Wakilii

Farmland Industries Limited v Globe Exports Limited (Arbitration Cause 3 of 1991)

High Court · [1991] UGHC 36 · 1991 Application Dismissed AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Application under Arbitration Act section 6(2) for appointment of arbitrator to resolve commercial contract dispute
Decision
Application struck out; parties advised to follow contract terms and commence negotiations for amicable settlement before resorting to arbitration

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

Held that an application for court appointment of an arbitrator under the Arbitration Act is premature where the contract requires parties to first attempt amicable negotiation before submitting to arbitration, and the applicant has not sufficiently proved that such negotiations took place. The court's duty is to give effect to the intentions of the parties as expressed in the contract.

Outcome

Application struck out; parties advised to follow contract terms and commence negotiations for amicable settlement before resorting to arbitration

Facts

On 24 April 1990, the applicant entered into a contract with the respondent for supply of 120 metric tons of beans at USD 400 per ton, F.O.T Kampala. The applicant delivered beans to the respondent, who refused payment on grounds that the beans did not correspond to the quality specified in the contract. A dispute arose. The contract contained an arbitration clause requiring parties to first settle disputes amicably by negotiation, failing which the matter would be submitted for arbitration. By mutual consent in May 1991, the arbitration venue was changed from Djibouti to Uganda. The applicant approached the respondent to agree on an arbitrator, suggesting Mr. Paul Sebalu on 27 May 1991. The respondent refused to sign arbitration instruments. The applicant served notice on 3 September 1991 that if no agreement on an arbitrator was reached within 10 days, the matter would be referred to court. The applicant then applied to court under section 6(2) of the Arbitration Act for appointment of an arbitrator.

Issues

  1. Whether the application for appointment of an arbitrator is properly before the Court where the contractual condition precedent of amicable negotiation has not been satisfied.
  2. Whether the applicant has discharged the onus of proving that negotiations for amicable settlement took place and failed.

Orders

  • Application struck out as premature and incompetent.
  • Each party to bear its own costs.

Rules and key headnotes

Arbitration — Appointment of Arbitrator — Condition Precedent — Requirement for Prior Negotiation
Where a contract contains a clause requiring parties to first settle disputes amicably by negotiation before submitting to arbitration, such negotiation is a mandatory condition precedent that must be satisfied before a court can entertain an application for appointment of an arbitrator under section 6(2) of the Arbitration Act.
Arbitration — Condition Precedent — Burden of Proof of Compliance
The onus of establishing that negotiations for amicable settlement took place and failed rests on the party applying to court for appointment of an arbitrator. The applicant must provide specific evidence of the method and substance of negotiations attempted, not merely general assertions that efforts were made to reach amicable understanding.
Arbitration — Role of Court — Giving Effect to Parties' Intentions
The duty of a court in arbitration matters is to give support to the intention of the parties as expressed in their contract and to carry out those intentions so far as they can be gathered from the terms of the particular contract under consideration.
Contract — Interpretation — Dispute Resolution Clauses — Policy Considerations
Contractual provisions requiring parties to attempt amicable negotiation before resorting to arbitration are put in place intentionally to avoid unnecessary expenses of arbitration and courts and to encourage good commercial relationships. Courts should give effect to such provisions rather than permit parties to circumvent them.

Legislation cited (2)

  • Arbitration Act (Cap 55) s.6(2)
  • Arbitration Rules r.16

Cases cited (1)

  • British East African Co Ltd v Abdulla Alibhai Kanjir & Another (1939) 6 EACA 62

Full judgment

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

Farmland Industries Limited v Globe Exports Limited (Arbitration Cause 3 of 1991) [1991] UGHC 36 (25 October 1991)
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.