ALCHEMY CLEANED

IN THE HIGH COURT OF THE UNITED REPUBLIC OF TANZANIA COMMERCIAL DIVISION AT DAR ES SALAAM COMMERCIAL CASE NO. 012187 OF 2024 ALCHEMY RESOURCES LTD................................................. PLAINTIFF VERSUS IMPOEXPO LOGISTICS COMPANY LIMITED............................. DEFENDANT RULING Date of last Order: 07/08/2024 Date of Ruling: 13/09/2024 GONZI, J. The Plaintiff sued the Defendant for recovery of USD 810,000.000 being as the outstanding amount paid by the Plaintiff to the Defendant as an advance for supply of 10,000 metric tons of coal. The Plaintiff alleged that the Defendant had breached the agreement for supply of coal by supplying lower quantity of the products that did not meet the specifications as set out in the contract hence resulting in the delivery of unmarketable products and incurring demurrage costs due to such breach. The Purchase Contract dated 23rd January 2023 between the Plaintiff-a company based in Mauritius and the Defendant- a Company based in Dar es Salaam, Tanzania contains a Clause on "Governing Law" which is Clause 15 in the contract. It provides that: i "This term sheet is governed by the English law with any dispute to be referred to and resolved by arbitration under the London Court of International Arbitration. Place of Arbitration to be London, England." The Defendant refuted the claims advanced by the Plaintiff. In the Written Statement of Defence the Defendant also raised a Preliminary point of objection in law that: (a) That, this honourable Court has no jurisdiction to entertain the matter on the basis of Clause 15 of the Purchase contract which requires any dispute between the parties to be resolved by arbitration under the London Court of International Arbitration and the place of Arbitration to be London, England. The Defendant prayed for dismissal of the suit with costs. During the hearing of the Preliminary Objection, the Defendant was represented by Mr. Shabani Mwaita, Learned Advocate while the Plaintiff was represented by Mr. Simon Mbawala, Learned Advocate. I thank both Learned Counsel for their insightful arguments. Mr. Mwaita, Learned Advocate, submitted that the Court has no jurisdiction due to clause 15 of the purchase contract attached to the plaint as annexture ALR 1 which requires that disputes between the parties to be taken to the London Court of International Arbitration (LCIA) by way of arbitration in London England and the applicable laws to be English laws. 2 He submitted that the preliminary objection raised qualifies as such under the criteria set in Mukisa Biscuits Manufacturing Company LTD v West End Distributors LTD (1969) EA 696, at page 700. He argued that the preliminary objections thereby allowed include the objection to the jurisdiction of the court or limitation of time or submissions that parties are bound by contract to refer the dispute to arbitration. He submitted further that in Abually Alibhai Azziz versus Bhatia Bros Ltd, (2002) TLR 288, it was held that parties must adhere to the terms of the contract under the principle of sanctity to contract. He submitted that Clause 15 of the Supply Contract shows that the term sheet is governed by English Laws with any dispute to be referred to and resolved by arbitration under the LCIA with the place of Arbitration to be London, England. Mr. Mwaita argued that under Clause 15 of the Supply Contract between the Plaintiff and the Defendant the applicable law chosen by the parties is English law as opposed to local law. This is because the Plaintiff is a Mauritius Corporate body and the Defendant is a Tanzanian body corporate. Hence it was a private international law arrangement and parties chose English law to apply to their contract. He submitted further that the chosen forum in case of a dispute was the London Court of International Arbitration (LCIA). Therefore, he argued that the filing this of this matter in this court by the Plaintiff was contrary to the terms agreed by the parties in the contract which is the basis of the suit before the court. Mr. Mwaita, learned Counsel, argued that the Contract provides that any dispute between the parties under the contract should be resolved by way of .arbitration. He submitted that Arbitration is the parties' chosen mode of dispute resolution and therefore the suit 3 should not have been instituted in this court, rather in the LCIA which the parties had agreed in the contract. Mr. Shabani Mwaita, Learned Advocate, submitted that an Arbitration Clause is unlike other clauses in the contract which are general. He submitted that in absence of the arbitration clause, the normal courts under the local laws could have powers to entertain the dispute but the arbitration clause is very specific and carries the clear intention of the parties. Mr. Mwaita, learned Advocate relied on the decision by the Court of Appeal of Tanzania in Fauzia Jamal Mohamed versus Lilian Kileo, Civil Appeal No.448/ 2020 where at page 