East African Breweries Ltd v.

GMM Company Ltd 1

(Where the defendant takes a step in legal proceedings instead of petitioning to stay proceedings)

Material Facts

The center of dispute is based in breach of a distribution agreement that was entered between the
parties. The plaintiff is a Kenyan company, which brews beer of a variety of brands, and it had
entered into a distribution agreement with a defendant which is a Tanzanian company. Their
initial agreement was that the plaintiff would supply beer to the defendant who would in turn
supply the same in different parts of Tanzania. Along with that the parties’ distribution
agreement also provided that the law that will govern their agreement was Kenya and the parties
submitted to the exclusive jurisdiction of Kenyan courts. To that effect the parties also came to
agreement that whenever a dispute will arise relating to their agreement or in any case of breach
thereof, the parties would try to settle the matter amicably, and when amicable settlement
between the parties fail, then the matter will finally be referred to an arbitrator of the parties’
choice. The seat of the arbitration will be in Nairobi and in accordance with the Arbitration Act
of Kenya, and all its rules that prevail at the time. Along with that the ruling of the arbitrator will
be final and binding to both parties.

As time went in execution of their contract the defendant breached a term in their distribution
agreement and the plaintiff filed a suit in the High Court in Tanzania. Subsequently the
defendant filed a written statement of defence, in dispute of the claim brought by the plaintiff
and along with that the defendant raised two preliminary points of objection in alternative.
Firstly, he contended that the High Court had no jurisdiction, according to the agreement it had
initially entered with the plaintiff since they exclusively submitted to the jurisdiction of Kenyan
courts. Secondly, the suit was also incompetent since the parties had in their distribution
agreement agree to mandatory arbitration in the circumstance that a dispute occurred and
amicable settlement failed.

1
Civil Case No. 67 of 1999.
Issues

a. Whether the parties were competent in law to agree to oust the jurisdiction of Tanzania
courts.

b. Whether the plaintiffs action of filing the suit could amount to breach of the distribution
agreement which contained an arbitration clause.

c. Whether the defendants action of filing a written statement of defence instead of

petitioning in court to stay the proceedings and refer the parties to arbitration, could
amount as “taking a step in the proceedings”

Held

a. The court held that the parties were not competent in law to agree to oust the jurisdiction
of the Tanzanian courts and as such the defendant had a registered place of business in
Tanzania. Therefore, the plaintiff had a right as provided under section 18 (a) of the
Civil Procedure Code of Tanzania to bring a suit against the defendant in the High court
of Tanzania.

b. The plaintiff filling a suit in the High Court without reference to arbitration was a clear
breach of article 14.9 of the distribution agreement which had an arbitration clause.

c. Since the plaintiff filed a suit in the High Court contravening the arbitration clause, the
defendant had a remedy which was to apply for stay of proceedings at the appropriate
time before taking a step in the proceedings by making appearance and filing a
WSD. since the defendant indeed filed a WSD instead of applying to stay proceedings,
the same amounted as taking “a step in the proceedings”
Nandhra Engineering & Construction co. ltd v Ambiere Real Estates ltd and Y & P Architects
ltd2

(Where the defendant was summoned but refused to avail herself to arbitration)

Material Facts

The parties had an agreement, whereby the plaintiff agreed to construct a double store building
for the first defendant. A project which was to proceed under the superintendence of the second
defendant. The first defendant defaulted in payment of construction fees, and therefore the
contract was terminated on 25th April, 2017. So the plaintiff filed a suit for recovery of the
outstanding payment. The plaintiff and defendants signed a contract which contains an
arbitration clause articulating the means through which they preferred to resolve their dispute
and the procedures thereto. So the parties had an undertaking that should a conflict arise between
them, it shall be referred to an adjudicator who shall resolve the dispute within 28 days. The
defendant filed the written statement of defense accompanied by a notice of preliminary
objection. The defendant claimed that the suit contravenes the arbitration clause, through which
the parties agreed to resolve the dispute amicably through an arbitrator, and therefore the
defendant asked the court to struck out the suit

