyd Law Reports

NCC - National Construction Council

PPRA - Public Procurement Regulatory Authority

R.E - Revised Edition

R.I.B.A. - Royal Institute of British Architects

SCC - Special Conditions of Contract

SLT/S.L.T - Scots Law Times

TCC - Technology and Construction

TIA - Tanzania Institute of Arbitrators


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TLR - Tanzania Law Reports

UK - United Kingdom

UNICITRAL - United Nations Commission on International Trade Law

WLR - Weekly Law Reports


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TABLE OF CASES

AMEC Civil Engineering Ltd v The Secretary of State for Transport [2005] 1 WLR 2339

Azov Shipping Co. v Baltic Shipping Co. 2 Lloyd’s Rep. (1999)159

Bilta (UK) Ltd v Nazir [2010] EWHC 1086 (Ch)

Biwater Gauff (Tanzania) Ltd. V. United Republic of Tanzania ICSID Case No. ARB/05/22

Construction Engineers and Builders Ltd V. Sugar Development Corporation (1983) TLR 13 (CA)

Crow Estate Commissioner v Mowlew (1994) 70 B.L.R 1

Earl of Malmesbury v Strutt and Parker [2008] EWHC 424 (QB)

Edmund Nuttall Ltd v R.G. Carter Ltd [2002] EWHC 400 (TCC)

Farrans (Construction) Ltd. -v- Dunfermline District Council, 1991 SLT 365

Fastrack Contractors Ltd v Morrison Construction Ltd & Imreglio UK Ltd [2000] 1 BLR 168

Ford's Hotel Co Ltd v Bartlett [1896] AC 1

Halki Shipping Corporation v. Sopex Oils Ltd [1998] 1 Lloyd’s Rep. 465 (CA)

Halsey v Milton Keys NHS Trust [2004] EWCA (Civ) 576

Hamlyn & Co. v Talisker Distillery (1894) 21 R (H.L.) 21 at 27

Heyman v Darwins Ltd [1942] A.C. 356

John G. McGregor (Contractors) Limited -v- Grampian Regional Council 1988 S.L.T. 466

Patel v Patel [1999] BLR 227

Robert Lawrence Co. v. Devonshire Fabrics, Inc, 271 F.2d 402, 411 (C. A. 2d Cir. 1959)

RS Jiwani v Ircon International Ltd 2010(1) ALL MR 605 (F.B.)

SAB Miller Africa v East African Breweries [2010] 1 Lloyd's Rep. 392

SAB Miller Africa v East African Breweries [2010] EWCA Civ 1564

Sanderson v Armour & Company 1922 S.C. (H.L.) 117 at 126

Smith v. Martin [1925] 1 K.B 754

Tanzania Cotton Marketing Board v Cogecot Cotton Company SA (1997) TLR 165

Tanzania Cotton Marketing Board vs Cogecot Cotton Company S.A, Civil App. No 60 of 1998) [2002] TZCA 4 (unreported)

Tanzania Motor Services Ltd and Others v Mehar Singh t/a Thaker Singh (Civil Appeal No. 115 of 2005) [2006] TZCA 5 (21 July 2006) (unreported)


xi

LIST OF STATUTES

Tanzania

1. Appellate Jurisdiction Act, 1979 (Cap 141 RE 2002)

2. Arbitration Act, 1931 (Cap 15 RE 2002)

3. Arbitration Rules 1957 (G.N. No.427)

4. Civil Procedures Code (Cap. 33 of R.E 2002)

5. Disposal of Public assets by Tender) (GN NO. 97/2005)

6. Employment and Labour Relations Act, No. 6 of 2004

7. Government Proceedings Act, 1967 (Cap. 5 RE 2002)

8. High Court Registries (Amendment) Rules, 1999

9. Judicature and Application of Laws, Cap. 358

10. Law of Evidence Act 1967 (Cap. 6 R.E 2002)

11. Law of Limitation Act, 1971 (Cap 89 RE 2002)

12. National Construction Arbitration Rules 2001 Edition

13. Public procurement (Goods, Works, Non-consultant services and

14. Public Procurement Act No. 21 of 2004

15. Tanganyika Order In Council, 1920

Other countries

1. Arbitration and Conciliation Act, 2000 (Uganda)

2. Arbitration (Scotland) Act 2010 asp 1 (Scotland)

3. Arbitration Act No. 4 of 1995 (Kenya)

4. Arbitration Act, 1996 (England & Wales)

5. Arbitration and Conciliation Act, 1996 (India)

6. Housing Grants, Construction and Regeneration Act 1996 (UK)

7. Indian Arbitration Act 1899(India)


xii

International Conventions

1. The Convention on the Settlement of Investment Dispute between States and

Nationals of Others States, 1965

2. The Geneva Convention on the Execution of Foreign Arbitral Awards, 1927

3. The Geneva Protocol of Arbitration Clauses, 1923

4. The New York Convention on the Recognition and Enforcement of the Foreign

Arbitral Awards, as adopted by the United Nations Conference on International

Trade Law on 21 June 1985 (as amended in June 2006).1958.

5. UNICITRAL Model law on International Commercial Arbitration as adopted by

the United Nations Commission of the International Trade Law on 21 June 1985

(as amended in June 2006)


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CHAPTER ONE

INTRODUCTION TO RESEARCH

1.0 BACKGROUND

The construction industry worldwide is dispute-prone due to the complex and

fragmented nature of the industry and the adversarial relationships that traditionally

exist between project participants. In construction, dispute often arise when parties

to a contract cannot agree on the interpretation and implementation of contractual

clauses during execution of contract (Oladapo and Onabanjo, 2009).

According to Murdoch and Hughes (2008), disputes if not dealt with swiftly and

equitably, can ruin the success of the project objectives. Disputes can consume

many resources which could otherwise be used in a more productive manner and

they can lead into poor performance of construction project (Cheung and Yiu, 2007;

Elis and Baiden, 2008).

In today’s complex construction projects, resolving dispute has become an inevitable

part of a project manager's work (Cheung, 1999). The use of Alternative Dispute

Resolution (ADR) techniques has gained great momentum during recent years in

various common law jurisdictions as part of managing construction disputes. These

alternative methods embody a range of processes, the most common of which are

mediation, arbitration and adjudication.

In order to promote and encourage the use of ADR, there have been several legal

and institutional reforms in various countries to make the techniques user-friendly.

For instance in the UK, besides its Arbitration Act, 1996 (for England and Wales),

following the recommendations of The Latham Report1, the Government enacted the

Housing Grants, Construction and Regeneration Act 1996 (HGCRA) to formalise

adjudication in construction contracts by giving parties to the contract a right to refer

the dispute to adjudication based on the procedures set out under the Act as a

matter of the parties’ right2.

HGCRA culminated in the review of the standard forms construction contracts such

as JTC to incorporate statutory requirements for the adjudication process whose

1 The Latham Report, “Constructing the Team” 1994.

2 See section 108 of HGCRA.


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decision is binding upon the parties until the dispute if finally resolved through

arbitration or litigation3. Further, to the HGCRA, the UK government introduced the

Civil Procedure Rules, 1999 based on the Lord Woolf Reforms to transform the Civil

Justice landscape in England and Wales in order to improve access to justice4. The

reform encourages the early settlement of disputes through a combination of pre-

action protocols, active case management by the courts, and cost penalties for

parties who unreasonably refused to attempt negotiation or consider ADR5.

In Scotland where the use of mediation is patchy, the Scottish Parliament passed the

Arbitration (Scotland) Act 2010 to regulate arbitration proceedings. The new Act

reforms and codifies the Scots law of arbitration, which was mainly based on

common law and precedents6. At the international level, the reforms involve

modernization of arbitration procedures in order to promote international trade by

making the arbitration process more effective and quicker method of dispute

resolution as alternative to litigation. Through international instrument such as

UNICITARL Model law, various countries of the world have harmonized their national

arbitration procedures to standardize their arbitration systems in compliance with the

international requirements.

1.2 PROBLEM STATEMENT

Effective implementation of any dispute resolution approach mainly depends on the

legal framework of a particular country where it is subjected. Apart from having the

law to govern the procedures of allowing the parties to access justice machineries to

assert their rights, the institutional framework also plays a great role in considering

what the system can deliver to its stakeholders.

In most developing countries of which Tanzania is, ADR techniques such as

mediation and adjudication are not very familiar in use for the resolving of

construction disputes. However, in Tanzania, arbitration is one of ADR technique

that has been legally recognised since the colonial time. The statutory regulation of

law relating to arbitration in Tanzania is contained in Arbitration Act Cap.15 of R.E

2002.

3 Section 108(3).

4 See. Access to Justice Final Report, by The Right Honourable the Lord Woolf, Master of the Rolls,

July 1996, Final Report to the Lord Chancellor on the civil justice system in England and Wales. 5 See Halsey v Milton Keys NHS Trust [2004] EWCA (Civ) 576 and Earl of Malmesbury v Strutt and

Parker [2008] EWHC 424 (QB). 6 Came into force on 7

th June 2010.


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Apart from the arbitration Act, the Civil Procedure Code for Tanzania7 provides also

for arbitration under the supervision of the court. The Code was amended in 19948

to incorporate court annexed ADR wherein the Courts were empowered to

encourage early settlement of disputes through use of ADR mechanisms including

arbitration, negotiations and mediation procedures. Arbitration is also recognised

through industrial law under the Employment and Labour Relations Act9 which

regulates conciliation, arbitration an adjudication of labour disputes.

Despite the presence of the legislative framework to govern settlement of disputes

through arbitration, there is still an issue to be raised as to how the existing legal

framework is effective in facilitating disputes resolution. This study is designed to

examine and reveal the effectiveness of the system from evidence on the ground.

1.3 AIM AND PURPOSE

The main aim of this study is to examine the current legal and institutional

frameworks for the arbitration in Tanzania in order to determine their adequacy and

effectiveness in facilitating resolution of construction disputes.

1.4 RATIONALE AND OBJECTIVE

For over a decade, the use of arbitration as a method of dispute settlement has been

established as a part of the world agenda to promote trade and commerce. As

pointed out by Murdoch and Hughes (2008),arbitration is one form of dispute

settlement which is mostly under the control of the parties. However, if a party to the

dispute wishes to take the matter to arbitration or further to a court of law, he will be

bound to comply with certain set procedures under the arbitration agreement or

governing legislation.

The resolution of disputes in the construction industry must of necessity be within the

legal framework of national legislation and applicable international protocol and

conventions (Oladapo and Onabanjo, 2009). However, it is important that the law

should be clear and certain in both procedures and substantive issues. Therefore,

the main objective of the study is to determine the effectiveness of the arbitration

system in Tanzania in resolution of construction disputes.

7 Cap. 33 of R.E, 2002

8 Government Notice No. 422 of 1994

9 NO. 6 of 2004


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1.5 SIGNIFICANCE OF THE STUDY

The past practices of arbitration as an informal and non-judicial process has received

great challenge through on-going legal reforms taking place all over the world with

the view to institutionalise the arbitration system. Though arbitration is not the only

form of dispute settlement amongst ADR techniques, it is widely acceptable as a

consensual, cost effective and binding method of resolving contract disputes with

fewer procedures and techniques compared to the cumbersome court processes.

Given all its inherent problems, the reforms of arbitration procedures through

governing laws is expected to make arbitration a more effective way of resolving

disputes in the construction industry. The basic area of concern is to identify and

examine any potential gaps or weaknesses in the existing legal and institutional

frameworks for resolving construction disputes in Tanzania through arbitration and

thereby to suggest appropriate recommendations which will yield improvement of the

arbitration system in order to ensure effectiveness in disputes resolution.

1.6 LITERATURE REVIEW

Although several researchers have established various problems facing construction

industry including disputes and their resolution techniques, there is no any literature

existing in respect to the arbitration of construction disputes in the Tanzania.

Samson (1992) discusses the views, difficulties and considerations of African

governments and African lawyers in dealing with international commercial arbitration

and their search for new universally applicable principles and rules. He argues that

the challenge in Africa with regard to the evolution of the international arbitral

process would appear unique and time and need revision to accommodate new

developments and enable Africa to comply with the rapid expansion of international

commercial arbitration.

The author urges the African States to establish regional arbitration centres in a

single formulating approach to service arbitration in Africa, in line with international

legal instruments such UNCITRAL Model Law. Although the whole study does not

relate to Tanzania, it covers various African countries having ineffective arbitration

laws including Tanzania.


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Chau (2007) explains various issues relating to arbitration in practice with particular

reference to the Hong Kong construction industry. The author describes the

importance of arbitration in its traditional nature as an informal, fair, and non-

adversarial way of resolving disputes. However, Chau (2007) challenges modern

arbitration in respect of the use of litigation techniques including involvement of

trained lawyers, who sometimes are not interested in assisting the parties to reach to

an amicable solution to the extent of making the arbitration an excessively

complicated process. The author concludes that although the modern arbitration

process appears to be adversarial in the form of procedures, it can still be used

alongside other forms of ADR techniques in resolving construction disputes. Despite

the fact that this work was meant for the Hong Kong construction industry, it

represents a substantial input and justification for the reform of arbitration to

accommodate modern techniques.