13 the Court stated that where parties have freely entered into a binding agreement, neither the court nor the parties should interpolate anything or interfere with terms and conditions therein agreed even if the agreement was made by lay people. Mr. Shabani Mwaita, Learned Advocate, wound up his submissions by submitting that the Court has no jurisdiction to entertain the matter due to the wording of Clause 15 in annexture ALR 1 to the Plaint which carries the intention of the parties. He submitted that all annextures annexed to the Plaint form part of the Plaint. For this rule he relied on Mbwana M. Chuma and 2 others versus DSM Parkland Holding Ltd, (2022) at page 11. He prayed for the court to dismiss the entire suit with costs so that the Plaintiff may refer the matter to the competent Arbitral Tribunal. Mr. Simon Mbawala, Learned Advocate made reply submissions. He submitted that jurisdiction of the court is provided by statute and cannot be ousted by an agreement between parties. He submitted that jurisdiction can only be ousted by a statute explicitly. He submitted that the nature of the dispute in this case is a cross border transaction. He 4 submitted that the Constitution of the United Republic of Tanzania under Article 105(2) vests powers in this Court to deal with any matter which according to the legal traditions applicable in Tanzania, it could be determined by the High Court, He argued that the Judicature and Application of Laws Act (JALA) under section 2(1) provides that the High court is a court of unlimited jurisdiction. He submitted that the Plaintiff has chosen the present court as the forum. Mr. Simon Mbawala, Learned Advocate, submitted that this suit does not become defective or incompetent by virtue of the clause 15 of the Contract as submitted by the Defendant, rather the court should employ appropriate remedies to put to test the arbitration clause and see its appropriateness, applicability and enforcement. The court cannot strike out the suit because of the objection rather provide appropriate remedy to the parties. He submitted that the gist of the matter in the suit is specific performance and since the defendant is a Tanzania entity, then this court is the appropriate one clothed with jurisdiction and powers to decide on the prayers stated in the plaint. He prayed for dismissal of the Preliminary Objection. By way of rejoinder submissions, Mr. Shabani Mwaita, Learned Advocate submitted that Clause 15 of the contract clearly provides that, the applicable law governing the contract is English Law. Therefore, he argued, the Judicature and Application of Laws Act and the Constitution of the United Republic of Tanzania do not apply since the parties, by their agreement, had decided to depart from Tanzanian laws in favour of English laws. He submitted that Clause 15 of the Supply Agreement shows the choice of forum by the parties who chose the LCIA. He argued that this was a private international law 5 arrangement. He argued that although the Defendant is a Tanzania company, the Plaintiff was incorporated in Mauritius. That is why they opted to refer the dispute outside Tanzania to LCIA. He reiterated that wishes of the parties to the contract must be respected under the principle of sanctity to contract. He concluded by arguing that none of the authorities cited has been distinguished by the Plaintiff's counsel. The only issue for determination in this matter is the effect of Clause 15 of the Supply Contract entered by the parties herein, to the present suit. As shown above, the Purchase Contract dated 23rd January 2023 between the Plaintiff and the Defendant contains the "Governing Law" Clause which provides that: "This term sheet is governed by the English law with any dispute to be referred to and resolved by arbitration under the London Court of International Arbitration. Place of Arbitration to be London, England." The above provision is a choice of law, choice of forum and choice of mode of dispute resolution clause. The applicable law chosen by the parties is the English Law as opposed to Tanzanian Laws. The competent forum is the London Court of International Arbitration. The method of dispute resolution is arbitration as the clause says that the dispute shall be resolved by arbitration. This Court is not the London Court of International Arbitration. This Court is not called upon by the Plaintiff to determine the dispute by way of arbitration, rather by litigation as per the suit filed. In determining the dispute this court can apply any law that applies to the case at hand be it Tanzanian law or otherwise. Therefore, the applicable law should not be an issue. The real issues are the ones related 6 to the obligation by the parties to refer the matter to arbitration before the London Court of International Arbitration. The Defendant has argued that Clause 15 of the Supply Contract denies the court of its jurisdiction. Does existence an arbitration