TYPES OF ARBITRATION

Issue 1, 15.04.2024

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What is Arbitration?
The Arbitration and Conciliation Act Cap. 4, Laws of Uganda, defines ‘arbitration’ to mean any arbitration whether or
not administered by a domestic or international institution where there is an arbitration agreement. Whereas this
definition does not fully define arbitration, it indicates that arbitration can be both domestic and international.

Arbitration can be defined as an alternative dispute resolution method involving one or more neutral third parties who
are agreed to by the disputing parties and whose decision is binding. It is also defined as the process by which a dispute
or difference between two or more parties as to their mutual legal rights and responsibilities is referred to and
determined judicially and with binding effect by the application of the law by one or more persons (the arbitral tribunal)
instead of by a court of law.

Arbitration is rapidly growing and is taking centre stage in the resolution of especially commercial disputes, both locally
and internationally. Its growth can be attributed to several factors, including its cost-effectiveness compared to litigation,
procedural flexibility, efficiency, and the assurance of finality, among others.

There exist various types of arbitration, with each type being determined by factors such as the arbitration agreement
between the parties, the specific industry in which the parties operate, relevant statutes, and procedural nuances. The
following are the different types of arbitration.
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Domestic Arbitration
The Arbitration and Conciliation Act Cap. 4 does not define the
term ‘domestic arbitration’. However, it can be defined as arbitration
dealing with national or domestic issues, and all aspects of the
arbitration proceedings relate to a single jurisdiction. It is where one
or more persons are appointed to hear a case that takes place within
one jurisdiction.

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International Arbitration
This is the type of arbitration that involves parties from different jurisdictions. Whereas the
Arbitration and Conciliation Act Cap. 4, laws of Uganda, does not provide a definition, we
can borrow its definition from the Indian Arbitration and Conciliation Act, 1996. The said
Act defines the term international commercial arbitration to mean “an arbitration relating to
disputes arising out of legal relationships, whether contractual or not, considered as
commercial under the law in force in India and where at least one of the parties is –
(i) an individual who is a national of, habitually resident in, any country other than India; or
(ii) a body corporate which is incorporated in any country other than India; or
(iii) an association or a body of individuals whose central management and control is
exercised in any country other than India; or
(iv) the Government of a foreign country.”

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Ad hoc Arbitration
This is the type of arbitration which is not conducted by an
institution, where the parties and the arbitrator will conduct the
arbitration according to procedures agreed by the parties or, in
default of an agreement, as laid down by the arbitrator at a
preliminary meeting when arbitration commences. This is the
most common type of arbitration in Uganda.

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Institutional Arbitration
This is the type of arbitration conducted by an institution. The parties may agree to have a
dispute arbitrated by an arbitral institution instead of an individual. For example, parties
can agree to have their arbitration determined by the International Centre for Arbitration
and Mediation at Kampala (ICAMEK). Once arbitration is initiated, the institution will
then determine certain aspects of the arbitral proceedings, including the appointment of
the arbitral tribunal, the seat of arbitration, the language of arbitration, the arbitral
timelines, and the manner for conducting the hearing, among others.

The Arbitration and Conciliation Act Cap. 4 contemplates this kind of arbitration.
According to Section 2(2), where a provision of the Act leaves the parties to determine a
certain issue, that freedom includes the right of the parties to authorise a third party,
including an institution, to make that determination.
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Statutory Arbitration
This type of arbitration is also known as ‘compulsory
arbitration’. It is arbitration which is sanctioned by the law,
or which statute compels parties to undertake. For example,
under the National Sports Act, 2023, sports disputes are to
be settled through arbitration by arbitrators appointed by
the Minister responsible for sports.

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Court-Directed Arbitration
This is arbitration sanctioned by a Court of Law. For
example, under Section 27 of the Judicature Act Cap.
13, the High Court of Uganda may order for a matter
other than a criminal matter to be tried by an arbitrator
agreed to by the parties.

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Investor-State Arbitration
Investor-state arbitration is one arising out of an international investment agreement or treaty
where an investor from one contracting state to the agreement brings a claim against another
contracting state (also known as ‘the host state’) in which the investor has invested. It is also
known as “arbitration without privity” because there is no direct arbitration agreement between
the state and an investor who institutes arbitration against the state.

The state’s consent to arbitrate may be found in the provisions of the bilateral or multilateral
treaty. On the other hand, the investor’s consent is deemed to be provided when it institutes
arbitration proceedings under the treaty.

An example of such a treaty is the Convention on the Settlement of Investment Disputes between
States and Nationals of Other States (ICSID Convention), 1965. Awards made under the ICSID
Convention are recognizable and enforceable in Uganda under Part IV of the Arbitration and
Conciliation Act Cap. 4. 8
‘Look-Sniff’ Arbitration
This is also known as ‘quality arbitration’. It is a combination of the arbitral process and expert
opinion and is normally found in the commodity field to resolve disputes on whether the
commodity delivered complies with the quality specification or agreed sample. The arbitrator is
selected based on his/her specialised knowledge, expertise and experience in a particular area
of business or trade. The parties will disclose to the arbitrator the relevant documents setting
out the required specification and may show him/her the agreed sample. There are no formal
hearings for taking evidence or hearing oral submissions. The arbitrator ‘looks’ or ‘sniffs’
(hence the name), using his/her experience and knowledge, and comes to an award based on
the evidence placed and gathered before the tribunal.

This type of arbitration is an exception to the rule that an arbitrator should not normally take
into account his/her own opinions unless he/she has explained such opinions to the parties and
has given the parties an opportunity to deal with them in evidence or submission.
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‘Flip-Flop’ Arbitration
This is also known as ‘pendulum’, ‘high-low’, or ‘baseball-style’ arbitration. It is commonly used in
quantum-only disputes and may take any of the following three forms;

In the first, the parties formulate their respective cases beforehand and present the arbitrator with
a final figure. The arbitrator is then invited to choose one of the two. He/she cannot choose
somewhere between the two. If one party over claims or offers an unreasonably low amount, the
probability of the arbitrator choosing his/her formulation is next to zero.

The second form is where the arbitrator decides a figure for the final settlement, regardless of
what the parties have put forward.

The third form is a ‘sealed bid’ procedure where each party puts in a figure to pay or receive in
sealed envelopes opened by a third party. If the bid falls within specified parameters, the
difference is split. 10
Documents-Only Arbitration
This is arbitration that proceeds on the basis of exchange of written
documents only. Section 24(7) of the Arbitration and Conciliation Act Cap.
4 contemplates this type of arbitration. It provides thus; “At any hearing or
meeting of the arbitral tribunal of which notice is required to be given under
subsection (5), or in any proceedings conducted on the basis of documents
or other materials, the parties may appear or act in person or may be
represented by any other person of their choice.”

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Thank you.
*If you know of any other types not included in this
issue, please list them in the comments.

Arbitration Insights.