kbl enterprises ltd vs cdi cotton distributors inc 2012 tzhccomd 41 30 march 2012

IN THE HIGH COURT OF TANZANIA

COMMERCIAL DIVISION

AT PAR ES SALAAM MISC.COMMERCIAL CAUSE NO.26 OF 2011 IN THE MATTER OF ARBITRATION ACT, CAP.15 OF THE LAWS OF TANZANIA R.E. 2002 AND IN THE MATTER OF SECTION 30(3) OF THE ARBITRATION ACT, [CAP.15 R.E 2002]

BETWEEN KBL ENTERPRISES LIMITED....................................... PETITIONER

VERSUS CDI COTTON DISTRIBUTORS INC.............................. RESPONDENT Date of last order: 19/12/2011 Date of final submissions: 17/02/2012 Date of judgment: 30/03/2012

JUDGMENT IN PETITION MAKARAMBA, J .: This judgment arises out of a petition the Petitioner, KBL ENTERPRISES LIMITED MWANZA lodged in this Court on the 23rd day of November, 2011 challenging the registration and enforcement of an Arbitral Award, (hereinafter the Award) the Arbitrator, INTERNATIONAL COTTON ASSOCIATION LIMITED, at the instance of CDI COTTON Page 1 of 32 DISTRIBUTORS INC., the Respondent herein, filed in this Court on the 31st October, 2011. The Petition which has been preferred under section 30(3) of the Arbitration Act, Cap.15 [R.E 2002] is for the following orders:- (i) An order that the arbitral award is (sic!) superseded by the compromise agreement. (ii) Costs o f Petition (Hi) Any other or further reliefs or direction this Court may deem appropriate to grant. The background to the Petition briefly is that the Award the subject of the present Petition arises out of a case the Respondent referred to the Arbitrator, INTERNATIONAL COTTON ASSOCIATION LIMITED of Liverpool, in England. On the 17th day of February 2011, the Arbitrator issued Award in favour of the Respondent herein, CDI COTTON DISTRIBUTORS INC. On the 31st October, 2011, the Arbitrator, at the instance of the Respondent filed the Award in this Court. On the 1st day of November, 2011, this Court issued a Notice to the parties to show cause why the Award filed in this Court by the Arbitrator on 31st

October, 2011 should not be registered and enforced as if it were a decree of this Court. Pursuant to that Notice, on the 23rd day of November, 2011 the present Petitioner filed the present Petition in this Court seeking to set aside the said Award on the ground that it was superseded by a compromise agreement of the parties to the Award. On the 22 day of December, 2011, the Respondent filed an answer to the Petition. In his petition, the Petitioner claims that prior to and subsequent to the issue of the Award, the parties have been negotiating an amicable Page 2 of 32 settlement outside the Arbitral Tribunal. The Petitioner claims further that the TANZANIA COTTON BOARD conducted meetings between the COTTON GINNERS including the Petitioner, the Respondent, and TANZANIA COTTON ASSOCIATION which culminated in a Memorandum of Understanding, the express terms of which was that the Ginners including the Petitioner and the Respondent: "... shall enter into individual agreement whereby Ginners shall compensate the Respondent the settled loss by payment o f USD 350 per ton o f the unfulfilled contract commencing on the cotton season 2011." The Petitioner claims further that the unfulfilled contract of the Petitioner is for 1,500 bales of 307.50 metric tons of average weight of 205 lbs. per bale. The Petitioner claims further that the Petitioner has agreed to pay the Respondent USD

107,625 in four installments of USD 26,906.25 annually, and that towards this compromise, the Petitioner has paid the Respondent USD 10,000/=. The Petitioner contends further that on the 22nd day of November 2011, the parties further agreed that the Petitioner: "...shall pay to the Respondent the awarded sum within a period o f three years commencing in 2011." The Petitioner claims further that the further terms of the Memorandum of Understanding was that: Page 3 of 32 "...any dispute between the Petitioner and Respondent shall be referred to Arbitration and failure to resolve the dispute the same shall be referred to the International Cotton Association Limited.’' The Petitioner cites the provisions of section 3 of the Arbitration Act, [Cap. 15 R.E 2002] and claims that the rights of the Respondent under the said award have been relinquished by the subsequent agreement and are therefore unenforceable. In response, the Respondent avers in the Answer to the Petition that the Petitioner was to compensate the Respondent for the sum of USD 350 (Three Hundred Fifty) per ton of cotton lint, in respect of unfulfilled contracts. The Respondent contends further that however, the amount agreed as compensation was not among the terms of the arbitral award issued by the International Cotton Association Limited and that the Award has never been varied. The Respondent claims further that it

is only the Arbitrators of the International Cotton Association Limited who can legally vary, amend or adjust the terms of the award. The Respondent claims further that the Memorandum of Understanding did not in any way affect or negates the rights and obligations of the parties to the arbitral award. The Respondent claims further that the Respondent has never at any particular point in time agreed, either pursuant to the terms of the Memorandum of Understanding or otherwise to relinquish any of its rights, whatsoever, under the arbitral award. The Respondent further claims that the terms of the Memorandum o f Understanding have never been incorporated into the Award and therefore are different from the Award. The Respondent Page 4 of 32 claims further that the Petitioner has not been cooperative in making compensation payments as agreed under the Memorandum of Understanding. The Respondent alleges further that it was a term of the Memorandum o f Understanding that the Petitioner would pay the compensation amount of USD 107,625 in a period of three years commencing from the crop season of June 2011 but to the date of this petition only USD 10,000 has been remitted. The Respondent claims further that the Memorandum o f Understanding does not supersede or in any way invalidate the arbitral award made by the International Cotton Association Limited. The Respondent further claims

