[2024] UGCommC 163

# 5 **THE REPUBLIC OF UGANDA IN THE HIGH COURT OF UGANDA AT KAMPALA [COMMERCIAL DIVISION] MISCELLANEOUS APPLICATION NO. 1860/2022 [ARISING FROM CIVIL SUIT NO. 983/2022]**

**ELECTRO-MAXX (U) LIMITED ] APPLICANT**

**VERSUS**

#### 15 **PRIME FUELS KENYA LIMITED ] RESPONDENT**

#### **Before: Hon. Justice Ocaya Thomas O. R**

#### **RULING**

#### 20

#### **Introduction**

This Application arises in respect of two suits, Civil Suit 983/2022 and Civil Suit 51/2022. The Applicant seeks the following reliefs:

(a) Civil Suit No. 983 of 2022 [hereinafter "the main suit"] be struck out for failure to

- 25 disclose a reasonable cause of action as against the Applicant. - (b) Civil Suit No. 983 of 2022 be dismissed with costs for being improperly and prematurely instituted before this Honourable Court, the dispute therein being an arbitrable dispute under a binding arbitration clause. - (c) Civil Suit No. 51 of 2022 is an abuse of process, is misconceived, frivolous and 30 vexatious. - (d) Costs of the application be provided for.

The Applicant contends that the Respondent commenced Civil Suit 983/2022 against it for the recovery of USD 86,685.60. The Applicant contends that the claim for the above 35 stated sum has no contractual basis, that this court has no jurisdiction to hear and determine the head suit as the same is regulated by an arbitration agreement and that the Respondent's suit is barred by law since the Respondent seeks to claim a sum of USD 86,685.60 allegedly under contract whereas there is no written agreement, in violation of Section 10(5) of the Contracts Act, 2010.

- 5 The Respondent for its part opposed this application. The Respondent contended that it is a mass transporter of petroleum products. On 20 February 2017, it entered a contract to transport the Applicant's petroleum products to Tororo District, where the Applicant was undertaking thermal electricity generation. The Applicant contends that the main suit aims to recover payments for services rendered and accepted after the expiration of - 10 the contract executed on 20 February 2017 and in respect of which the Applicant made several commitments and undertakings to pay prior to commencement of the suit which were reneged on.

The Respondent avers it attempted arbitration with the Applicant who declined to 15 participate in the arbitration proceedings alleging that the arbitration clause was no longer effective because the agreement had lapsed. It is also the Respondent's contention that the arbitration clause is defective because it provides that in the event of a dispute, the Chairman of Law Society of Kenya would appoint the arbitrator but no such office/position exists. It is further the Respondent's position that their claim does not

20 offend the law. The Respondent contends that it rendered transportation services to the Applicant, which services were accepted without complaint as is evidenced in the consignment notes, delivery notes and the invoices annexed to the Respondent's affidavit and that the Applicant made several promises to pay and did not deny receipt of the goods or make protestations akin to the ones in its application. It was the Respondent's 25 averment that this application was a ploy to frustrate recovery.

In Response, the Applicant alleged that the contention that an inquiry was conducted with the Law Society of Kenya was false, as there was no evidence on the same annexed to the Respondent's affidavit. The Applicant also contended that it never agreed to pay the 30 claimed amount and the Respondent's evidence to the contrary is a falsehood.

#### **Representation**

The Applicant was represented initially by M/s Muwema & Co. Advocates and later M/s Moogi Brian & Co. Advocates while the Respondent was represented by M/s BKA 35 Advocates.

#### **Evidence and Submissions**

The Applicant led evidence by way of an affidavit in support and an affidavit in rejoinder deponed by Charles Muhumuza, a director in the Applicant. The Respondent led evidence 5 by way of an affidavit in reply deponed by Julia Mwasingo, the Respondent's Finance Manager.

Both parties with leave of court made written submissions in support of their respective cases which I have read but I have not seen the need to reiterate the same below but will 10 refer to them where appropriate in the decision.