Clause oust the jurisdiction of the court? My answer is in the negative. The Arbitration Act, CAP 15 (R.E 2020) is very clear on this under section 14. Where there is a valid arbitration agreement on the matter which has been filed in court, the Court should simply refer the parties and the matter in dispute to arbitration. This presupposes that the court has jurisdiction over the same matter but that the parties' agreement is thereby being respected. If the Court had no jurisdiction over the matter subject of arbitration agreement, the Court would not then have the power to even pass an order to refer the matter to arbitration. The court would simply dismiss a matter over which it had no jurisdiction. The Court of Appeal of Kenya in the case of "MV Lilian S" [1989] 1 KLR, observed that: - "Jurisdiction is everything, without it, a Court has no power to make one more step. Where the Court has no jurisdiction, there would be no basis for a continuation of proceedings ...A court of law downs tools in respect of the matter before it the moment it holds the opinion that it is without jurisdiction." Thus, the court in this matter has jurisdiction to entertain the suit in the same way that the London Court of International Arbitration (the Arbitral Tribunal) also has jurisdiction to arbitrate the same. Contractual Clauses on forum choice, choice of law and arbitration clauses do not deprive the court of its jurisdiction but may debar the court from taking 7 cognizance of the matter despite having jurisdiction thereon. In the case of Sunshine Furniture Co. Ltd Versus Maersk China Shipping Line Co. Ltd and Another, Civil Appeal No.98 of 2016 decided by the Court of Appeal of Tanzania at Dar es Salaam, confirming the decision of this Court, it was held that: "In the present case, it was upon the parties choice of forum that the learned High Court Judge applied the provisions of Section 7(1) of the CPC to find that the High Court was barred from entertaining the suit. His finding was based on the parties choice of forum. The parties did not by agreement, oust the jurisdiction of Tanzanian courts, rather they chose one of the courts which have jurisdiction, to be the court at which their dispute should be determined. Back to the matter at hand, the Defendant has raised an objection on a point of law in an attempt to refer the matter to arbitration. Referral of actions filed in court to arbitration is governed by section 14 of the Arbitration Act. The import of section 14(1) of the Arbitration Act, CAP 15 (R.E 2020) is that in circumstances where both the court and the arbitral tribunal have substantive jurisdiction over substance of the same mater in dispute, where an action has been filed in court, the court should refer the matter to the arbitral tribunal in conformity with the principle of party autonomy except only where there is no valid arbitration agreement. The justification of having section 14 of the Arbitration Act, CAP 15 (R.E 2020) lies under the general principles of arbitration law that by entering into an arbitration agreement, parties commit to submit certain matters to the arbitrators' 8 decision rather than have them resolved by law Courts. Thus, the parties: (a) waive their right to have those matters resolved by a Court; and (b) grant jurisdictional powers to private individuals (the arbitrators). These two main effects of the arbitration agreement are called "negative" and "positive", respectively. This theoretical foundation underlies the provision of section 14 of the Arbitration Act, CAP 15, (R.E.2020). Thus it forcefully provides that where the arbitration agreement is valid, it is not the Courts which should take cognizance of the matter, but rather the arbitral tribunals. Hence, where a valid arbitration agreement exists and a party to it has timely and properly made an application for referral of the dispute to arbitration, a referral order must be issued by the Court, referring the parties to arbitration under section 14 of the Arbitration Act. There are two types of applications for referral to arbitration under section 14(1) of the Arbitration Act, based on the timing of presenting the application for referral to arbitration. For the sake of specificity, I will label them as the immediate application and the delayed application. The immediate application for referral to arbitration is the one that may be made prior to the date of the applicant submitting his written statement of defence on the substance of the dispute. The delayed application for referral to arbitration is the one that may be made on the date of the applicant submitting his written statement of defence on the substance of the dispute. In the case at hand, the Defendant raised the preliminary objection in the written statement of defence. Although there is no formal application by the defendant to refer the matter to arbitration as envisaged under section 14(1) of the Arbitration Act, the obtaining