that section 225 of the International Cotton Association Limited bylaws is the governing law under which the Petitioner agreed to be bound. Such as narrated briefly above is the factual background to this Petition. The Petition, by consent of the learned Counsel for the parties, was disposed of by way of written submissions, Mr. C.A. MATATA, learned Counsel for the Petitioner and Messrs LINDA BOSCO and MEDINA CHENGE learned Counsel for the Respondent. The brief three pages of submissions by Mr. Matata were responded to twelve pages of reply submission by Messrs Linda Bosco and Medina Chenge accompanied with voluminous pages of supporting authorities. Essentially this Petition revolves on two main grounds, namely, that the Memorandum of Understanding or compensation agreement and the letter of 14th November 2011 supersedes and has the effect of extinguishing the Award; and that the arbitral award has been adjusted in Page 5 of 32 whole to the satisfaction of the Respondent by the compromise agreement subsequently entered into by the parties. Mr. Matata contends that in Clause 1 of the Memorandum of Understanding the parties agreed that: "The Ginners shall compensate CDI US Dollars 350 per ton o f cotton lint as a final and conclusive payment o f their CLAIMS in respect o f unfulfilled contracts." Mr. Matata also makes reference to the letter of the Respondent dated 14th day of

November, 2011, which forms Annexture 3 to the Petition, where the parties agreed to accept payment of USD 120,000 to be paid within 3 years by the Petitioner. In making his submissions on the Petitioner's stand that the Memorandum of Understanding or Compensation Agreement supersedes and extinguishes the rights and liabilities of the parties in the Award, Mr. Matata learned Counsel for the Petitioner has equated an "enforceable award' to a " court decree." Mr. Matata argues that since an award filed in court is rendered and is enforceable "as i f it were a decree o f a court', therefore the rules which apply to a decree also apply to an award. Mr. Matata refers this Court to the decision of the Court of Appeal of Tanzania in TANZANIA COTTON MARKETING BOARD V. COGECOT COTTON CO. SA [1995-1998] 1 E.A 312 (CAT) to buttress his point. I should point out here that this case is also reported in the TANZANIA LAW REPORTS of 1997 at page 165. Mr. Matata however, did not tell this Court what relevance this case has on his equating an "enforceable award" to a Page 6 of 32 "court decree." In her reply submissions M/s Chenge informed this Court that in actual fact in that case the Court of Appeal of Tanzania never reached such conclusion that the rules which apply to a decree also apply to an award. M/s Chenge puts the record straight. She submits that in that case at page 314 paragraph 5,

the Court of Appeal of Tanzania enunciated that "the act o f filing o f an arbitral award in terms o f section 16(1) o f the then Arbitration Ordinance rendered such an award capable o f being enforced "as if it were a decree o f the court. "I could not agree more with M/s Chenge on this score. That is what the Court of Appeal stated in that case among others and not what Mr. Matata was trying to suggest to this Court. Mr. Matata takes issue with the averments of the Respondent in paragraph 4 of the Answer to the Petition that "it is only the Arbitrators o f the International Cotton Association Limited who can legally vary, amend or adjust the terms o f the Award." Mr. Matata argues that there is no any law which prohibits or restricts the liberty of the parties to contract with reference to their rights and obligations and to make a compromise in full satisfaction of the award/decree. Mr. Matata however, did not elaborate on this crucial statement neither did he cite any authority in support of it. A closer look at section 30(3) of the Arbitration Act, [Cap. 15 R.E. 2002], which empowers a party to resist the enforcement of a foreign award, is to the effect that if the party against whom the award is sought to be enforced proves that there is any ground other than the non-existence of the specified conditions in paragraphs (a), (b) and (c) of subsection (1) of that section, or

the existence of the conditions specified in paragraphs Page 7 of 32 (b) and (c) of subsection (2) of that section entitling him to contest the validity of the award, the court has discretion, if it thinks fit, to either refuse to enforce the award or "adjourn the hearing until after the expiration o f such period as appears to the court to be reasonably sufficient to enable that party to take the necessary steps to have the award annulled by the competent tribunal." It is clear from the provisions of section 30(3) of the Arbitration Act, Cap. 15 R.E. 2002 cited above that the powers of this Court are limited only to refuse to enforce the foreign award or to adjourn the hearing and give time to enable the party against whom the award is sought to be enforced "to take the necessary steps to have the award annulled by the competent tribunal" I take it that the "competent tribunal" is that very tribunal which handed down the foreign award sought to be recognized or enforced in a court of law. In my view, if Parliament intended that any annulment, variation, amendment or otherwise of a foreign award could be done by this Court or the parties to the submission it would have stated so in express terms. The present petition has been preferred under section 30(3) of the Arbitration Act which concerns the recognition and enforcement of a foreign award in a court of law. Both parties do