## **Decision**

## **PART ONE: DECISION ON PRELIMINARY POINTS OF LAW**

Counsel for the Respondent raised a number of preliminary points of law which I wish

- 15 to delve into before I proceed with determination of the merits of the Application. Counsel raised the following objections: - (a) The Application contradicts Order 6 Rule 28; - (b) The allegations that the suit doesn't disclose a cause of action or that it is frivolous and vexatious cannot be disposed off in the present application. - 20

## Procedural Non-Compliance

Counsel for the Respondent argued that under Order 6 Rule 28, preliminary points of law can only be raised in the pleadings except by consent of parties or with leave of court. This provision reads thus:

- 25 "Any party shall be entitled to raise by his or her pleading any point of law, and any point so raised shall be disposed of by the court at or after the hearing; except that by consent of the parties, or by order of the court on the application of either party, a point of law may be set down for hearing and disposed of at any time before the hearing." - 30 In my considered view, the submissions by the Respondent are premised on a fundamental misreading of the above rule. Order 6 Rule 28 merely offers a general direction on the handling of points of law.

Points of law fall into categories; they may be preliminary points of law and non-35 preliminary points of law. Preliminary points of law are those which are questions of pure law alone and do not require evidence to determine. A preliminary objection may be raised at any time before judgment. See **Mukisa Biscuit Manufacturing Co v West End**

## 5 **Distributors [1969] EA 696, N. A. S. Airport Services v Attorney General [1959] EA 53, Rev George Lubega & Anor v Luwero Town Council & Anor HCCS 193/2009.**

In determining preliminary points of law, the court must review the pleadings and assume them to be correct. It must then enter a decision flowing from the assumption 10 that the pleadings are correct. See **Wanumi Godfrey & Anor v Nzirejje Ronald Mutebi & Ors HCCS 574/2020.**

The non-preliminary points/questions of law require some adducing of evidence. These are typically, together with questions of fact and mixed fact and law, framed for 15 determination by a court which may either determine them after a hearing on all of them or split them and hear them in parts, especially where a hearing and determination of one part would determine the entire or a significant portion of the rest of the questions.

Any ordinary and plain reading of the law shows that a litigant may plead a point of law 20 and the court may, suo moto or on application, hear and determine the point of law before proceeding to the merits. Nothing in the rule says points of law cannot be brought by a separate application or even orally. In fact, a preliminary point of law may even be raised orally. See **Allan Makula v First Finance Bank Limited HCMA 957/2023**

25 Accordingly, for those reasons, I overrule the Respondent's objection. In any case, the Applicant's application is an omnibus application challenging both the competence of the suit Under **Order 7** and **Section 5** of the Arbitration and Conciliation Act ["ACA"]. The two heads of objection above are essentially of the same nature as they touch on the competence of the main suit before this court. It is trite law that an omnibus application 30 may be brought where applications are of the same nature, have the effect of mitigating a multiplicity of suits, one is a consequence of the other or where no injustice would be occasioned by handling both applications. See **Dr. Sheik Ahmed Kisuule vs Greenland Bank Ltd HC M. A No. 2 of 2012, Kapiri vs International Investments Ltd & 5 Ors HC M. A No. 160 of 2014 and ABSA Bank v Electromaxx (U) Ltd HCMA 21/176 of 2020,** 35 **Abdul Kawuki v Habib Lukwago HCMA 1146/2022.**

In my view, the objection regarding the alleged lack of a cause of action could be carried in the present application which also seeks to challenge the jurisdiction of the court and 5 therefore, such a procedural objection would not stand where an omnibus application has been utilized as seen from the authorities above.

In any case, proceeding by the wrong procedure is itself not fatal as long as jurisdiction exists and the method of procedure used is one that competently enable the disposal of

- 10 the cause. See **Article 126(2)(e), Gids Consults Limited & Anor v Naren Mehta HCMA 864/2022, Saggu v Roadmaster Cycles Ltd 2002 1 EA 258, Joselyne Kalembe v Buildnet Construction Materials and Hardware HCIP 7/2022, Attorney General v Wazuri Medicare Limited HCMA 283/2023.** - 15 In the event that an appellate court were to find that my findings above are wrong, I would take the view that this application is one in which, in any case leave under Order 6 Rule 28 ought to be given. The interests of justice require comprehensive and complete adjudication of all causes, which in my view involves applications of this nature, and leave under that rule would enable the resolution of the real matters raised in this action. See

## 20 **Uganda Debt Network v Edward Sekyewa HCMA 1017/2023**

In the alternative, and in the event that my findings above are overturned on appeal, I would give leave under to have the preliminary points raised by the Applicant heard and disposed off at this stage in accordance Order 6 Rule 28.