Andrew (2005) examines and discusses the merits and popularity of both

adjudication and arbitration processes as it has been in use in the UK construction

Industry. His work elaborates the historical background of arbitration from medieval

times and its development in European international trade and commerce.

The author makes an account of the use of arbitration in Scotland as evidenced from

domestic arbitration case law dating back at least to 1207. Though the author

considers the possibility of arbitration declining following adoption of statutory

adjudication, through HGRCA 1996, he admits the reforms in arbitration procedures

will eradicate its main problems and accommodate its use as an effective form of

dispute resolution in the construction industry parallel with the adjudication process.

This study is important, as it provides a clear background of arbitration and

elaborates its benefits despite the rise of other forms of ADR such as adjudication.

Further, the study is helpful in considering various important issues pertaining to the

review of the arbitration system in Tanzania in line with reforms taking place in other

countries.

Smith (2004) critically analyses the problems of disputes in the construction industry

and the relationship between arbitration and adjudication as two forms of disputes

recognised in the Scottish construction industry. The work is mainly concerned with

the Arbitration (Scotland Bill) which is now the Arbitration (Scotland) Act 2010.

Comparing the two forms of dispute resolution, the author is of the view that the


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adjudication is a rough and ready process that is unsuitable for certain types of

dispute,. The process provides no means of appeal, therefore, the courts have no

option but to enforce decisions even when they are clearly wrong. The author

comments that the new arbitration Act for Scotland will provide a viable alternative to

adjudication especially in dealing with complex cases while providing the arbitrator

with the power to control the process. Like other previous studies, this study though

is not relevant to Tanzania it contains very useful information to show experience of

the use and benefits of the modern arbitration.

Daele (2010) reports on the current system of arbitration in Tanzania, the work

highlights among others, the legal framework and arbitral institutions; the constitution

of the arbitral tribunal, its jurisdiction, arbitral proceedings, awards, on what grounds

an award could be challenged, and recognition and enforcement of awards. The

study tries to review the arbitration system in Tanzania by identifying some

shortcomings in the existing legislation. However, the review is not sufficiently

exhaustive to cover a detailed comparative analysis of the current arbitration system

in practice vis-à-vis other jurisdictions. Also, as the purposes of this work was to

identify the arbitration landscape in Tanzania, it lacks a thorough analysis of all

issues pertaining to the actual practice of arbitration including case laws which will

be examined in this study.

1.7 HYPOTHESES

This study has been written based on the following proposed assumptions, namely:-

(i) The legal and institutional frameworks for Tanzanian arbitration are not

sufficiently effective to promote resolution of construction disputes;

(ii) The existing arbitration laws are too out-dated to accommodate

modern arbitration techniques; and

(iii) Parties to construction disputes cannot resolve their disputes without

delay and unnecessary costs.

1.8 RESEARCH METHODOLOGY

In order to achieve the aim, the author gathered and analysed data from the

following sources:

Relevant previous academic literature

Relevant case laws and statutes relating to the topic


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Technical and academic journals and text books

The internet, Westlaw and Lexis Library websites

Reports from government and other bodies

Materials/ Course Handouts on the subject

The author adopted a qualitative methodology involving a comprehensive literature

review and analysis of gathered information to present the work. The study may by

no means be exhaustive due to the words, time and monetary restraints to undertake

an extensive and detailed field survey. It is merely designed to present some ideas

for the contraction industry in order to improve the existing arbitration system in

Tanzania.

1.9 ORGANISANISATION OF STUDY

This study is organised into six chapters.

Chapter One covers an introduction to the research. It deals with the background,

aim, objective and rationale of the research. It also explains the methodology used,

and literature review. Chapter Two provides for an examination of root causes and

effects of the disputes on construction projects based on various literatures. It also

gives an overview of various dispute resolution techniques commonly used in the

construction industry.

Chapter Three discusses arbitration in practice by highlighting its contextual legal

meaning, advantages and disadvantages and the governing principles of the

method. Chapter Four examines the legislative framework and arbitration institutions

in Tanzania in order to establish their effectiveness in facilitating resolution of

construction disputes. Chapter Five discusses challenges on arbitration the

institutional framework in Tanzania and Chapter Six provides for the findings,

conclusion and recommendations of the study.


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CHAPTER TWO

CONSTRUCTION DISPUTES AND RESOLUTION TECHINIQUES

2.0 INTRODUCTION

This chapter examines root-causes and effects of disputes on construction projects

based on the literature. It also gives an overview of various dispute resolutions

techniques which are commonly used in the industry. Due to the word limitation,

detailed examination will only be done on arbitration.

2.1 CONSTRUCTION DISPUTES

Disputes between parties to construction contracts have become an inherent feature

of the construction industry. They may arise in projects due to the number of factors

which are within and outside the control of the parties. As argued by Cheung et al.

(2000), disputes are a common occurrence in construction and their resolution is

now among routine management functions of the project actors. There has been

considerable research undertaken that has sought to determine the causes of

disputes (Love, et al., 2008).

2.1.1 Dispute Defined

A review of the literature reveals that the term “dispute” has no fixed or definite

meaning. There are a number of literatures that try to define what constitutes a

dispute in the construction industry and the word has been used interchangeably or

in pair with the term “conflict” (Love et al., 2008).

The study by Langford et al., (1996) reveals that a dispute is one of the effects of

conflicts. In the work, the authors defined ‘disputes’ as events which resulted in

some form of formal contractual notice and which could be resolved by the

recognisable contractual resolution process whereas a conflict cannot be resolved by

contractual means without becoming a dispute. They suggest that a conflict could

mutate into a dispute if its severity escalated.

Love et al.,(2008) have adopted the legal meaning of dispute from the principle

derived in the case of Halki Shipping Corporation v Sopex Oils Ltd10, in which the

court held that a dispute does not exist until a claim or request for compensation for


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damages incurred by any party to the contract has been submitted and rejected by

the other. From a contextual point of view, disputes can arise because of

disagreement, misunderstanding, poor relationships or escalated conflicts between

the parties. Disputes arise not just because people enter into contracts but because

of a wide variety of interactions between diverse people and the failure of one party

to the contract to keep their promise (Murdoch and Hughes, 2008).

2.1.2 Cause of Disputes

It is a matter of fact that at the time of entering into a contract, parties are often

motivated by different objectives, which guide the entire construction process. As

pointed out by Sir John Egan in the “Rethink Construction, 1998”, clients need better

value from their projects and their main objective normally is to see that the project

is be delivered on time, within budget and to the standards of quality expected.

However, on the other hand, construction companies need reasonable profits to

assure their long-term future the success of the project. In construction, disputes

may arise due to the failure to achieve the perceived objectives by each of the

parties to the contract.

In addition, disputes can arise because of the failure of one party to the contract to

perform his/her obligation(s) or seeking to exploit the other party (Murdoch and

Hughes, 2008). Disputes in construction contracts are generally rooted in fact that

while the client on one hand usually aims to optimize quality and functionality at

minimum cost, the contractor on the other hand strives to satisfy the client and

achieve maximum profit at the same times using minimum resources (Howard et al.,

1997).

Levy (2007) identifies common causes of disputes in construction projects to include

poor or ineffective communication; inadequate finance to support the project; errors

in planning and coordination; problems with site conditions which occur during

contract execution; unforeseen events beyond the contemplation of the parties;

increase in scope of works or variations; breach of contracts and disruption or delays

ending up in costs overruns.

Sharing the similar views, Yates (2003); Walton (2005), Hall (2002) and Langford et

al., (1996) identify the cause of construction disputes to include unfair allocation of

risks; multiple contracts; unrealistic expectations and schedules; poorly drafted or


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inadequate contract documents; design omissions, tighter funding; the lack of

experienced personnel, communication problems; complexity of construction

projects; poor choice of the method of procurement; and failure to identify and deal

timely and properly with problems when they arise.

Generally, the root cause of disputes can well be described as the failure of one

party to the contract to honour his/her obligation which in the legal context is

considered as the breach of the contract giving an affected party a right to redress.

As such, disputes in the construction project can occur at any time of the project’s

life. Therefore, in anticipating that disputes may arise, most of the modern standard

form construction contracts contain provisions on how disputes should be dealt with.

2.1.3 Effects of Disputes in Construction

Like any other business transactions, the achievements of the objectives in the

construction project invariably depend upon a good relationship between the parties.

Therefore, when a dispute arises at any point in the execution of the project it can

ruin both the objectives and the relationship between the parties to the project

(Murdoch and Hughes, 2008).

Disputes in construction are detrimental and if not properly managed, they may

cause project delays, undermine team spirit, increase project costs, and, above all,

damage continuing business relationships (Cheung et al., 2002).

Wahi (2008) has attempted to review various literatures regarding the effect of

disputes in the construction industry. The summary from the study suggest that there

are several effects of construction disputes ranging from contractual to social

relationships. Among identified effects, include increase in project costs because of

project overruns or litigation; deterioration of the quality of product to be delivered;

loss of productivity due to untimely utilization of labour, equipment and other

resources at site; reduction in investment profits and loss of trust among parties to

the dispute.

2.2 DISPUTE RESOLUTION METHODS

Cheung and Wing (2006) point out that dispute form part of the portfolio of

engineering managers and that, managing construction disputes is akin to conflict

resolution. Once a dispute occurs, it requires resolution approach which addresses

the problem between the parties for the betterment of the project.


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Epling (1987) adds that in the hope of avoiding the long delays, skyrocketing costs

and expenses, enormous legal fees, and other disadvantages attendant upon court

adjudication, the parties to construction contracts look to substitute for quicker,

easier, less costly determination of claims and disputes. In today’s world, there are

several methods of dispute resolution techniques ranging from litigation to

consensual or mutual agreement between the parties. The recognised form of

dispute resolution in the construction industry apart form litigation include,

adjudication, negotiations, conciliation, mediation, private enquiry, mini-trial, Dispute

Resolution Board (DRB) and arbitration.

The following are the main factors which can influence disputants in the selection of

resolution methods:

(i) how fast to get the dispute resolved;

(ii) need to preserve commercial relationships;

(iii) cost effectiveness (fee for tribunal/lawyers etc ) ;

(iv) quality of decision in terms of reaching the expected results;

(v) recoverability of expenses incurred;

(vi) privacy of the procedure;

(vii) finding a creative solution to suit all parties; and

(viii) finality of decision (without further possible challenges or appeals).

It is worth noting that the dispute resolution method whether is based on consensual

or adversarial approach, has several of its requirements in both procedural and

substantive matters. In addition, each resolution method has both advantages and

disadvantages.

Despite the fact that there are several dispute resolution techniques, in most of sub-

Sahara African countries like Tanzania, the only popular methods in use for

settlement of construction disputes are adjudication and arbitration. It is not the

intention of this study to cover much on the other forms of dispute settlement apart

from arbitration which is now gaining popularity for use in construction industry in

various developing countries, including Tanzania.


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Although adjudication is a dispute resolution method which recognised within

Tanzanian construction industry and can be found in most of the public procurement

construction contracts, its applicability is not well preferred as compared to the UK

whereby the method is legally recognised through HGCRA, 1996 upon extensive

research to determine its efficacy and adequacy in the resolving of construction

disputes. Therefore, the author finds that as it was in the UK before the enactment

of the HGCRA, there is a need for a separate and in-depth study on adjudication for

Tanzania which cannot be addressed well in this work due to the limitation factors

indicated under paragraph 1.8 above.


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CHAPTER THREE

ARBITRATION IN PRACTICE

3.0 INTRODUCTION

Arbitration was originally devised as an alternative to litigation but is prone to many

of the problems that beset litigation (Murdoch and Hughes, 2008). However, the

method is still accepted worldwide as one of the best forms of dispute settlement and

thus there are several reforms in various jurisdictions to make the method more

user-friendly by eliminating some of its shortcomings. This chapter discusses

arbitration in practice by highlighting its contextual legal meaning, advantages and

disadvantages and the governing principles of the method.

3.1 ARBITRATION DEFINED

Commenting on UK arbitration, Uff (2009) argues that there is no agreed definition of

the word “arbitration”. However, for its popular usage in commercial disputes, the

term “arbitration” denotes the placing of a dispute before a third party to obtain a fair

or equitable resolution based on discretion rather than on fixed rules.

Arbitration as a form of ADR is a voluntary process based on the agreement

between the parties who wish to resolve their dispute outside the court by referring

the same to the tribunal or person of their choice for making a decision that is legally

binding for both sides.

3.2 HISTORICAL PERSPECTIVE

Arbitration as a dispute resolution technique has been in use since time immemorial

(Andrew, 2005). The use of the arbitration in private disputes started to be

sanctioned through law by various states as an alternative to what was perceived to

be shortcomings of litigation, with its concomitant escalation in costs, delays and

adversarial relationship (Oladapo and Onabanjo, 2009). In recent years, the use of

arbitration in the construction industry, has been preferred through incorporation of

procedures in the standard form contracts as a voluntary approach by the parties to

arbitrate in case a dispute arises which they cannot resolve by their own initiatives.