not seem to contest that the award the subject matter of the present petition is a foreign award. However, Mr. Matata did not explain the basis for lodging the Petition under section 30(3) of the Act which deals with enforcement and recognition of foreign award. M/s Chenge learned Counsel for the Respondent argues that the Arbitral Award was governed by the laws of Page 8 of 32 England and in particular the Arbitration Act 1996. M/s Chenge argues further that such award is final and binding unless the parties have agreed otherwise and adds that this final and binding effect of an award made under the Laws of England is given recognition both at section 58 of the Arbitration Act, 1996 of England and by Halsbury's Laws of England. There is no evidence in the present petition of the parties agreeing otherwise. Accordingly, it must be presumed that the Arbitral Award is final and binding on the parties, M/s Chenge surmises. Mr. Matata did not make any rejoinder on this particular point of the finality and bindingness of the award in the absence of any agreement by the parties otherwise. I take note however that although in her submissions M/s Chenge refers to section 58 of the Arbitration Act, 1996 of England, and The Halsbury's Law of England, she does not cite to this Court the contents of section 58 of the Arbitration Act, 1996 or of the Halsbury's Law of England. The general

rule as regards the finality and bindingness of an arbitral award M/s Chenge refers to in her reply submissions is clearly stipulated section 58(1) of the Arbitration Act of England of 1996 thus: "58(1) Unless otherwise agreed by the parties, an award made by the tribunal pursuant to an arbitration agreement is final and binding both on the parties and on any persons claiming through or under them, "(the emphasis is o f this Court) The provisions of subsection (2) of section 58 of the same Act however, provides for an exception to the general rule enunciated under subsection (1) of section 58 of the Act as follows: Page 9 of 32 "58(2) This does not affect the right o f a person to challenge the award by any available arbitral process o f appeal or review or in accordance with the provisions o f this Part." (the emphasis is o f this Court). The legal position as obtaining in England under the Arbitration Act of 1996 is that much as an award made by the tribunal pursuant to an arbitration agreement is final and binding on both parties if they have not agreed otherwise, this does not however, affect the right of a person to challenge the award. The challenge could be either by "any available arbitral process o f appeal or review or in accordance with the provisions o f this Part." Section 2(1) of the same Act stipulates that "The provisions o f this Part apply where the seat of

the arbitration is in England and Wales or Northern Ireland." As I intimated to earlier in this judgment, in the absence of any contestation from the party against whom the award is sought to be enforced as to the foreign nature of the award, it cannot be expected that the parties will be in dispute as to the "seat of the arbitration" being in London, England. This very fact made M/s Chenge, relying on section 28 of the Arbitration Act, [Cap. 15 R.E. 2002] and the most recent unreported decision of the High Court of Tanzania at Dar es Salaam in Miscellaneous Civil Application No.8 of 2011 between the LEGAL AND HUMAN RIGHTS CENTRE AND 3 OTHERS V. DOWANS TANZANIA LIMITED,

DOWANS HOLDINGS SA AND TANZANIA ELEDTRIC SUPPLY COMPANY, to cite the authoritative statement derived there from that "an Page 10 of 32 award made under the laws o f a state other than where recognition and enforcement are sought is a foreign award." Proceeding by way of deduction, M/s Chenge argues further that the Arbitral Award the subject matter of the instant Petition is therefore a foreign award, and as such it is enforceable in Tanzania and binding on the persons as between "whom the same are made." In support of this legal position M/s Chenge cites the provisions of section 29 of the Arbitration Act, Cap. 15 R.E. 2002, which stipulates that: "(1) A foreign award shall, subject to the provisions o f this Part, be enforceable in the High Court either by action or under the provisions o f section 16 o f this Act. (2) A n y foreign award which would be enforceable under this Part shall be treated as binding for all purposes on the persons as between whom it was made and may accordingly be relied on by any o f those persons b y way o f defence, set-off or otherwise in any legal proceedings; and any reference in this Part to enforcing a foreign award shall be construed as including references to relying on an award." The provisions of section 29 of the Arbitration Act, [Cap.15 R.E. 2002] cited above provide for two methods of enforcement of a foreign award in a court of law.

It is either by action or by filing it in court under section 16 of the Act. The Arbitration Act, [Cap 15 R.E. 2002] does not however, define what a "foreign award" is. Resort could therefore be had to Article 1 of the PROTOCOL ON ARBITRATION CLAUSES in the Third Schedule to the Arbitration Act, which states as follows: Page 11 of 32 "1. Each o f the Contracting States recognises the validity o f an agreement whether relating to existing or future differences between parties, subject respectively to the jurisdiction o f different Contracting States by which the parties to a contract agree to submit to arbitration all or any differences that may arise in connection with such contract relating to commercial matters or any other matter capable o f settlement by arbitration, whether or not the arbitration is to take place in a country to whose jurisdiction none o f the parties is subject." I can haphazard a definition by way of deduction of the foregoing provision that, a "foreign award" is an arbitral award arising out of existing or future differences between parties subject respectively to the jurisdiction of different Contracting States in connection with contract relating to commercial matters or any other matter capable of settlement by arbitration, which by contract the parties agree to submit to arbitration whether or not the arbitration is to take place in a country to

whose jurisdiction none of the parties is subject. However, the 1958 United Nations Convention on the Enforcement of Foreign Arbitral Awards (famous as the New York Convention), which Tanzania, the Tanganyika signed in 1962 and ratified in 1965 is much more clearer and contain some very elaborate and detail provisions on the recognition and enforcement of foreign arbitral awards. The Government of Tanzania most unfortunately to this date has yet to enact law to domesticate the provisions of the New York Convention. Consequently, courts of law are forced to endure painstakingly interpreting and applying the archaic Arbitration Act and the its equally relatively old 1957 Arbitration Rules, to administer justice in arbitral proceedings. These laws are therefore in need of serious and Page 12 of 32 immediate amendments if not total overhaul to take cognizance of current developments in the field of arbitration and recognition and enforcement of foreign arbitral awards. According to section 29 of the Arbitration Act, [Cap.15 R.E. 2002], the law in vogue in Tanzania, deficient as it is, stipulates that a "foreign award" is "enforceable in the High Court either by action or under the provisions o f section 16 o f this Act." In her submission M/s Chenge argues that the general rule under the Arbitration Act is that upon an award on submission being filed in court it is "enforceable as

