[2024] UGCommC 263

## 5 **THE REPUBLIC OF UGANDA**

## **IN THE HIGH COURT OF UGANDA AT KAMPALA**

# **(COMMERCIAL DIVISION)**

# **MISCELLANEOUS CAUSE NO. 0053 OF 2024**

**PLINTH CONSULTANCY SERVICES LTD ::::::::::::::::::::::::::::::::::::::: APPLICANT**

10 **VERSUS**

**1. INYATSI CONSTRUCTION LTD**

**2. INYATSI GROUP HOLDINGS (PTY) LTD**

**3. ABSA BANK (U) LTD :::::::::::::::::::::::::::: RESPONDENTS**

#### **Before: Hon. Lady Justice Harriet Grace Magala**

## 15 **JUDGMENT**

#### **Background**

The 1st Respondent was contracted by the Government of Uganda through the Ministry of Water and Environment for the construction works of Kabuyanda Earth Dam in Isingiro District (herein 'The Project'). Subsequently, the Applicant

20 executed a Subcontract Agreement with a company, Inyatsi Construction (U) Ltd, which the Applicant asserts to be an agent of the 1st Respondent, for the execution of the Project. Disagreements arose between the parties relating to the execution of the project and the 1st Respondent terminated the Subcontract Agreement on the basis that it had failed to get approval and

5 consent from the Ministry of Water and Environment on subcontracting the Applicant.

The dispute escalated and now the matter is before the International Chamber of Commerce for arbitration (ICC). The Applicant now seeks interim measures from this Court pending the hearing and final determination of the dispute at 10 the International Chamber of Commerce.

#### **The Application**

This Application is brought under **Article 28(2)** of the **Rules of the International Chamber of Commerce, Section 6(1)** of the **Arbitration and Conciliation Act, Rules 13 of the Arbitration Rules** and **Section 98 of the Civil Procedure Act**.

- 15 The Applicant seeks to invoke the Court's powers and orders that: - a) A lien be issued over the bank guarantee by and between the 1st, 2nd and 3 rd Respondent in respect of the Construction works for the Kabuyanda Earth Dam in Isingiro District and an order be granted to the Applicant restraining the Respondents from discharging the said guarantee 20 pending the determination of the Arbitration claim before the International Court of Arbitration of the International Chamber of Commerce. - b) In the alternative, an order be issued compelling the 1st and 2nd Respondents to provide security for the award and costs pending the 25 determination of the Arbitration claim. - c) Alternatively, an order be issued to attach a lien and/or freeze the outstanding contractual sum owing to the 1st Respondent from Ministry of Water and Environment in respect of the Construction works for the

- 5 Kabuyanda Earth Dam in Isingiro District pending determination of the Arbitration claim. - d) A lien be issued over the accounts and/or money belonging to the 1st Respondent held in the 3rd Respondent bank as security for the award and costs pending the determination of the Arbitration claim. - 10 e) Costs of this Application be provided for.

#### **Representation and Hearing**

The Applicant was, at the hearing of this Application represented jointly by M/s Nexus Solicitors and Advocates, M/s Meritas Advocates and M/s Kasiko Advocates while the 1st and 2nd Respondents were represented by M/s K & K Advocates. The 3rd 15 Respondent was not represented.

Both parties filed their written submissions which this Court has considered in arriving at its decision.

# **Preliminary point**

On the Electronic Court Case Management Information System (ECCMIS), there is a letter from the Applicant's advocates dated 23rd 20 July 2024 addressed to the Deputy Registrar of this Honorable Court requesting to file a Supplementary Affidavit in Rejoinder to the Application. The Applicant's advocates proceeded to upload the Supplementary Affidavit in Rejoinder on the 24th July 2024 without leave of court. This Letter was also uploaded on the 24th July 2024.

The 1st and 2nd 25 Respondents' advocates objected to the request of filing of this 'Supplementary Affidavit in Rejoinder' in their letter dated 25th July 2024.

The Applicant's counsel asserts that whereas this Court issued directives for filing pleadings and submissions to both parties, the Applicant in paragraph 17

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- 5 of the Affidavit in Support of the Application had made mention of a Multi-Option Facility Commercial Terms Agreement between the 2nd Respondent and the 3rd Respondent but could not attach it because it was not in its reach and could not be easily obtained due to the strict laws regulating bank-customer relationship. However, that the Applicant's Director travelled to Eswatini and - 10 retrieved the Multi-Option Facility Commercial Terms Agreement and seeks to admit the same through the Supplementary Affidavit in Rejoinder.