Issues

a. Whether the matter before the Court is incompetent

Held

The Court referred the case of Construction and Builders v. Sugar Development Corporation3
where it was held that “If is clear .... that the parties have agreed to submit all their "disputes or
differences arising "under" the contract to an arbitrator, then the dispute must go to arbitration
unless there is some good reason to Justify the court to override the agreement of the parties

It was seen that, the plaintiff notified the defendants on termination of the Contract, and
thereafter submitted the matter to the National Construction Council (NCC), where she (plaintiff)
successfully paid the required fees and the arbitration proceedings instituted. The first defendant
2
Civil Case No 70 of 2018
3
[1983] TLR 13.
was summoned but she refused to avail herself to arbitration and the NCC could not compel the
defendant to avail herself to the arbitration proceedings, so this was the reason why the defendant
decided to appear before the Court since the matter could not be resolved by arbitration

Also section 6 of the Arbitration Act4 (this has remained to be the position even after the repeal
and the replacement of the Arbitration Act, CAP 15 RE 2019 by the Arbitration Act, No.2 of
2020 under section 13(1)) provided that where a party to an arbitration commences a legal
proceeding, the other party may, after appearing in court and before taking any action, apply for
stay of proceedings and the court may, if it is satisfied, order the stay of the proceedings and
refer the parties to arbitration. Thus, the remedy available to the 1st defendant was to apply for
stay of proceedings before taking any further steps in legal proceedings. This is in tandem with
the provision of Section 64 of the Civil Procedure Code5, read in conjunction with the 2nd
schedule to the Code which in paragraph 19 states that, when a party to an arbitration agreement
institutes a suit, the aggrieved party may apply for stay of the suit and the court may order stay of
the suit. Since in the instant case, the 1st defendant has not availed herself to this opportunity
because he cannot have the matter struck out as the remedy available under the law is stay of the
proceedings. So since the defendant has not availed to the remedy available under section 13(1)
of the Arbitration Act, then the defendant’s objection was overruled with costs

Icea Lion General Insurance Co. Ltd & Ndege Insurance Brokers Ltd V Fortunatus Lwanyantika
Masha6

(Where the dispute is whether the contract which contains the clause has ever been entered into
at all)

Material Facts

It is an appeal from the district court; the respondent is the owner of a motor vehicle, which was
insured comprehensively with the first respondent, through the second respondent’s brokerage
services. The respondent incurred an accident on his way from Sengerema to Mwanza, the

4
CAP 15 RE 2019.
5
CAP 33 RE 2019.
6
Civil App No. 17 of 2019
accident damaged the engine. Respondent pressed a claim for indemnification of the sum
incurred, but to no avail. As a result of this impasse, the respondent instituted court proceedings
which culminated in the decision that is the subject of this appeal. On appeal the question was on
the jurisdiction or competence of the District Court of Nyamagana to entertain a matter from the
appeal. The insurance Contract contained an arbitration clause, which requires the parties to refer
their differences to an arbitrator.

Issues

a. Whether the Court had jurisdiction to entertain the matter.

Held

The court referred various court decisions on deciding the case, including the case of
Construction and Builders V Sugar Development Corporation, 7 emphasizing that, if the parties
agree to refer the matter to arbitration then the case should start with arbitration. He urged the
Court to order the parties to follow the agreement. The Judge further defined the term arbitration
Clause to mean that, it is a written submission, agreed to by the parties to the contract, and, like
other written submissions to arbitration, must be construed according to its language and in the
light of the circumstances in which it is made. He further held that, if the dispute is whether the
contract which contains the clause has ever been entered into at all, that issue cannot go to
arbitration under the clause, for the party who denies that he has ever entered into the contract is
thereby denying that he has ever joined in the submission. Similarly, if one party to the alleged
contract is contending that it is void ab initio (because, for example, the making of such a
contract is illegal), the arbitration clause cannot operate, for on this view the clause itself also is
void. The Judge set aside the Judgment and decree of the trial court, and orders the parties to
abide by the provisions of the insurance contract.