#### 25

## Objections Raise Questions of Evidence

As noted above, preliminary points of law can only be determined before trial if they do not raise questions of evidence. I take the view that the assessment of this head of objection should be done together with a resolution of the application of the merits, with 30 the detailed evaluation of the contentions of the Applicant, so that there is no repetition.

## **PART II: DECSION ON THE MERITS OF THE APPLICATION**

#### Misquotation in Pleadings

I must start by noting that whereas prayed for an order that HCCS 51/2022 abuse of 35 process, is misconceived, frivolous and vexatious. I note that the above stated suit was neither referred to elsewhere in the affidavits and submissions. I have also not been able to establish any nexus between the main suit and HCCS 51/2022. It appears that the reference to HCCS 51/2022 was more likely than not a misquotation of Civil Suit No. 983 5 of 2022. I will therefore determine the above stated prayer for the said order in respect of HCCS 983/2022 from which this application arises and not HCCS 51/2022.

### Cause of Action

**Order 7 Rule 1(e)** of the CPR provides:

10 "The plaint shall contain the following particulars—

(e) the facts constituting the cause of action and when it arose;"

## **Order 7 Rule 11(a)** provides

"The plaint shall be rejected in the following cases—

(a) where it does not disclose a cause of action;"

#### 15

A cause of action has been defined as every fact which is material to be proved to enable the plaintiff to succeed or every fact which, if denied, the plaintiff must prove in order to obtain judgment. See **Read v Brown 22 QBD 31, Tororo Cement Company Limited v Frokina International Limited SCCA 2/2001**

As a settled rule of law, a cause of action exists where the following ingredients are made out.

(a) the plaint must show that the plaintiff enjoyed a right;

(b)that right has been violated; and

25 (c) that the defendant is liable.

See **Tororo Cement Company Limited v Frokina International Limited (Supra), Jimmy Walakira v Ssengendo Lubwama Isaac & Ors HCCS 152/2018, Auto Garage vs- Motokov (No. 3) (1971) EA. 514, Nurdin Ali Devji and Others -vs- Meghi Co. and Others (1953) EACA. 132.**

What is necessary is not that the above elements are proved in the pleadings, but that the above elements are alleged. The fact that counter allegations are made in the defences does not per se impeach the averments of the plaint and render it liable for rejection. The requirement is for the plaintiff to make out clearly each of the above ingredients in its

35 pleadings. See See **Allan Makula v First Finance Bank Limited HCMA 957/2023**

#### 5 Existence of A Right

The Respondent alleges that it has a right of payment for services rendered to the Applicant. The Applicant alleges that there is no valid contract, and that accordingly, there is legal basis for the action. It must be remembered that, in determining a preliminary objection, the court must review the pleadings and assume them to correct. What is clear

- 10 is that the Respondent asserts that it provided an agreed service for which payment must be made. In these circumstances, the Respondent has demonstrated, prima facie, an allegation that it has a right to payment of the claimed amounts from the Applicant. The allegations on the expiry of the contract, whether it was renewed and whether indeed, the action is barred in law require evidence, and ought to be handled at trial. This is - 15 because it is important to establish whether the said contract was extended by the parties, or if there are estoppels mandating payment or other matters of law arising from evidence. I therefore take the view that this ingredient is made of.

#### That right has been violated

20 According to Black's Law Dictionary, 11th Edition, Page 232, a breach is defined as "A violation or infraction of a law, obligation or agreement." See **Allan Makula v First Finance Bank Limited HCMA 957/2023**

A review of the pleadings in the main suit show that the Respondent alleges that, in 25 breach of the parties' agreement, the Applicant failed and/or neglected to make payment for services enjoyed/consumed.