Smith (2004) describes arbitration as a dispute settlement approach which has its

foundation in medieval times. It is a procedure for resolving disputes whereby the


Page | 14

parties put their dispute to an independent person for a decision that is binding on

them. Smith refers also to the court’s position on arbitration including the decisions of

Lord Watson on the origin of arbitration where it was held that ‘The law has, from the

earliest time, permitted private parties to exclude the merits of any dispute between

them from consideration of the court by simply naming their Arbiter’11. As regards

enforceability of the arbitration agreement, the courts have held that ‘If the Parties

have contracted to arbitrate, to arbitration they must go’12.

3.3 PRINCIPLES OF ARBITRATION

Arbitration as mechanism of dispute resolution is based on its founding principles

which intend at giving the parties autonomy to decide on the rules of the game while

maintaining fairness based on the relevant laws. The modern arbitration statutes

such as the English and Scottish Arbitration laws have attempted to incorporate the

principle expressly in the body of statutes. For instance, section 1 of the Arbitration

(Scotland) Act, provides for the principles as follows:-

(i) that the object of arbitration is to resolve disputes fairly, impartially and

without unnecessary delay or expense,

(ii) that parties should be free to agree how to resolve disputes subject only to

such safeguards as are necessary in the public interest,

(iii) that the court should not intervene in an arbitration except as provided by

the law for smooth and effective administration of the arbitration

proceedings.

The arbitration principles are covenants by the parties to the arbitration agreement

and provides for guidance to the tribunal or court in determining the matter between

the parties in order to ensure that the clear purposes of arbitration are not distorted.

3.4 ADVANTAGES AND DISADVANTAGES OF ARBITRATION

From its founding principles, arbitration being a creature of contract and a method

which can be fashioned by parties in many ways, has several major advantages to

offer in comparison with other disputes resolution techniques such as adjudication

and litigation. However, the method also has its own disadvantages that need to be

taken into account.

11

Hamlyn & Co. v Talisker Distillery (1894) 21 R (H.L.) 21 at 27. 12

Sanderson v Armour & Company 1922 S.C. (H.L.) 117 at 126.


Page | 15

According to Smith (1998) and Mazirow (2008), among the advantages of arbitration,

include time and cost savings, convenient process to the parties, limited discovery

and smaller attorney's fees. The process is also faster than the court procedures

unless there are multiple parties. The parties are also free to choose a dispute

resolver according to their preference. The process is private, confidential and

usually final. It also provides easy way to enforce an international arbitral award in

another country as opposed to the decisions of the courts.

The perceived disadvantages of arbitration include very limited possibilities of appeal

even if the arbitrator makes a mistake of fact or law. In addition, the process lacks

precedents and often no explanation for the reasoning behind the award (Mazirow,

(2008). The other disadvantages is that, unless there is an agreement to the

contrary, it is impossible for the arbitrator to consolidate actions or dispute between

the same parties and also on the basis of privity, he cannot order the joinder of a

party who is not a signatory to the arbitration agreement (Sherwin,Vermal and

Figueira, 2007).

3.5 STARTING AN ARBITRATION

Murdoch and Hughes, (2008) submit that whereas there is normally an automatic

right to take a dispute to court, the right to go to the arbitration is by its nature more

restricted. There are three prerequisite conditions to be met before an arbitration

proceeding can be commenced. The conditions are as follows:-

(i) First, there must be a genuine dispute or difference between the parties

capable of being arbitrated and determined through an award by the

arbitrator which can be enforced as a judgment of the court.

(ii) Secondly, there must be a binding contractual agreement to arbitrate

which allows a party to such agreement to submit a dispute or difference

between them to arbitration by a chosen third party or one appointed in

accordance with their instruction. The agreement to arbitrate can be

made when the dispute has already arisen or can be provided from the

outset in the construction contract document.

(iii) Thirdly, there must be a submission or reference of a specific dispute to

the arbitrator or tribunal in accordance with the procedures set out in the

http://www.proskauerguide.com/authors/data/0460


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arbitration agreement. The procedure mainly includes a “notice to refer

the dispute to arbitration”13.

The above prerequisite conditions for arbitration are important to make the arbitration

proceedings valid. Otherwise, a party who wishes not to go to arbitration may

challenge the proceedings.

3.5.1 Genuine dispute or difference

Reid and Ellis (2007) argue that it is a prerequisite on both adjudication and

arbitration that a dispute must exist before such proceedings can commence. If there

were no dispute, then an appointed adjudicator or arbitrator would have no

jurisdiction to decide the matters referred and any decision reached in the absence

of a valid appointment can result in challenge of enforcement of that decision due to

the lack of jurisdiction or breach of natural justice.

The question of whether or not there is a dispute that must be referred to arbitration

arises with great frequency in many different contracts and has produced a large

number of cases. Construing what the “dispute” means in arbitration or adjudication,

Reid and Ellis (2007) are of the views that there is no definitive meaning of the word

“dispute”. The authors reviewed the decision of Halki Shipping Corporation v. Sopex

Oils Ltd14 in which upon construction of section 9 of the English Arbitration Act 1996

and the arguments by the parties in respect to the application for stay of the

proceedings, the Court of Appeal held that there is a dispute once money is claimed

unless and until the defendants admit that the sum is due and payable.

Accordingly, Reid and Ellis (2007), submit that in determining whether a dispute

exists or not, it is necessary for the arbitrator or the court to take into account the

circumstances and facts existing in each particular case based on the common

sense approach and having cognisance of time-related issues i.e. what transpired

before the matter was referred to the arbitration or adjudication.

13

For example, clause 66C (1) of ICE 7 Standard form contract as amended in 2004, requires “a notice to refer” has to be served not later than 3 months after the decisions of an adjudicator. 14

[1998] 1 Lloyd’s Rep. 465 (CA).


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In Fastrack Contractors Ltd v Morrison Construction Ltd & Imreglio UK Ltd15, upon

considering various cases including that of Halki (supra), HHJ Thornton QC derived

the following principle at paragraph 27 to define the word “dispute”:

“A dispute can only arise once the subject-matter of the claim, issue or other

matter has been brought to the attention of the opposing party and that party

has had an opportunity of considering and admitting, modifying or rejecting the

claim or assertion”.

In another case of Edmund Nuttall Ltd v R.G. Carter Ltd16 His Honour Judge

Seymour QC considered that while a "dispute" can be about a "claim", there is rather

more to a "dispute" than simply a "claim" which has not been accepted. The decision

of this case suggests that for there to be a "dispute" there must have been an

opportunity for the protagonists to each consider the position adopted by the other

and to formulate arguments of a reasoned kind.

The current settled principle on what constitutes a dispute in both arbitration and

adjudication is derived from the decision of the Court of Appeal in the case of AMEC

Civil Engineering Ltd v The Secretary of State for Transport17. In the case the main

issue which the court was invited to consider is whether there was existence of a

‘dispute’ for the purposes of ICE (5th) Clause 66. In the case, the Court of Appeal

endorsed the decision of Jackson J at first instance in which the judge had the

following views under part 68 of the decisions:

“…1. The word ʺdisputeʺ which occurs in many arbitration clauses and also in

section 108 of the Housing Grants Act should be given its normal meaning. It

does not have some special or unusual meaning conferred upon it by lawyers.

“…3.The mere fact that one party (whom I shall call "the claimant") notifies the

other party (whom I shall call "the respondent") of a claim does not

automatically and immediately give rise to a dispute. It is clear, both as a

matter of language and from judicial decisions, that a dispute does not arise

unless and until it emerges that the claim is not admitted”.

15

[2000] 1 BLR 168. 16

[2002] EWHC 400 (TCC). 17

[2005] 1 WLR 2339.


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According to Jackson J, in order to determine whether there is a failure on part of the

defendant to admit the claim, it is upon the court to review and make an appropriate

conclusion based on the circumstances or facts of a particular case. It is interesting

to note that some of the modern arbitration statutes such as the Arbitration

(Scotland) Act 2010 provides for the clear definition of a “dispute” based on the

judicial findings. For instance, section 2 of the Act defined the word “disputes” as

follows:

“dispute” includes –

(a) any refusal to accept a claim, and

(b) any other deference (whether contractual or not)”.

3.5.2 Arbitration agreement

Application of arbitration in the construction industry and other areas of commercial

law is regarded as a consensual process for which a party cannot be forced to go to

arbitration unless he agrees to do so through an arbitration agreement.

The requirement for “arbitration agreement” can distinguish arbitration from the

adjudication process as applicable in the UK construction industry, in which the

adjudication is regarded as a statutory right irrespective of whether the contract so

provides (Uff, 2009). As it is required under the law of contracts, every arbitration

agreement needs to have an element of consent for the arbitration to have legal

force. Lack of consent can invalidate the arbitration process.

In Azov Shipping Co. v Baltic Shipping Co18, the court set aside an award on the

ground that the plaintiff never agreed to be bound by the underlying contract or the

arbitration agreement contained in it. As opposed to the normal agreements

recognised under law of contract regimes, various arbitration statutes such as the

English and Scottish Arbitration laws require the agreement to be in writing19.

Section 5(2) – (6) of the English Arbitration Act, 1996 is more elaborative and

constitutes “an agreement in writing” for validity of arbitration proceedings. Under the

provision, any writing or exchange of communications in respect to the arbitration

18

2 Lloyd’s Rep. (1999)159 19

See section 5 of the Arbitration Act 1996 (English) and section 4 of the Arbitration (Scotland) Act, 2010.


Page | 19

can be deemed as evidence of an agreement, and need not be signed by the

parties.

3.5.3 Submission or reference of a specific dispute

Submission or reference of a dispute to the arbitration can be in any form. However,

it is important to note that this step is crucial, as it is an essential formal step without

which no dispute may be held to have occurred. For instance, Rule 1 of the Scottish

Arbitration Rules, 2010 provides that “An arbitration begins when a party to an

arbitration agreement (or any person claiming through or under such a party) gives

the other party notice submitting a dispute to arbitration in accordance with the

agreement”.

In the most usual way, unless otherwise specified, reference to the arbitration is

deemed to be to a single arbitrator who is either named in the arbitration agreement

or selected/appointed thereafter by the nomination or appointment body (Uff, 2009).

Most of the arbitration legislation requires the parties to agree on the appointment of

the arbitrator in advance or prior to the occurrence of a dispute. If the Arbitrator is not

named in the contract, the nominating body will select and send a list of arbitrators

from whom the parties will choose their arbitrator in accordance to their preference.

Normally arbitrators are required to be individuals with extensive experience in

alternative dispute resolution apart from their professional background.

3.6 SEVERABILITY OF ARBITRATION AGREEMENT

Generally, an arbitration agreement is not distinguished from the main contract

between the parties and is always governed by the law that governs the main

contract (Uff, 2009). Although the arbitration agreement can be incorporated in the

main agreement, it is considered separate and independent from the main contract.

An arbitration agreement is not void, voidable or otherwise unenforceable only

because the agreement of which it forms part is void, voidable or otherwise

unenforceable20.

The analytical rationale of severability or separability doctrine is to accord with the

original intention of the parties to the arbitration agreement whereby mutual promises

to arbitrate would form the quid pro quo of one another and constitute a separable

20

See for instance Section 5 of Arbitration (Scotland) Act.


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and enforceable part of the agreement21. In arbitration proceedings, under the

principle of severability, the matter submitted to arbitration can be separated from

one not submitted, the court may set aside that part of the arbitral award alone which

is not submitted to arbitration.

In RS Jiwani v Ircon International Ltd22 a full bench of the High Court of Bombay held

that an arbitration award is severable and if a part of it is illegal and incapable of

enforcement the other part that is valid and legal can still be enforced. In that case,

the court was invited to decide on whether the Court could set aside an award

partially under Section 34 of the Arbitration and Conciliation Act, 1996 of India. The

court held that once an award attains finality and vests a legal right in one of the

parties, it would be unjust to deny such a party the vested right on the grounds that

other portions of the award are invalid.

3.7 APPLICABLE LAW AND SEAT OF THE ARBITRATION

Most of jurisdictions recognize and put a mandatory requirement for the applicability

of a particular law to the arbitration agreement and also for the geographical and

legal jurisdiction to which the arbitration is tied. For example, section 6 of the

Arbitration (Scotland Act) 2010 provides that where the parties to an arbitration

agreement agree that an arbitration is to be seated in Scotland, but the agreement

does not specify the governing law, that unless the parties otherwise agree, the

arbitration will be governed by Scots law.

It is important to note that the governing law and seat normally determine the

procedural rules of arbitration to be followed, and the courts which will exercise

jurisdiction in the matter.

3.8 DUTIES AND POWERS OF ARBITRAL TRIBUNAL

Though there is great flexibility in arbitration, the arbitrator or arbitral tribunal is

required to act in accordance with the agreement of the parties and the law. The

tribunal is bound to observe principles governing administration of justice as it is for

the courts of law. Subject to the agreement by the parties and applicable law, among

the duties of the arbitral tribunals are-

21

See Robert Lawrence Co. v. Devonshire Fabrics, Inc, 271 F.2d 402, 411 (C. A. 2d Cir. 1959) 22 2010(1) ALL MR 605 (F.B.)


