4th April 2024
INTRODUCTION
Effective dispute resolution is an essential part
of any society, this is because disputes must not be prolonged as they detrimentally
impact business and social relationships (Tembo and others. Assessing the
Effectiveness of Arbitration in the Zambian Construction industry, 2014). The Constitution of
Zambia under Article 118(2)(d) encourages alternative dispute resolution
mechanisms. This essay aims to provide a comprehensive analysis of one such
alternative, namely Arbitration, delving into its critical aspects and its role
in fostering effective dispute resolution.
The predominant method of dispute resolution
worldwide has traditionally been litigation, wherein parties seek resolution
through the formal court system. However, the escalating global population has
significantly burdened courts with an overwhelming caseload, leading to delays
in resolving disputes. The drawbacks of litigation, such as its high cost, the
intimidating courtroom environment, stringent procedural rules, and the strain
on social and business relationships, have prompted a re-evaluation of its
effectiveness. Consequently, various jurisdictions, including Zambia, advocate
for alternative dispute resolution (ADR) mechanisms as a more flexible and
efficient means of resolving conflicts outside the courtroom. These mechanisms,
such as arbitration, mediation, conciliation, and negotiation, are encouraged
to promote social justice and address the limitations of traditional
litigation.
Arbitration is
defined as a form of alternative dispute resolution which is a legal technique
for the resolution of disputes outside the courts, wherein the parties to the
dispute refer it to one or more persons called arbitrators or arbitral
tribunal, by whose decision called the award they agree to be bound.
In Zambia, the
primary regulatory framework for arbitration is the Arbitration Act No. 19 of
2000, which incorporates and modifies the United Nations Commission on
International Trade Law's Model Law on International Commercial Arbitration
(UNCITRAL Model Law). Section 8 of the Arbitration Act(no. 19 of 2001)
expressly domesticates the UNCITRAL Model Law as the first schedule to the Act,
aligning it with Zambian arbitration proceedings, regardless of whether they
occur within or outside the country.
A notable legal
precedent reinforcing the adoption of the UNCITRAL Model Law is evident in the
Supreme Court's ruling on China Henan International Cooperation Group
Company v G and G Nation Wide (2017 ZMSC 18). The court
clarified that Zambia, in repealing the old Arbitration Act (Chapter 40) and
enacting the current Arbitration Act, chose to adopt the Model Law with
specific modifications outlined in the Arbitration Act. A similar affirmation
was made in the case of Zambia Revenue Authority v Tiger Limited and
Zambia Development Agency (2016 ZMSC 11), where the court asserted
that Zambia's Arbitration law essentially mirrors the UNCITRAL Model Law. This
position extends beyond Zambia, as exemplified by the Zimbabwean Arbitration
Act, which similarly includes the Model Law as Schedule 1 to the Act. In
addition, Zambia has rectified
the New York Convention on the Recognition and Enforcement of Foreign
Arbitration awards which were enacted in New York on June 10, 1958, by the
United Nations Conference on International Commercial Arbitration, Zambia has
domesticated the New York Convention with reservations in Zambia as Schedule 2
to the Arbitration Act.
Other pieces of
legislation include the domestication of the Washington Convention for the
Settlement of Investment Disputes Between States and Nationals of Other States
through the Investment Dispute Convention. Additionally, Statutory Instrument
No. 12 of 2007 introduces the Arbitration (Court Proceedings) Rules, and the
Arbitration (Court Conduct and Standards) Regulations, collectively shaping the
comprehensive legal framework governing arbitration in Zambia.
One of the essential
elements of arbitration is that it is based on the wishes of the parties.
Therefore, the disputants must agree prior to the dispute arising or during the
ongoing dispute to subject it to arbitration. This agreement is referred to as
an arbitration agreement. Section 2 of the Arbitration Act (no. 19 of 2001)
defines an arbitration agreement as one, whether in writing or not, by parties
to submit to Arbitration all or certain disputes that have arisen or which may
arise between them in respect of a defined legal relationship, whether
contractual or not. Arbitration can therefore arise as a contractual
requirement or parties decide to arbitrate once a dispute occurs. This was
illustrated in Savenda Management Services Limited v Stanbic Bank
Zambia Limited (2018 ZMSC 413) where the respondent gave the appellant
banking facilities which were secured by, among other things, legal mortgages.
The parties agreed to refer to arbitration any dispute that may arise
concerning the banking facilities, as was stipulated under Clause 14 of the
Facility letters.
Crucially, an
arbitration agreement must align with the types of disputes amenable to
arbitration. Section 6 of the Arbitration Act outlines disputes that cannot be
determined through arbitration, encompassing those contrary to public policy,
criminal matters, and issues related to paternity or parentage determination
among others listed in the aforementioned section.
