Wakilii

Ruling in Kilembe Mines Ltd v BM Steel Ltd (HCT-00-CC-MC 2 of 2005)

High Court · [2005] UGCOMMC 40 · 2005 Application Granted — Award Set Aside AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Application to set aside an arbitral award under Section 34 of the Arbitration and Conciliation Act
Decision
Arbitral award set aside. Parties left to determine their next course of action (whether to commence fresh arbitration or court proceedings).

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

Held that the arbitral award was set aside. The arbitrator exhibited evident partiality by failing to scrutinise the respondent's duplicitous claims for special damages with the same rigour applied to the applicant's counterclaim, resulting in unjust enrichment. The arbitrator also prevented the applicant from calling key witnesses (an auditor and electrical engineer) without proper justification, thereby denying the applicant the opportunity to fully present its case. Both grounds independently justified setting aside the award under Section 34 of the Arbitration and Conciliation Act. The Minister's directive to withdraw proceedings did not bar the application, as the Public Enterprises Reform and Divestiture Act protected the autonomy of the public enterprise's board. Costs awarded to the applicant.

Outcome

Arbitral award set aside. Parties left to determine their next course of action (whether to commence fresh arbitration or court proceedings).

Facts

Kilembe Mines Ltd (applicant) and BM Steel Ltd (respondent) entered into a five-year lease and services agreement on 13 November 2001, under which the applicant provided premises, equipment, and 33KV electricity supply to the respondent. Within the first year, disputes arose leading to termination of the agreement and the respondent's relocation to Mbarara. The respondent commenced arbitration proceedings. On 13 December 2004, an arbitrator issued an award ordering the applicant to pay the respondent UGX 3,488,427,789 for special and general damages, with interest. The award included claims for lost income due to power unavailability, failure to supply scrap, insufficient power, procurement costs, equipment damage, and relocation costs. The applicant applied to set aside the award, alleging violation of conciliation procedures, evident partiality, inability to present evidence, and errors in damages assessment.

Issues

  1. Whether the application to set aside the arbitral award was filed under the correct cause number.
  2. Whether the application to set aside the arbitral award was filed within the statutory time limits.
  3. Whether the Minister's directive to withdraw legal proceedings barred the applicant from pursuing the application.
  4. Whether the arbitral procedure violated a prior agreement between parties to proceed to conciliation.
  5. Whether the arbitrator displayed evident partiality in conducting the arbitral proceedings and making the award.
  6. Whether the arbitrator prevented the applicant from fully presenting its case.
  7. Whether the arbitrator's award on damages was manifestly erroneous.

Orders

  • Application to set aside the arbitral award allowed.
  • Arbitral award dated 13th December 2004 set aside.
  • Costs of the application awarded to the applicant.
  • Costs before the arbitral tribunal awarded to the applicant.

Rules and key headnotes

Setting Aside Arbitral Awards — Evident Partiality — Unequal Treatment in Evaluation of Evidence
An arbitrator who subjects one party's claim to rigorous scrutiny while accepting the opposing party's claim without questioning or analysis exhibits evident partiality, justifying the setting aside of the award under Section 34 of the Arbitration and Conciliation Act. Evident partiality need not be actuated by dishonesty, fraud, or corruption; it is established where the scales were not even in the arbitrator's treatment of the parties.
Special Damages — Duplicitous Claims — Burden of Proof
Where claims for special damages include duplicitous heads that claim loss of income on the same product, from the same production line, for the same period, an arbitrator who fails to identify and disallow such overlapping claims awards unjust enrichment. Claims for loss of profits on a shortfall in production and simultaneous claims for loss of profits due to unavailability of power during the same period are duplicitous where both relate to the same production line and period.
Right to Present One's Case — Refusal of Witnesses
An arbitrator who refuses to permit a party to call relevant witnesses without clear and convincing reasons prevents that party from fully presenting its case, constituting a ground for setting aside the award under Section 34(2)(iii) of the Arbitration and Conciliation Act. The right to present one's case includes a reasonable opportunity to call witnesses whose testimony is material to the issues in dispute.
Miscellanous Causes versus Arbitral Causes — Numbering of Proceedings
Where an application to set aside an arbitral award is numbered as a Miscellaneous Cause rather than under the original Arbitral Cause number as required by Rule 3 of the Arbitration Rules, this is a technicality that cannot defeat substantive justice under Article 126(2)(e) of the Constitution, particularly where the error lies with the court registry and not the applicant party.
Autonomy of Public Enterprises — Ministerial Interference
Under Section 9(1)(a) of the Public Enterprises Reform and Divestiture Act, government policy must recognise autonomy in public enterprise management, including freedom to manage operational and financial affairs without interference. A minister's directive to a public enterprise to withdraw legal proceedings constitutes unlawful interference in the enterprise's autonomy. The competence to institute or defend legal actions lies with the board of directors and management, not with shareholders including government, unless the company's regulations provide otherwise.
Conciliation Proceedings — Bar to Arbitration
Under Section 62 of the Arbitration and Conciliation Act, no arbitral or judicial proceedings may be initiated in respect of a dispute while conciliation proceedings continue between the parties. However, conciliation proceedings are not in progress unless and until the parties have appointed a conciliator. Mere investigatory steps by a third party do not constitute conciliation proceedings that bar arbitration.
Remoteness — Relocation Costs — Foreseeability
An arbitrator determining liability for damages claimed as a consequence of breach must consider whether such damages were reasonably foreseeable and not too remote. Where an agreement is for a fixed term, costs of constructing a new production facility to which a party relocates may be too remote as a consequence of breach, as the party would have been required to relocate or remove itself from the premises upon expiry of the agreement in any event.

Legislation cited (10)

Cases cited (3)

  • Yugasta Construction Ltd v Coffee Marketing Board (Arbitral Cause No. 1 of 1884)
  • Total Uganda Ltd v Buramba General Agencies (Arbitral Cause No. 3 of 1998)
  • London Maritime Arbitration by Clare Ambrose and Karen Maxwell 1996

Full judgment

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

Ruling in Kilembe Mines Ltd v BM Steel Ltd (HCT-00-CC-MC 2 of 2005) [2005] UGCommC 40 (13 July 2005)
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.