if it were a decree o f the court' unless the court either remits it to the reconsideration o f the arbitrators or umpire or sets it aside. "M/s Chenge cites section 17 of the Arbitration Act, Cap. 15 R.E. 2002 (previously section 16 of the Arbitration Ordinance mentioned in Cogecot Cotton case supra), which provides as follows: "17(1) An award on a submission on being filed in the court in accordance with this Act shall, unless the court remits it to the reconsideration o f the arbitrators or umpire or sets it aside, be enforceable as i f it were a decree o f the court." I should point out here however, that in so far as the recognition and enforcement of a foreign award is concerned, respect should be had more on the provisions of section 30(3) of the Act, which in my view are more relevant. M/s Chenge arrives at the conclusion that the arbitral award filed in this Court whose enforcement is now being contested by the Respondent is a "foreign award" on the basis of the contents of Annexture Page 13 of 32 1 of the Petition that the Arbitral Award was governed by the laws of England and in particular, the Arbitration Act, 1996. M/s Chnege then embarks on an elaborate expose of the term " enforceable" and concludes that as such, it is evident from the provisions of section 17(1) of the Arbitration Act that the act of filing renders an arbitral award capable of being established

as a decree of the court. M/s Chenge rather authoritatively reasons that it is therefore the filing of an award which catapaults an arbitral award to the status of a decree of the court, and not any sooner. M/s Chenge is of the opinion that the procedure of filing has been purposely put in place to ensure that before the High Court can file the award, I guess she meant register, it must satisfy itself that the award is enforceable under the provisions of the Arbitration Act, and if the contrary is proved, the court is afforded an opportunity to set it aside or remit it for reconsideration. I would only agree with this statement in so far as the enforcement of arbitral awards generally is concerned. However, in so far as the finality or otherwise of a foreign arbitral award is concerned, the provisions of section 30(3) are far reaching. That provision enjoins this Court either to refuse to enforce the foreign award or to adjourn the hearing to enable the party against whom the award is sought to be enforced "to take the necessary steps to have the award annulled b y the competent tribunal." Perhaps I should point out here that the arbitration process is sacrosanct. As such arties to the arbitration process are at liberty to agree how their dispute should be resolved by concluding a contract to that effect. The parties also agree to be bound by the award except where the Page 14

of 32 law stipulates otherwise, which is why courts are wary and desist from too much interference in the arbitral process, which intervention if allowed is to be minimal and within the law governing the procedure in arbitration matters. It is not however that parties will always come to court to enforce an arbitral award. If the parties agree to honour the award without seeking the intervention of the Court they are completely free to do so, which is why section 29(2) of the Arbitration Act stipulates very clearly that a foreign award ' shall be treated as binding for all purposes on the persons as between whom it was made" even without the court's intervention. In so far as foreign awards are concerned, the law stipulates clearly the grounds for resisting their recognition and enforcement. In the present petition the Petitioner seeks to resist the registration and enforcement of the foreign arbitral award on the ground of having been extinguished and superseded by a subsequent compromise agreement of the parties, and the interrelated ground that the arbitral award has been adjusted in whole to the satisfaction of the Respondent by the compromise agreement subsequently entered into by the parties. Mr. Matata contends that the subsequent compromise agreement of the parties to the present petition had the effect of extinguishing their rights and liabilities and superseded the award. Mr. Matata cites a proposition of the law by Mulla, the Code of Civil Procedure 16th Ed. Vol.3, on the provisions of Order XXI Rule 2 of the Indian Code of Civil Procedure, which is pari materia to Order XXI Rule 2 of our Civil Procedure Code, Cap.33 R.E.

2002. Mr. Matata argues further that in terms Page 15 o f 32 of Order XXI Rule 1 of the Civil Procedure Code, Cap.33 R.E. 2002, the Arbitral Award has been adjusted in whole to the satisfaction of the Respondent by the compromise agreement subsequently entered into by the parties notwithstanding that it is not certified by the Court. Mr. Matata quotes in extensio a proposition of the law from Mulla, the Code of Civil Procedure 16th Ed. Vol.3, on the provisions of Order 21 Rule 2 of the Indian Code of Civil Procedure which is pari materia to Order XXI Rule 2 of our Civil Procedure Code, Cap.33 R.E. 2002 The proposition of law from Mulla (supra) run thus: 1. "In a full bench decision; the Lahore High Court held that, i f there is a complete contract which immediately extinguishes and take the place o f the decree that contract is an adjustment within the meaning o f this rule.... In each case it is a question o f fact to be decided by the executing Court (See page 2486 paragraph 1 line 7 (Copy attached for ease o f reference).

