Legal Analysis of Tge New Arbitration Law in Tanzania by Lexicon Attorneys Law Company

NEW ARBITRATION LAW IN TANZANIA

(by G. Method, Intern Lexicon Attorneys Law Company – March 2022)

 

1.0       Tanzania has repealed the Arbitration Act [Cap 15 R.E 2002] and replaced it with a new Arbitration Act No. 2 of 2020 (the Act), which came into effect on 18^th January 2021.

 

1.1       Under the  Act several Regulations were made and came into effect from 29^th January 2021, namely the (i). Arbitration (Rules of Procedure) Regulations, 2021; (ii). the Tanzania Arbitration Centre (Management and Operations) Regulations, 2021; and (iii). the Reconciliation, Negotiation, Mediation and Arbitration (Practitioners Accreditation) Regulations, 2021.

 

2.0       Part 1: The Arbitration Act, 2020

The Act is geared to promoting alternative dispute resolution mechanisms. One of its strengths is that it eliminates ambiguity by clarifying what amounts to domestic commercial arbitration and international commercial arbitration.

 

2.1       The scope of the Act is limited to mainland Tanzania (Section 5(1)), save for specific circumstance covered under sections 13 and 68 of the Act which relate to stay of proceedings and enforcement of an award, respectively.

 

2.2       Part 1 provides for the interpretation and application of the Act.

Parts II and III provide the general provisions of the Act, which are guided by the principles of:

 

• fair resolution of disputes by an impartial tribunal without delay or expense;
• parties’ discretion on how their disputes should be resolved; and
• the court’s role as merely subsidiary (non-interference by the court unless permitted by the law).

 

3.0       Parts IV and V cover commencement of arbitral proceedings and the arbitral tribunal, respectively. An interesting component of the Act is the power conferred on the court to grant a complainant an extension of time to undertake the steps required before commencing arbitration proceedings, even if the timeframe for doing so under an agreement or previous order of the court has elapsed.

 

3.1       Additionally, in line with the spirit and general provisions of the Act, which call for parties to be free to agree on how their disputes should be resolved, it places few limits on the parties’ choice of arbitrator.

 

3.2       However, specific criteria in the arbitration agreement may constrain such choice. It is also worth noting that parties are generally at liberty to agree on the number of arbitrators and the procedure for their appointment as provided in sections 17 and 18 of the Act. However, as far as the number of arbitrators is concerned, in cases of default of agreement between the parties, the tribunal shall only consist of one arbitrator. Moreover, where the parties have agreed to an even number of arbitrators, an additional arbitrator will be appointed as chairman.

 

3.3       Further, a party may apply to the court for the removal of an arbitrator if, among other things, it has justifiable doubts as to the arbitrator’s impartiality or competence.

 

3.4       The Act also gives an arbitrator immunity from any liability associated with his/ her actions unless it can be proven that the said actions were done in bad faith or showed professional negligence.

 

4.0       Parts VI, VII and VIII of the Act deal with jurisdiction of the arbitral tribunal, arbitral proceedings and costs.

 

4.1       Unless otherwise agreed between the parties, the tribunal is granted the power to rule on its own ‘substantive’ jurisdiction, ranging from whether there is a valid arbitration agreement to whether the tribunal has been properly constituted.

 

4.2       Subject to the agreement in writing  by the  parties  or the permission of  the tribunal, a party can also apply to the court to determine any question as to the substantive jurisdiction of the tribunal (determination of preliminary point of jurisdiction).

 

4.3       Traditional duties relating to the conduct of the tribunal are also imposed. These require the tribunal to act fairly and impartially, whilst ensuring that unnecessary delays or expenses are avoided, to provide a fair means for the resolution of the matters to be determined. It is worth noting that the Act is silent on the duty of the arbitrator to disclose any interest (however, both case law and literature have provided for the test for disclosure).

 

4.4       Further to the above, the onus is placed on the arbitral tribunal to decide on all procedural and evidential matters (subject to the agreement of the parties thereof). As is the case in numerous jurisdictions, the award rendered by the tribunal is treated as final and binding (unless there is an agreement to the contrary by the parties). A tribunal may refuse to deliver an award to the parties where one or more parties fail to make full payment of the fees and expenses of the arbitrators.

 

4.5 Concerning the cost of the arbitration, the tribunal may make an order as to cost (subject to any agreement between the parties). Such cost may be in respect to the following:

• the arbitrator’s fees and expenses;
• fees and expenses of any arbitral institution;
• legal or other costs of the parties; and
• costs of, or incidental to, the proceedings.

 

5.0       With regards to the powers of the court in relation to an award, Part IX of the Act provides that an award can only be enforced, with leave (permission) of the court, and may be enforced in the same manner as a judgement and order of the court. Under the Act, a party has the option of applying to the court to challenge an award on the basis that the tribunal lacked substantive jurisdiction; and/ or on grounds of serious irregularity affecting the tribunal, the proceedings or the award.

 

6.0 An interesting feature of the Act is the creation of the Tanzania Arbitration Centre (centre), under Part X of the Act. This provides for the establishment of the centre with functions that include:

• the conduct and management of arbitration;
• registration and maintenance of a list of accredited arbitrators; and
• enforcement of the code of conduct and practice for arbitrators.

 

7.0 In terms of enforcement of arbitral awards, Part XI of the Act provides that domestic arbitral awards and foreign arbitral awards may be enforced and recognised as binding upon written application to the court by the party and upon the court being satisfied that certain conditions have been met. However, a court may not enforce an award if the party it is rendered against provides evidence that the parties to the agreement:

• lacked capacity to enter into the agreement;
• that it was not properly represented or given notice of the appointment of the arbitrator or arbitral proceeding; or
• that the making of the arbitral award was induced or affected by fraud, bribery, corruption or undue influence.

 

8.0       The Act does not expressly provide a time limit for applying for enforcement of an award. Previously, practice dictated that the application must be within six months of the making of the award. This is based on a High Court decision on the interpretation of the previous Act and it would be interesting to see whether this interpretation is adopted for the reading of the current Act.

 

9.0       Parts XII and XIII of the Act deal with miscellaneous provisions of, and consequential amendments arising from, the Act. A key provision under these parts is section 86, which states that in applying and construing the Act, an arbitrator should take into regard positions taken by other arbitrators in similar subject matters, as well as positions taken by courts of law in such matters, and justify his or her decision if he or she decides to differ with the position of other arbitrators or courts.

 

9.1       Additionally, the Act calls for any arbitration arrangement concluded before the coming into effect of the Act which has not yet materialised to be renegotiated and brought in line with the Act. This requirement to align also extends to any arbitration proceedings that are pending when the Act comes to full effect.

 

9.2       It is noted that no person shall be authorised to practice for a fee as reconciliator, negotiator, mediator or arbitrator unless such a person is accredited. Any person in breach of this requirement would be liable to a fine of up to TZS 5 million or subject to imprisonment of up to two years or both.

 

9.3       The Act permits the use of foreign arbitral bodies such as London Centre of International Arbitration if the venue of the arbitration is in Tanzania and Tanzanian law applies. This is a breakthrough as previously these laws required the use of arbitral bodies ‘established in’ Tanzania (i.e. TiArb or NCC), which some investors viewed as non-independent.

 

10.0     Conclusion:

The Act is to a larger extent in parimateria with the English Arbitration Act, 1996.

 

11.0     Disclaimer:

For more and further reliable particulars, please contact your legal consultant.