COMPUTER CENTRE

IN THE HIGH COURT OF THE UNITED REPUBLIC OF TANZANIA (COMMERCIAL DIVISION)

AT DAR ES SALAAM COMMERCIAL CASE NO. 18931 OF 2024 COMPUTER CENTRE TANZANIA LIMITED…...................................PLAINTIFF

VERSUS THE PERMANENT SECRETARY, PRESIDENT'S OFFICE , REGIONAL ADMINISTRATION AND LOCAL GOVERNMMENT (PO-RALG) ……………….………………………………………….…...1ST DEFENDANT THE HON.ATTORNEY GENERAL……………………………………….2ND DEFENDANT

RULING Date of last order: 11/02/2025 Date of Ruling: 21/03/2025 GONZI, J. The Plaintiff filed the present suit against the Defendants praying for Judgment and Decree against the 1st Defendant for the outstanding contractual amount for the supply and Installation of GIS Equipment for GIS Centre Office, Computer Laboratory in PO-RALG and Participating LGAs under TSCP AF2-Lot 1. 1|Page On 9th September 2024, the Defendants filed their Written Statement of Defence (the WSD) in the suit which included in it a notice of preliminary objection. The objection was to the effect that: i. The suit has been filed prematurely in contravention of Clause No. 10 of the General Conditions of Contract (GCC) which make it mandatory for any dispute between parties to first be settled amicably, if unsolved the dispute has to be referred to adjudication or arbitration in accordance with the laws of the purchaser’s country. On 16th October 2024, the matter was ordered to be disposed by way of written submissions. The Plaintiff enjoyed the service of Mr. Ferdinand Thomas Kiecha, Learned Advocate, and the Defendants enjoyed the services of Ms. Kause K. Izina, Learned State Attorney. In the submissions in chief of the defendants, Ms. Izina submitted that the contract between the parties had an agreement to exhaust adjudication remedies as the same had an arbitration Clause under clause 10 of the of the

General Conditions of Contract (GCC) which stipulates that when a dispute arises between the two in regard to any matters arising out of or in connection with the agreement, the same shall be submitted to and decided 2|Page by arbitration according to the laws of the purchaser’s country. Submitting further, she argued that an arbitration agreement does not oust the jurisdiction of the court, however, the role of the Court is to uphold the parties' agreement by keeping parties to their bargain in relation to the principle of Parties autonomy. She referred the court to the case of Azania Bank and Another vs. Grill House Limited and 4 others (Commercial Case No. 103 of 2023), [2024] TZHCCom D212 (12 July, 2024) at page 19- 20. Ms. Izina referred the court to paragraphs 19, 20 and 21 of the Plaint and paragraph 9 of the Defendants’ Written Statement of Defence to portray that indeed parties had an arbitration agreement. She submitted further that the Plaintiff’s connotation that the Defendant, by conduct, had refused to proceed with arbitration and therefore the Defendants had no other option but to file the suit, is untenable. She submitted that if the Defendants were reluctant to honour the arbitration agreement, the Plaintiff could invoke the Court’s supervisory powers rather than filing a suit in court in violation of the arbitration agreement. She concluded by praying for the

preliminary objection be upheld with costs. 3|Page In reply, Mr. Ferdinand Kiecha, Learned Advocate, submitted that the Plaintiff has an agreement with first Defendant to supply and Install GIS Equipment for GIS Centre Office, Computer Laboratory in President‘s Office Regional Administration and Local Government and Practicing LGAs under TSCP AF2-Lot 1. He admitted that the parties have an arbitration agreement under clause 10.2 of the General Conditions of Contract. However, he argued, the Defendants made it impracticable for the Plaintiff to proceed with arbitration as the Plaintiff had proposed three arbitrators for the Defendants to select but that the defendants had refuted all the three proposed appointments of Arbitrators by the Plaintiff. Mr. Kiecha, Learned Advocate, submitted that after various communications and follow ups, the efforts by the Plaintiff were all rendered futile as the defendants frustrated the arbitration process. Mr. Kiecha admitted that the arbitration clause in this case is valid and the Plaintiff has always been desirous of complying with the same except that the Defendant has been frustrating the process. He prayed that if the court is mindful of referring the parties herein to arbitration, the court should set strict conditions for the Defendants to adhere to so that the Defendants do not abandon the arbitration process as it was done