Page | 21

(i) to act fairly and impartially as between the parties, giving each party a

reasonable opportunity to present and defend the case;

(ii) to ensure that the adopted procedures to deal with the case do not

cause unnecessary delays or expenses to the parties; and

(iii) to decide all evidential matter, including whether to apply the strict rules

of evidence as to the admissibility, relevance or weight of any materials

on any matters of fact or opinion.

Although the arbitration is considered as a flexible method in which an arbitrator can

have wider powers, in some countries, the arbitrator has limited jurisdiction in

determining some issues in the disputes. In the UK, it was formerly the case that an

arbitrator did not have power to decide whether or not the contract is void23 or if his

jurisdiction is challenged, whether or not he himself has jurisdiction upon any

question24. These points were reserved to the exclusive determination of the courts.

Section 30 of the English Arbitration Act 1996 has altered the position whereby,

unless parties agree otherwise, the arbitrator may have jurisdiction to decide on the

validity of the arbitration agreement, proper constitution of the tribunal and legality of

reference to the arbitration.

Accordingly, pursuant to Section 31 of the Act a party who wishes to challenge the

jurisdiction of the arbitrator must do so at the outset, before taking any step to

answer the case on merit (Murdoch and Hughes, 2008).In Scotland, among powers

vested to the arbitrator under the Scottish Arbitration Rules, 2010 is to decide the

dispute in accordance with the law chosen by the parties as applicable to the dispute

and not on the basis of general considerations of justice, fairness or equality, unless

such matters form part of the law chosen by the parties or an agreement of the

parties25.

In reaching its decision, the tribunal has to take into account among other factors,

the provisions of contract relating to the dispute, normal trade or commercial

customs or practices and other matters which the parties have agreed26. As for the

23

See Heyman v. Darwins Ltd [1942] A.C. 356 24

Smith v. Martin [1925] 1 K.B 754 25

Rule 47 (1) and (2). 26

Rule 47(3).


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orders which the arbitral tribunal can issue in Scotland pursuant to Rules 48-47,

include the following:-

(i) order as to the payment of damages;

(ii) declaratory or injunctive orders;

(iii) order of rectification or reduction of any deed or document other than a

decree of court; and

(iv) order of interest to be paid in whole or in part of any amount

claimed in respect of any period up to the date of award and or up

to the date of payment.

The arbitral tribunal power to award interest as provided for in the Arbitration

(Scotland) Act, has altered a common law position as it was considered in the case

of Farrans (Construction) Ltd. -v- Dunfermline District Council27 in which it was a

matter for the parties to the arbitration agreement to ensure that any issue relating to

interest is put before the arbiter for his decision. Otherwise, as it was also held in

John G. McGregor (Contractors) Limited -v- Grampian Regional Council28, the arbiter

could not have any implied power at common law to award interest before the date

of his final decree.

3.9 ENFORCEMENT OF AWARD

As noted before, the main advantage of arbitration as opposed to other forms of

ADR is that the decision of the arbitral tribunal is final and binding on the parties and

any person claiming through or under them (except a third party)29. Either of the

parties to the arbitral award can apply to the Court for enforcement of the decision of

the arbitrator as if it were a judgment or order of the court. In some countries,

enforcement of either domestic or foreign arbitral awards is made through bringing

an action to the court of competent jurisdiction, though approaches may differ from

country to country. However, most of the common law countries have adopted

quicker mechanisms, in the form of summary enforcements.

27

1988 S.L.T. 466. 28

1991 SLT 365 29

See also section 11 of Arbitration (Scotland) Act.


Page | 23

Under the Arbitration (Scotland) Act, the arbitral award may be enforced as if it is an

extract registered decree bearing a warrant for the execution granted by the court30.

Under section 66 of the English Arbitration Act, a party wishing to enforce the award

has to seek leave of the court so as a judgment may be entered in terms of such an

award. Further, the Act provides that leave to enforce an award shall not be given

where, or to the extent that, the person against whom it is sought to be enforced

shows that the tribunal lacked substantive jurisdiction to make the award.

3.10 CHALLENGING AN AWARD

The finality of the award does not affect the right of a person to challenge the award

by any available arbitral process including appeal or review to the competent court of

law on jurisdictional or procedural grounds or on the basis of an error of law31. Under

the English Arbitration Act, 1996, an arbitration award is incapable of direct

enforcement by the successful party in case that there is a challenge to it on the

grounds of serious irregularity or a question of law arising out of an award made in

the proceedings32.

It should be noted that an appeal process under the Act is very complex and or

restrictive; it requires either consent of the parties to the arbitration or leave of the

court. The party in the arbitration who seeks to challenge an award on grounds of

lack of jurisdiction or serious irregularities has first to exhaust the appeal or reviewing

process provided by the arbitration agreement itself (Murdoch and Hughes, 2008).

3.11 COURTS’ POWERS ON ARBITRATION

In contrast to the old practice where courts had traditionally used to exercise wide

range of powers in the arbitration process, in recent years, arbitration is regarded as

a private process of resolving disputes with very limited interferences by either the

administrators or the courts. Therefore, the determination of the dispute has been left

to the parties’ autonomy. In most jurisdictions, there have been gradual changes of

laws to reduce powers of court to intervene in the arbitration process. For instance,

under the English and Scottish arbitration Acts, the courts can only exercise

supportive powers in order to ensure that there is fairness and justice in the

arbitration process. Such powers include appointment and removal of the arbitrator;

30

Section 12. 31

See also section 58 of English Arbitration Act 1996. 32

Section 67, 68 and 69 (ibid)


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extension of time and stay of proceedings; supportive powers to the process and

enforcement or challenges to awards33. Both the English and Scottish Arbitration

Acts have adopted the requirements of UNCITRAL Model law to restrict courts

interferences on arbitration by incorporating a provision in their laws stating that the

court should not intervene in the arbitration except provided expressly by the Act34.

33

See sections 17, 18, 24, 44, 45, 68 and 69 of English Arbitration Act, 1996. 34

Section 1 of the Arbitration (Scotland) Act, 2010.


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CHAPTER FOUR

LEGAL FRAMEWORK FOR ARBITRATION IN TANZANIA

4.0 INTRODUCTION

Depending on the form of the arbitration process which the parties choose to resolve

their dispute, the laws and institution governing a particular process are very

important in determining the effectiveness of any outcome from the process. This

Chapter examines the legislative framework in Tanzania in order to establish their

effectiveness in facilitating resolution of construction disputes.

4.1 ARBITRATION ACT (CAP. 15)

The Arbitration Act35 is the principal legislation regulation arbitration in Tanzania. It

is a replica of the English Arbitration Act 1889 and amongst the oldest pieces of

legislation in the Tanzanian statute books enacted in 1931. The Arbitration Act

regulates both domestic arbitral proceedings and enforcement of foreign arbitral

awards. It also gives effect to the two international measures, viz. the Geneva

Protocol on Arbitration Clauses of 1923 and the Geneva Convention on the

Execution of Foreign Arbitral Awards of 1927 appended to the Act as 3rd and 4th

Schedules.

Since the last amendments to the Act were made in 1971, the Arbitration Act does

not incorporate requirements of most important international arbitration agreement

entered into force or ratified by Tanzania after that period. The agreements include

the Convention on the Settlement of Investment Dispute between States and

Nationals of Other States (ICSID), 196536 and the Multilateral Investment Guarantee

Agency of 198537.

As pointed out by Mkono et al., (2007), to date, Tanzania has entered into four

bilateral agreements relating to arbitration with Switzerland, Germany, Netherlands

and UK for the purposes of the investment treaty. On the other hand, UNCITRAL

Model Law of 1985 has no influence on the Tanzanian Arbitration Act. Besides the

35

Cap 15 R.E 2002. 36

Ratified on 17 June 1992. 37

Ratified 19 June 1992.


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Act, there are also Arbitration Rules of 195738 which are made under section 20 of

the Act to provide for arbitration procedures. However, the Rules contain thirteen

provisions which cover very few matters on arbitration procedures.

It is also worth noting that by virtue of sections 17 (2) Tanganyika Order In Council39

and sections 2(3), 14, 16 and 17 of Judicature and Application of Laws40

respectively, the English common law, doctrine of equity and statutes of general

application and Indian Law in force as by 22nd July 1920 (in England) and 1st

December 1920 (in India) was made applicable in Tanganyika (now Tanzania

mainland) with such modification and so far as the circumstances of Tanzania and its

inhabitants permit.

4.1.1 Applicability

The Tanzanian Arbitration Act is applicable to any arbitration dispute which, if the

matter submitted to arbitration formed the subject of a suit, only the High court would

have competence to try41.

4.1.2 Reference to arbitration

Pursuant to section 4 of the Arbitration Act read together with the First Schedule,

unless there is any agreement to the contrary, a submission to the arbitration is

deemed to be irrevocable except by leave of the court.

Section 5 of the Act allows parties to the arbitration agreement to agree on the name

of an arbitrator(s) to be appointed by a third person or appointment body designated

therein.

The arbitrator(s) are bound under the Act to make an award in writing within three

months after entering on the reference, or after having called on to act by notice in

writing from any party to the submission or on or before any later day to which the

arbitrator(s) may, from time to time, extend the time for making the award42.

Under the Act, the umpire may forthwith enter on the reference in lieu of the

arbitrators if the arbitrators have allowed the time to be extended or expire without

38

G.N. No. 427 of 1957 39

1920 40

Cap. 358 R.E 2002 41

Section 3 42

Clause 3 of the First Schedule to the Act.


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making an award or have shown an indication in writing that they cannot agree43.

Once the umpire enters on the reference, he will be bound to make his award within

one month after the original or extended time appointed for making the award of the

arbitrators has expired, or on or before any later day to which the umpire, in writing

signed by him may, from time to time, extend the time for making his award44.

Pursuant to section 14, the law empowers the High court to extend the time for

making an award by the arbitrator or umpire.

4.1.3 Powers of an arbitrator

Under the law, the arbitrator or umpire has power to examine any document to be

relied upon by the parties to the arbitration proceedings, to examine witnesses on

oath, to issue an award which is final and binding on the parties and the persons

claiming under them respectively, to determine and direct which party to the dispute

has to pay the costs of the proceedings and may tax such costs45.

4.1.4 Effect of arbitration agreement

Though there are few reported cases in Tanzania in respect to the courts power to

enforce arbitration agreement, the application of common law cases has been of

great significance to the Tanzanian legal system in which the courts have shown a

keen interest to compel the parties to respect their arbitration agreement.

Where there is an arbitration agreement, by virtue of section 6 of the Act, a party to

a submission, or a person claiming under him, has a right to apply to the court to

have any legal proceeding barred/ stayed so as the dispute may be determined

through arbitration. An application under section 6 must be made by the defendant

before filing a written statement or taking any other steps in the proceedings.

Further to section 6, rule 11 of the Arbitration Rules 1957 reads as follows:

“11. A judge may stay proceedings on such terms as he thinks fit, but not without

notice to the opposite party except where it appears that the object of granting the

stay would be defeated by the delay occasioned by the notice”.

Arguably, as the law provides, the court’s power to stay arbitration proceedings in

Tanzania is a matter of the discretion of the presiding judge. It should also be noted

43

Clause 4 of the First Schedule. 44

Clause 5 of the First Schedule. 45 Section 11.


Page | 28

that contrary to the other arbitration statutes in the common law, there is no any

conditions to guide the court on the circumstances for which stay should or should

not be allowed. In Kenya for example, through section 6 of the Kenya Arbitration

Act46 , for the order of stay to be issues by the court, the applicant must prove

existence of an arbitration agreement which is valid and enforceable, and that he/she

is a party to the arbitration agreement or at least a person claiming through a party

e.g. a personal representative or trustee in bankruptcy and that the dispute in

question has arisen fall within the scope of the Arbitration Clause (Muigua,2008).

The decisions of Construction Engineers and Builders Ltd V. Sugar Development

Corporation47 provides for the authority in Tanzania regarding the circumstances in

which the court can order stay of proceedings pursuant to section 6 of Tanzania

Arbitration Act. This case involved termination of a building contract contained an

arbitration clause based on R.I.B.A. The Court of Appeal of Tanzania held that

where it is clear that the parties to a contract have agreed to submit all their disputes

or differences arising "under" the contract to an arbitrator, the dispute must go to

arbitration unless there is good reason to justify the court to override the agreement

of the parties.

In arriving to the decision in the above case, the Court of Appeal was highly

persuaded by the decision of the House of Lords in the English case of Heyman v

Darwins Ltd48 in which upon construing the true nature and function of the

arbitration agreement and the wording of the arbitration clause in the contract

between the parties, the House of Lords concluded for the order of stay pursuant to

section 4 of the Arbitration Act 1889 was proper to allow the matters in dispute

between the parties to be dealt with under the arbitration clause.

