Wakilii

Oikocredit Ecumenical Development Co-operative Society, U.A v Ishaka Farmer Sacco Ltd and 3 Ors (CAD ARB 25 of 2017)

Tribunal · [2017] UGCADER 3 · 2017 Application Partly Allowed AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Application for compulsory appointment of arbitrator under Section 11 of the Arbitration and Conciliation Act
Decision
Application to join guarantors dismissed; matter may proceed to arbitration between applicant and first respondent only

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

CADER declined to join the second, third and fourth respondents (guarantors) to the arbitration proceedings. The arbitration clause existed only in the Loan Agreement, not in the separate Guarantee Deed signed by the guarantors. The Guarantee Deed contained its own dispute resolution clause referring disputes to Ugandan courts. Clause 6(b) of the Loan Agreement expressly prohibited the addition or consolidation of parties to the arbitration proceedings. CADER held it lacked jurisdiction to revoke this negative pledge and could not compel the joinder of parties not bound by the arbitration agreement.

Outcome

Application to join guarantors dismissed; matter may proceed to arbitration between applicant and first respondent only

Facts

Oikocredit Ecumenical Development Co-operative Society entered into a Loan Agreement with Ishaka Farmer Sacco Ltd on 11 December 2015. The Loan Agreement contained an arbitration clause providing for disputes to be resolved by arbitration under UNCITRAL Rules, with the arbitrator to be appointed by CADER's Executive Director. The second, third and fourth respondents signed individual Guarantee Deeds in connection with the loan. The Guarantee Deeds contained a separate dispute resolution clause stating that disputes would be governed by the laws of Uganda and brought in Ugandan courts. The applicant sought to have CADER appoint an arbitrator and join the guarantors as parties to the arbitration proceedings. The first respondent did not oppose the application. The guarantors opposed their joinder, arguing they were bound only by the Guarantee Deed dispute resolution clause, not the Loan Agreement arbitration clause.

Issues

  1. Whether CADER has jurisdiction to appoint an arbitrator where the guarantors are not party to the arbitration agreement.
  2. Whether the second, third and fourth respondents (guarantors) can be joined to arbitration proceedings under the Loan Agreement when they signed a separate Guarantee Deed with a different dispute resolution clause.
  3. Whether the negative pledge in Clause 6(b) of the Loan Agreement prevents the joinder of additional parties to the arbitration proceedings.

Orders

  • Application to join second, third and fourth respondents to arbitration proceedings dismissed.
  • Applicant to bear the costs of the second, third and fourth respondents.
  • Each party to bear their own costs with regard to the application for compulsory appointment of arbitrator under the Loan Agreement.

Rules and key headnotes

Arbitration Agreement — Parties — Joinder of Non-Signatories
A party who is not a signatory to an arbitration agreement cannot be compelled to participate in arbitration proceedings under that agreement, even where that party has signed a related guarantee deed with a different dispute resolution clause.
Arbitration Agreement — Negative Pledge — Prohibition on Joinder
Where parties to an arbitration agreement have expressly agreed that no other parties shall be included in or consolidated with the arbitration proceedings, CADER lacks jurisdiction to override that negative pledge and compel the joinder of additional parties.
Jurisdiction of CADER — Section 11 Arbitration and Conciliation Act
CADER's statutory power under Section 11 of the Arbitration and Conciliation Act is limited to the compulsory appointment of arbitrators where parties have failed to constitute a tribunal, and does not extend to determining which parties should be joined to arbitration proceedings.
Dispute Resolution Clauses — Separability Doctrine
Dispute resolution clauses are by nature a contract separate and distinct from the subject matter contract, even where the contracts are interconnected and inter-related.
Arbitration Agreement — Form — Writing Requirement
Section 3(2) of the Arbitration and Conciliation Act requires that an arbitration agreement must be in writing before CADER can exercise jurisdiction to appoint an arbitrator.

Legislation cited (2)

  • Arbitration and Conciliation Act Cap.4 s.11
  • Arbitration and Conciliation Act Cap.4 s.3(2)

Full judgment

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

Oikocredit Ecumenical Development Co-operative Society, U.A v Ishaka Farmer Sacco Ltd and 3 Ors (CAD ARB 25 of 2017) [2017] UGCADER 3 (8 May 2017)
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.