previously. For this 4|Page argument, he referred the court to the case decided by the Court of Appeal of Singapore in BATAVIA EXIMP & CONTRACTING (S) PTE LTD vs. OWNER OF THE VESSELS NEW BREEZE & 9 OTHERS (Civil Appeal No 19 of 2021 [2021] SGCA 99 . He concluded by praying for an order for costs to be waived for effective arbitration, as the Plaintiff is willing and ready to restart the arbitral proceedings under the new conditions as shall be imposed and directed by the court. That marked the end of submissions by the Learned Counsel. I thank them both. I have considered the submissions from both sides. The only issue for determination in this matter is the effect of Clause Number 10 of the Supply Contract entered into by the parties herein. The Purchase Contract dated 21st September 2020 between the Plaintiff and the 1st Defendant contains a "Settlement of disputes" Clause which provides that: “10.1 The Purchaser and the supplier shall make every effort to resolve amicably by direct informal negotiation any disagreement or dispute arising between them under or in connection with the contract. 10.2 If, after twenty-eight (28) days, the parties have failed to resolve their dispute or difference by such mutual consultation, then either the Purchaser 5|Page or the Supplier may give notice to the other party of its intention to commence arbitration, as hereinafter provided, as to

the matter in dispute, and no arbitration in respect of this matter may be commences unless such notice is given. Any dispute or difference in respect of which a notice of intention to commence arbitration has been given in accordance with this clause shall be finally settled by arbitration. Arbitration may be commenced prior to or after delivery of the goods under the contract. Arbitration Proceedings shall be conducted in accordance with the rules of procedure specified in the SCC. 10.3 Notwithstanding any reference to arbitration herein, (a) the parties shall continue to perform their respective obligations under the Contract unless they otherwise agree: and (b) the Purchaser shall pay the Supplier any monies due the supplier .“ The above provision entrenches the parties’ own chosen mode of dispute resolution. The chosen methods of dispute resolution are tiered and include an arbitration. The clause provides that disputes shall be resolved by 6|Page way of arbitration after failure of an amicable settlement. As to the procedure of Adjudication and Arbitration, the Special Conditions of Contract which amplify GCC 10.2 provide that: “In the case of a dispute between the purchaser and a supplier who is a national of the purchaser’s country, the dispute shall be referred to adjudication or arbitration in accordance with the laws of the Purchaser’s country.” Enforcement of an

arbitration agreement can be done in several and different ways. One way is by the Defendant raising a preliminary objection challenging competence of the suit filed in court in violation of the arbitration agreement between the parties. This is the import of the rule in the judicial pronouncement in of MUKISA BISCUIT MANUFACTURING CO. LTD VS. 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 clear 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 7|Page limitation, or a submission that the parties are bound by the contract giving rise to the suit to refer the dispute to arbitration.” In the present case, the Defendants have raised a preliminary objection that the parties are bound by the contract giving rise to the suit to refer the dispute to arbitration. It is therefore a Preliminary Objection which seeks to enforce the arbitration agreement between the parties to the suit at hand. There is no dispute between the parties that indeed there is a valid arbitration agreement in respect of the matters falling into the present suit. However, Mr. Kiecha, Learned Counsel, submitted that the defendants,

by conduct, delayed or frustrated the arbitration process initiated by the Plaintiff hence justifying the Plaintiff to ignore the process and takin the dispute to court straight away. I agree to what was argued by Ms. Kause Izina, Learned Counsel that the Plaintiff as a party to the arbitration agreement which was not being honourered by the other party, could resort to the supervisory powers of the court to facilitate the conduct of arbitration between them rather than filing a suit in contravention of the Arbitration Agreement. The Court has such powers under section 22 of the Arbitration Act. It provides: 8|Page 22.-(1) Where an arbitration agreement does not provide for the appointment of arbitrator, parties may agree on the modality of appointment of arbitrator. (2) Where no agreement has been made under subsection (1), a party to the arbitration agreement may, upon notice to the other party, apply to the Centre which may- (a) give directions as to the making of any necessary appointment; (b) direct that the arbitral tribunal shall be constituted by such appointment, or any one or more of them, as has been agreed; or (c) make any necessary appointment. (3) An appointment made by the Centre under this section shall have effect as if it was made by the agreement of the parties. As stated herein, the Special Conditions of Contract which amplify GCC 10.2 provide that: “In the