2. An adjustment can, in any case be pleaded in an answer to the execution application by the decree holder. The fact o f adjustment being uncertified is no bar, equally the decree holder can plead non-satisfaction o f the decree matter which is to be decided by executing Court, "(page 2487paragraph 6). Responding on the reach and import of Order XXI Rule 2 of the Civil Procedure Code, [Cap. 33 R.E. 2002], M/s submits that it does not apply to any agreement entered into before the coming into existence of a decree, and adds that Order XXI Rule 2 of the CPC assumes the presence of a decree at the time of adjustment. M/s Chenge concludes that Order XXI Rule 2 of C.P.C is therefore of no relevance to this matter. Page 16 of 32 M/s Chenge distinguishes the decision of Lahore High Court cited by the Petitioner and argues that it is of no relevance since it also deals with an adjustment of the decree. Ms Chenge refers this Court to two Indian decisions, the one in MEGHRAJ V. KESARIMAL by the Nagpur High Court, and the other in S.S NIRMALCHAND S/O S.S V. SMT. PARMESHWARI DEVI W/O AIR [1958] MP 33, in support of her argument. M/s Chenge strongly denies that the Respondent has at any material time agreed to relinquish or forfeit all rights under the Arbitral Award in exchange for a promise made by the Petitioner under the Memorandum of Understanding and the letter of 14th November 2011.

M/s Chenge argues further that the Petitioner is not even a party to the Memorandum of Understanding. M/s Chenge propounds that an arbitral award is final and cannot be challenged, modified or reversed except on very limited grounds set out under sections 15, 16, 17 and 30 of the Arbitration Act. M/s Chenge elaborates that the Arbitration Act under section 17(1) and 30(3) presumes the validity of an award and places the burden of proving such invalidity on the party opposing enforcement and further that section 30(3) permits this Court to refuse an enforcement of award where there are sufficient grounds or conditions other than those specified in section 30(1) and 30(2) of the Arbitration Act warranting such refusal. I am at one with M/s Chenge on this particular point. Mr. Matata refers this Court to the English case of MERCIER V. PEPPERELL (1881) 19 Ch.D 58, whose copy he availed to this Court but without explaining its relevance to the present matter. M/s Chenge Page 17 o f 32 distinguishes the English case of MERCIER V. PEPPERELL (1881) 19 Ch.D 58 relied on by the Petitioner's Counsel, and avers that it cannot be applied to the facts of the present petition because in that case the defendant had asked the Chancery Division to set aside an award for want of finality but failed to state that very ground in the notice of motion. M/s Chenge alerted this Court to the fact that

Orders under the Civil Procedure Code are not referred or written in Arabic Numbers as Mr. Matata did in his submissions, but are referred to or written in Roman Numbers. I wish in this score to associate myself with the observations my learned brother, Hon. Werema, J as he then was made in Commercial Case No. 27 of 2009 between MGS INTERNATIONAL (T) LTD V, SCANDINAVIAN EXPRESS SERVICES LTD, while responding to reference Mr. Maige, learned Advocate made to Orders of the Civil Procedure Code in Arabic Numbers. His Lordship Werema as he then was made the following instructive observation as to proper citation of Orders in the Civil Procedure Code: "Orders in the code are referred to or written in roman numbers and not Arabic numbers. This is not style but substance. I t is prudent, regular and good order i f the orders are continued to be referred as such until amendment o f the code to use Arabic numbers is effected." I find it rather tempting to deliberate further on citation methods for the laws. I am hesitant to take that course. Suffice however, to say that in my considered opinion failure to cite the Orders in the Civil Procedure Code Page 18 o f 32 in Roman or citing them in Arabic Numbers is not that fatal as to render incompetent a matter before this Court or the submissions for that matter. As my learned brother Judge Werema, J. as he then correctly observed, "/f is

prudent, regular and good order" to cite such Orders in Roman. It remains so, nothing more nothing less. This Court cannot therefore in its good sense of administering justice expeditiously engage in the painstaking exercise of ruling on the propriety of citing Orders in the Civil Procedure Code in Arabic Numbers instead of Roman. I find this to be a matter more of practice and procedure than of substantive law. No party in my view will be harmed or prejudiced or injustice will be occasioned by the citation of Orders in the Civil Procedure Code in Arabic Numbers instead of Roman. I leave it at that. I have had the opportunity of perusing and reading the excerpts from Mulla (supra), a copy of which Mr. Matata availed to this Court in the course of his submissions. In that excerpt, the Lahore High Court decision from which Muiia (at footnote 23 supra) quotes the legal proposition to the effect that "// there is a completed contract, which immediately extinguishes and takes the place o f the decree, that contract is an adjustment within the meaning o f this ruid', is derived from a statement made in the decision of Udham Singh vAtma Sing AIR 1941 Lah 149 (FB); PK Nair v N Krishna AIR 1972 Ker 90. With due respect to Mr. Matata, the proposition of the law quoted from Mulla, the Code of Civil Procedure 16th Ed. Vol.3, has been taken out of context. The situation covered in Muiia,

the Code of Civil Procedure 16th Ed. Vol.3 in my view and as rightly submitted by M/s Chenge, concerns the Page 19 of 32 existence of a decree. The same learned authoritative author states in his treatise at page 2486 that the rule, that is, 0. 21 R 2 of the Indian Civil Procedure Code, (which is in pari materia with our Order XXI Rule 2 of the Civil Procedure Code, Cap. 33 R.E. 2002), " contemplates an adjustment o f an existing decree whereby the liabilities are extinguished either in whole or part" (see footnote 22 in the excerpt from Muiia supraj quoting from the case of Md Bashir v Abdul AIR 1965 Cai209. I am also alive to the summing up of the law by the Nagpur High Court in Meghraj r Kesarimai (1947) Nag 197, AIR 1948 Nag.35 {see footnote 24 in the exercpt from Muiia supra) that, "contract is an adjustment within the meaning o f the rule whereby there is a completed contract, which immediately extinguishes and takes the place o f the decree and such as it therefore relates to agreements to compromise a claim to execute a decree." The learned Judge in Meghraj v Kesarimai (1947) Nag 197, AIR 1948 Nag.35 {see excerpt from Muiia, supra) elaborated that agreements to compromise a claim to execute a decree may be divided into three classes. I find the first class to be of more relevance for our purpose. According to compromise agreements of the first class, the existence of a