The above referred English case was later considered by the Court of Appeal of

Tanzania in another case of Tanzania Motor Services Ltd and Others v Mehar Singh

t/a Thaker Singh49. In this case, the parties entered into a building contract contained

an arbitration clause whereby the parties agreed to refer any dispute or difference

arising between them to arbitration. A dispute having arisen between the parties, the

respondent instituted a civil case in the High court seeking to recover from the

46

Act No. 4 of 1995, Laws of Kenya. 47

(1983) TLR 13 (CA) 48

[1942] A.C. 356. 49 (Civil Appeal No. 115 of 2005) [2006] TZCA 5 (21 July 2006) (unreported).


Page | 29

appellants outstanding monies under the contract. Instead of filing a written

statement of defence, the appellants applied by way of petition for a stay of the

proceedings in terms of Section 6 of the Arbitration Act. The learned judge dismissed

the petition, hence the Appellant decided to appeal to the Court of Appeal.

However, at the commencement of hearing the appeal, the respondent raised a

preliminary objection challenging the competence of the appeal by reason of Section

5(2) (d) of the Appellate Jurisdiction Act 1979, on the ground that the decision in

question was interlocutory and it did not finally determine the case between the

parties in the trial court, therefore was not appealable50. Dismissing the respondent’s

objection, the Court of Appeal held that the decision of the learned judge refusing to

stay the proceedings in the case instituted by the appellant had a final determination

of the petition by barring the parties from going to arbitration. Accordingly, the Court

of Appeal considered that the decision by the trial judge closed the door to arbitration

thus rendering provisions in contract for arbitration meaningless.

It should be noted that the wording of Section 6 of the Arbitration Act for Tanzania

is in pari materia with section 4 of the old English Arbitration Act, 1889. Under the

English law, the defendants sometimes inadvertently lost their rights of stay when

taking some fair trivial procedural step in response to the legal proceedings against

them. For instance, as held in Ford’s Hotel Co Ltd v Bartlett51, the defendants who

took out a summons seeking an order for an extension of time would have precluded

from applying for a stay unless there was an express reservation of rights.

Before the 1996 Arbitration Act, the judges in English courts would have refused stay

in the case involving more than two parties with consideration that such kind of

disputes could be easily handled up by the court than in arbitration. Relying on the

discretion of court to refuse to grant stay, it was possible under the old law to bring a

multi-party proceeding. However, under the new Act, all multi-party arbitration

proceedings must be based on consent (Uff, 2009).

Murdoch and Hughes (2008) comment that section 9 of the English Arbitration Act

1996 has revised the old law whereby, in interpreting the section, the English

50

Section 5(2) (d) of the Appellate Jurisdiction Act, 1979 as amended by Act No. 25 of 2002 bars appeals against preliminary or interlocutory decision or order unless such decision or order has the effect of finally determining the suit. 51

[1896] AC 1.


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Courts have been unwilling to deprive defendant’s rights of stay on technical

grounds. Under section 9, the court must order a stay of proceedings unless satisfied

that the arbitration agreement is null and void, inoperative or incapable of being

performed.

Based on the strict interpretation of section 9 of the English Arbitration Act, 1996, the

judges have applied the law to favour arbitration. For instance, a party applying to

set aside a default judgment with associated leave to defend cannot thereby be

regarded to take any substantial step in proceedings which would debar him from

insisting that the matter be stayed pending a referral to arbitration52.

Similarly, it was held in Bilta (UK) Ltd v Nazir53 that an application for an extension

of time to serve a defence will not amount to a waiver of the right to seek a stay of

proceedings pending arbitration if a party has expressly reserved its rights. In that

case, Sale J. reviewed previous decisions including that of Patel v Patel (supra.),

and approved the principle that "the right to apply for a stay will be lost if the

Defendant in the judicial proceedings has expressly or impliedly represented that he

does not intend to refer the dispute to arbitration".

In contrast to English arbitration law, section 6 of Tanzanian Arbitration Act can

deprive the defendants’ right of stay of proceedings just by mere filing a written

statement of defence or by making an application for adjournment of the proceeding.

The technicalities on right to stay under section 6 appear not to favour the intention

of arbitration agreement and contradict requirements of the international conventions

such as the New York Convection 1958, which require each Contracting party to

recognize and or respect an arbitration agreement54.

4.1.5 Court powers in support of arbitral proceedings

Under the English Arbitration Act 1996, courts have inherent power to support

arbitration proceedings whereby pursuant to Section 44, the courts can issue an

injunctive order where it is appropriate to preserve the status quo and the greater

risk of potentially irremediable injustice lay in refusing injunctive relief. In the case of

SAB Miller Africa v East African Breweries55, Justice Christopher Clarke of the High

52

Patel v Patel [1999] BLR 227. 53

[2010] EWHC 1086 (Ch). 54

See Article I(1). 55

[2010] 1 Lloyd's Rep. 392.


Page | 31

Court of Justice, Queens Bench Division granted such an injunctive relief pending

further order of the arbitral tribunal, which at the time of hearing was yet to be

appointed in order to determine the disputes between the parties.

The application for the leave to appeal made against such an injunctive order

against the respondent was later refused by the Court of Appeal as the court found

that it had no power to grant permission to appeal for the order made under section

4456. Under the Tanzania Arbitration Act, such an inherent power by the court to

honour the arbitration agreement is not specifically provided. Therefore, if there is no

any agreement to the contrary, the parties have to rely upon the common law if they

wish to preserve the status quo on their case.

4.1.6 Extension of time for commencement of arbitration

Section 7 of the Tanzania Arbitration Act empowers the court to extend time for

commencement of the arbitration proceedings, if it is of the opinion that in the

circumstances of the case ‘hardship would otherwise be caused’ and

notwithstanding that the time so fixed in the arbitration agreement has expired. In

that provision, the court’s power to extend time is without prejudice to any written law

limiting the time for the commencement of arbitration proceedings57.

Under the Law of Limitation Act58 which governs limitation of claims in Tanzania the

word “arbitration" is defined to mean arbitration on a submission or under any written

law59. Section 40 of the Law of Limitation provides that the Act apply to arbitrations in

the same manner as it applies to other proceedings.

For the purpose of limitation, the law considers that where a submission contains a

term that no cause of action shall accrue in respect of a matter, the cause of action

shall accrue in respect of any such matter at the time when it would have accrued

but for the term in the submission. The Law of Limitation provides further under

section 40(3) as follows:-

“(3) For the purposes of this Act, an arbitration shall be taken to have

commenced when one party to the arbitration serves on the other party a

notice requiring him to appoint an arbitrator or, where the submission provides

56

SAB Miller Africa v East African Breweries [2010] EWCA Civ 1564. 57

Sub-section (2). 58

Cap. 89. 59

Ibid. section 2.


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that the reference shall be to the person named or designated in the

submission, requiring him to submit the dispute to the person so named or

designated”.

Usually, a construction contract may contain certain provisions which trigger

commencement of claims. For instance, under the standard construction contracts

such as clause 66 of ICE Conditions and clause 30.9 of JTC 98 respectively, the

engineer or architect decision on the certificate is final and binding unless

challenged by a notice of arbitration. In one English case of Crow Estate

Commissioner v Mowlew60, the employer sought to rely upon the power of the court

to extend time for commencing arbitration proceedings in order to avoid the binding

effect of the final certificate under the JCT 80 form of contract. The court held that

the power to extend time for arbitration could override the binding effect of the final

certificate as agreed upon in construction contract by the parties.

Based on the old English Arbitration law, the courts could not avoid the effect of

time-bar and binding effect of the decisions by the engineer or contract administrator

in respect of the final certificate. However, the position has now been revised by

section 12 of the Arbitration Act 1996 in which the court can on discretion extend the

time only if the claimant proves that –

(i) the circumstance which barred or extinguished the claimant’s rights to

begin the arbitral proceedings or other dispute resolution are such as were

outside the reasonable contemplation of the parties when they agreed the

provisions in question, and that it would be just to extend the time; and

(ii) the conduct of one party makes it unjust to hold the other party to the strict

terms of the provision in question.

As opposed to the above-referred English position, section 7 of Tanzania Arbitration

Act gives a wider discretion to the judge to determine extensions of time by importing

the word “hardship” without further clarification.

60

(1994) 70 B.L.R 1.


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4.1.7 Appointment of an arbitrator or umpire

The Tanzania Arbitration Act also empowers the court to intervene in the arbitration

proceeding by the appointment of an arbitrator or umpire61. This power can only be

exercised by the court under the following situation:

(i) where the parties fail to agree on an appointment of an arbitrator;

(ii) where the appointed arbitrator (s) or umpire neglects or refuses to act or

is incapable of performing or dies or is removed; and

(iii) where parties or two appointed arbitrators fail to appoint an umpire or third

arbitrator (if they were to do so).

One party to the arbitration agreement could seek the intervention of the court if the

other party has not decided on the appointment of an arbitrator or umpire within

seven clear days after the service of the notice of appointment62.

However, it is not provided under either Arbitration Act or Rules if in appointing the

said arbitrator, umpire or third arbitrator, the court is bound to consider any factors,

which will ensure effective determination of dispute among the parties such as the

nature of the subject matter, qualification, age or competency of a particular

arbitrator or umpire. In other jurisdiction such Scotland, the law excludes persons

under 16 years old and any incapable adult from becoming arbitrators63

4.1.8 Removal of arbitrator

Sections 9(a) and 10(1) (a) of the Arbitration Act allow the arbitrator who is appointed

by one party to become a sole arbitrator in case the other party has failed to appoint

or replace his own arbitrator within seven clear days upon being served with a

written notice to make the appointment. Under section 9(b) and 10(2), the court can

set aside the appointment made by one party but it is not clear on what specific

grounds the court can set aside such an appointment before the end of arbitration

proceedings.

It should be noted that the only ground provided for in the Act in which the court can

remove an arbitrator or umpire is when the said arbitrator or umpire has committed

61

Section 8 (1). 62

Section 8(2). 63

See Rule 4 of the Scottish Arbitration Rules, 2010.


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misconduct64. Nonetheless, the word “misconduct” is not defined or elaborated in the

Act or Rules, something which may make difficult for the court to remove an

arbitrator from office. In addition, as opposed to Scottish Arbitration Rules in which

the arbitrator can be removed from office at any time by the parties who appointed

him/her65, the Tanzanian Arbitration Act or Rules does not provide such right to the

parties to remove the arbitrator at their wishes.

4.1.9 Procedural and evidential matters

In contrast to the English and Scottish arbitration laws66, in Tanzania, neither the

Arbitration Act nor the Rules provide specifically on what form of procedures should

be adopted by the arbitrator or umpire. Although the Tanzanian Law of Evidence

Act67 excludes strict application of evidentiary rules to the arbitration proceedings68,

sometimes, it is upon the parties to agree on the specific powers to be vested to the

tribunal including evidential matters to guide the tribunal.

Otherwise, if an arbitration agreement by the parties lacks detailed information,

then the whole procedure of administering the dispute before tribunal including filing

of pleadings, calling of witnesses, examination of evidence etc., will largely depend

upon the experience of a particular arbitrator handling the matter and legal counsels

of the parties to the dispute (if at all represented).

4.1.10 Powers of the Arbitrator or Umpire

Section 11 of the Arbitration Act read together with the First Schedule provide for the

specific powers of the arbitrator as follows–

(i) to determine cost of reference and award

(ii) to administer oaths to the parties and witnesses appearing;

(iii) to state a special case for the opinion of the court on any question of law

involved;

(iv) to correct in an award any clerical mistake or error arising from any accidental

slip or omission.

64

Section 18. 65

Rule 10 -12 of Scottish Arbitration Rules 66

See also section 33(b) of the English Arbitration Act 1996 and Rule 28 of the Scottish Arbitration Rules, 2010. 67

Cap. 6 of the Laws of Tanzania (R.E 2002) 68

Section 2


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As opposed to the arbitration laws of other countries including that of its neighbour

Kenya69, the Tanzanian legislation does not specifically empower the arbitral tribunal

to determine its own jurisdiction/ competence or order interim measures such as

injunction, prohibition or security for costs70.

Although under the Tanzania Arbitration Act the arbitrator has powers to award

costs, such powers are limited to the costs relating to what is in the submission by

the parties. The arbitrator can award costs within his discretion if satisfied that the

arbitration agreement is silent on cost and the governing legal provision empowers

him to do so. However, there is nowhere in the Arbitration Act empowering the

arbitrator to award interest on costs in whatever form. In Kenya, under section 32C

the of Kenya Arbitration Act, where there is no any agreement to the contrary, an

arbitral award may include provision for the payment of simple or compound interest

calculated from such date, at such rate and with such rests as may be specified in

the award.

4.1.11 Confidentiality

As opposed to the arbitration laws of other countries such as Scottish Arbitration

Rules, which provide for confidentiality of arbitration proceedings71, in Tanzania, both

the arbitration Act and its Rules do not provide specifically whether the arbitration is

a confidential process. Therefore, the parties will only consider the issue of

confidentially of proceedings in the arbitration process as a matter of practices or

agreement.