Counsel for the 1st and 2nd Respondents objected and submitted that when the matter came up for hearing, the Applicant opposed the Respondents filing of Supplementary Affidavit in Reply and pleadings were closed and parties given

- 15 directions on filing their submissions. Counsel submitted that the Applicant had already filed its written submissions in rejoinder and now seeks to belatedly introduce a supplementary affidavit in rejoinder to cure issues raised in the Affidavit in Reply. According to counsel for the 1st and 2nd Respondents, there is no legal basis for court to grant leave to file a supplementary affidavit in - 20 rejoinder after pleadings have closed and both parties have filed written submissions. The Affidavit was filed in bad faith and without leave of court. This is an attempt by the Applicant to amend its pleadings which shall prejudice the 1 st and 2nd Respondents.

The Applicant requests court to invoke its powers under **Section 98 of the Civil**

25 **Procedure Act** and **Order 51 Rule 6 of the Civil Procedure Rules** to admit the Supplementary Affidavit in Rejoinder.

The Court notes that the Applicant filed the contested supplementary affidavit in rejoinder without leave of court and the request to file it was done by way of an ordinary letter. The prudent and proper way to move court should have

30 been by way of a formal application for both parties to be heard. In the case of

- 5 **Mutembuli** *Yusuf Versus Nagwomu Moses and another Election Appeal No. 43 of 2016* the Court of Appeal observed that it is trite law that pleadings must at some point come to a closure. In the case of *Oyiki Sirino Kassiano and others Versus Kampala University HCMC No. 129 of 2022***, Hon. Justice Boniface Wamala** reechoed his position in *Surgipham (U) Ltd Versus Uganda* - 10 *Investment Authority and another HCMC No. 65 of 2011* that where pleadings have closed in a matter that has proceeded by way of affidavit evidence, a party would not be at liberty to file a supplementary affidavit after the closure of pleadings without seeking the court's leave and giving the other party an opportunity to respond to the additional averments. - 15 The Applicant seeks to invoke the discretionary powers of this court to admit and rely on a document smuggled onto the record. Admitting the supplementary affidavit in rejoinder would require court to give the Respondents the opportunity to be heard since the Agreement sought to be introduced was never in the first place attached to the affidavit in support of - 20 this Application. Further, the Applicant had the opportunity to bring it to the attention of court at the hearing that it intended to adduce a Multi-Option Facility Commercial Terms Agreement between the 2nd Respondent and the 3rd Respondent. This was not done. The Applicant, cannot at this point be been seen to seek court's indulgence to adduce such document when the pleadings - 25 in the matter have closed and respective submissions filed. Additionally, I have observed that the Multi-Option Facility Commercial Terms Agreement between the 2nd Respondent and the 3rd Respondent was never mentioned, nor did it arise out of the Affidavit in Reply and thus according to the case of *Mutembuli Yusuf Versus Nagwomu Moses (supra)*, affidavits in rejoinder can only be 30 sworn to clarify or rejoin specific issues raised by the respondent in affidavits in reply. The Applicant is attempting to reconstruct its case against the 2nd

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5 Respondent which this court cannot condone. In any event, the said facility agreement attached to the letter was neither executed by the 1 st Respondent nor the 2 nd Respondent.

I am in agreement with learned counsel for the 1 st and 2nd Respondents that the admission of this Supplementary Affidavit in Rejoinder would prejudice the

1 st and 2nd 10 Respondent because it would prolong the litigation of this matter; and court would have considered it without giving them an opportunity to be heard. It would reopen this Application which is at the point of delivery of a ruling.

In the circumstances and for the reasons given above, the supplementary 15 affidavit in rejoinder is rejected and struck off the court record.

#### **High Court's intervention in Arbitration matters**

Under **Section 9 of the Arbitration and Conciliation Act** (*hereinafter referred to as the "ACA"*), the Court's intervention in matters governed by the Act is restricted to only what is provided for under the ACA. In the case of *Babcon*

- 20 *Uganda Ltd Versus Mbale Resort Hotel Ltd CACA No. 87 of 2011***, Justice Egonda-Ntende, JA** observed that **Section 9 of the ACA** ousts the courts' general jurisdiction. It bars the courts from intervening beyond the limited or special jurisdiction permitted under the ACA. The ACA authorizes the courts to intervene under **Section 6 of the ACA** to provide interim relief. Therefore, in - 25 the circumstances, this court is not allowed to intervene in the matter which is being arbitrated by the parties before the International Chamber of Commerce.

The rationale for the restriction of the courts' intervention is often attributed to the fact that arbitration is a creature of contract; that is agreed upon by the parties to exclude court jurisdiction and prefer the finality and expediency of

- 5 the arbitral process devoid of procedural technicalities. In the case of MSS *XSABO Power Ltd and others Versus Great Lakes Energy Company NV HCMA No. 1567 of 2022*, the court observed that, when parties choose to resolve their disputes privately outside the public court system, they should be left to that choice and not be subject to court intervention, except as needed to - 10 determine validity of the arbitration agreement or to ensure standards of basic procedural fairness for the arbitral process.