decree sought to be executed is a condition precedent for an agreement to compromise a claim. Essentially this would mean that there has to be a decree-holder and a judgment debtor, whereby the decree holder agrees to give up all his rights on the judgment-debtor's doing something or other. In that regard there will therefore be no adjustment until the judgment debtor has done whatever he promised. Page 20 of 32 This Court asks itself therefore whether in the present petition there is a decree which is sought to be executed. The Petitioner has preferred this petition under section 30(3) of the Arbitration Act, Cap. 15 R.E. 2002, to resist the enforcement of the foreign award. Mr. Matata argues that this Court has jurisdiction to refuse to enforce the Award and set it aside. In his submissions Mr. Matata however, conveniently forgot to cite the contents of section 30(3) of the Arbitration Act, Cap. 15 R.E. 2002, which stipulates as follows: "30(3) I f a p a rty seekin g to resist the en forcem en t o f a foreign a w a rd proves that there is a n y g ro u n d o th er than the non-existence o f the conditions specified in paragraphs (a), (b) and (c) o f subsection (1) o f this section, or the existence o f the conditions specified in paragraphs (b) and (c) o f subsection (2) o f this section entitling him to co n te st the validity o f the a w a rd the court may, i f it thinks

fit, either refuse to enforce the award or adjourn the hearing until after the expiration o f such period as appears to the court to be reasonably sufficient to enable that party to take the necessary steps to have the award annulled by the com peten t trib u n a l." The provisions of section 30(3) of the Arbitration Act cited above concern the enforcement of a "foreign award." As I intimated to earlier in this judgment, Mr. Matata does not come out clearly in his submissions why he elected to proceed under section 30(3) of the Arbitration Act. As I stated earlier on however, M/s Chenge has assisted this Court by citing the Arbitration Act, 1996 in particular, as the governing law for the arbitration and the seat of arbitration as being London in England. I shall take a bit of Page 21 of 32 excursion here on the aspect of the grounds for resisting the recognition and enforcement of a foreign award. In terms of section 30(3) of the Arbitration Act, Cap. 15 R.E. 2002, where a party seeking to resist the enforcement of a foreign award proves to the court that there is a n y ground other than the non-existence of the conditions specified in paragraphs (a), (b) and (c) of subsection (1) of section 30 of the Act, or the existence of conditions specified in paragraphs (b) and (c) of subsection (2) of section 30 of the Act, entitling him to contest the validity of the award, the court

has discretion either to refuse to enforce the award or to adjourn the hearing until after the expiration of reasonably sufficient period to enable that party to take the necessary steps to have the award annulled by the competent tribunal. The main ground fronted by Mr. Matata in this Petition for resisting the recognition and enforcement of the foreign award is that the Award has been extinguished by the subsequent compromise agreement of the parties. This point need not belabor us much since I have already elaborated sufficiently enough on it above when deliberating on the import and reach of the proposition of the law with regard to agreement to compromise a claim as argued by Mr. Matata and resisted by M/s Chenge. The finding and holding of this Court is that a contract is an adjustment within the meaning of the rule whereby there is a completed contract, which immediately extinguishes and takes the place of the decree. Since however, the present petition is not a claim to execute a decree, the subsequent compromise agreement, if any, reached by the parties, cannot be said to have extinguished the rights and liabilities of the parties to the Page 22 of 32 foreign award now being sought to be registered and enforced by this Court as a decree. The proposition from Mulla (supra) cited by Mr. Matata in his submissions although proper in law, with due respect, it has

been quoted out of context as I intimated to earlier. As M/s Chenge rightly submitted presently there is no decree sought to be executed. In that regard therefore the subsequent compromise agreement by the parties, could not have the effect of extinguishing the rights and liabilities of the parties as Mr. Matata would wish this Court to believe. As M/s Chenge rightly submitted, it is the filing of an award which catapults an arbitral award to the status of a decree of the court and not any sooner. An arbitral award, as M/s Chenge submitted and rightly so in my view, cannot be equated with a decree of the Court until such time the same has been filed in the High Court pursuant to the terms of section 17(1) of the Arbitration Act, Cap.15 R.E.