jurisprudence in Tanzania appears to recognize the raising of a preliminary objection as a means to enforce an arbitration agreement, in 9 Mukisa Biscuits Manufacturing Company LTD v West End Distributors LTD (1969) EA 696, at page 700, Law, J.A observed as follows: - So far as I am aware, a preliminary objection consists of a point oflaw which has been pleaded or which arises by dear implication out of the pleadings, and which, if argued as a preliminary objection may dispose of the suit. Examples are an objection to the jurisdiction of the court, or a plea of limitation, or a submission that the parties are bound by the contract diving rise to the suit to refer the dispute to arbitration. (Underlining supplied) As the rule in the Mukisa Biscuit case (supra) forms part of the general corpus of the laws applicable in Tanzania, I am of the view that enforcement of an arbitration clause can be done by way of a party raising a preliminary objection as well. Thus, enforcement of an arbitration agreement can be done in several and different ways. One way is vide section 14(1) of the Arbitration Act, CAP 15 (R.E 2020). Under it the Defendant is required to make a formal application praying to refer the matter in dispute to arbitration in compliance with the dictates of section 14 of the Act. He can make that application prior to filing his defence or at the time of filing his defence, not thereafter. The other way to enforce an arbitration agreement is by way of the Defendant raising a preliminary objection challenging competence of the suit filed in court in violation of the arbitration agreement between the parties to refer their dispute to arbitration. He can rely on the rule in Mukisa Biscuits case (supra) that allows a party to make a submission that the io parties are bound by the contract giving rise to the suit to refer the dispute to arbitration. A preliminary objection on referral to arbitration, being not a jurisdictional objection, should be raised at the earliest possible opportunity, preferably prior to or at the time of filing the Written Statement of Defence in line with the spirit under section 14(1) of the Arbitration Act. Another avenue for a party to enforce an arbitration agreement is by invoking the Court's inherent jurisdiction of judicial case management to prevent the Plaintiff from circumventing the obligation to refer the dispute to arbitration. In Reichhold Norway ASA v Goldman Sachs International [1999] 2 Lloyd's Rep 567 it was held that: "It has been observed that English Courts have accepted that a Court has "inherent jurisdiction" to stay its own proceedings where the action depends upon the outcome of an arbitration between either the same or different parties." In Gulf Hibiscus Ltd v Rex International Holding Ltd and Another [2017] SGHC 210, it was held by the Supreme Court in Singapore that: "The power to order a case management stay is part of the Court's own inherent and immediate powers to control proceedings before it...the existence of an arbitration agreement between the parties would give strong grounds fora stay of Court proceedings taken in contravention of that agreement..." li Where inherent powers of the court are sought by a party or are exercised by the court suo motto, the guiding principles are the ones which were stated in Tomolugen Holdings Ltd and another v Silica Investors Ltd and other appeals [2015] SGCA 57, where the Court of Appeal of Singapore had this to say on inherent powers of judicial case management on arbitration clauses: The Court must in every case aim to strike a balance between three higher-order concerns that may pull in different considerations: first, a plaintiff's right to choose whom he wants to sue and where; second, the Court's desire to prevent a plaintiff from circumventing the operation of an arbitration clause; and third, the Court's inherent power to manage its processes to prevent an abuse of process and ensure the efficient and fair resolution of disputes. The balance that is struck must ultimately serve the ends ofjustice." In the case at hand, I find that the Defendant has rightly invoked the rule in Mukisa Biscuits case (supra), as it was submitted by Mr. Shabani Mwaita, Learned Advocate for the Defendant. The preliminary objection was contained in the Written Statement of Defence hence raised timely at the time of filing the Written Statement of Defence. In an application under section 14 of Arbitration Act for referring the matter in dispute to arbitration, the only issue for consideration is whether parties have a valid arbitration Agreement or not. That is all. There is only one test in terms of section 14(1) of the Arbitration Act. Section 15 of the Arbitration Act, CAP 15 (RE 2020) which has more 12 considerations does not apply in determining the question of referral of the matter to arbitration as it deals with the question of stay of proceedings pending determination of the question of referral of the