LABX Scientific Ltd v Katakwi District Local Government and Attorney General (Miscellaneous Cause No. 02 of 2025) [2025] UGCommC 174 (19 June 2025)

# 5 **THE REPUBLIC OF UGANDA IN THE HIGH COURT OF UGANDA AT KAMPALA (COMMERCIAL DIVISION) MISCELLANEOUS CAUSE NO. 02 OF 2025 LABX SCIENTIFIC LTD :::::::::::::::::::::::::::::::::::::::::::::::::::: APPLICANT** 10 **VERSUS 1. KATAKWI DISTRICT LOCAL GOVERNMENT 2. ATTORNEY GENERAL :::::::::::::::::::::::::::::::::::::::::::: RESPONDENTS BEFORE: HON. LADY JUSTICE PATIENCE T. E. RUBAGUMYA**

**RULING**

## 15 Introduction

This application was brought by way of Notice of Motion under **Sections 6, 11(3), 19, 68 and 71 (now repealed) of the Arbitration and Conciliation Act, Cap. 5** and **Orders 47 rule 1 and 52 rules 1 and 3 of the Civil Procedure Rules SI 71-1**, seeking orders that:

- 20 1. The Court be pleased to appoint an arbitrator to resolve the dispute. - 2. Costs of this application be provided for.

## Background

The background of this application is contained in the affidavit in support 25 of the application deponed by **Mr. Makokha Vincent**, the Applicant's Director, and is summarized below:

1. That the Ministry of Education and Sports advertised a bid for the supply of workshop equipment vide PRN: KATA857/SUPLS/22- 23/00011 to Epel Memorial Vocational Training Institute, Katakwi.

- 2. That the Applicant was the best evaluated bidder and to that, on 3rd 5 July, 2023 a Contract for the supply of equipment was executed and that the contract price was UGX 450,000,000/=. - 3. That the Applicant supplied the equipment as acknowledged by the 1st Respondent. - 10 4. That the 1st Respondent wrote to the Ministry of Education and Sports giving it the clearance for the Applicant's payment to be made, but the same was not effected despite numerous demands. - 5. That since the Applicant has not been paid, a dispute that needs resolution, has arisen. - 15 6. That the Applicant, on numerous occasions, requested the Respondents to appoint an arbitrator so that the matter is resolved by arbitration in accordance with the Contract, but they have refused. - 7. That due to the Respondents' refusal to appoint an arbitrator, the 20 Applicant has a right to apply to CADER for the appointment of an arbitrator however, CADER is not fully constituted and therefore, cannot appoint an arbitrator. - 8. That therefore, Court has the authority to appoint an arbitrator.

In reply, **Ms. Akwi Harriet Faith** the Principal Assistant Secretary of the 25 1st Respondent, opposed the application contending that:

- 1. The Contract between the 1st Respondent and the Applicant provides for arbitration, as a mechanism of dispute resolution. - 2. The 2nd Respondent responded to the Applicant's request for the appointment of an arbitrator.

5 3. Under the law, only CADER is empowered to or has the jurisdiction to entertain an application for the appointment of an arbitrator in case the parties fail to appoint one.

In rejoinder, **Mr. Makokha Vincent** the Applicant's Director, reiterated his earlier averments and added that:

- 10 1. The Respondents confirm the arbitration clause in the Agreement, but they have failed to honour it. - 2. The 2nd Respondent's, alleged response has neither been served onto the Applicant nor was it attached to the affidavit in reply. - 3. The Respondents have not suggested an alternative arbitrator from 15 the proposed Mr. Kenneth Akampurira, nor have they rejected him. - 4. The Court is vested with the jurisdiction to appoint an arbitrator since CADER is not fully constituted. - 5. It is in the interest of justice that the Court appoints Mr. Kenneth Akampurira as the arbitrator in the matter for the final resolution of 20 the dispute.

## Representation

The Applicant was represented by **M/s CMS & Co. Advocates** while the Respondents were represented by the **Attorney General's Chambers**.

Both parties filed their submissions as directed by Court and the same 25 have been considered.

#### Issues for Determination

In their written submissions, each party raised its own issue for determination by this Court.