4.1.12 The arbitral award

Pursuant to section 12 of the Arbitration Act, the arbitrator is entitled to make and

sign an award and thereof notify the parties to the dispute of the delivered award

together with any fees and charges payable in respect of arbitration and award.

Unlike section 52 of the English Arbitration Act 1996 and Rule 51 of the Scottish

Arbitration Rules, the Tanzanian Arbitration law does not provide for any mandatory

form or conditions that the tribunal should take into account in the award.

69

The Arbitration Act No. 4 of 1995, Laws of Kenya as amended in 2009. 70

Ibid, section 17 and 18 (1)(a)-(c). 71

See Rule 26 of Scottish Arbitration Rules, 2010.


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The only requirement under the law is for the arbitrator to make an award on the

format provided for in Form 5 to the Second Schedule to the Act. Notwithstanding

that requirement, the Act does not provide any fate or remedy if an award has not

complied with Form 5 of the Second Schedule.

As for the judgment of the court, an arbitral award is just a determination and

declaration of the rights and obligations of the parties in a case. Under section 12(2)

of the Act, once the arbitrator or umpire has made his award and notified the parties

thereto, he will only file the award or cause it to be filed in court upon a request by

any of the parties to the submission or any person claiming under such party. The

filing of the award shall be after payment of all fees, charges and all costs in respect

to the arbitration and award and the costs of filing it in court.

In order to file an award to the High court, rule 4 of the Arbitration Rules requires that

the arbitrator or umpire to forward the award or certified true copy with all

accompanying documents to the Registrar of the High court by a registered post and

in a sealed envelope. In Tanzania Cotton Marketing Board v Cogecot Cotton

Company SA72 the Court of Appeal of Tanzania provided clear guidance on the

procedure for filling an award pursuant to section 12(2) and rule 4.

In that case a dispute arose between the appellant and the respondent which

resulted in the matter being referred to arbitration before the Liverpool Cotton

Association Limited. An award granted in favour of the respondent and confirmed by

the Technical Appeal Committee of the Arbitrators was filed in the High Court of

Tanzania through the service of one local law firm in Tanzania having being

forwarded by DHL courier and not by registered post as required by rule 4 of the

Arbitration Rules, 1957.

The appellant objected to the award on the ground that the proper procedure as

required under the Arbitration Act was not followed. The court held that there was no

reason for a restrictive interpretation of the provisions of section 11(2) of Arbitration

Act73 which allowed the arbitrator to `cause the award, or a signed copy of it to be

filed in the court'. The import of this was that the arbitrator either could file the award

himself in court or could cause the award to be filed by instructing somebody else to

do it on his behalf. The court went on to consider that:-

72

1997 TLR 165 73

[now section 12(2)]


Page | 37

“ the words `registered post' had to be interpreted widely enough in order to

take into account the current development in communication technology, such

as courier postal services, that had taken place since 1957 when the rules were

enacted. In the circumstances the award had been properly filed”.

The court was of the views that also rule 4 of the Arbitration rule, 1957 is more

restrictive than the principal legislation. Therefore, it should be interpreted widely in

order to accord to it a more meaningful and practical interpretation which is in line

with the spirit behind the principal Act. As guidance on what happens after the award

has been filed, the court also upon considering various arbitration decisions by the

Supreme Court of India in light of the Indian Arbitration Act 189974, was of the view

that from the date of filing, the award is capable of being enforced as though it were

a decree. The court as well challenged the practise in the enforcement of an award

through the Arbitration Act Cap. 15 of Tanzania as follows:-

“So far in our country the practice in matters of arbitration awards is that the

court is moved by an application for an order for filing which is then followed by

proceedings. On the basis of the Indian decisions we are persuaded to take the

view that as a matter of law it is not necessary to conduct proceedings before

an order for filing is made. In our view, the receipt of the award by the Court

Registry constitutes the filing of the award. Thereafter, the court is required to

notify the parties who may wish to challenge or to enforce the award in terms of

the law”.

The observation by the Court of Appeal in the above case would support for the

reform of Tanzanian arbitration law in order to accommodate new developments in

the arbitration procedures taking place elsewhere in the world.

4.1.13 Challenging an award

While under the English and Scots laws it is required that a party first exhausts any

available review or appeal process under the arbitration agreement before going to

the court, in Tanzania, the decision of the arbitrator or umpire under the Arbitration

Act is not appealable; instead an aggrieved party can make an application/petition to

the court for the same to be set aside or remitted back to the arbitrator or umpire for

reconsideration.

74

The Indian legislation was in pari materia with Arbitration Act Cap 15 of Tanzania,


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The court may set aside the award only when it is satisfied that there are elements of

misconduct or improper procurement of an award by the arbitrator or umpire75. Once

an award is remitted back for reconsideration, the arbitrator or umpire shall, unless

the court direct otherwise, make a fresh award within three months76. As noted

before, pursuant to section 12 (1) of the Arbitration Act, when and arbitrator or

umpire makes his award, is required to give a notice to the parties in that effect.

It was considered in the case of Tanzania Cotton Marketing Board v Cogecot Cotton

Company SA, (supra), that a party to the arbitration can apply for the enforcement or

changing an award once it has been filed in court and upon being notified such filing

by the Registrar of the High Court.

In the circumstances, should there be a time limitation to apply for the enforcement

or challenging the award, the time has to be counted starting from the date when a

party has received a notice of the filing of an award by the arbitrator from the

Registrar but not from the date when the award has been filed in court.

In Tanzania Cotton Marketing Board Vs Cogecot Cotton Company S.A77, the Court

of Appeal was to consider what form of pleading should be filed in the court to

challenge an award and time limit for taking such action. In that case, the appellant

petitioned to the High Court to impeach an award under section 15 of the Arbitration

Act and Rules 5 and 6 of the Arbitration Rules.

The matter was dismissed by High Court on the ground that it was time-barred

pursuant to Item 21 of Part III of the First Schedule to the Law of Limitation Act that

provides for the limitation period of 60 days. The Appellant then appealed against

that decision contending that the High court erred in holding the time of limitation to

be 60 days. The Appellant contended that a petition was a suit founded on a

judgment, namely the award and therefore, the time of limitation under the Law of

Limitation Act is 12 years reckoned from the date the notice of filing the award was

served on the appellant. In its judgment, the Court of Appeal held that a petition

under rules 5 and 6 of the Arbitration Rules is an application rather than a suit and

that all applications under the Arbitration Act fall under Item 21 of Part III of the First

75

Section 15 and 16 of the Act read together with Rule 5 and 6 of the Arbitration Rules 1957. 76

Section 15(2). 77 60 of 1998) [2002] TZCA 4 (1 January 2002) http://www.saflii.org/tz/cases/TZCA/2002/4.html (accessed on 4 August 2010).

http://www.saflii.org/tz/cases/TZCA/2002/4.html


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Schedule to the Law of Limitation Act, and the period is 60 days78. On the contrary,

as we will see later on, the same Law of Limitation Act provides for the time limit of

30days for making an application to set aside an award under the Civil Procedure

Code79. In furtherance to the above, the Law of Limitation Act is silent on when the

right of action accrues as far as application/petition for the challenging of an award is

concerned.

Section 6(j) of the Law of Limitation Act provides for when a right of action accrues in

respect to the “appeals” This section provides that time starts to run on the date

when the judgment, decision, award, decree or order appealed against was

delivered, passed or made. Section 2 of the Law of Limitation defines “appeal” to

mean an appeal against a decree, order, award, judgment or decision passed,

delivered or made in a proceeding of a civil nature. The word “award” is defined to

mean an “award of an arbitrator”.

Section 19 (4) of the Law of Limitation Act provides further that in computing the

period of limitation prescribed for an application to set aside an award, the time

requisite for obtaining a copy of the award shall be excluded. Interpretation of section

6 and 19 of the Law of Limitation Act can cause confusion in determining an

appropriate way of challenging the award and the time limit for doing so. As a matter

of law according decisions of the court of appeal in the case of Tanzania Cotton

Marketing Board vs. Cogecot Cotton Company S.A, an award under the Arbitration

Act can only be challenged by way of application referred as “petition” instead of

“appeal”. Therefore, the whole procedure under the Law of Limitation for challenging

an award does not involve an award made under the Arbitration Act.

4.1.14 Recognition and enforcement of domestic award

Under the Tanzania Arbitration Act the award upon being filed in the court, unless

the court remits it to the consideration to the arbitrator(s) or umpire(s) or sets it aside,

is enforceable as if it were a decree of the court80. An award can be enforced by filing

78

Note: The Arbitration Act does not provide for the period of limitation but refers to the limitation period under the Law of Limitation Act. 79

Under Part III, item 2 of the First Schedule. 80

Section 17.


Page | 40

a petition in the High Court in the manner set out in the Arbitration Rules81, to which

a copy of the submission (or arbitration clause) have to be attached.

Under Part I, item 9 of the First Schedule to the Law of Limitation Act, the award can

also be enforced as a “suit” to be filed in court within 6 years.

Contrary to the English Arbitration law where an award can be enforced through an

application for the leave of court or an action for a summary judgment on the sum

awarded82, in Tanzania, a party who wishes to enforce the award under the Act has

to follow the normal procedures for the enforcement of the decrees of the court as

provided for under the Civil Procedure Code. This is a subject which may involve a

lot of other legal complications which may end up in justice delayed if not denied.

Twaib (2009), challenges the civil justice system of Tanzania as far as process of

enforcement of decree is concerned. The author argues that even when the litigation

ends, another problem usually arises that of enforcing whatever decree or order a

person might have obtained from the Court. The execution process is full of

procedural complications, especially where, as in most cases, the losing party is not

willing to comply with the court order.

4.1.15 Enforcement of Foreign Arbitral Awards

In Tanzania, the enforcement of foreign arbitral award is governed by sections 29 to

32 of the Arbitration Act. A foreign award is enforceable either by action or through a

petition made to the High Court upon the award being filed. Although the law does

not define what “action” means, it can be construed to imply a formal suit. A party to

the foreign award may rely upon it in any legal proceedings by way of defence, set-

off or otherwise83. Pursuant to section 32, in order that a foreign award to be

enforceable under the Act, it must–

(i) have been made in pursuance of an agreement for arbitration which was valid

under the law by which it was governed;

(ii) have been made by the tribunal provided for in the agreement or constituted

in manner agreed upon by the parties;

81

Rule 5, 6 and 7. 82

Section 66 of Arbitration Act 1996. 83

Section 29.


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(iii) have been made in conformity with the law governing the arbitration

procedure;

(iv) have become final in the country in which it was made (there is no any

proceedings for contesting its validity in the country in which was made).

(v) have been in respect of a matter which may lawfully be referred to arbitration

under the law of Tanzania, and its enforcement must not be contrary to the

public policy or the law of Tanzania.

The foreign award cannot be enforced if the court is satisfied that-

(i) the award has been annulled in the country in which it was made; or

(ii) the party against whom it is sought to enforce the award was not given notice

of the arbitration proceedings in sufficient time to enable him to present his

case or was under some legal incapacity and was not properly represented;

or

(iii) the award does not deal with all the questions referred or contains decisions

on matters beyond the scope of the agreement for arbitration.

Section 31 of the law requires that a party seeking to enforce a foreign award must

prove the existence of a particular award by producing–

(i) the original award or its copy duly authenticated in the manner required by the

law of the country in which it was made;

(ii) evidence proving that the award has become final; and

(iii) such evidence as may be necessary to prove that the award is a foreign

award including certified translation of any of document if it is in the foreign

language.

Recognition and enforcement of a foreign award in Tanzania is based on the

Convention on the Execution of the Foreign Arbitral Awards of 1923 and The

Protocol on Arbitration Clauses of 1923 for which Tanzania is a member. The two

international agreements are incorporated in 3dr and 4th Schedules to the Arbitration

Act. Unlike Scots Arbitration Law which incorporates the international agreements in

its national law84 , the Arbitration Act for Tanzania does not make any reference to

84

Arbitration Act (Scotland) Act 2010 expressly recognises these two agreements through Sections 18 – 22 and 26 respectively.


Page | 42

the New York Convention or and UNICITRAL Model Law though the United Republic

of Tanzania is a member to such agreements.

Lack of recognition of international agreement through its national arbitration law has

made most of the arbitration cases involving the government of United Republic of

Tanzania and some international companies to be referred to the international

arbitrators even if the companies are registered and have their place of business in

Tanzania.

Among recent cases referred to the international arbitration tribunal (ICSID) is that of

Biwater Gauff (Tanzania) Ltd. V. United Republic of Tanzania85 which involved a

dispute on the termination of the World Bank funded project for the management and

operation of the water and sewerage services in Tanzania. In that case, though the

implementation of agreement involved a locally incorporated company in Tanzania,

named City Water Services Limited, the seat of arbitration was in Paris. In the

circumstances, it was very expensive for a poor country like Tanzania to handle the

case abroad. The costs that are incurred in submitting the dispute to the international

centres for disputes resolution could be avoided by having strong national arbitration

institutions and competent arbitration practitioners.