matter to arbitration. In the case at hand, no application for stay of proceedings exists under section 15 of the Arbitration Act. In the present case referral to arbitration was not sought under section 14(1) of the Arbitration Act. It was sought by way of raising a preliminary objection. In my view, deciding whether or not to refer parties to arbitration the test is existence of valid arbitration agreement. It is the arbitration agreement which forms basis of the Arbitrators owners and jurisdiction. Thus, the same test applies to the case at hand. It is not disputed by the Plaintiff that Clause 15 forms part of the Purchase Contract dated 23rd January 2023 between the parties herein. Actually, that Contract was brought by the Plaintiff as an annexture to the Plaint and it is the basis upon which the suit is founded. In the submissions by Mr. Mbawala, learned Advocate, there was no attack to the validity of the arbitration agreement which constitutes Article 15 of the Purchase Contract dated 23rd January 2023. As there is a valid arbitration agreement between the parties, the duty of this court now is holding the parties to their bargain by ordering specific performance of their agreement. I thus refer the present dispute arising from the Purchase Contract dated 23rd January 2023, to be resolved by arbitration under the London Court of International Arbitration with the place of Arbitration being in London, England. This is what the parties agreed in their contract. 13 What is the effect of my order of referral to arbitration to the present proceedings? According to the UNCITRAL 2012 Digest of Case Law on the Model Law on International Commercial Arbitration (supra), "the referral of an action to arbitration entails that it cannot be further continued before domestic Courts". In Kerala State Electricity Board and Anr. V. Kurien E. Kalathil and Anr., (C.A. Nos. 3164 and 3165 of 2019), the Supreme Court of India in Paragraph No.39 of the Judgment held that: "Referring the parties to Arbitration has serious civil consequences. Once the parties are referred to arbitration, the proceedings will be in accordance with provisions of Arbitration [Act], and the matter will go outside the stream of the civil Court. The arbitral tribunal shall not be bound by the Code of Civil Procedure and the Evidence Act. Once the award is passed, the award shall be set aside only under the limited grounds. Hence referring the parties to arbitration, has serious civil conseguences procedurally and substantively...." (Underlining supplied) In Mukisa Biscuits Manufacturing Company LTD v West End Distributors LTD (1969) EA 696, at page 700 Law, J.A observed as follows: - So far as I am aware, a preliminary objection consists of a point of law which has been pleaded or which arises by dear implication out of the pleadings, and which, if argued as a 4 preliminary objection may dispose of the suit. Examples are an objection to the jurisdiction of the court, or a plea of limitation, or a submission that the parties are bound by the contract giving to the suit to refer the dispute to arbitration. (underlining supplied) I construe an order of referral to arbitration as one disposing of the matter before the court in a similar way like in transfer of a suit where a suit which was supposed to be filed in a lower Court, is filed in the higher Court. In that case, both the lower Court and the higher Court will have jurisdiction over the matter but in terms of section 13 of the Civil Procedure Code which requires a case to be instituted in the lowest court competent to try it, the higher Court may transfer the case to the lower Court competent to try it. After passing an order of transferring the case to the lower Court, the higher Court cannot go ahead and stay the same transferred case before it pending determination of the transferred case by the lower Court! After the case is transferred from the higher Court to the lower Court, the action/suit makes an exodus from the higher Court. When the transferred case is determined by the lower Court of competent jurisdiction, there is no room for the same matter to be re-instated or reactivated for purposes of trial in the higher Court. Therefore, upon a transfer order being issued, the case before the higher Court would end with the transfer order thereby marking total and permanent exodus of the case from the higher Court to the lower Court competent to try the case. Equally, an order referring to arbitration the matter in the action/suit filed before the Court, does not envisage staying the action before the Court pending the referral to arbitration. Section 15 14 of the Arbitration Act, CAP 15 (RE 2020) which regulates referral of matters to arbitration does not envisage that either. Stay of proceedings pending referral to arbitration, is the subject of section 15 of the Arbitration Act, CAP 15 (RE 2020). The fact that some of the preconditions for invoking section 14 and