Accordingly, it follows that the Respondent has alleged a breach of a payment right which it asserts exists in law.

#### Defendant is Liable

The Respondent alleges that the sums claimed and sought to be recovered were payable by the Applicant, that it is liable for the payment of the said sums and that orders should be issued compelling him the make payment of the stated sums. In short, the Respondent,

35 in the main suit, alleges that the Defendant is liable to make payment for the sums sought and should be ordered to pay them.

5 In my view, the third element is also made out. It now remains for the Respondent, as the plaintiff in the main suit, to prove each of these allegations in order to have judgment rendered in their favour.

## Frivolous and Vexatious

10 The Applicant alleged that the Respondent's action was frivolous and vexatious. In **John Garuga Musinguzi & Anor v Dr. Chris Baryomunsi & Anor HCMC 817/2016**, court defined frivolous and vexatious claims thus:

"A frivolous claim or complaint is one that has no serious purpose or value. Often a "frivolous" claim is one about a matter so trivial or one so meritless on its face that

- 15 investigations would be disproportionate in terms of time and cost. The implication is that the claim has not been brought in good faith because it is obvious that it has no reasonable prospect of success and/or it is not a reasonable thing to spend time complaining about. A "vexatious" claim or complaint is one (or a series of many) that is specifically being pursued to simply harass, annoy or cause financial cost to their - 20 recipient."

The Applicant did not indicate how the Respondent's action is frivolous and vexatious. As was held in **Night Nagujja v Namuwonge Agnes & Ors HCMA 1878/2021**, it is not enough for a party to throw unsubstantiated allegations at the court, hoping that the court

- 25 will fill in the gaps, speculate or use its powers to separate the hay from the chaff. It is trite law that courts base their decisions on evidence and not assumptions, abstractions or innuendos. See also **Oscar Ssemawere v African Express Airways HCMA 259/2023, Byaruhanga Mahmood v Top Finance Bank HCMA 250/2023** - 30 I have reviewed the plaint and failed to find evidence that it is frivolous and vexatious. Accordingly, I would overrule this objection.

#### Arbitration

Jurisdiction means and includes any authority conferred by the law upon the court to 35 decide or adjudicate any dispute between the parties or pass judgment or order. A court cannot entertain a cause which it has no jurisdiction to adjudicate upon. See **Koboko Local Government v Okujjo Swali HCMA 1/2016, Owners of Motor Vessel Lillian "s"**

## 5 **v Caltex Oil Kenya Limited [1989] KLR 1, NBL v Lugogo Events and Entertainment Limited HCMA 1497/2022.**

A Court's jurisdiction flows from Law. Thus, a Court of law can only exercise jurisdiction as conferred by the constitution or other written law. It cannot arrogate to itself 10 jurisdiction exceeding that which is conferred upon it by law. A court ought to exercise its powers strictly within the jurisdictional limits prescribed by the law. See **Pastoli v Kabale District Local Government Council and others [2008] 2 E. A 300, Kasibante Moses v. Katongole Singh Marwaha and another, HCEP. 23/2011, Kawaga Lawrence & 2 Ors v Zziwa & Sons Property Consultants HCCR 4/2018.**

The Applicant's application was premised on **Section 5** of the Arbitration and Conciliation Act. **Section 5(1)** reads thus:

"A judge or magistrate before whom proceedings are being brought in a matter which is the subject of an arbitration agreement shall, if a party so applies after the filing of a

20 statement of defence and both parties having been given a hearing, refer the matter back to the arbitration unless he or she finds—

(a) that the arbitration agreement is null and void, inoperative or incapable of being performed; or

(b) that there is not in fact any dispute between the parties with regard to the matters 25 agreed to be referred to arbitration."

Essentially, for the powers of court under Section 5(1) to be invoked, it must be demonstrated that;

- a. There is a dispute - 30 b. The dispute is arbitrable - c. The dispute is governed by a valid and enforceable arbitral agreement. - d. The dispute is within the scope of the arbitration agreement.

