arbitration / adr news

Court quashes Shs.680M arbitration award in Entebbe Airport case

By: The Independent

The Civil Division of High Court in Kampala has set aside a 680 million shillings arbitration award given to Central Plumbing Works Limited in a case in which it had been contracted to construct extra water reservoirs at Entebbe International Airport. Justice Musa Ssekaana in his decision dated January 25th 2024 quashed the award following a successful application filed by Uganda Civil Aviation Authority Case against the Central Plumbing Works Limited. In 2023, UCAA petitioned the Court saying it invited bids for Works and Related Services earmarked as CAA/WRKS/12-13/00043 “Construction of Extra Water Reservoir at Entebbe International Airport” where Central Plumbing Works (U) Limited made a bid to undertake the works and emerged the successful bidder. UCAA said that since the contract involved expending public funds, they prepared a draft agreement and submitted it to the solicitor General for his perusal, guidance and approval as required by the law. As a result that on the August 12th 2013, the UCAA entered into a Construction works agreement with the respondent to construct extra water reservoirs at at a total consideration of 835 million shillings. The Court heard that Clause 25.4.1 of the special conditions of contract stipulated clearly on how the Arbitral tribunal would be constituted and how the members would be appointed. That following a dispute arising out of the agreement, the Respondent/Claimant filed a claim before the Arbitration tribunal on December 2nd 2021, and that contrary to the clear provisions of the Agreement, the parties by consent purported to amend clause 25.4.1 of the special conditions of contract which distinctly provide for the procedure on how the chairperson of the tribunal should be appointed. As such, UCAA argued that the said amendment was contrary to the law as it did not get the Solicitor General’s approval and clearance. Court further heard that November 25th, 2022, the Arbitration Tribunal Chaired by Belinda Lutaya Nakiganda made an arbitral award in favor of the Respondent/Claimant. According to UCAA, the  Arbitration Tribunal was incompetent to entertain and make an Arbitral award in the matter filed before it because of its   improper and irregular composition  contrary to the clear provisions of the construction works agreement. On its part, Gurjeet Singh Ghataurhae through its Managing Director argued that the Centre for Arbitration and Dispute Resolution (CADER) properly exercised its mandate to appoint the 3rd Arbitrator having derived its authority from the consent executed by the parties. The Company told Court that UCAA did not raise any objections during the entire arbitral proceedings therefore the application is intended to frustrate them from recovering the fruits of the Arbitral award. In his decision, Justice Ssekaana has ruled that whereas the position of the law and practice in arbitration is that a party is not allowed to contest an arbitration and raise a jurisdictional objection for the first time if the award is unfavorable, his court is mindful of the breach of the law that governs agreements involving public bodies like UCAA. “The court should not facilitate illegalities that may be committed by some persons’ public officials through unexplained means and commit the public funds after altering the clauses of the agreement illegally without approval of the solicitor general. The actions of the parties amounted to the wrong composition of the arbitral tribunal and would result in setting aside an award”, said Justice Ssekaana. According to the Judge, the court shall not look on when a glaring illegality is brought to its attention which goes to the root of the arbitral award made after altering an arbitration dispute clause in the main agreement without the approval of solicitor general. “The respondent equally had a duty to ensure that the agreement is not irregularly altered without necessary approvals of solicitor general. The fact that there was no objection at the arbitral proceedings about the constitution of the tribunal cannot result in validating the arbitral tribunal’s jurisdiction if its constitution was illegal and contrary to the agreement or made after illegal alteration,” adds  Ssekaana. The Judge has ruled that once a party has complained of the appointment process, the entire procedure adopted by the parties in their attempt to choose the arbitrator must be scrutinized and therefore, the process that led to the appointment of the chairperson of the panel in this matter was flawed and the UCAA was right to come to court.

Source: The Independent