This agreement not
only incorporates the nature of the dispute amenable to arbitration but also
the names of the parties, the method of appointment of the members of the
arbitral tribunal, and the number. Some of the qualifications that are
considered when parties are considering who to appoint as their arbitrator are
the person's impartiality and independence from the dispute and the parties,
and other standards agreed upon by the parties. Failure to comply with these
qualifications may be a valid ground to challenge an award or the jurisdiction
of the arbitrator. In the case of Zambia Telecommunications Co. Limited
v. Celtel (Z) Ltd (2008 ZMSC 23) the Supreme Court had the opportunity
to consider whether the Chairman of the arbitral tribunal's failure to disclose
his interest in another matter rendered the arbitral award issued by the
arbitral tribunal in conflict with public policy therefore subject to being set
aside.
Upon the emergence of
a dispute, parties refer to their arbitration agreement to ascertain its
compatibility with the agreed-upon terms. In Audrey Nyambe v Total
Zambia Limited (Appeal No.29 of 2011), a Marketing License Agreement
contained an arbitration clause specifying that disputes arising during the
contract's continuance would be resolved through arbitration. The court,
however, determined that a dispute arising post-termination fell outside the
scope of the arbitration agreement, rendering it inoperative. In cases where the matter is deemed arbitrable, it
is brought before the arbitral tribunal that was agreed upon by both parties in
the arbitral agreement.
The arbitration
process is a more formal dispute resolution process where parties are heard
before a neutral decision-maker known as the arbitrator. This process closely
mirrors court proceedings, encompassing opening statements, the presentation of
evidence through documents, testimony, and exhibitions, along with the
examination of witnesses under oath. While the arbitration procedure maintains
certain similarities to court proceedings, it distinguishes itself by relaxed
rules of evidence, often considering hearsay evidence (Helmut Rubmann, Remedies
against Arbitral Awards: The Legal Consequences of Fraud in Arbitral
Proceedings).
Following the
thorough presentation of cases, the arbitral tribunal issues an award, and the
prevailing party possesses the right to seek enforcement through a court order.
Section 20(1) of the Arbitration Act establishes the general rule that arbitral
awards, made following the arbitration agreement, are deemed final and binding
on both parties, as well as any party claiming through or under them. Unlike
judgments from first-instance courts, arbitral awards are not subject to
appeal, rendering them more conclusively final.
Despite the idea that
arbitration outcomes are final, parties can still contest an award based on
specific grounds laid out in the Arbitration Act. The case of National
Pension Scheme Authority v Sherwood Greene Limited (2018 ZMHC 283) confirmed
that the only way to challenge an arbitral award is by applying to set it
aside. In Zambia, dissatisfied parties may take it up with the High Court
through an application to set aside the award. The process for this is detailed
in Section 23 of the Arbitral (Court Proceedings) Rules (Statutory instrument
75 of 2001), which specifies that such applications are submitted using
originating summons.
While challenging
arbitral awards is a possibility, the permissible grounds for such challenges
are notably restricted, as highlighted in the case of Zambia Revenue
Authority v Tiger Limited and Zambia Development Agency (2016 ZMSC 11). The
Supreme Court clarified that there are two distinct sets of grounds, as
outlined in Section 17 of the Arbitration Act. The first set, under Section
17(2)(a) from (i) to (v), includes factors such as the incapacity of a party to
form a valid arbitral agreement. This ground, rooted in the consent-based
nature of arbitration, allows for setting aside an award if a party is a minor
or mentally incapable, lacking proper representation.
Other grounds in this
set involve situations where a party was not adequately notified of arbitrator
appointments or proceedings, or if a party couldn't present their case
effectively. Since arbitration is party-driven, each party must have an equal
role participating as to who will be in of the arbitral proceedings and render
a final arbitral award. Additionally, an award may be set aside if an
arbitrator exceeds the submission to arbitration, the composition or procedure
deviates from the parties' agreement, or if the award is not yet binding,
suspended, or set aside by a relevant court.
In the second set,
covered by Section 17(2)(b) from (i) to (iii), the court may set aside an award
if the subject matter is not arbitrable under Zambian laws, if the award
conflicts with public policy, or if fraud, corruption, or misrepresentation
influenced the award. To successfully challenge an award under Section
17(2)(a), a party must demonstrate that the circumstances in the specified
grounds indeed exist. In contrast, under Section 17(2)(b), the court merely needs
to find that the award falls under one of the three grounds outlined in (i) to
(iii). However, the timeframe to make an application to set aside an award is
limited. Section 17(3) of the Arbitration Act states that an application to set
aside an award may not be made after 3 months have elapsed from the date on
which the party making the application had received the award.