4.2 ARBITRATION UNDER THE CIVIL PROCEDURE CODE

The Civil Procedure Code provides for its own unique arbitration through the Rules

incorporated in the Second Schedule made under Section 80 to the Code. The Rules

governs both arbitration by the order of the court and that without an intervention of

the court.

4.2.1 Arbitration by order of Court

The Arbitration by order of Court requires that the parties in the proceedings who

wish to settle the dispute through arbitration, to apply in writing for the order of the

court that the matter be referred to arbitration before judgment has been

pronounced. In that circumstance, the arbitrator will be appointed by the court in

such manner as may be agreed upon between the parties and be required to make

an award within a specified time86. As for the Arbitration Act, the court may as well

85

ICSID Case No. ARB/05/22 86

Rules 2 – 3 of the Second Schedule


Page | 43

assist the proceedings by compel attendance of witness and extend time for making

an award by an arbitrator87.

Once the arbitrator has made an award in the suit will then cause it to be filed in

court. The court is empowered under Rules 12 and 14 to order modification,

correction or reconsideration of only if:

(i) it appears that a part of the award contains matters which were not

referred to the arbitration;

(ii) the award is imperfect in form, or contains an obvious error which can be

amended without affecting such decision; or

(iii) the award contains a clerical mistake or an error arising from an

accidental slip or omission.

The court can also interfere with the award by making such order as it thinks fit

respecting the costs of the arbitration if the award contains no sufficient provision

regarding the cost. Pursuant to Rule 15(1), the court cannot set aside the award

except on one of the following grounds, namely-

(i) corruption or misconduct of the arbitrator or umpire;

(ii) fraudulent concealment or misleading of any matter which ought to have

been disclosed to the arbitrator or umpire; and

(iii) the award having been made after the issue of an order by the court

superseding the arbitration or after the expiration of the period allowed by the

court or being otherwise invalid.

The rule 15 provide further that if the court sees no cause to remit the award for re-

consideration in whatever manner and no application has been made to set aside

the award or the court has refused such application, the court shall, after the time for

making such application has expired, proceed to pronounce judgment according to

the award which then shall be followed by a decree. A party to the proceedings is

allowed to challenge the decree only if it is in excess of, or not in accordance with

the award.

87

Rules 7 and 8


Page | 44

4.2.2 Agreement to refer to the arbitration

By virtue of Rule 17(1), any persons who agree in writing that any difference

between them shall be referred to arbitration, may make a written application to any

court having jurisdiction in the matter to which the agreement relates, that the

agreement be filed in court.

The application in this nature shall be accepted and registered as a suit between the

parties. Then the court will direct a notice thereof to be given to all the parties to the

agreement, requiring such parties to show cause within the time specified in the

notice, why the agreement should not be filed. In the absence of any objection

against the agreement, the court will order the agreement to be filed in court and the

arbitrator be appointed in accordance with the agreement. In line with section 6 of

the Arbitration Act, the court can stay any legal proceeding pending arbitration on

application by any party to the proceeding88.

4.2.3 Arbitration without the intervention of court

By virtue of rule 20 of the Second Schedule of CPC, where any matter has been

referred to arbitration without the intervention of a court and an award has been

made thereon, any person interested in the award shall make an application in

writing to the court that the award be filed in court. The application made in this

manner shall be registered as a suit between the parties and the court shall direct

notice to be given to the parties to show cause as to why the award should not be

filed in court.

If there is no any objection as regard to the filling, setting aside or remitting of the

award, the court will pronounce judgment according to the award. Upon the

judgment, so pronounced a decree shall follow and no appeal shall lie from such

decree except insofar as the decree is in excess of or not in accordance with the

award89.

4.3 COMPARING ARBITRATION UNDER THE ARBITRATION ACT AND CPC

It is submitted that, in contrast to the Arbitration Act, the CPC provides for two

procedures of arbitration i.e. arbitration which can or cannot involve intervention of

the court. However, both the proceedings require existence of an arbitration

88

Rule 18 89

Rule 21.


Page | 45

agreement between the parties. Under the CPC, the procedure of filing, enforcement

or challenging an arbitral award is different from that provided for in the Arbitration

Act. While in the Arbitration Act an award can be challenged by way of petition to

High court upon the award being filed by the arbitrator pursuant to section 12 of the

Arbitration Act, under CPC an award without intervention of the court can be

enforced by way of an action or a suit in which a judgment and a decree can be

pronounced straight forward.

The remedy for any of the parties who is aggrieved by the decree under the CPC

arbitration is to file an appeal against the decree whereas under the Arbitration Act

recourse of an aggrieved party is to challenge the award so as it should not be

treated as a judgment or decree of the court. As noted before, the Law of Limitation

Act provides under Part III, item 2 of the First Schedule that an application to set

aside an award “under the CPC is within thirty days (30) this is different from 60

days for challenging an award under the Arbitration Act .

Another contradiction in the arbitration procedures is that, while the Arbitration Act

requires all applications to be made in court by way of petition and that suit cannot

be recognized as “an application”, under the CPC, a party can use an action known

as a “suit” to enforce an award and the time limitation provided under the Law of

Limitation Act is six (6) years90. On the other hand, while the Arbitration Act does not

provide when an award has to be filed in the High court for the enforcement or

challenge, the Law of Limitation Act requires that an application under the CPC for

the filing an award in a suit made in any matter referred to arbitration by order of the

court or without the intervention of a court be made within six (6) months91.

Unless the laws are harmonized, it can be confusing if a party to an award decides to

quote both the provisions of CPC and the Arbitration Act on making his application

for the challenging or enforcement of an arbitral award.

4.4 ARBITRATION UNDER THE NATIONAL CONSTRUCTION COUNCIL

The National Construction Council (NCC) is a statutory body that was established in

1979 through the National Construction Act 1979. Cap 162, as amended in 200792.

Pursuant to section 4 of its Act, among functions of NCC include promoting and

90

Part I, item 9 of the Schedule to the Law of Limitation Act. Cap. 89. 91

Part III, item 18 of the First Schedule of the Limitation Act. 92

No. 20 of 1979, Cap. 162.


Page | 46

providing strategic leadership to the stakeholders for the development of the

construction industry as well as advice the government on all matters relating to the

construction industry in Tanzania. Apart from its main statutory mandates in the Act

of establishment, the Council is also engaged in facilitating construction dispute

settlements through adjudication and arbitration under the National Construction

Council arbitration rules. The current Rules applicable in the arbitration are the

Arbitration Rules 2001 Edition, which replaced the old Rules of 1984. The Rules are

in the form of guiding procedures for regulating arbitration between parties who seek

to resolve their construction dispute through NCC.

4.4.1 Scope of application

By virtue of its preamble, the NCC Rules are applicable to both domestic and

international arbitration. For the international arbitration, the Rules take recognizance

of the UNCITRAL Model Law. It is provided under the preamble that the parties who

wish to have their construction disputes determined through the Rules, they should

insert an arbitration clause in their contract to provide that any dispute or difference

of any kind whatsoever which may arise in relation to any matter in connection with

the agreement shall be referred to the arbitration under the Rules of NCC.

If there is no any prior agreement to arbitrate, the Rules allows the parties to enter

into “an agreement to refer” the dispute through the NCC Rules at the time of

occurrence of such dispute.

The NCC Rules state that any matters, which are not covered therein, shall be

governed by the agreement between the parties and the laws of Tanzania in case of

disputes under domestic contract or in accordance with the law agreed by the parties

in case of dispute arising out of, or in connection with international contract.

However, the word “domestic” or “international” contacts are not defined in the

Rules, neither is there any clause in the Rules defining words used therein.

4.4.2 General principles

Unlike the Arbitration Act Cap. 15, the NCC Rules contains a provision for the

general principles regarding the objective of arbitration. In addition, they provide

clear duties of the arbitrator and parties to the arbitration proceedings93. Generally,

93

Rule 1.0 - 3.0.


Page | 47

the object of arbitration is considered as an approach to obtain fair resolution of

dispute by an impartial tribunal without unnecessary delay or expense.

The arbitrator on his part is required to act fairly and impartially between the parties

and to adopt procedures suitable to the circumstances of the case to avoid

unnecessary delay or expenses to the parties. Likewise, parties to the disputes are

also required to do whatever possible for the proper an expeditious conduct of the

proceedings. Under Rule 3.2 Parties may agree to confer any other power to the

arbitrator apart from those in the rules or their arbitration agreement.

As a matter of procedure, pursuant to Rule 4, a party who wishes to commence

arbitration shall send to the NCC a written request to that effect. A request shall

contain particulars of the parties, brief statement of the dispute, copies of agreement

and a separate submission with a copy sent to the other party. On receipt of the

request, NCC shall then submit to the claimant a list of approved arbitrators and the

claimant shall select three names and send back the names to NCC and NCC shall

thereafter upon checking the availability of the arbitrators, request the Respondent to

select one with 14 days, otherwise if there is a disagreement on the name, parties

may request NCC to appoint an arbitrator who shall not be from the list proposed by

the claimant.

The procedure involving two arbitrators and umpire is only applicable on complicated

arbitration whereby NCC is the one, which appoints the umpire after each party has

appointed his own arbitrator94.

4.4.3 Jurisdiction and powers of the arbitrator

The jurisdiction and powers of the Arbitrator under NCC Rules are provided for under

Rule 7.0 in which the arbitrator is required to exercise his powers and discretion so

far as Tanzanian law allows. Among the powers of the arbitrators under the Rules

include to determine validity and enforceability of contract by the parties, to order

correction or amendment to such contract, to determine any question of law arising

in the arbitration, to determine validity of arbitration agreement, to determine any

question as to his jurisdiction, to order a joining of any party by consent and make

single award, to make any interim orders and to award interest on any sum from and

to any date as such as he determines to be appropriate etc.

94

Rule 5.0


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As it has been noted above, most of the referred powers in the NCC Rules are not in

the principal arbitration law, thus Arbitration Act Cap.. 15 and Rules of 1957.

4.4.4 Arbitration costs

As opposed to the Arbitration Act which does not stipulate how costs are to be

allocated at the end of the proceedings and or interest thereof, NCC Rules require

parties to pay in equal contribution all costs and fees relating to arbitration in

advance.

The said contributions, which are deposited with the NCC before or during the

arbitration proceedings, will probably differ from the costs at the end of the

arbitration, the entire costs of the arbitration are usually ordered to be borne by the

unsuccessful party95. The arbitration expenses are payable to cover for the

arbitrator’s fees, and all facilitation costs to be incurred by the NCC.

4.4.5 Procedures for enforcement and challenging an award

The procedure for making an award under the NCC Rules is completely different

from that provided in the Arbitration Act and CPC. Under Rule 12 of NCC it is

provided that the arbitrator will make his reasoned award in writing and then send his

award to NCC within 14 days after the conclusion of the hearing. NCC will then notify

the parties for collecting of the award upon payment of any outstanding fee and

costs. Rules 15.1 provides that if the award is not taken within one month of

notification , NCC may by action recover all outstanding costs of the arbitration from

any or all the parties. Nonetheless, NCC Rules do not specify what follows a party

had taken the award. In the other hand, rule 12 of the NCC Rules contradicts with

section 12 of the Arbitration Act, which requires the arbitrator to file or cause to be

filed an award in court upon being requested by any party to the arbitration to do so.

4.5 ARBITRATION UNDER THE PUBLIC PROCUREMENT

Amongst mandatory conditions in the procurement of public works or services in

Tanzania is a requirement that all Public Procurement Entities (PE) make use of an

appropriate standard model tender document and contract form prepared by the

PPRA96. As far as dispute settlement is concerned, the procedures are provided for

95

Rule 14 96

Sections 63(1) and 70(3) of the Public Procurement Act No. 21 of 2004 read together with Regulations 77 (4) and 83 (3) and (4) of the of the Public procurement (Goods, Works, Non-consultant services and Disposal of Public assets by Tender) (GN NO. 97/2005)


Page | 49

under clause 27 and 28 of under the Clause of the General Conditions of Contract

(GCC) in the current standard form tender documents approved by PPRA.

The conditions require that a dispute in a public project between the contractor and

the Project Manager should be determined by the Adjudicator whereby the

contractor who is aggrieved by the decision of the Project Manager has to refer the

matter to the Adjudicator within 14 days of the notification of the Project Manager’s

decision. The Adjudicator is bound to give a decision in writing within 28 days of

receipt of a notification of a dispute and if either is aggrieved with the decisions of the

Adjudicator, he may refer the matter to an Arbitrator within 28 days of the

Adjudicator’s written decision. Otherwise, the Adjudicator’s decision becomes final

and binding.

Pursuant to the said GCC, the Adjudicator is the person appointed jointly by the

Employer and the Contractor to resolve disputes in the first instance and such

appointment needs to be done through Special Conditions of Contract (SCC) within

the same standard tender documents. It is provided further under Clause 28(3) of the

said GCC that “The arbitration shall be conducted in accordance with the arbitration

procedure published by the institution named and in the place shown in the Special

Conditions of Contract”.