Under **Section 6(1) of the ACA**, a party to an arbitration agreement may apply to the court, before or during arbitral proceedings, for an interim measure of protection, and the court may grant that measure. In the case of *Captain*

- 15 *Joseph Charles Roy Versus D and D International (U) Ltd HCMA No. 283 of 2018***, Hon. Justice Mubiru Stephen** observed that **Section 6(1)** of the **Arbitration and Conciliation Act** creates a concurrent jurisdiction between the arbitral tribunal and the court to grant interim reliefs. However, the learned Judge noted that the Court should not usurp the functions of the arbitrator and - 20 that it is not appropriate for a court to grant interim measures which will preempt the decision which will ultimately be made by the arbitral tribunal.

While answering why the courts are more preferred for application for interim reliefs in arbitration proceedings, **Hon. Stephen Mubiru** further observed in **Captain Joseph Roy Versus D and D International (U) Ltd (supra)**, that:

- 25 *"The affirmation of the concurrent jurisdiction between arbitral tribunals and the courts generally rests on the practicability of arguments that: (i) Courts are oftentimes faster and more efficient when ordering interim measures; (ii) interim measures ordered by arbitral tribunals are generally not directly enforceable. Arbitral powers do not extend over third parties* - 30 *that may play a crucial role in the dispute, like banks or subcontractors; (iii)*

- 5 *additional assistance of the courts is necessary. Lack of coercive powers will lead the parties to courts whenever the enforcement of interim order is needed, e.g., tribunals have no power to enforce freezing orders; and (iv) the free-choice model has the advantage that it leaves the assessment of where to apply to obtain the most efficient provisional remedy to the parties,* - 10 *thereby minimizing grounds for dispute over the dispute resolution mechanism."* (Emphasis is mine)

Therefore, the Court ought to exercise its powers cautiously and mindful of the fact that its intervention in arbitration matters is limited to the specifications of the ACA only.

#### 15 **Determination**

# **Issue 1: Whether the Application satisfies the grounds for grant of interim protective measures.**

Decided cases have established that the existence of a valid arbitration agreement between parties is one of the considerations before the grant of 20 such Application.

I have observed that **section 6(1) of the ACA** does not provide the considerations to be taken into account by the court in the determination of applications for grant of interim protective measures. However, **Hon. Christopher Madrama, J (**as he then was) observed in *Swabir Mukungu Versus*

25 *Kobil Uganda Ltd HCMC No. 41 of 2015* that an interim measure of protection under **Section 6(1) of the ACA** should be taken to mean any lawful order that may be made in the interim to protect a party to an arbitration agreement pending arbitration proceedings, and such orders include interim temporary injunctions, attachment before arbitration, deposit of security among others.

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- 5 Therefore, I am convinced that the traditional considerations of grant of interim measures apply in such applications, and are: - *i) If the Applicant has established a prima facie case or a serious question to be arbitrated?* - *ii) Does the Applicant stand to suffer irreparable harm which would not be* 10 *compensated by an award of damages if the interim measure is not granted; and* - *iii) On which side does the balance of convenience lie? See. Polat Yol Yapi Sanvetic SA Versus UNRA HCMC No. 003 of 2022* - *(i) Prima facie case* - 15 The High Court of Kenya in the case of *BABS Security Ltd Versus Geothermal Development Ltd HCCC N0. 543 of 2013* observed that the existence of an enforceable arbitration agreement constitutes a prima facie case. The Applicant's Director deposed in the Affidavit supporting this Application under paragraph 4 that the Applicant executed a Subcontract Agreement with the 1st 20 Respondent for the execution and completion of the works under Annexture A of the Agreement and in the Principal Contract.

In reply, the Director of the 1st Respondent deposed that this Application was incompetent because the Applicant has not disclosed a prima facie case or cause of action against the 1 st and 2nd Respondents. That the alleged

25 Subcontract Agreement was executed between the Applicant and M/s Inyatsi Construction (U) Ltd and not with the 1st and 2nd Respondents. As such, the Application was brought against wrong parties. In Rejoinder, the Applicant's director averred that the 1st and 2nd 5 Respondents are both shareholders and beneficial owners of M/s Inyatsi Construction (U) Ltd and thus there is a cause of action under the principal agent relationship.

As to whether there exists prima facie case, counsel for the Applicant argued that the question to be determined was if there was a valid agreement 10 between the parties, a dispute has arisen between the parties and there is an

- agreement between the parties to arbitrate in the event that a dispute arose between them. That this has been demonstrated by initiation of the arbitration proceedings in the International Chamber of Commerce as preferred by the 1st Respondent. - 15 The question this Court is meant to answer is, whether there exists a valid and enforceable arbitration agreement between the parties to this Application. This Court notes that the 1st and 2nd Respondent object to the existence of this agreement and this same question may arise before the International Court of Arbitration of International Chamber of Commerce since the 1st and 2nd - 20 Respondents in their Reply object to the arbitration on the ground that they are not parties to the Subcontract Agreement. To this end, the law on privity of contract should apply.