## See **ATC Uganda Limited v Smile Communications Uganda Limited HCMA 621/2023**

35 In **British American Tobacco v Lira Tobacco Stores HCMA 924/2013**, this honourable court held thus:

*"Section 5 (1) of the Arbitration and Conciliation Act clearly provides that a judge or magistrate before whom proceedings are brought in a matter which is the subject of an* - 5 *arbitration agreement shall, if a party so applies after the filing of a written statement of defence and both parties have had been given a hearing, refer the matter back to the arbitration. In other words, a party may apply for reference to arbitration after filing a written statement of defence. The filing of a written statement of defence does not operate as a waiver of the right to apply for reference of the matter to arbitration*. Consequently, - 10 *the submission of the Respondents Counsel that both the Respondent and the Applicant waived the right to apply for reference of the dispute to arbitration has no merit.*

*Concerning submissions on the exercise of the court's discretion (if any) so as to enable the Respondent adduce evidence of any custom or usage in the circumstances of the case, the* 15 *issue is whether the court has discretion in the matter. The wording of section 5 of the Arbitration and Conciliation Act is that a judge or magistrate before whom proceedings are brought in a matter which is the subject of an arbitration agreement shall, if the party applies after the filing of a defence and having given both parties a hearing, refer the matter back to arbitration. In other words, the court has no discretionary powers under section 5*

- 20 *(1) of the Arbitration and Conciliation Act, not to refer the dispute for arbitration. The powers of the court are only to determine whether the arbitration agreement is null and void, inoperative or incapable of being performed or whether there is not in fact any dispute between the parties with regard to matters agreed to be referred to arbitration. In other words, the powers of the court are confined to establishing whether the agreement is null* - 25 *and void, inoperative or incapable of being performed on whether there is no dispute as contemplated by the parties in the arbitration clause. The power whether to refer the dispute for arbitration or not under section 5 (1) of the Arbitration and Conciliation Act is not a discretionary power. It is simply a power to determine whether the conditions or grounds upon which the dispute may not be referred exist. The grounds for not referring the* - 30 *dispute for arbitration are statutory. The powers of the court are confined to establishing the statutory grounds for refusal of an application by any of the parties to an arbitration agreement to refer the dispute for arbitration. In the premises, the arguments of the Respondents Counsel so as to move the court to permit the adducing of evidence about any customs or usages cannot be sustained. The only basis for refusal of any reference has to fall* - 35 *within the grounds set out under section 5 (1) of the Arbitration and Conciliation Act. The question of adducing evidence of any "customs or usages" does not fall within the statutory grounds for refusal of the reference."*

#### 5 Is there a dispute?

A reference of a matter to arbitration requires a dispute to exist between the parties. See **Section 5(1) of the Arbitration Act, Redfern and Hunter On International Arbitration, 6th Ed, Para 1.60-1.65.**

Black's Law Dictionary, 11th Edition, P 593 defines the word "dispute" thus

- 10 "A conflict or controversy, esp. one that has given rise to a particular lawsuit." It is common ground that the Respondent filed the main suit against the Applicant seeking various remedies. This claim is opposed by the Applicant on the basis of the grounds set forth in its Written Statement of Defence. - 15 The filing of the civil suit is in itself evidence of the existence of a dispute. Further, as seen in the pleadings in the main suit, there are contentions advanced by one party and disputed by another, and it follows that a dispute exists as to those matters. See **NBL v Lugogo Events and Entertainment Limited HCMA 1497/2022, Newplan Limited v Mercentile Properties Limited HCMA 234/2022, ATC Uganda Limited v Smile** 20 **Communications Uganda Limited HCMA 621/2023**

#### Is the dispute arbitrable?

It must be noted that not all disputes are capable of being disposed of by arbitration. Specific provisions of law may require that certain disputes are resolved either by 25 conventional courts of law, or by other modes of adjudication, such as expert determinations or specialist tribunals. See **Arbitration and Contract Law. Common Law Perspectives by Neil Andrews, Pp 63-65, John Billiet, et al., International Investment Arbitration, A Practical Handbook, Maklu Publishers, 2016, p. 196.**