- 5 Learned Counsel for the Applicant in his submissions in rejoinder contended that the Respondents diverted from their pleadings and introduced a new issue in their submissions to the effect that there is no valid arbitration clause. Learned Counsel further contended that parties are not allowed to depart from their pleadings and relied on the cases of - 10 *G. P. Jani Properties Ltd Vs Dar es Salaam City Council [1966] EA 281 and Struggle (U) Ltd Vs Pan African Insurance Co. Ltd [1990-1991] KARL 50.*

Learned Counsel contended that however where the departure causes no prejudice, or where for some reason it is obvious that the Court, if asked, 15 is likely to give permission to amend the pleadings, the other party may not raise the point since not every departure will be fatal to the proceedings. (See: *Uganda Breweries Ltd Vs Uganda Railways Corporation [2002] 2 EA 634*).

I have considered the above objection raised by Learned Counsel for the 20 Applicant. The Respondents under **Paragraph 2** of the affidavit in reply stated that they would raise preliminary objections at the commencement of the hearing however the specific objections were not mentioned. However, since the gist of this application, being the appointment of an arbitrator, stems from the issue of whether there is a valid arbitration 25 agreement to support the arbitration process, my considered view is that the Applicant will not suffer any prejudice by Court considering the issue of whether there is a valid arbitration agreement. The Applicant's objection is therefore overruled.

Accordingly, as per **Order 15 rule 5(1) of the Civil Procedure Rules** and 30 the case of *Oriental Insurance Brokers Limited Vs Transocean (U)*

- 5 *Limited SCCA No.55 of 1995*, this Court has amended and framed the issues to read as follows: - 1. Whether there exists a valid arbitration agreement between the parties? - 2. Whether the Court should appoint an arbitrator? - 10 3. What remedies are available to the parties?

Issue No. 1: Whether there exists a valid arbitration agreement between the parties?

Respondents' submissions

Learned Counsel for the Respondents first relied on **Sections 2 and 3 of**

- 15 **the Arbitration and Conciliation Act** and the case of *Ambitious Construction Company Ltd Vs Uganda National Cultural Centre HCMA No. 441 of 2020* wherein it was held that a party seeking to refer a matter for arbitration is required to show that there is a binding and enforceable agreement between the parties. - 20 In relation to the above, Learned Counsel submitted that the Applicant has failed to provide this Court with the specific arbitration clause they allege exists in the Contract. That the Contract in question consists of three parts: the Contract Agreement, the General Conditions of the Contract (GCC) and the Special Conditions of the Contract (SCC). That 25 while the Applicant relies on Clause 10(1 and 2) of the GCC, it was explicitly modified by Clause 10.2 of the SCC, which states that any

dispute between the parties shall be referred to a Court of law.

That this modification unequivocally excludes arbitration as a dispute resolution mechanism, rendering the Applicant's reliance on the 30 Arbitration and Conciliation Act misplaced since the Courts have consistently held that the validity of an arbitration agreement is

- 5 paramount in determining whether a dispute should be referred to arbitration. Learned Counsel relied on the cases of *Dr. Kagoro Kaijamurubi Vs Jeremy John Graham Civil Suit No. 48 of 2021* and *Security Group Uganda Ltd Vs Finasi-ishu Construction SPV-Ltd (SMC) Civil Suit No. 829 of 2023*. In conclusion, Learned Counsel - 10 submitted that the application is misconceived and incompetent before this Court and ought to be dismissed.

#### Applicant's submissions in rejoinder

Learned Counsel for the Applicant contended that the parties signed the Contract that provided for arbitration as the available course of action in

- 15 case of disputes. Learned Counsel submitted that **Clause 10.2** of the GCC provides for arbitration and that the same is also admitted by the Respondents in their affidavit in reply. That therefore, there is no need to prove beyond the presentation of the written Agreement. Learned Counsel further submitted that the Respondent did not avail Court with the SCC - 20 being relied on.

Learned Counsel contended that the law of evidence provides that facts not disputed are deemed accepted. That the arbitration was available, save for the fresh averments by the Respondents in their submissions. Learned 25 Counsel concluded by praying that the Court be pleased to appoint the arbitrator for the purpose of resolving the dispute.

#### Analysis and Determination

Having considered the pleadings, submissions of the parties and 30 authorities, I find as hereunder;

**Section 2(1) of the Arbitration and Conciliation Act** defines an arbitration agreement as an agreement by the parties to submit to

5 arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not.