those for invoking section 15 of the Arbitration Act are incompatible and mutually exclusive, is a clear indication that the two processes were not intended to always be carried out together. It would not be necessary to stay every proceedings pending referral to arbitration. A party to an arbitration agreement may apply for referral to arbitration under section 14 of the Arbitration Act, CAP 15 (RE 2020) without being entitled to apply for stay of proceedings under section 15 of the Arbitration Act, CAP 15, (RE 2020). This happens where one makes an immediate application for referral to arbitration even before filing his defence to the substantive claim. A party to an arbitration agreement may apply for referral to arbitration under section 14 of the Arbitration Act, CAP 15 (RE 2020) and also be entitled to apply for stay of proceedings under section 15 of the Arbitration Act, CAP 15, (RE 2020). This can happen where the applicant for referral to arbitration makes a delayed referral application latest at the time of filing his defence to the substance of the claim. Mr. Simon Mbawala, Learned Advocate, submitted that this suit does not become defective or incompetent by virtue of the clause 15 of the Contract as submitted by the Defendant, rather the court should employ appropriate remedies to put to test the arbitration clause and see its appropriateness, applicability and enforcement. He argued that, the court cannot strike out the suit because of the objection rather provide appropriate remedy to the parties. I agree with Mr. Simon Mbawala, Learned Advocate. 16 The court cannot strike out or dismiss this suit for violating the arbitration agreement. I have already tested the validity of the arbitration agreement which is not even being challenged, but rather relied upon by the Plaintiff as well. What is the appropriate remedy to the parties which Mr. Mbawalla had in mind in his submissions? He did not disclose it in his submissions. The Court of Appeal of Tanzania, however, has already pointed out the appropriate remedy for breach of arbitration agreement by a party to it. The remedy is enforcement. In Civil Appeal No. 115 of 2005, between Tanzania Motor Services Ltd & Presidential Parastatal Sector Reform Commission versus Mehar Singh T / A Thaker Singh, decided by the Court of Appeal of Tanzania, the court quoted with approval what was held by the House of Lords (now the Supreme Court of the UK) in Heyman v. Darwins Ltd. (1942) AC 356 at page 375 that: "I venture to think that not enough attention has been directed to the true nature and function of an arbitration clause in a contract. It is quite distinct from other clauses. The other clauses set out the obligations which the parties undertake towards each other but the arbitration clause does not impose on one of the parties an obligation in favour of the other. It embodies the agreement of both parties that if any dispute arises with regard to the obligation which the one party has undertaken to the other, such dispute shall be settled by a tribunal of their own constitution. And there is this very material difference, that whereas in an ordinary 17 contract the obligation of the parties to each other cannot in general be specifically enforced and breach of them results only in damages, the arbitration clause can be specifically enforced by the machinery of the Arbitration Acts. The appropriate remedy for breach of the agreement to arbitrate is not damages, but is enforcement." (Underlining supplied) As the appropriate remedy for breach of the agreement to arbitrate is not damages, but enforcement, I do hereby issue an order in the nature of specific performance and refer the present matter, arising from the Purchase Contract dated 23rd January 2023, to be resolved by arbitration under the London Court of International Arbitration with the place of Arbitration in London, England. This is pursuant to clause 15 of the purchase contract. Mr. Simon Mbawalla, Learned Advocate for the Plaintiff, has submitted that that the Plaintiff has chosen the present court as the forum. I can do no better than adopting and subscribing to the wisdom in Tomolugen Holdings Ltd and another v Silica Investors Ltd and other appeals [2015] SGCA 57, where the Court of Appeal of Singapore had this to say: "Hfe recognize that a plaintiff's right to sue whoever he wants and where he wants is a fundamental one. But that right is not absolute. In appropriate cases, that right may be curtailed or may even be regarded as subsidiary to holding 18 the plaintiff to his obligation to arbitrate where he has agreed to do so. In fine, I do hereby uphold the preliminary objection raised by the Defendant with costs. I do hereby refer the present dispute arising from the Purchase Contract dated 23rd January 2023, to be resolved by way of arbitration under the London Court of International Arbitration with the place of Arbitration being London, England. It is so ordered. 19