- 30 Arbitrability can be broken down into objective and subjective arbitrability. Subjective arbitrability (or "arbitrability ratione personae") concerns certain individuals or entities that are considered to be unable to submit their disputes to arbitration due to their status or function, such as states or local authorities,4 (see also Jurisdiction ratione personae). The objective arbitrability (or "arbitrability ratione materiae") focuses on whether a - 35 certain subject-matter can be settled through arbitration (see also Jurisdiction ratione materiae). In determining whether a matter is arbitrable one should consider that both criteria – i.e. subjective and objective arbitrability – supplement each other. See **Lew, J.,**

- 5 **Mistelis, L. and Kröll, S., Comparative International Commercial Arbitration, Kluwer, 2003, pp. 100, 130, 189, 193, Mistelis, L. and Brekoulakis, S. (eds.), Arbitrability: International & Comparative Perspectives, Kluwer Law International, 2009, p. 10.** - 10 In determining whether a dispute is "arbitrable", a practitioner should look to relevant law, depending upon where and at what stage of the proceedings the question arises. Arbitrability is governed by the law of the arbitration agreement and the law of the seat. See **Anupam Mittal v Westbridge Ventures II Investment Holdings [2023] SGCA 1, M/S Dozco India P. Ltd vs M/S Doosan Infracore Co. Ltd SCAP 5/2008** - 15

# **In Nedmar Technology BV Ltd v The Kenyan Anti-Corruption Commission & Anor HCP 360/2006**, the court held thus

"It is the national laws which establish the domain of arbitration as opposed to that of the courts. It is the prerogative of each state to decide which matters may or may not be 20 resolved by arbitration in accordance with its own political, social and economic policy. It is for the Legislature and the courts in each country to balance the domestic need of reserving matters of public interest to the courts against the more general public interest in promoting trade and commerce and also the settlement of disputes. Regard must be had to the issue of arbitrability, to the local law of Kenya (and the effect of the specific 25 exclusion of public law ..), to the law governing the arbitration agreement (ie the United Kingdom law), the law of the seat of arbitration (the Netherlands) and the law of the place of enforcement of the award (this could be Netherlands or Kenya or whenever the assets of Kenya are (the Agreement having waived the immunity of the Kenya assets! – it could

Accordingly, the determination of the arbitrability of a dispute is a function of the applicable law and public policy. See **Midland Finance & Securities Globetel Inc v Attorney General & another [2008] eKLR, Kenya Ports Authority v Base Titanium Limited (Miscellaneous Application 456 of 2019) [2022] KEHC 265 (KLR)**

be anywhere the assets are at the moment and therefore the position is fluid."

In determining whether a dispute is arbitrable, there is a general presumption in favour of arbitrability. Unless there is a clear bar against a dispute being amenable to arbitration, arbitration should be enforced, including where it is not clear whether the dispute is 5 arbitrable or not. See **United Steel Workers of America v Warrior & Gulf Navigation Company 363 US 574 (1960), Moses H. Cone Memorial Hospital v Mercury Construction Corporation 460 US 1 (1983)**.

Generally, all disputes capable of settlement by ordinary court proceedings are 10 arbitrable. See **Acord Acvedo v PPG Industries Inc. 514 F.2d 614 (1st Circuit, 1975), Griffin v Semperit of America 414 F. Supp. 1384. (S. D Tex. 1976) Modern Juniors Inc v Spinnerin Yarn Co. 29 NY 2d 946**

Disputes arising out of, or regulated by legislation intended to protect the public from 15 harm such as antitrust laws, criminal laws, laws dealing with the welfare or guardianship of children, employment laws among others are generally not arbitrable. See **Hoellering, Michael F. "Arbitrability of Disputes." The Business Lawyer 41, No. 1 (1985): 125– 44.<http://www.jstor.org/stable/40686674>**