Similarly, under
international law, an arbitral award according to Article 35(1) of the
UNICITRAL Model Law is binding irrespective of the country it was made and upon
application in writing to the competent court shall be enforceable. A party may
not be happy with the arbitral tribunal's decision even if the award is binding
on both parties. As a result, article 34 of the UNICITRAL Model law, which
governs international arbitration, permits a party to apply that an award be
set aside, which is similar to the grounds provided for in section 17 of the
Arbitration Act.
The above discussion
highlights the various advantages associated with arbitration as an alternative
dispute resolution mechanism. Fundamentally, it operates as a party-driven
process, wherein the disputing parties collaboratively decide whether to submit
their matter to arbitration and select the arbitrator or arbitral tribunal, provided
they demonstrate independence. This differs significantly from the judicial
system, where parties lack the ability to choose their adjudicators.
Moreover, in arbitral
proceedings, parties can establish fair conditions regarding the place of
arbitration, the language used, procedural aspects, applicable rules of law,
nationality considerations, and legal representation (Mwenda, Arbitration in
Zambia: The East African Journal). Arbitration may take place in any country,
in any language, and with arbitrators of any nationality. With this
flexibility, it is generally possible to structure a neutral procedure offering
no undue advantage to any party.
Furthermore, the
prompt and cost-effective nature of arbitration sets it apart from litigation.
The limited grounds for challenging arbitral awards, compared to court
judgments, contribute to the quicker resolution of disputes and prevent
prolonged and costly appeals. Also, the flexibility of arbitration allows
parties to set up proceedings that can be conducted quickly and economically as
the circumstance allows (Ibid).
Also, arbitration
hearings are not public, and only the parties themselves receive copies of the
awards. The confidentiality of arbitration is provided for in section 27 of the
Arbitration Act
Despite the numerous
advantages that are inherent in arbitration, it also has short-comings. For
instance, there is no creation of precedence. Consequently, every dispute
before an arbitral tribunal is heard on its individual merits. It therefore
lacks consistency and predictability which are essential in the fostering of a
good legal system.
Also, matters that
are capable of being arbitrated are limited. Section 6 (2) of the Arbitration
Act provides a list of matters that cannot be referred to arbitration. These
are; criminal matters, matrimonial cause, paternity, maternity or parentage of
a person, and matters affecting the interests of a minor or person under legal
incapacity.
CONCLUSION
In summary, alternative dispute mechanisms such as
arbitration have played a pivotal role in prompting social justice. Not only
does it help in decongesting the court system that experiences a backload of
cases but also helps in the quick dispensation of justice. Moreover, due to its
effectiveness, arbitration is widely practiced on an international scale as
well.
BIBLIOGRAPHY
STATUTES
The
Arbitration Act No.19 of 2000
The Constitution
Act No.2 of 2016, chapter 1 of the laws of Zambia
The New York Convention on the Recognition and
Enforcement of Foreign Arbitration awards (Done in New York on June 10, 1958)
The United Nations Commission on International Trade
Law's Model Law on International Commercial Arbitration (UNCITRAL) Model Law
(Adopted on 21st June 1985)
CASES
Audrey Nyambe v Total Zambia Limited Appeal No.29 of
2011
China
Henan International Cooperation Group Company v G and G Nationalwide [2017]
ZMSC 18
Savenda
Management Services Limited v Stanbic bank Zambia Limited [2018] ZMSC 413
Zambia
Revenue Authority v Tiger limited and Zambia Development Agency [2016] ZMSC 11
Zambia
Telecommunications Co. Limited v. Celtel (Z) Ltd [2008] ZMSC 23
JOURNAL
ARTICLES
Kenneth. K. Mwenda, Arbitration in Zambia: ‘The Efficacy of the Legal
Framework’ (n.d) The East African Law Journal http://erepository.uonbi.ac.ke/handle/11295/43029/browse?type=subject&value=Arbitration+law+in+Zambia+the+efficacy+of+the+legal+framework accessed on 22nd January, 2024
BOOKS
John
Williams Rowley et al., The Guide to Challenging and Enforcing Arbitration
Awards (London: Law Business Research Limited, 2021)
OTHER
SOURCES
Chipozya Tembo, Dastan Chiponde, Lawrence Punda Mutale
and PatienceMupeta ‘Assesing the Effectiveness of Arbitration in the Zambian
Construction Industry’ (2014) Conference paper 2 https://www.researchgate.net/publication/292074981
assessing the effectiveness of arbitration in the zambian Construction Industry
Helmut
Rubmann, Remedies against Arbitral Awards: The Legal Consequences of Fraud in
Arbitral Proceedings http://archiv.jura.uni-saarland.de/projekte/Bibliothesk/text.php?id=306
LEGAL AID INITIATIVE(Bringing the Law to Your Comfort)
About the Author:Nosiku Nyambe is a third year student at the University of Zambia and serving as the Chief Legal Editor of Legal Aid Initiative.