In the circumstances, parties have to nominate through SCC both the adjudicator

and the rules of an arbitration institution of which their dispute will be determined in

case it is unresolved through adjudication.

Apart from the fact that the standard tender documents (GCC) lack the procedure on

how the dispute can be referred to the adjudication or arbitration as it is under JTC,

2005 as commonly in use for the UK construction Industry97, it is the settled position

that in Tanzania, the adjudication process is the first step for the settlement of

disputes relating to public procurement and that the arbitration can only be instituted

as an appeal or review of the adjudicator’s decision.

However, the position is unclear as what should be the approach in a case where the

dispute between the parties does not involve the decision of the Project Manager.

97

Section 9.2 – 9.8


Page | 50

Similarly, the GCC does not make clear what will be an implication if the decision of

the adjudicator is unchallenged within 28 day, because the finality of the decision

does not always carry the same weight as a “binding decision” which renders the

decision enforceable before the court of law as it is for the adjudicator’s decision in

the UK under the HGCRA 1996.


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CHAPTER FIVE

INSTITUTIONAL CHALLENGES FACING ARBITRATION IN TANZANIA

5.0 INTRODUCTION

An attempt has been made in the preceding chapter to review the legal aspects of

arbitration in Tanzania. As noted, there are various weaknesses to the existing

arbitration legislation which cannot assist the parties to the arbitration proceedings to

resolve their dispute more effectively and enjoy all the benefits attached to arbitration

as one method of dispute resolution in the modern world. On the institutional aspect,

the arbitration is a form of dispute resolution method, which requires a workable

institutional framework to facilitate disputes resolution without causing unnecessary

delay or costs to the parties. This chapter examines and all the challenges facing

arbitration as far as the institutional aspect is concerned.

5.1 ARBITRATION INSTITUTIONS

Though Tanzanian courts have traditionally adopted a favourable attitude towards

arbitration, there are less private institutions for arbitration in the country. As it has

been observed, arbitration construction disputes proceedings in Tanzania can be

commenced directly in specialist arbitration tribunals or upon start of the proceedings

in the court if parties thereto agree to arbitrate.

Tanzanian legal system is based on the English common law in terms of substantive

law and procedures. Depending on jurisdiction issue and subject matter, apart from

arbitration, that requires a different approach, normal construction disputes can also

be adjudicated in the ordinary courts of law. About arbitration, pursuant to section 3

of the Arbitration Act, the only court having jurisdiction on arbitration cases is the

High Court of Tanzania whose decisions can be appealed to the Court of Appeal.

Currently, the High Court has three specialized divisions that are Commercial, Land,

and Labour divisions.

The Commercial Court shares jurisdiction over commercial matters concurrently with

the general division of the High Court and can act as a court of law as well as an

arbitral tribunal.


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5.1.1 Arbitration in Commercial Courts of Tanzania

The Commercial division commonly known as the Commercial Court was

established under the High Court Registries (Amendment) Rules, 199998. The Rules

empower the Court to determine all civil cases of a commercial nature including

arbitration proceedings99. The Commercial division of the High Court of Tanzania

was established with the express purpose of improving the efficiency and fairness of

commercial dispute resolution.

The division was established in order to solve the problem of poor case

management, delays and backlog of cases in the general registries of the High

Court. However, access to the commercial court can be very difficult for poor litigants

due to the higher case filing fees and pecuniary jurisdiction of the court. The

statutory minimum fee in 2002 was at least Tanzanian shillings 100 million (about

US$94,250). This has reduced the number of cases that are being brought before

the Commercial Court (Finnegan, 2005). In the other hand, though arbitration of

commercial dispute is part of the role of the court, this study has failed to find any

case determine through arbitration by the commercial court of Tanzania.

Also, as opposed to the UK where construction disputes are determined by the

Technology and Construction Court, in Tanzania neither the Commercial court nor

the ordinary High Court registries have such a specialized section to deal with

construction disputes. Therefore, all construction cases be it normal litigation or an

arbitration case, can be dealt either as a “commercial case” or normal disputes

depending on the registry where the matter has been filed. In that regard, as for

other cases, if the matter is taken to the court, the same problem of delays in

decision will be suffered by the litigants in the construction disputes.

5.1.2 Arbitration under NCC

As noted before, currently NCC is the only semi-government institution facilitating

arbitration of construction disputes in Tanzania. Under the NCC Arbitration Rules,

2001, NCC role regarding arbitration, is only to facilitate appointment of arbitrators

and coordination of all proceedings as the parties may agree.

98

. G.N. No 141 of 1999 99

Rule 2(a) (xi).


Page | 53

In the process, NCC has been charging facilitation costs referred in the NCC Rules

as “administrative costs” imposed as part of the arbitration costs calculated by NCC

based on the estimated time required by the arbitrator to arrive at an award100 (not

the time required by Arbitration Act). NCC is empowered under the Rules to

determine the arbitration fees of the arbitrator based on the work done, his special

qualification, and complexity of a particular case to be determined.

Pursuant to Rules 14.3 and 4, the arbitration fees include the administrative costs of

NCC but do not cover other specific expenses incurred by NCC or arbitrator such as

travel costs, fees for venues, subsistence allowances, report of experts and any

advisory services which are charged at cost. Rule 14.1 of the NCC Rules state

categorically that from the commencement of the arbitration, all parties shall be

jointly and severally liable to the NCC for arbitration cost until they are fully paid.

NCC has a right to enforce payment of arbitration costs by filing an action in the

court to recover all unpaid costs of arbitration against any party101. In such

circumstances, sometimes, arbitration under NCC Rules may be an expensive

process for the parties as opposed to litigation in which the only required costs are

court fess for filling the case but not costs of adjudicating their matters.

Being a public-owned entity, NCC operations depend upon funds from the central

government. Due to the lack of financial and human resources, sometimes it can be

difficult for the NCC to undertake effectively the role of facilitating arbitration. The

other challenge to the arbitration under NCC is that, currently NCC has no offices

only in Dar es Salaam region despite the fact that Tanzania has more than 25

regions. Due to the lack of branch offices in other regions of the country, it is difficult

for all stakeholders in the construction industry outside Dar es Salaam to have their

arbitration disputes resolved through facilitation of NCC without incurring

unnecessary cost and delays.

5.1.3 Tanzania Institute of Arbitrators

The Tanzania Institute of Arbitrators (TIA) is another registered private NGO in

Tanzania whose main objective is to deal with arbitration. The Institution has been

collaborating with NCC in training of construction professionals and lawyers to

100

Rule 14.2 101

Rule 15.2


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become arbitrators. However, there is no record to show that the activeness of the

Institute in facilitating arbitration as it is for the neighbouring countries such as Kenya

and Uganda where private arbitration institutions are well organised and active102.

With increased pace in the use of ADR for commercial disputes, TIA can be

empowered to work effectively as a trusted institution for the promotion and

determination of disputes through arbitration and other forms of ADR in Tanzania.

It appears that lack of effective arbitration institutions in Tanzania compel the parties

in construction disputes to opt for litigation through traditional courts.

5.1.4 Arbitration Professionals

Apart from institutions, the success of arbitration also depends on the quality of

arbitrators. Concurrently with competent arbitration institutions to facilitate arbitration,

the need to have skilled arbitrators who are knowledgeable of arbitration procedures

and other forms of ADR is very important in the arbitration process.

As already pointed out, under the NCC Rules for instance, the appointment is made

from the list of arbitrators who are enrolled under NCC panel of arbitrators For a

person to be enrolled as an arbitrator under NCC he/she has to attend training

courses administered by NCC in collaboration with TIA and pass the relevant

examinations in procedures and practices of arbitration. The published list of

arbitrators by NCC103, as of July 2009, reveals that currently, there are only forty five

(45) approved arbitrators in Tanzania of which only 14 are lawyers and the rest are

engineers, quantity surveyors or architects.

This figure of 45 arbitrators is very small compared the to number of registered

contractors and the number of disputes occurring in the construction industry. As by

July 2010, there were about 2,527 local contractors, who constitute 96.41% of all

registered contractors in Tanzania104

102

In Kenya there is a Chartered Institute of Arbitrators Kenya Branch, established in 1984 and now has about 300 registered (http://www.ciarbkenya.org/about.html) and the Centre for Arbitration and Dispute Resolution of Uganda ( established by the Arbitration and Conciliation Act, 2000 of Uganda 103

http://www.ncc.or.tz/ArbitratorsListJuly09.pdf. 104

The Express News Paper of 07/29/2010 (Tanzania) http://theexpress.server295.com/node/894

http://www.ciarbkenya.org/about.html


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CHAPTER SIX

FINDINGS, CONCLUSION AND RECOMMENDATIONS

6.1 FINDINGS AND CONCLUSION

The complex nature of projects in the construction industry has made disputes

unavoidable. Disputes in construction can be caused by various factors mostly being

risk or uncertainties inherent in the project concerned or parties’ attitudes. As argued

by Brown and Marriot (1999), dissatisfaction with litigation as a form of dispute

resolution has led to the development of various alternative forms of dispute

resolution including arbitration.

Arbitration as an alternative to litigation has been widely acceptable as an effective

dispute resolution method especially in domestic and international trade

transactions. This is evidenced by the worldwide reforms of arbitration systems in the

form of international harmonization of the procedures and substantive arbitration

laws.

The main focus of this study was to examine how the existing legal and institutional

framework for arbitration in Tanzania is effective in assisting the parties to the

construction dispute to resolve their dispute. The study was made by identifying gaps

and or inconsistencies with the existing Tanzanian laws and arbitration institutions.

The study has revealed that the resolving of construction disputes through arbitration

in Tanzania is governed by the Arbitration Act, Cap. 15, Civil Procedure Act Cap. 33

and the NCC Arbitration Act 2001 Edition. It has been also found that the main

arbitration law (Arbitration Act and its Rules) being a replica of the English

Arbitration Act 1889 contain various provisions which cannot assist in the facilitation

of resolution of commercial disputes in compliance with modern arbitration

requirements.

It has been observed that the procedure under the Arbitration Act is different from

that provided in the CPC and the NCC Rules. CPC provided for the arbitration that

can arise in the course of the court’s proceedings, whereas arbitration under the

Arbitration Act and NCC Rules are based on the arbitration agreement without an

intervention of the court. Though NCC Rules that deal with construction disputes are


Page | 56

based on the UNICITRAL Model law, they are just as procedural rules in a form of

subsidiary legislation that cannot in any way supersede the main legislation i.e.

Arbitration Act (Cap. 15) and its Arbitration Rules, 1957 which are however out-

dated.

Among others, the following shortcomings have been identified in the arbitration

system for Tanzania, namely:-

(i) lack of founding principles in the legislation to guide arbitration as compared

with arbitration legislation of other countries such as the English and Scottish

Arbitration laws;

(ii) too much power vested to the court to control the arbitration proceedings

including discretion of judges to order stay of proceedings pending arbitration;

(iii) lack of powers of arbitrator(s) or umpires to determine their

competence/jurisdiction of tribunal, to issue interim orders, to award interest

on costs, to order joinder of proceedings or parties;

(iv) lack of details on procedural matters to guide the tribunals on the conduct of

arbitration proceedings such as filing of proceedings, discoveries and

administration of evidence;

(v) lack of provision to allow the parties to remove the arbitrator at their own

wishes;

(vi) inconsistencies in procedures for enforcement or challenging of an award

delivered by the arbitrators appointed under the Arbitration Act and those

appointed under CPC or NCC Rules;

(vii) lack of any provision in respect of mandatory issues which should be

covered in the arbitral award; and

(viii) lack of appropriate provision empowering the arbitrator to award interest on

costs of the matter.

The study also observed that as far as arbitration institutions in Tanzania are

concerned, NCC seems to be an active arbitration institution in dealing with

construction disputes. However, NCC as a public owned institution entrusted with

other core mandates in respect of the construction industry lacks enough competent


Page | 57

enrolled arbitrators something that poses a great challenge to the institution for

effective resolution of construction disputes.

6.2 RECOMMENDATION

Although parties are free to determine the procedure applicable to their arbitration,

national laws also have a significant impact on arbitral proceedings. International

agreements such as UNICITRAL Model law, Geneva Convention and New York

Convention on Enforcement have played a major role in harmonization of

procedures and promotion of settlement of the international trade disputes through

consensual methods such as arbitration.

Several Contracting parties to the aforementioned international agreements have

enjoyed great support in developing their own national arbitration legal frameworks

so as to create better environment for the settlement of disputes through arbitration.

It is therefore recommended that Tanzania should modernize its arbitration law in the

light of the ratified multilateral and regional conventions so as to ensure

effectiveness in settlement of disputes.

Apart from compliance with the international conventions of arbitration, the revising

of its arbitration law will enable Tanzania to step on the same footing with her

neighbours and trading partners under the East Africa Community i.e. Kenya and

Uganda whose laws have been revised in line with the UNCITRAL Model law.

It is also recommended that the Tanzanian Government should promote the

establishment of private arbitration institutions so that they can work effectively in

facilitation and promotion of arbitration and other ADR forms of dispute resolution in

the construction industry.


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