2002. The assertions of the Petitioner, as M/s Chenge rightly submitted, are therefore premature. M/s Chenge argues further that the Memorandum of Understanding was not incorporated in the award for it to be said to have superseded or extinguished the award. M/s Chenge suggests further that the assertion by the Petitioner that the award was superseded by the Memorandum of Understanding will only be relevant at the time of execution of the decree. I could agree more with M/s Chenge that the application before this Court not being one for execution of a decree, but of seeking to resist the enforcement of an award, a compromise agreement by the parties could not be said to have extinguished the rights and liabilities of the parties to the foreign arbitral award. Page 23 of 32 Let me albeit very briefly point out here the reach and import of section 28 of the Arbitration Act, [Cap. 15 R.E. 2002], which M/s Chenge made reference to in her reply submissions. The provisions of section 28 of the Arbitration Act, Cap. 15 R.E. 2002, fall in PART IV of the Act, which is titled "PROVISIONS RELATING TO THE CONVENTION SET FORTH IN THE FOURTH SCHEDULE (ss 28-33)." The Fourth Schedule of the Act is titled "CONVENTION ON THE EXECUTION OF FOREIGN ARBITRAL AWARDS." Article I of that scheduled Convention provides as follows: "In the territories o f any High Contracting party to which the

present Convention applies, an arbitral award made in pursuance o f an agreem ent whether relating to existing or future differences (hereinafter called "a submission to arbitration") covered b y the Protocol on Arbitration Clauses, opened a t Geneva on 24th September, 1923, shall be recognised as binding and shall be enforced in accordance with the rules o f the procedure o f the territory where the award is relied upon, provided that the said award has been made in a territory o f one o f the High Contracting Parties to which the present Convention applies and between persons who are subject to the jurisdiction o f one o f the High Contracting Parties, "(the emphasis is o f this Court). Essentially, Article 1 of the CONVENTION ON THE EXECUTION OF FOREIGN ARBITRAL AWARDS in the Fourth Schedule of the Arbitration Act, [Cap. 15 R.E. 2002], cited above, recognize foreign arbitral awards as binding and enforceable "in accordance with the rules o f the procedure o f the territory where the award is relied upon" The condition sine qua non for the enforcement of a foreign arbitral award is Page 24 of 32 that such award must have been made "7n a territory o f one o f the High Contracting Parties to which the present Convention applies an d between persons who are subject to the jurisdiction o f one o f the High Contracting Parties. "The "High Contracting Parties to which the present

Convention applied would in my view have meant the then parties to the Convention and to the Protocol on Arbitration Clauses, which was opened at Geneva on 24th September, 1923. At that time Tanzania then Tanganyika, was still under British rule and could not validly have been a "High Contracting Party" to that Convention. The "High Contracting to which the present Convention applied therefore would mean the British colonial government and its colonies and protectorates. Upon Tanzania (then Tanganyika) gaining her independence from the British, the Government of the independent young Republic (United Republic since 1964) adopted the law on arbitration as contained in the then colonial Arbitration Ordinance, now the Arbitration Act, [Cap. 15 R.E. 2002] with all its Schedules, the Fourth Schedule inclusive. Article 3 of the CONVENTION ON THE EXECUTION OF FOREIGN ARBITRAL AWARDS which is contained in the Fourth Schedule of the Arbitration Act, Cap. 15 R.E. 2002, and which is partly similarly worded as section 30(3) of the Act, save for the grounds entitling a party to contest the validity of a foreign award in a court of law, stipulates as follows: "Article 3. I f the party against whom the award has been made proves that, under the law governing the arbitration procedure, there is a ground, other than the grounds referred to in Article 1(a) and (c), and Article 2(b) and (c),

entitling him to contest Page 25 of 32 the validity o f the award in a court o f law, the court m ay i f it thinks fit, either refuse recognition or enforcement o f the award or adjourn the consideration thereof giving such party a reasonable time within which to have the award annulled bv the competent tribunal, "(the emphasis is o f this Court). As M/s Chenge rightly submitted the Award the subject of the present petition being a foreign award is recognized as such in Tanzania under section 29 of the Arbitration Act, [Cap.15 R.E. 2002]. In terms of Article 1 which I have cited above, if the party against whom the award has been made proves that, under the law governing the arbitration procedure, there is a ground, other than the grounds referred to in Article 1(a) and (c), and Article 2(b) and (c), entitling him to contest the validity of the award in a court of law, the court may if it thinks fit, either refuse recognition or enforcement of the award or adjourn the consideration thereof, giving such party a reasonable time within which to have the award annulled by the competent tribunal. The law governing the arbitration procedure in Tanzania is found in the archaic Arbitration Act Cap. 15 R.E. 2002 and the Arbitration Rules of 1957 respectively. The procedure for the enforcement of foreign awards as M/s Chenge rightly submitted has been well stated in the TANZANIA COTTON

MARKETING BOARD V COGECOT COTTON COMPANY SA [1997] TLR 165 (The Tanzania Cotton's case {supra} where the Court of Appeal enunciated that the act of filing of an arbitral award in terms of section 16(1) of the then Arbitration Ordinance rendered such an award capable of being enforced "as if it were a decree o f the court" Page 26 of 32 The instant petition has been preferred under section 30(3) of the Arbitration Act, Cap. 15 R.E. 2002 which relates specifically to a party seeking to resist the recognition and enforcement of a foreign arbitral award. The provisions of section 30(3) of the Arbitration Act, Cap. 15 R.E. 2002 provides for the ground upon which such resistance can be marshaled. The specified conditions the non existence of which a party contesting the validity of a foreign award must prove, are those that are expressly stated in paragraphs (a), (b) and (c) of subsection 1 of section 30 as follows, thus: "30 (1) In order that a foreign award m ay be enforceable under this Part, it must- fa) have been made in pursuance o f an agreement for arbitration which was valid under the law by which it was governed; (b) have been made by the tribunal provided for in the agreement or constituted in manner agreed upon by the parties; ( c) have been made in conformity with the law governing the arbitration procedure; In the alternative, the party may prove the specified