This pauses the question as to whether the ICC has jurisdiction to entertain the Parties. Arbitration is a creature of contract. In absence of an arbitration

- 25 contract/clause, there cannot be arbitration and a tribunal cannot have jurisdiction over the parties. Clause 20.7 of the Subcontract Agreement executed on the 4th May 2023 constitutes an arbitration agreement between the Parties. This Agreement allows them to commence arbitration to resolve disputes that arise between them. The Republic of Uganda in the year 2011 - 30 adopted the United Nations Commission on International Trade Law

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- 5 (UNCITRAL) model law on arbitration. This law recognizes parties' arbitration agreements as presumptively separable from the contract in which it is contained. One of the consequences of such separability is that it allows an arbitrator or tribunal to find that the underlying agreement in which the arbitration clause is contained is invalid without at the same time invalidating - 10 the arbitration clause itself and thereby depriving the arbitrator or tribunal of jurisdiction. See the case decision of Dr. Mukundakam Sharma J, in the Supreme Court of India **Arbitration Petition No. 13 of 2017: M/s Everest Holding Ltd. Versus Shyam Kumar Shrivastava & Ors.** Bringing this closer to home, in the case of *Afri-Power Engineering Co. Ltd Versus Roko Construction* - 15 *Ltd HCCS 216 of 2022***,** Hon. Justice Thomas Ocaya observed that Arbitration clauses constitute a separate and distinct contract from the underlying contract to which it relates, and this is what is called the principle of separability. The principle or doctrine of separability proposes that the validity or existence of the contract will not affect the arbitration agreement and the identities of the 20 contract.

Therefore, the arbitration agreement herein is different from the Sub Contract Agreement between Inytsi Construction (U) Ltd and the Applicant.

Arbitration jurisprudence under the English law (common law that Uganda subscribes to) has evolved to come up with what has been termed as

25 *'arbitration without privity.'* Arbitration without privity is an exception to the general doctrine of privity of contract. This however only applies to arbitration matters. Some of the instances where arbitration without privity applies include; consent of the party or parties, agency relationship, assignment and novation, corporate veil doctrine and the group of companies' doctrine.

- 5 Below Court shall consider the instances to where arbitration without privity applies in relation to the instant case. - (a) Consent / willingness of the parties to arbitrate

The consent or willingness of the parties to arbitrate as observed in the persuasive Nigerian case of **Mekwunye v. Lotus Capital Ltd & Ors (2018)** 10 **LCN/11288 (CA)**, need not to be proved by documentary evidence. In the case

of *TMA Consults and another Versus Prome Consultants Ltd HCMC No. 80 of 2021* **Hon. Justice Mubiru** observed that:

> *"In a post-dispute agreement to submit to arbitration a party may provide a unilateral offer of consent to arbitration in a communication, which the*

15 *other "perfects" with its own consent by bringing a claim. The only element of mutuality required for a valid arbitration agreement is the mutual consent of the parties at the point when they entered into a dispute resolution agreement. Subsequently, when the right to elect to arbitrate is exercised under that agreement, a specific (and separate) arbitration agreement* 20 *would be created in relation to that dispute."* (Emphasis added)

In other words, the parties can create and enter into an arbitration agreement irrespective of the former or existing/underlying performance agreement.

In the matter before court, according to *Annexture J* to the Affidavit supporting this Application, the 1st Respondent's Advocates in a letter dated the 26th day of

25 April 2024 to the Applicant's advocates preferred to refer the dispute between them to arbitration before the ICC in accordance with Clause 20.7 of the Subcontract Agreement. This offer was accepted by the Applicant on the 6th day of May 2024 vide *Annexture L* to the Affidavit in support of this application. To my mind, an arbitration agreement was reached by the parties.

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- 5 In the case of *Wyndham Rather Ltd Versus Eagle Star & British Dominions Insurance Co. Ltd (1925) Lloyd's Law Reports at 214*, the Appellant insured its premises against burglary, theft and fire through an insurance slip with the Defendants. The insurance slip did not refer to or incorporate the conditions of the policy issued four months later after the risk had accrued by reason of - 10 burglary. The Appellants action was stayed because it was said that they were bound by the policy, which included an arbitration clause. **Lord Justice Atkin** ruled that:

*"We have not to consider the question of whether or not the insurance company are liable on some contract of insurance. The only question we* 15 *have to determine is whether, on the contract of insurance, there was a*

*submission to arbitration."*

I therefore find that there was consent between the parties to subject their dispute to arbitration before the ICC.