case of a dispute between the purchaser and a supplier who is a national of the purchaser’s country, the dispute shall be referred to adjudication 9|Page or arbitration in accordance with the laws of the Purchaser’s country.” The provision does not designate any particular Arbitration Center or institution in Tanzania, which is the purchaser’s country as being exclusively mandated to conduct the arbitration agreed by the parties. The Contract does not even require a mandatory institutional arbitration. This leaves it open for the parties to agree as to who should be the arbitrator (s) over their dispute. In case the parties do not agree, the Court has inherent and supervisory jurisdiction to help the arbitration take place. The powers given to the Arbitration Center under section 22 of the arbitration Act are equally enjoyed by the Court in the event of an arbitration which is not institutionalized like the one envisaged under the arbitration agreement in respect of the present dispute. The supervisory powers of the national Courts to facilitate the arbitration process including the appointment and removal of arbitrators are inherent. In Civil Application No. 103 of 2003, In the Matter of an Intended Appeal between Blueline Enterprises Limited Applicant and East African Development Bank, the applicant had petitioned the High Court for the appointment of a sole arbitrator from a

list submitted by the petitioner to the respondent. The High Court appointed the 10 | P a g e sole arbitrator with like powers to act in the reference and to make an award, as if he had been appointed by consent of the parties. In the case of Azania Bank and Another vs. Grill House Limited and 4 others (Commercial Case No. 103 of 2023), [2024] TZHCCom D212 (12 July, 2024) at page 43-44, this court stated thus: “If parties fail to attend the arbitration as ordered or fail to appoint the arbitrator or that arbitral proceedings cannot, for some reasons, take place after the referral order is issued, the solution is not thereby to automatically reactivate in Court the matter that has already been transferred from the cognizance of the Court. The solution is for the parties or the arbitrator to invoke the provisions of the Arbitration Act and resort to the facilitative supervisory powers of the Court, from time to time, to ensure that the arbitration process takes place and continues to its finality. “ In the matter at hand I am taking the same stance that the available remedy against a party whose conduct frustrates the arbitration process being initiated is for the affected party to resort to the supervisory powers of the court so as to ensure that arbitration is commenced and smoothly conducted as agreed by the parties in their arbitration agreement. The 11 | P a g e Plaintiff in

this suit opted to file a suit against the Defendants upon finding that the Defendants were not voluntarily heeding to the Plaintiff’s initiatives to have their arbitration agreement honoured and complied with. That was wrong. The preliminary objection raised, therefore, has merit. I uphold the preliminary objection and refer the parties to arbitration as they agreed in Clause 10.2 of the General Conditions of Contract. What is the effect of my order of referral of the dispute and parties to arbitration to the present proceedings? According to the UNCITRAL 2012 Digest of Case Law on the Model Law on International Commercial Arbitration "The referral of an action to arbitration entails that it cannot be further continued before domestic Courts". In a persuasive case of 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 12 | P a g e 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 consequences procedurally and substantively...." I am of the fortified view that an order for referral to arbitration disposes of the matter before the court in the same 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 eventually 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. In a similar vein, upon the transfer of 13 | P a g e the present matter to arbitration, there is no room for the same dispute to be tried in this court after the arbitration

proceedings are concluded and an award is issued. Either the Award winner or Award Debtor may resort to court only for challenging or enforcing the Award but not for resuming the court proceedings for litigation. Therefore, there is no practical utility in staying the present suit in court after having transferred the same dispute to be determined by way of arbitration. In the same way that a transfer order marks the 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, marks the total and permanent exodus of the case from the Court to the Arbitrator. In the end, I uphold the preliminary objection raised by the defendants. I do hereby refer the parties to the present dispute to arbitration pursuant to the Arbitration Agreement between the Plaintiff and the 1st defendant. I direct further that the arbitration process should commence within 30 days from the date of this Ruling. In the spirit of amicable 14 | P a g e settlement, I order each party to bear its own cost in this Ruling. It is so ordered. A. H. GONZI

JUDGE 21st March 2025 Ruling is delivered in Court this 21st March 2025, in the presence of Mr. Ferdinand Kiecha, Advocate for the Plaintiff and Ms. Tausi Kilonzo, State Attorney, for the Defendants. A. H. GONZI

JUDGE 21st March 2025 15 | P a g e