conditions the existence of which the party seeking to resist the enforcement of a foreign award must prove, these are stated in paragraphs (b) and (c) of subsection (2) of section 30 thus: "30(2)Subject to the provisions o f this subsection, a foreign award shall not be enforceable under this Part if the court is satisfied that- Page 27 of 32 (a) .... (not applicable); or (b) the party against whom it is sought to enforce the award was not given notice o f 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 (c) the award does not deal with all the questions referred or contains decisions on matters beyond the scope o f the agreement for arbitration: Provided that if the award does not deal with all the questions referred the court may, if it thinks fit, either postpone the enforcement of the award or order its enforcement subject to the giving of such security by the person seeking to enforce it as the court may think fit."(the emphasis is o f this Court). As I stated at the outset of this judgment the petitioner is resisting the enforcement of the foreign award basing on the grounds that the Memorandum of Understanding entered between parties to the award supersedes and extinguishes the rights and liabilities of the parties in the said award and that the arbitral award has

been adjusted in whole to the satisfaction of the Respondent by the compromise agreement subsequently entered into by the parties. It is on record that, prior to and subsequent to the issue of the arbitral award, parties to the submission have been negotiating trying to settle the dispute outside the arbitral tribunal. Parties had then reached an agreement which culminated into drafting of a Memorandum of Understanding, among the terms of which the Petitioner shall pay the Respondent the awarded sum within a period of three years commencing from 2011. That Memorandum of Understanding however, Page 28 of 32 was made subsequent to the arbitral award. This means that in any event, the Memorandum of Understanding could no longer affect or negate an arbitral award which had already being procured by an arbitrator as rightly submitted by M/s Chenge. In terms of paragraph 8 of the 1st Schedule to the Arbitration Act an award by an arbitrator or umpire shall be final and binding on the parties and the persons claiming under them respectively. The "rule o f finality"and "condusiveness"of arbitral proceedings make courts of law to be rather cautious when dealing with petitions seeking to resist enforcement of what otherwise the parties have agreed to by their own free will. Since it is the parties themselves who by mutual consent agreed to refer their commercial differences to

arbitration the decision of the Arbitrator is final and binding upon them unless they have agreed otherwise. There is no evidence in the present petition that the parties have agreed otherwise. I have had occasion to restate the legal position in Miscellaneous Civil cause N o .ll of 2010 between the HON. ATTORNEY GENERAL V, HERMANUS PHILIPPINUS STEYN (unreported), and in Miscellaneous Civil Cause No.4 of 2011 between SHELL TANZANIA LTD VERSUS SUPER STAR FORWARDERS COMPANY LTD (unreported). In one Indian case, MADANLAL V. HUKAMCHAND MILLS LTD (1967) 2 SCR 105; AIR 1967 SC 1030 the legal position as to finality and bindingness of an arbitral award was succinctly put thus: "Arbitrator's award on both facts and law is final and the Court cannot interfere in it unless there is apparent invalidity." Page 29 o f 32 Emanating from the above, it was not the intention of the law that courts of law should sit in review of an award and/or correct the adjudication of arbitrators unless the objection to the validity of the award is apparent on its face. The jurisdiction of this Court under section 15, 16 and 30 of the Arbitration Act, Cap.15 R.E. 2002 is very limited. The Court is only empowered to look on the face of the award, and not to go into the merits of the award itself and reach its own conclusion on the finding on the fact and law reached by the arbitrators. This legal position has

been restated in the case of UNION OF IN D IA V. BUNGO S T E EL FU RN ITU RE (P) LTD, a decision by Hon. Ramaswami J, quoting Hon. William, J in HO D G KIN SO N V, FERN IC and held that: "The Court has no jurisdiction to investigate into the merits o f the case and to examine the documentary and oral evidence for the purpose o f finding out whether or not the arbitrator has committed an error o f law. Subject to the remedies provide under the Act, the award cannot be set aside, amended, modified or affected in any way whatsoever." Here at home, Msumi J. as he then was had occasion to state in DB S H A PR IY A A N D CO LTD V. BISH IN T E R N A T IO N A L B V (2} (2003) E.A. 404 that: "Courts cannot interfere with findings o f fact b y an arbitrator. A mistake o f fact or law is not a ground for setting aside or remitting an award for further consideration on the grounds o f misconduct. The Court's intervention is limited to errors o f law which are apparent on the face o f the award." Page 30 of 32 In the event and for the foregoing reasons the Memorandum of Understanding has nothing to do with the Arbitral Award at this stage of recognition and enforcement. Accordingly the first ground that the Memorandum of Understanding entered into between parties to the award supersedes and extinguishes the rights and liabilities of the parties is without merits and it fails. As for the

comprise agreement made by the parties subsequent to the arbitral award, this Court has determined that it was already overtaken by event. As such an adjustment of the arbitral award could never be made unless the same had been filed in Court and registered as a decree of this Court. Accordingly the second ground is also without any merits and it must also fail. In the whole and for the foregoing reasons the Petition fails. It is hereby dismissed with costs. The Arbitral Award filed in this Court on the 23rd day of November, 2011 is hereby registered and shall be enforced as if it were a decree of this Court. It is accordingly ordered. 30/03/2012 Page 31 of 32 Judgment delivered in this 30th day of March, 2012 in the presence of M/s Linda Bosco for Mr. Matata, Advocate for the Petitioner and M/s Lind Bosco, Advocate for the Respondent.

JUDGE 30/03/2012 Words count: 8,459 Page 32 of 32