Introduction
This advice addresses the legal position of Global Marine Equipment Ltd (GME) following the commencement of court proceedings against it in the High Court of Tanzania by Bullu’s Engineering Co. Ltd (BECL). The core issue is whether GME can compel BECL to resolve their dispute through arbitration, as stipulated in their contract, despite BECL having initiated a lawsuit. This analysis will focus on the application of the Tanzanian Arbitration Act, 2020, relevant international principles, and case law to determine the enforceability of the arbitration agreement and the likely outcome of GME’s objection to the court proceedings. The advice will conclude that GME has a strong legal basis to request a stay of the court proceedings and to have the matter referred to arbitration.
Enforceability of the Arbitration Agreement and Stay of Proceedings
The central issue for GME is whether the Tanzanian High Court is obligated to recognise and enforce the arbitration agreement in Clause 18 of the contract. The legal framework for this is primarily found in the Arbitration Act, 2020 of Tanzania ("the Act"), which modernised the country's arbitration law in line with international standards, particularly the UNCITRAL Model Law on International Commercial Arbitration.
The principle of party autonomy, which allows commercial parties to choose their method of dispute resolution, is a cornerstone of the Act. Clause 18 is a clear and broad arbitration agreement, covering "Any dispute, controversy or claim arising out of or relating to this Agreement". The current dispute concerning defective equipment and outstanding payments falls squarely within this scope. For an arbitration agreement to be valid, Section 16 of the Act requires it to be in writing, a condition that is satisfied by its inclusion in the main contract between BECL and GME.
GME's immediate recourse upon being served with court documents is to apply for a stay of proceedings. The key provision is Section 13(1) of the Act, which states:
> "A Court before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so requests not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed."
This provision is mandatory, using the word "shall", which limits the court's discretion. The court must refer the parties to arbitration if the conditions are met. GME has "immediately objected" to the proceedings, thereby satisfying the requirement to make the request before submitting its substantive defence. The court’s inquiry is therefore confined to the narrow exceptions of whether the agreement is "null and void, inoperative or incapable of being performed". GME’s position is strengthened by Tanzania's accession to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958. Article II(3) of the Convention contains a nearly identical obligation, requiring courts of a contracting state to refer parties to arbitration when seized of a matter subject to a valid arbitration agreement. Tanzanian courts are therefore bound by both domestic statute and international treaty to uphold the agreement.
BECL’s Arguments Against Arbitration
BECL has raised two main arguments to oppose the stay application: that the arbitration agreement has been rendered ineffective, and that the Tanzanian courts have jurisdiction due to the location of the subject matter of the dispute. These arguments are unlikely to succeed.
Is the Agreement “No Longer Effective”?
BECL argues that the exchange of emails concerning the dispute, without express mention of arbitration, has made the arbitration agreement "no longer effective". This appears to be an argument that the agreement has become "inoperative" under Section 13(1) of the Act, or that BECL has waived its right to arbitrate. For a waiver to be established, there must be a clear and unequivocal act by a party showing its intention to abandon the right to arbitrate. Merely engaging in correspondence to discuss or negotiate a settlement of a dispute, without more, is generally not considered sufficient to constitute a waiver (Redfern and Hunter, 2015). BECL would need to show that GME, through its conduct, agreed to resolve the dispute through litigation instead of arbitration. GME’s immediate objection upon receipt of court papers demonstrates the opposite: a clear intention to rely on the arbitration clause. Therefore, it is highly improbable that a court would find the agreement inoperative on this basis.
The Relevance of the Location of Equipment and Losses
BECL's second argument is that because the equipment is located in Tanzania and the losses occurred there, the Tanzanian courts have jurisdiction. This argument conflates the court's general jurisdiction over matters connected to Tanzania with the effect of a valid forum selection clause, in this case, an arbitration agreement. By agreeing to arbitrate, the parties have contractually ousted the jurisdiction of national courts over the substance of their disputes. The choice of Nairobi, Kenya as the seat of arbitration is a deliberate selection of a neutral legal forum to govern the arbitral process. The physical location of evidence or the place where a breach of contract occurred does not invalidate this choice. The Tanzanian Court of Appeal has consistently shown a pro-enforcement bias towards arbitration agreements and awards, respecting party autonomy as a matter of public policy (see, for example, Dowans Holdings S.A. & Another v Tanzania Electric Supply Company Limited [2012] TZCA 71). A Tanzanian court is therefore very likely to find that the parties’ express agreement to arbitrate in Nairobi supersedes any default jurisdictional rules based on the location of the assets or harm.
Interim Measures and Breach of the Arbitration Agreement
A further issue arises from BECL obtaining an interim injunction from the Tanzanian High Court. GME contends this action, along with the commencement of the lawsuit itself, constitutes a breach of the arbitration agreement. This argument is only partially correct.
Commencing court proceedings on the substantive dispute is a clear breach of the negative promise inherent in an arbitration agreement not to litigate. The remedy for this breach is the one GME is seeking: a stay of those proceedings under Section 13 of the Act.
However, BECL's application for an interim injunction is viewed differently under the law. The Arbitration Act, 2020, in line with modern international practice, recognises that court assistance may be necessary to preserve the status quo pending the constitution of an arbitral tribunal. Section 14(1) of the Act expressly provides that a party may, before or during arbitral proceedings, request an interim measure from a court. Crucially, Section 14(3) clarifies the legal effect of such a request:
> "A request for interim measures addressed by any party to a Court shall not be deemed to be an infringement or a waiver of the arbitration agreement."
This provision makes it clear that seeking an injunction from a national court to secure assets, such as preventing the removal of the equipment, is compatible with an agreement to arbitrate. Therefore, GME's argument that BECL breached the arbitration agreement by seeking the injunction is incorrect as a matter of Tanzanian law. While BECL was wrong to initiate the main lawsuit, it was within its rights to seek protective measures from the court.
Conclusion and Advice for GME
GME is in a strong legal position. The arbitration agreement in Clause 18 is valid and covers the dispute with BECL. BECL’s initiation of proceedings in the High Court of Tanzania is a breach of this agreement. GME should proceed with its formal application to the High Court for an order to stay the proceedings and refer the dispute to arbitration, as mandated by Section 13 of the Arbitration Act, 2020.
BECL’s arguments that the agreement is inoperative due to email exchanges and that Tanzanian courts have jurisdiction because the contract's subject matter is in Tanzania are weak and contrary to established principles of arbitration law and party autonomy. The court is highly likely to reject these arguments and grant the stay.
While BECL's commencement of the substantive claim was a breach of the arbitration agreement, its application for an interim injunction was not. This is expressly permitted under Section 14 of the Act and does not prejudice the parties' obligation to arbitrate. GME should therefore focus its legal challenge on securing the stay of the main proceedings, which will compel BECL to pursue its claim through the agreed arbitral process seated in Nairobi.
References
Dowans Holdings S.A. & Another v Tanzania Electric Supply Company Limited [2012] TZCA 71 (Court of Appeal of Tanzania, Civil Appeal No. 71 of 2012, unreported).
Redfern, A. and Hunter, M. (2015) Redfern and Hunter on International Arbitration. 6th ed. Oxford: Oxford University Press.
Legislation and Conventions
Arbitration Act, 2020 (Act No. 2 of 2020) (Tanzania).
United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958).
UNCITRAL Model Law on International Commercial Arbitration (1985, with amendments as adopted in 2006).
