WHY TANZANIA NEEDS A NEW ARBITRATION LAW: VOLUME 1; THE ARGUMENT FOR REFORMS
- The 85 year old law needs desperate revision and possibly repealing.
- The rules of evidence, injunctive reliefs and other technical issues needs to correspond to the current prevailing international commercial arbitration standards/models.
- Court interference factor needs to be specifically minimized as per the objective of alternative dispute resolution.
- A look into celebrated literature and instruments on international commercial arbitration on the lex arbitri concept.
Of recently, the Tanzanian Government has been heard and has endeavored to laud out its intention of creating an arbitration institution in Tanzania to harness the local arbitration opportunities as well as compete regionally. Revamping institutional framework for Arbitration in Tanzania is very much a good move. However, it is to our Arbitration experts, a classic case of new wine in the same old cup. Our Arbitration Act, Cap 15 is very much outdated, to say the least.
This article reflects on the ongoing process of new arbitration institutions being readied and most probably poised to apply the same law, and trying to steer many an international arbitration cases this way. We, as stakeholders of arbitration in Tanzania stand at a disadvantaged position since our law is non-competitive and readily non-reflective of the many modern day arbitration standards and models (Such as the UNCITRAL model law or the ICC Arbitration Rules).
2.0 State of the Tanzanian Arbitration law
The Tanzanian Arbitration law is very much in a cluttered state given the fact that it is more than 80 years old and has been loosely revised twice, in 1932 and 1971. Both these revisions did not have a benefit of the modern day’s arbitration practice and technicalities. The Act, in its provisions and schedules still embodies two international instruments, to wit, The Protocol on Arbitration Clauses of 1923 and The Convention on the Execution of Foreign Arbitral Awards of 1927.
Both these instruments are repealed by the New York Convention on Recognition and Enforcement of Foreign Arbitral Awards of 1958. It is a mystery however, how the two repealed instruments are still featured in our law, despite Tanzania having signed the New York Convention in the year 1964, and having revised the Act in 1971 as highlighted earlier.
Furthermore, the situation is worsened since there are several forms of preferring Arbitration, including the one under the Civil Procedure Code (Arbitration) Rules, which essentially caters for arbitration opted when suits are instituted in courts sprawled around in several instruments.
3.0 Why Change of the Arbitration Act Will Affect the International Commercial Arbitration
In an age of commercial competition and expansion of international business, alternative dispute resolution methods are to be readily advanced. One cannot advance if the regulatory law and regimes are archaic and antiquated. In essence, when the countries’ arbitration laws are expansive, harmonized, and reflective of the up to date competitive international commercial arbitration practices, such a country is automatically put at an advantageous position to become an international commercial arbitration hub. The reason is that the law of the country is and may be used to regulate proceedings when the country is preferred as a seat of arbitration. It goes without saying that, international commercial arbitration cannot and will not choose a country with poor and unorganized laws as their hub for important and complex arbitration disputes.
According to Ramazan Zorlu the international commercial arbitration is presumed to be governed by the law of the place in which it is held. He says that this is the ‘lex arbitri’ or the law of the seat of arbitration. But it includes the principal of party autonomy, which allows the parties to choose the applicable law.
In essence therefore, by “party autonomy” Zorlu means that the choice remains the parties’ to choose the applicable law. The applicable law choice therefore goes and is born from where the said arbitration shall seat. This position is not alien to the international arbitration practice and is actually highlighted in various instruments regulating the arbitration processes. Parties would not, it is emphasized, choose the seat of arbitration which is lacking in clear cutting sharp and responsive laws.
The Geneva Protocol states that “the arbitral procedure, including the constitution of the arbitral tribunal, shall be governed by the will of the parties and by the law of the country in whose territory the arbitration takes place.” Zorlu again expounds that the Geneva protocol (vide the article referred) demonstrates that there is a strong link between the law of the country where the arbitration takes place and the law governing that arbitration (lex arbitri). Also see Margaret L. Moses’ book “The Principles and Practice of International Commercial Arbitration she expounds that “….Most parties choose a national substantive law to govern their contract, and a place of arbitration whose lex arbitri will govern the arbitral proceedings”.
It is therefore agreeable and logical that choosing a seat of arbitration is choosing more than a place but rather importantly it is choosing the law and procedure applicable. To summarize the position, it is imperative to make reference to the Wolf Theiss’ analysis on “Seat of Arbitration” which states;
“…Under many national arbitration laws, the seat of arbitration (sometimes also called place of arbitration) is purely a legal term. The choice of the seat of arbitration must be made carefully as it carries consequences for the entire arbitration proceedings.”
Reading more of Wolf Theiss (Supra), it is further explained by the learned authors that a choice of seat of the arbitration shall also affect and have its repercussion onto;-
- Enforceability of the future award: Many signatory parties to the New York Convention will only enforce awards rendered by fellow member countries. Therefore, it is vital that the country chosen for the seat of arbitration is a signatory country of the New York Convention;
- Content of the arbitration law: The arbitration law of the seat will, amongst others, govern the degree of support, but also interference of state courts, e.g. when an award is challenged. If the country of the seat of arbitration adopted the UNCITRAL Model Law, there should be no concerns in this respect . This does not mean that all other countries are disqualified; however, their arbitration laws may need careful review;
- Attitude of domestic courts: It is important to check not only whether the country chosen as the seat of arbitration has a modern arbitration law but also to look at the way local courts interpret this law;
- Necessary resources: Although the seat of arbitration is not necessarily the place where hearings take place, in practice this is often the case. Therefore, the seat of arbitration should be a place which can provide the necessary resources such as hearing rooms, interpreters, transport, etc.; and
- Choice of arbitrators: If the parties cannot agree on a sole arbitrator or the chair of the arbitral tribunal then the institution or the appointing authority will do this for them. In a number of cases, there is a strong chance that the arbitrator will be a national of the seat of arbitration.
In essence from the above extrapolations, it is inevitable that the seat affects the law, procedure and proceedings of arbitration. And as parties are keenly advised to choose very carefully their seat of arbitration for many reasons, but most of all, the leeway of interference by the local courts and certainties of the arbitration law, Tanzania as a jurisdiction lacks the cutting edge legal framework to promote our ability as a suitable arbitration hub.
Overall, to us at Breakthrough Attorneys, the primal legal setup needs to be totally overhauled and updated for the better of the practice and income generation as well. A quick review of the law and its accompanying rules is, to say the least, a necessity.
Kindly read Volume II of this Article on key areas that the Tanzanian Arbitration Act may need to address as a matter of legal necessity.
Also check our other articles on arbitration
 International Arbitration and Lex Arbitri at page 1 (Making reference to A. Redfern’s and M. Hunter’s “Law and Practice of International Commercial Arbitration, Sweet Maxwell, 4th Edition, 2004, page 92.)
 The Geneva Protocol on Arbitration Clauses of 1923 – Article 2.
 Cambridge University Press, 2008 at page 63 (In item D: Parties Choice of Law)
 Looking at the Kenyan Arbitration Act it is apparent that they have readily adopted and incorporated the UNCITRAL Model Law. It is therefore pretty easy and conducive for major international arbitration disputes to choose Kenya as their seat of arbitration.
This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, Breakthrough Attorneys, its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.