(b) Agency relationships

- 20 Arbitration without privity applies to agency relationships. The evidence on the court record shows that all communications to the Applicant be it by e-mail or ordinary letter were sent by officers (such as John Greenway and Derrick Shiba) of the 1st Respondent. This includes the termination letter to the Applicant that was signed by Mr. Derrick Shiba, the CEO Construction of the 1st Respondent. - 25 Letters from the Applicant requesting for the payment of interim certificates Nos. 2 and 4 were also addressed to the Project Manager of the 1st Respondent. I agree with the Applicant that the Subcontract Agreement arises out of the Main Contract that was signed between the 1st Respondent and the Government of the Republic of Uganda represented by the Ministry of Water

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- and Environment. It is also on record that the $1^{st}$ and $2^{nd}$ Respondents are $\mathsf{S}$ shareholders and beneficial owner of M/s Invatsi Uganda Limited. That whereas Mr. Shiba is neither a shareholder nor a director in the latter company, he is a Director of the 1^st Respondent and he is the one that terminated the contract between the Applicant and M/s Invatsi Construction Uganda Limited. Mr. Shiba - also signed the Sub Contract on behalf of M/s Inyatsi Construction Uganda $10$ Limited. I am therefore in agreement with the submissions of the Applicant that Invatsi Construction Uganda Limited was an agent of the 1^st Respondent. The Applicant cited and relied on **sections 118,122,123,130** and **131 of the** Contracts Act: and the case of Zura Mohammed Nasim vs Latim Andrew CA No. 027 OF 2017. 15

## (c) The group of companies' doctrine

Counsel for the Applicant further argued that it is possible to join non signatories to an arbitration agreement, under the Group of companies' doctrine, which rests on maintaining the corporate separateness of the group

- of companies while determining the common intention of the parties to bind $20$ the non-signatory to the arbitration agreement. Reference was made to the ICC **Tribunal case No. 4131 Dow Chemical Group Versus Isover Gobian** where the Tribunal held that Dow Chemical France was party to the contracts and consequently the arbitration agreements contained in them because it played a - preponderant role in the negotiation, performance and termination of the $25$ contract. That considerations to apply this doctrine include presence of a tight group structure, participation of the non-signatory in the execution of the contract, and mutual intent of the parties to bind the non-signatory. The courts in India have upheld this doctrine in *Cox and Kings Ltd versus SAP India Private*

pudaque

## 5 *Ltd Arbitration Petition No. 38 of 2020* and *Chloro Controls Pvt Ltd Versus Severn Trent Water Purification Inc. and another (2013) 1 SCC 641*.

The Subcontract Agreement between the Applicant and M/s Inyatsi Construction Uganda Limited was executed on behalf of the latter by Mr. Derrick Shiba. Mr. Shiba is a director and CEO Construction in the 1st Respondent. The 1st and 2nd 10 Respondents also each own a 33% stake in M/s Inyatsi Construction Uganda Limited. They are also the beneficial owners of M/s Inyatsi Construction Uganda Limited. The 1st and 2nd Respondents are therefore estopped from denying that they are a party to the arbitration agreement included therein.

- The question as to whether the 1st and 2nd 15 Respondents are parties to the Subcontract, in my opinion is an issue to be resolved by the Arbitral Tribunal and it is the only one with such jurisdiction. This Court cannot preempt or pre determine the decision of the Arbitral Tribunal under the doctrine of *kompetenze-kompetenze*. This is jurisprudential doctrine whereby a legal body, - 20 such as a court or arbitral tribunal may have competence or jurisdiction to rule as to the extent of its own competence on an issue before it.

The 1st Respondent has already submitted to the arbitration proceedings before the International Chamber of Commerce. I therefore find that an arbitration agreement therefore exits between the Applicant and the 1st and 2 nd

25 Respondents.

A prima facie case in such circumstances is such that the matter is not frivolous or a sham. This court is not at this stage supposed to determine the merits of arbitration but, that there is a serious question for arbitration. Privity to the contract is one of the serious questions for arbitration/trial. In the premises, I

5 am convinced that the Applicant has established a prima facie case or a serious question to be arbitrated upon.

## *(ii) Applicant stands to suffer irreparable harm*

The second question to be answered by the court in such applications is, whether the Applicant stands to suffer irreparable harm which would not be

10 compensated by an award of damages if the interim measure is not granted?

The Applicant through its Director deposed under paragraphs 13, 14, 15, 17 and 23 of the Affidavit in support of this application that it will suffer irreparable loss if this Application is not granted and its remedies arising from arbitration shall be rendered nugatory since the 1st Respondent has no known

assets in Uganda and that the 1st 15 Respondent may transfer all the monies sought to be attached.

The 1st and 2 nd Respondents averred in their Affidavit in Reply under paragraphs 17, 20 and 23 that arbitral awards can be enforced in any jurisdiction and the Applicant can be compensated in damages and in any case,

20 the Applicant has failed to establish imminent risk of suffering irreparable damage.