- 20 As a general rule, save for matters for which public policy does not allow to be subject to arbitration, all matters that can be handled by a court can be handled by arbitration. The existence of a statute conferring jurisdiction to a court is not by itself evidence that such a dispute is not arbitrable. - 25 The present dispute between the parties is contractual, and involves private rights (or claims thereto) by a party or parties to the dispute. There is no law or public policy barring the reference of the current dispute between the parties to arbitration. Accordingly, this court returns the finding that this dispute is arbitrable. See **NBL v Lugogo Events and Entertainment Limited HCMA 1497/2022, Newplan Limited v** 30 **Mercentile Properties Limited HCMA 234/2022 (unreported), ATC Uganda Limited v Smile Communications Uganda Limited HCMA 621/2023**

#### Is there a valid and enforceable arbitration agreement?

I have read Clause 39 of the agreement between the parties executed in 2017. The Clause 35 reads thus

"All disputes, difference, disagreements and questions which may at any time arise between the parties hereto touching or arising out of or in respect of this agreement or the subject matter thereof which cannot be settled by negotiation shall be referred for 5 determination to and shall be determined by a highly reputable sole arbitrator licensed in either Kenya or Uganda to be agreed upon by the parties within thirty (30) days seeking the determination of the matter in dispute. In default of agreement by the parties, the Chairman of the Kenyan Law Society shall nominate such arbitrator."

## 10 **Section 16(1)** of the Arbitration and Conciliation Act provides thus

"The arbitral tribunal may rule on its own jurisdiction, including ruling on any objections with respect to the existence or validity of the arbitration agreement, and for that purpose—

(a)an arbitration clause which forms part of a contract shall be treated as an agreement 15 independent of the other terms of the contract; and

(b)a decision by the arbitral tribunal that the contract is null and void shall not itself invalidate the arbitration clause."

Arbitration clauses constitute a separate and distinct contract from the underlying 20 contract to which it relates. This is what is called the principle of separability. See **Harbour Assurance Co. Ltd. V. Kansa General International Insurance Co. Ltd., [1992] 1 Lloyd's L. Rep. 81, Nigel Blackbay and Constatine Paratasides, QC, Redfern and Hunter On International Arbitration. 6th Edition. Para 10.42., Republic of Serbia v. Imagesat International NV [2009] EWHC 2853 (Comm).,**

Without this principle, arbitration would be heavily compromised as a termination or repudiation or other invalidity in respect of the main contract would also serve to invalidate the parties' agreement to arbitrate. This enables the arbitration clause to be effected even if the underlying contract is void or voidable, subject to applicable 30 limitations. See **DHL Project v Gemini Ocean Shipping (The Newcastle Express)**

**[2022] EWCA Civ 1555, Enka Insaat Ve Sanayi AS v OOO Insurance Company Chubb [2020] UKSC 38, Harbour Assurance Co. Ltd. V. Kansa General International Insurance Co. Ltd., [1992] 1 Lloyd's L. Rep. 81, Heyman v. Darwins, Ltd [1942] App. Cas. 356 (HL).**

According to **Black's Law Dictionary (supra pg 944)**, inoperative means having no force or effect. According to distinguished authors (**Andrew Tweeddale et al at page 114**), inoperability applies where the arbitration agreement has ceased to have effect. In my

- 5 view, an arbitration agreement is inoperable if is no longer legally valid. I have already found above that there are no circumstances impeaching the validity of the agreement executed by the parties. - It was contended by the Respondent that the Applicant asserted previously that the 10 arbitral clause is inapplicable or inoperative, the same having previously expired. In my humble view, the application of an arbitration clause is not the question of the unilateral opinion of one party, such as that which has been alleged by the Respondent. If a party challenges the application of the clause, they ought to raise it either at this stage or before the arbitrator who will determine the same under the principle of competence - 15 competence. Further, in my view, were the Applicant to allege that these previous comments amounted into an estoppel or a rescission of the arbitration clause, the same would need evidence which is best left in the purview of the arbitral tribunal that would investigate this and provide a decision on whether these averments had an impact on the applicability of the clause. I recognize that an arbitral agreement may be rendered 20 unenforceable by rescission. See **Francis Byaruhanga v Sari Consulting Limited HCMA 740/2023**

I however note that the determination of the impact of these consequent statements (alluded in paragraph 9 of the affidavit in reply) is one that requires adducing evidence, 25 something that is best left to the arbitral panel.

