Wakilii

British American Tobacco Uganda Ltd v Lira Tobacco Stores (HCMA 924 of 2013)

High Court · [2013] UGCOMMC 192 · 2013 Application Granted — Referred to Arbitration AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Application for stay of proceedings and referral to arbitration under the Arbitration and Conciliation Act arising from civil suit for breach of distribution contract
Decision
High Court proceedings closed; dispute referred to arbitration in accordance with parties' arbitration agreement

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

The court held that filing a written statement of defence does not constitute waiver of the right to apply for arbitration under section 5 of the Arbitration and Conciliation Act. Section 5 mandates referral to arbitration where an arbitration agreement exists; the court has no discretionary power to refuse referral except on statutory grounds (agreement null and void, inoperative, incapable of performance, or no dispute). The arbitration clause is independent of the substantive contract and survives the expiry of the distribution agreement. Trade usage cannot override statutory provisions requiring arbitration. Application granted; dispute referred to arbitration.

Outcome

High Court proceedings closed; dispute referred to arbitration in accordance with parties' arbitration agreement

Facts

The applicant (British American Tobacco Uganda Ltd) and respondent (Lira Tobacco Stores) entered into a distribution agreement on 1 January 2010 for one year, expiring 31 December 2012. The agreement contained an arbitration clause (clause 7.13.2) requiring disputes to be resolved through mediation and, failing that, arbitration. The respondent filed civil suit for breach of contract after the agreement expired, claiming the parties had customarily continued business after each annual agreement lapsed until signing a new agreement months later (typically June or July). The applicant filed a defence and counterclaim, then applied for stay of proceedings and referral to arbitration under section 5 of the Arbitration and Conciliation Act. The respondent opposed, arguing both parties had waived arbitration by litigating, and that trade custom justified court adjudication.

Issues

  1. Whether the Defendant/Applicant waived its right to apply for reference of the dispute to arbitration by filing a written statement of defence and counterclaim.
  2. Whether the High Court has discretionary powers under section 5 of the Arbitration and Conciliation Act not to refer the dispute to arbitration.
  3. Whether the arbitration clause remained operative and enforceable after the distribution agreement had lapsed.
  4. Whether trade usage and custom between the parties could override the statutory requirement to refer disputes to arbitration.

Orders

  • Application for reference to arbitration granted.
  • Dispute embodied in High Court proceedings referred to arbitral tribunal to be appointed by parties under clause 7.13.2 of distribution contract.
  • Proceedings in High Court collapse and file closed.
  • Costs occasioned by commencing action in High Court to be determined by arbitral tribunal.

Rules and key headnotes

Stay of Legal Proceedings — Filing Defence Not a Waiver
Section 5(1) of the Arbitration and Conciliation Act expressly permits a party to apply for reference to arbitration after filing a written statement of defence. Filing a defence does not operate as a waiver of the right to apply for arbitration.
Mandatory Referral to Arbitration — No Judicial Discretion
Where an arbitration agreement exists, section 5(1) of the Arbitration and Conciliation Act mandates referral to arbitration. The court has no discretionary power to refuse referral except on statutory grounds: that the arbitration agreement is null and void, inoperative, incapable of being performed, or that there is no dispute between the parties with regard to matters agreed to be referred to arbitration.
Separability Doctrine — Independence of Arbitration Clause
An arbitration clause is independent of the substantive contract and survives the expiry or invalidity of the main agreement. Section 16(1) of the Arbitration and Conciliation Act provides that an arbitration clause forming part of a contract shall be treated as an agreement independent of other contract terms; a decision that the contract is null and void does not invalidate the arbitration clause.
Arbitral Jurisdiction — Competence-Competence Principle
Under section 16(1) of the Arbitration and Conciliation Act, the arbitral tribunal may rule on its own jurisdiction, including on objections regarding the existence or validity of the arbitration agreement. Issues concerning the expiry, validity, or continuing effect of the main contract are properly determined by the arbitral tribunal.
Inherent Jurisdiction — Subordination to Statute
Section 14(2) of the Judicature Act requires the High Court's jurisdiction to be exercised in conformity with written law. The court has no jurisdiction or discretionary powers to adjudicate disputes on the basis of custom or usage where statute (section 5 of the Arbitration and Conciliation Act) mandates arbitration.
Effect of Referral to Arbitration — Collapse of Court Proceedings
Where the court orders a dispute embodied in pending court proceedings to be referred to arbitration under section 5 of the Arbitration and Conciliation Act, the court proceedings collapse and the file is closed. A formal stay of proceedings serves no useful purpose once the entire dispute is referred for resolution through arbitration.
Supervisory Jurisdiction of Court over Arbitration
Under section 9 of the Arbitration and Conciliation Act, except as provided in the Act, no court shall intervene in matters governed by the Act. The High Court retains appellate and supervisory powers as prescribed by statute, including ruling on jurisdiction under section 16, assisting in taking evidence under section 27, and setting aside arbitral awards under section 34.

Legislation cited (11)

Cases cited (8)

  • Power and City Contractors Ltd v LTL Project (PVT) Ltd (Miscellaneous Application No. 7062 of 2011)
  • Heyman and Another v Darwin's Ltd [1942] 1 All ER 337
  • National Social Security Fund and Another v Alcon International Ltd (Civil Appeal No. 02 of 2008)
  • Mugabo v Saava and 2 Others (Civil Suit No. 65 of 2012)
  • Daniel Delestre and Six Others v Hits Telecom (U) Ltd (Miscellaneous Application No. 310 of 2013)
  • Atteridgeville Town Council and Another v Costa Livanos t/a Livanos Brother Electrical [1991]
  • Chevron Kenya Ltd v Daqare Transporters Ltd (Miscellaneous Application No. 490 of 2008)
  • National Social Security Fund and Another v Alcon International Ltd (Civil Appeal No. 15 of 2009)

Full judgment

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The original judgment as reported. Read the original PDF before relying on any passage.

British American Tobacco Uganda Ltd v Lira Tobacco Stores (HCMA 924 of 2013) [2013] UGCommC 192 (14 November 2013)
Source: this page presents Wakilii’s issue analysis and metadata for a publicly reported Ugandan judgment. Any AI-generated summary is marked as such. Judgment text is sourced from the Uganda Legal Information Institute (ulii.org). Wakilii is not affiliated with ULII.