It was submitted for the Applicant that there was uncertainty of when the arbitration proceedings shall be completed and it is highly probable that by the time the arbitration proceedings are completed, 1st Respondent shall have

25 caused the discharge of the Bank Guarantee and the transfer of all the funds held on its behalf by the 3rd Respondent.

Further to the above, that in the unlikely event that the Government of Uganda terminated the contract with the 1st Respondent, the Applicant will be left

- 5 empty handed in terms of its inability to execute the arbitral award should it turn out to be in its favor since the 1st and 2nd Respondents are foreign entities with no known physical assets in Uganda save for the guarantee and monies held with the 3rd Respondent Bank. Counsel relied on the case of Eastern *Cargolines Consults Ltd & another V RJF International (PTY) M. A No. 611 of* - 10 *2021* to submit that the Applicant has established a real irreparable damage or injury that it will suffer in the event that the properties /assets of the 1st Respondent are sold or disposed of or transferred.

Conversely, it was submitted for the 1st and 2nd Respondents that the Applicant in its request for arbitration quantified its loss and damages under paragraph

- 15 16 of the Affidavit in support. That this in itself was an admission that the injury can be atoned by an award of damages or monetary compensation, and this is not irreparable injury within the meaning of the law. That the Applicant has not adduced evidence that the 1st and 2nd Respondents are unable to satisfy any arbitral award issued against them. As to whether the 1st and 2nd Respondents - 20 have assets within the jurisdiction of the court is without legal merit. Counsel relied on the case of *Great Lakes Petroleum (U) Ltd Versus Vivo Energy Uganda Ltd HCMC No. 133 of 2023*.

It is a known fact that Kabuyanda Earth Dam project has only two years before its completion. It was argued for the 1st and 2nd Respondents that **ICC Rules,**

25 **Art. 31,** limit the rendering of the final award within six months which is within time before the end of the project. There was therefore no imminent threat of the 1st Respondent leaving Uganda.

Irreparable damage according to the **Black's Law Dictionary 9th Edition** is defined as damage that cannot be easily ascertained because there is no fixed

5 pecuniary standard of measurement. In *Polat Yol Yapi Sanvetic SA Versus UNRA (supra)***, Hon. Justice Stephen Mubiru** observed that:

*"In order to establish that damages are not adequate; the innocent party will generally have to adduce evidence either that a) the subject matter of the contract is rare or unique or b) damages would be financially ineffective.* 10 *Damages may be found to be an inadequate remedy in the following circumstances, among others: (a) the damage is impossible to repair; (b) the damage is not easily susceptible to be measured in economic terms; (c) the harm caused is not a financial one; (d) monetary damages are unlikely to be recovered; (e) an award of damages is inappropriate in light of the*

15 *importance of the interest in issue; and (f) the harm has not yet occurred or the wrong is continuing. If there is an adequate alternative remedy, the claimant should pursue such remedy."* (Emphasis added)

In the instant facts, the claimed amount by the Applicant is ascertained. The worry of the Applicant is that the said amount is unlikely to be recovered since

the 1st and 2nd 20 Respondents have no known physical assets within Uganda. This court notes that the purpose of grant of interim protective measures is to preserve the status quo of the matter so that the outcome of the main arbitration matter is not rendered academic, moot or nugatory.

The Applicant averred that the 1st Respondent was in the process of 25 subcontracting another company to finish the project works, vacate the site and flee the country to avoid liability against the Applicant. This fact was never disputed by the 1 st and 2nd Respondents. This in my considered opinion constitutes an imminent threat or risk of injury suffered to the Applicant, should the remedies sought be denied. 5 I find that the Applicant has established that it is likely to suffer irreparable damage that cannot be atoned for by damages.

## *(iii) Where does the balance of convenience lie?*

It was submitted for the Applicant that the Subcontract Agreement was unlawfully terminated by the 1st Respondent and it was agreed that the dispute

is determined through arbitration. This a process that the 1st and 2nd 10 Respondents have agreed and submitted to.

For the 1st and 2nd Respondents, while relying on the case of *CFAO Motors Uganda Ltd and others Versus Public Procurement Disposal of Public Assets Authorityy and others HCMA No. 205 of 2024*, it was submitted that courts

- 15 should be slow in granting injunctions against government projects and agencies which are meant for the interest of the public at large as against the private proprietary interest for a few individuals. That the orders sought by the Applicant have the effect of halting the ongoing construction of activities of the Kabuyanda Earth Dam in Isingiro District and this would prevent the timely 20 delivery of the necessary services and benefits from the dam to the general - public and constrain Government of Uganda's ability to provide essential services to its citizens. Thus this court ought to consider the grave inconvenience that shall not only be suffered by the 1st and 2nd Respondents but the general public as well. - 25 Balance of convenience is considered when the court is in doubt as to the existence of the first two tests, in such Applications. This test assesses which party would suffer greater harm from the granting or refusal of the grant of the orders pending the arbitration. The applicant has passed the first two tests. It is my finding that the balance of convenience favors the Applicant.