Under the ACA, the court's role is to facilitate arbitration. This means the court ought to take all measures, subject to law, to facilitate and enable arbitration. Accordingly, where there is a clear intent to arbitrate, the same should be facilitated in order for arbitration

- 30 to take place. This, in my view, also includes allowing for the appointed mode of dispute resolution, namely arbitration, to handle all questions that it is lawfully and/or contractually empowered to handle. See **Attorney General v Networth Consults Limited HCMA 1830/2022, NBL v Lugogo Events and Entertainment Limited HCMA 1497/2022** - 35

Accordingly, whereas I noted this contention by the Respondent, the same would best be resolved by the arbitrator, rather than by this court.

5 The Respondent contended that the arbitration clause is unenforceable as since the appointing officer/entity does not exist. It is not disputed that the parties have failed to appoint an arbitrator.

It is submitted for the Respondents that the arbitration clause in the deed is inoperative.

10 According to **Black's Law Dictionary (supra)**, inoperative means having no force or effect. According to distinguished authors (**Andrew Tweeddale et al at page 114**), inoperability applies where the arbitration agreement has ceased to have effect. In my view, an arbitration agreement is inoperable if is no longer legally valid. I have already found above that there are no circumstances impeaching the validity of the agreement 15 executed by the parties.

The Respondent contended that it attempted to have Law Society Kenya handle the arbitrator's appointment but was advised that the office of the "Chairman" does not exist. The Respondent did not provide any documentation and or correspondence of this and 20 only sought to rely on bare averments of its witness. Without a record of correspondence, I am uninclined to believe the contentions of the Respondent as there isn't a formal record indicating that this feedback was obtained from the above stated institution. I therefore find no basis to hold that the agreement is incapable of being performed. In any case, where this is later considered to be so, the court may exercise its powers and give 25 directions on the same. See **ATC Uganda Limited v Smile Communications Limited HCMA 621/2023**

The above is extremely important in the present circumstances since, a stay of proceedings by this court terminates the action itself, and consequent proceedings under 30 this cause may be difficult if not impossible.

I notice that the agreement was contained in an agreement that expired and the present dispute relates to transactions after the expiry of that contract. The question that arises is whether the present dispute is within the scope of the arbitration agreement. What is 35 clear is that the Applicant alleges that, inspite the absence of a written extension, the same

relationship was continued until the period of the impugned transactions. In my humble view, there would need for evidence to determine whether there was such an extension and whether it in anyway affected the scope of the arbitral agreement.

- 5 'Competence-Competence' is a principle of arbitration that holds that an arbitral tribunal is empowered to decide for itself whether or not it has jurisdiction over a particular dispute. This means that, on top of the substantive jurisdiction to determine the dispute between the parties, an arbitral tribunal can also entertain and determine questions regarding its own jurisdiction to hear and determine a question. See **Republic of Serbia** - 10 **v. Imagesat International NV [2009] EWHC 2853 (Comm), Nigel Blackbay and Constantine Paratasides, QC, Redfern and Hunter On International Arbitration. 6th Edition. Para 10.42.**

In my view, the above should be resolved by the arbitral institution which is empowered 15 to deal with all questions relating to the arbitration, and not only the merits.

### **Conclusion**:

In Conclusion, the Applicant's application succeeds partly and I make the following orders:

20 (a) Civil Suit No. 983 of 2022 is hereby stayed and referred to arbitration. Accordingly, the same action determines.

- (b)In the event that the parties fail to appoint an arbitrator, and the designated person/institution empowered under the agreement, being the Chairman Law Society of Kenya is found to be inoperative or nonexistent in a manner confirmed - 25 by correspondence, the Registrar of this court shall appoint an arbitrator within thirty (30) days of the request for the same. - (c) Costs of this application and the main suit shall abide the outcome of the arbitration. - 30 I so order.

| 4th | April | Dated this____________________________day of________________________2024 and uploaded on | |------------------|-------|------------------------------------------------------------------------------------------| | ECCMIS. | | | | Ocaya Thomas O. R | | | | Judge | | | | 4th April 2024. | | |