7
[1983] TLR 13
DB Shapriya Co. Limited v. Yara Tanzania Limited 8

(Where the parties are unwilling to go for arbitration)

Facts

This case involves an arbitration clause based on the parties’ contract, the court gave a ruling
dated 31/March/ 2016 which had ordered stay of application for 30 days to enable parties to take
all necessary steps and proceed to arbitration. Therefore, the court relying on the arbitration
clause in the contract and pursuant to section 6 of the Arbitration Act ordered the stay of
proceedings for 30 days to enable the parties to pursue arbitration. Surprisingly after the expiry
of the thirty days and resume of court proceedings the court had expected the parties to have
initiated arbitration processes or taken measures to necessitate an order for further stay of
proceedings pending the determination of their dispute by the arbitrator, of which none of the
mentioned was done.

The defendant/respondent contended that since the plaintiff was the one aggrieved by what took
place in the contract and instituted the suit, then is the one whom was under contractual
obligation to refer the dispute to arbitration, and the defendant has further taken the initiative of
reminding the plaintiff to do the same. The plaintiff also counter claimed arguing that since it
was the defendant and his counsel whom claimed to refer the matter to arbitration, they are the
one who have a duty to refer the matter to arbitration.

Issues

a. Who between the parties was under obligation to refer the dispute to arbitration?

b. What is the fate of the stayed proceedings if parties are not willing to go to arbitration?

Held

a. With regards to refereeing the matter to arbitration the court found that according to the
arbitration clause in their contract it expressly stated that “parties” it was therefore
obvious that the contractual obligation to refer the dispute to arbitration was a joint
contractual obligation and none of the parties has a greater burden over the other.
8
Misc. Commercial Case No. 55 of 2016.
 b. With regards to the parties’ unwillingness to go for arbitration. The court found that there
was no reason to keep staying the proceedings due to the temporary injunction and
decided to proceeding with the hearing on the 20/5/2016.

Queensway Tanzania (EPZ) Ltd v. Tanzania Tooku Garments Co.ltd9

(Where nature of proceedings do not rest on the arbitration agreement)

Facts.

The respondent entered into a sublease agreement with the petitioner and had initially agreed if
any dispute had to arise whatsoever the matter would be referred for arbitration. Later on a
dispute arised and the petitioner intended to windup the respondent by petitioning the provisions
of Section 275, 279(1)(d), 281(1) and 294 of The Companies Act. The respondent however filed
a preliminary objection to the petition and contended that the matter was prematurely referred to
Court and the Court lacked Jurisdiction. The Petitioner relying on the case of Rufiji Basin
Development Authority v. Kilombero Holdings Ltd10 he contended that the nature of the
proceedings did not rest on the Arbitration agreement and the High Court of Tanzania is the one
mandated with the authority to windup a company and not an arbitrator.

Issue.

Whether the Court is precluded from proceeding with determination of winding up petition when
it is alleged that its underlying dispute is governed by an arbitration agreement?

Held.

The Court held that the objection raised by the petitioner was correct since it is the High Court
alone that has jurisdiction to wind up a Company and not arbitrator. The Court departed from the
decision of Rufiji Basin Development Authority case by stating that although it is correct but it
could not apply to all cases. Since the present case arose from a Sub-lease the petitioner opting
for insolvency proceedings before dealing with the breach of the agreement was incorrect and if
the court would allow it to happen it would be contrary to the parties agreement. Therefore, the
court as means of encouraging arbitration directs the parties to arbitrate their dispute and the
9
Miscellaneous Commercial Case No.43 of 2020, High Court of Tanzania Commercial Division.
10
Miscellaneous Commercial Case No.34 of 2006, High Court of Tanzania Commercial Division(Unreported).
preliminary objection raised by the defendant is upheld since the parties dispute from which the
petition arouse is an attributable dispute.