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## 5 **Issue No. 2: Whether the Applicant is entitled to the orders sought**

The Applicant seeks the following orders:

i) A lien be issued over the bank guarantee by and between the 1st, 2nd and 3 rd Respondent in respect of the Construction works for the Kabuyanda Earth Dam in Isingiro District and an order be granted to the Applicant 10 restraining the Respondents from discharging the said guarantee pending the determination of the Arbitration claim before the International Court of Arbitration of the International Chamber of Commerce.

The Respondents' counsel objected to this order that the value of the 15 guarantee is not specified, and the beneficiary of the guarantee is not a party to this Application or the arbitration proceedings. Counsel relied on *Evelyn Bachwenkojo Karugaba Versus Shengli Engineering Construction Co. Ltd HCMA No. 44 of 2022.*

A guarantee or demand guarantee has been defined under **Article 2 of the ICC**

- 20 **Uniform Rules for Demand Guarantees (URDG 758)** as any signed undertaking, however named or described, providing for payment on presentation of a complying order. By its nature, a guarantee is independent of the underlying relationship and the application, and the guarantor is no way concerned with or bound by such relationship**. See. Article 5 (a) of the ICC Uniform Rules for** - 25 **Demand Guarantees (URDG 758).**

In *Polat Yol Yapi Sanvetic SA Versus UNRA (supra)***, Hon. Justice Stephen Mubiru** noted that demand guarantee, standby letters of credit, and commercial letters of credit are all treated as autonomous contracts whose operation will not be interfered with by courts on grounds irrelevant to the

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5 guarantee or credit itself. A guarantee document is a separate agreement from the construction contract or the guaranteed undertaking. This document is executed between a guarantor and the beneficiary.

**Hon. Justice Stephen Mubiru** explains in *AC Yafeng Construction Co. Ltd Versus the Living World Assembly and others Civil Suit No. 739 of 2021* that:

10 *"A bank guarantee has a tripartite structure comprising of the bank, the beneficiary and the principal. The principal and the beneficiary first enter into contract between themselves imposing certain obligations upon the principal, which is known as the underlying contract. The second contract is made between the bank and the beneficiary to indemnify the beneficiary* 15 *with a sum of money if the principal fails to perform his obligations which the bank will later collect from the principal. This second contract is the bank guarantee in its most basic form."*

In essence, a bank guarantee is a separate contract that creates rights and obligations on the parties privy to it. This guarantee is subject to a call being 20 made by the beneficiary. If the court is to interfere with the operation of this guarantee on requests made by third parties, detriment shall be faced by the beneficiary to the said guarantee, in case the guaranteed condition occurs or the call on demand is made.

The above notwithstanding, as earlier observed, the determination of issue of 25 privity of contract is for the ICC to determine and not this court.

I shall therefore grant this order.

ii) In the alternative, an order be issued compelling the 1st and 2nd 5 Respondents to provide security for the award and costs pending the determination of the Arbitration claim.

An order for security for costs is granted to ensure satisfaction of the decree/order, should the Applicant become successful at the main trial. While 10 granting this order, the court exercises its discretion.

In the case before court, the Applicant states that the 1st Respondent has no physical known assets within the jurisdiction of this court. This fact is not denied by the 1st Respondent, although their counsel argued that lack of physical assets is not a ground for allowing this Application. The 1st Respondent stated that the arbitral award is enforceable in any jurisdiction where the 1st 15

Respondent has assets.

In the case of *Bank of Uganda Versus Bank Arabe Espanol SCCA No. 20 of 1998*, the **Supreme Court** observed that absence of assets within the jurisdiction alone justified making an order for security for costs and future 20 costs.

There is evidence on the court record that the 1st Respondent was registered in Uganda as foreign company and that the 1st Respondent was incorporated in Swaziland now Eswatini. It is not disputed that the 1st Respondent has no assets in Uganda. Further, the 1st Respondent has not demonstrated that it will or is

25 willing to satisfy the award, should it lose the arbitration proceedings. As rightly observed by his Lordship Justice Vincent Emmy Mugabo in **Evelyn Backwenkojo Karugaba (***suing through her lawful attorney) Denis Karugaba vs Shengli Engineering Construction Co. (U) Ltd* that:

5 *"…the object of the provision of the law on attachment before judgment and provision of security is to prevent any attempt on the part of the defendant to evade justice and avoid the decree that may be passed against him or her. It is a sort of guarantee against a decree becoming infructuous for want of property available from which the plaintiff can* 10 *satisfy the decree. Orders like the one prayed for by the applicant prevent against instances when court could find itself issuing decrees in vain".*

I am inclined to issue an order for security for the costs. This Court cannot order for the security of the award since no determination as to liability of either parties has been made by the Arbitral Tribunal.

- 15 iii) Alternatively, an order be issued to attach a lien and/or freeze the outstanding contractual sum owing to the 1st Respondent from Ministry of Water and Environment in respect of the Construction works for the Kabuyanda Earth Dam in Isingiro District pending determination of the Arbitration claim. - iv) A lien be issued over the accounts and/or money belonging to the 1st 20 Respondent held in the 3rd Respondent bank as security for the award and costs pending the determination of the Arbitration claim.

Orders (iii) and (iv) above as sought for by the Applicant shall be resolved concurrently.

It is not disputed that the 1st 25 Respondent executed the main contract with the Government of Uganda represented by the Ministry of Water and Environment for the construction of the Kabuyanda Earth Dam in Isingiro District on the 23rd November 2022. The contract price is Ugx. 84,574,952,685.00/=. It was also the submission of learned counsel for the 1st Respondent that the Project still has a

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5 life span of about two years. This in my view implies that the Ministry of Water and Environment has not fully paid the 1st Respondent and therefore is still holding onto some payments due to the 1st Respondent pending the completion of the Project.

The accounts sought to be issued a lien over have also been identified by the 10 Applicant. But seeing that these accounts were the subject of an interim order in HCMA No.0979 of 2024 which was later vacated upon the hearing and determination of HCMA No.1189 of 2024; and it is the same bank accounts the Applicant also seeks to have frozen in this application, one cannot rule out the possibility that these accounts either have a minimum balance or as soon as

payments are made the money is withdrawn immediately or the 1st and 2nd 15 Respondents have since opened up new bank accounts that are not known to the Applicant.

A lien according to **Branch Banking Law and Practice 3rd Edition at page 94** has been defined a right of a creditor in possession of property of the debtor to

20 retain the property and in some case to sell it as a means of enforcing payment. In *ABSA Bank Uganda Ltd Versus Chukwu Ejiofor and another HCCA No. 231 of 2022*, the court defined a lien as a legal claim or legal right accruing against the assets that are held as collaterals for satisfying a debt.

The subcontract agreement between the Applicant and M/s Inyatsi

- 25 Construction Uganda Limited arises out of the main contract that was executed between the 1st Respondent and the Government of the Republic of Uganda through the Ministry of Water and Environment. It is from the payments made to the 1st Respondent that the Applicant as a sub-contractor shall be paid or is expected to be paid. I therefore find that the Applicant has a lien over the - money due to the 1st 30 Respondent from the Ministry of Water and Environment.

5 The Applicant's claim before the International Chamber of Commerce is for Ugx. 21,221,615,641/=.

I shall therefore allow these orders only to the extent that a lien is placed on the 1st Respondent's money held by the Ministry of Water and Environment. I am reluctant to put a freeze on the Project accounts held with the 3rd

- 10 Respondent as this would frustrate the completion or ongoing works of the Project. - v) Costs

The Applicant prayed for costs of the application to be provided for.

## **Section 27(1) of the Civil Procedure Act** states that:

15 *"Subject to such conditions and limitations as may be prescribed, and to the provisions of any law for the time being in force, the costs of and incident to all suits shall be in the discretion of the court or judge, and the court or judge shall have full power to determine by whom and out of what property and to what extent those costs are to be paid, and to give* 20 *all necessary directions for the purposes aforesaid."*

Costs shall always follow an event unless the court determines otherwise. The costs shall abide the outcome of the Arbitration. The 3rd Respondent shall not be condemned to costs.

This Application is allowed and court hereby makes the following orders:

a) That the 1 st, 2nd and 3rd 25 Respondents are restrained from discharging the Bank Guarantee in respect of the construction works of the Kyabuyanda Earth Dam in Isingiro District pending the hearing and final

- 5 determination of the dispute before the International Chamber of Commerce; - b) That the 1 st Respondent is hereby ordered to furnish security for costs in the form of a bank guarantee issued by any commercial bank in Uganda in the sum of Ugx. 5,000,000,000/= (Five Billion Uganda Shillings) within 10 a period of 30 (thirty) days from the date of delivery of this judgment; - c) That the Government of Uganda represented by the Ministry of Water and Environment is hereby ordered to withhold the payment of Ugx. 21,221,615,641 /= to the 1st Respondent pending the hearing and final determination of the dispute between the Parties before the - 15 International Chamber of Commerce; - d) That the 3rd Respondent shall not be condemned to costs; and - e) That the costs in relation to the Applicant, 1st Respondent and 2nd Respondent shall abide the outcome of the Arbitration.

## **Dated and signed at Kampala this 26 th day of August 2024.**

**Harriet Grace MAGALA**

**Judge**

**Delivered online via ECCMIS this 30th day of August 2024.**