**Section 3(1)** thereof also provides that the agreement may be in the form of an arbitration clause in a contract or in form of a separate agreement.

- 10 In the case of *Heyam and Another Vs Darwins Ltd [1942] 1 All E. R 337* at **page** *342*, **Viscount Simon L. C** defined an arbitration clause as a written submission agreed to by the parties to the contract and, like other written submissions to arbitration, must be construed according to its language and in light of the circumstances in which it was made. - 15 It is also trite that the existence and the validity of an arbitration agreement should be determined primarily in light of the common intent of the parties, the requirement of good faith, and the belief that the person who signed the agreement had the power to bind the Company. (See: *Premium Nafta Products Ltd and others Vs Fili Shipping Company* 20 *Ltd and others [2007] UKHL 40 and Fiona Trust and Holding* - *Corporation Vs Privalov [2008] 1 Lloyd's Rep 254, [2007] 4 All ER 951*)

I also partly agree with the submissions of Learned Counsel for the Respondents to the extent that it is now trite that for a matter to be referred 25 to arbitration, there must exist a binding and enforceable arbitration agreement between the parties and an arbitrable dispute.

As to whether there exists a binding and enforceable arbitration agreement between the parties; the Applicant asserts that on 3rd July, 2023, it entered into an Agreement for Supplies with the 1st Respondent wherein it was to 30 supply workshop equipment for Epel Memorial Vocational Training 5 Institute, Katakwi under Procurement Ref. Number: KATA857/SUPLS/22- 23/00011 at a consideration of UGX 450,000,000/=.

That under Part 4, **Clause 10** of the General Conditions of Contract, the Agreement provides for the settlement of disputes and thereunder, Clause 10.2 provides for arbitration. In evidence, the Applicant adduced annexure

10 "**B**" attached to the affidavit in support and a copy of the General Conditions of the Contract for Procurement of Supplies, attached to the affidavit in rejoinder.

I have carefully perused annexure "**B**" attached to the affidavit in support, the Contract for Supplies executed on 3rd July, 2023 between the Applicant

15 and the 1st Respondent. **Clause 8** of the Contract stipulates that:

"*In the event of any conflict in the document forming part of the contract, the Solicitor General's clearance, agreement, and Special and General Conditions of the contract shall prevail in that order of priority*."

20 Under Part 4, Section 7 of the General Conditions of Contract (GCC), attached to the affidavit in rejoinder, **Clause 10.1** stipulates that:

"*The Procuring and Disposing Entity and the Provider shall make every effort to resolve amicably by direct informal negotiation any disagreement or dispute arising between them under or in connection* 25 *with the contract*."

## **Clause 10.2** thereof also provides that:

*"If the parties fail to resolve such a dispute or difference by mutual consultation within twenty-eight (28) days from the commencement of such consultation, either party may require that the dispute be*

5 *referred for resolution under the Arbitration law of Uganda or such other formal mechanism specified in the SCC*."

In my view, **Clause 10.2** of the General Conditions of Contract, provides the parties with the options to either proceed to arbitration under the arbitration law of Uganda or any other formal mechanism specified in the 10 SCC.

Further, in their affidavit in reply, under **Paragraph 3**, the Respondents conceded to the fact that the Contract between the 1st Respondent and the Applicant provided for arbitration as a mechanism of dispute resolution.

I have also observed that much as, in their submissions, the Respondents 15 contend otherwise by averring that **Clause 10** of the GCC was explicitly modified by **Clause 10.2** of the Special Conditions of Contract (SCC), which allegedly stipulates that any disputes between the parties shall be referred to a Court of law thus unequivocally excluding arbitration as a dispute resolution mechanism; no evidence was adduced to prove the 20 above. The Respondents did not adduce or attach the Special Conditions

of Contract being relied on, for the Court's consideration.

Therefore, in the absence of any evidence to the contrary, it is evident that there is a binding and enforceable arbitration agreement between the parties.

25 As to whether there is a dispute between the parties; the Applicant asserts that upon executing the Contract and performing its obligations, the 1st Respondent acknowledged receipt of the Supplies and even wrote to the Ministry of Education and Sports giving it clearance to pay the Applicant however, to date, no payment has been made.

- 5 In evidence, the Applicant adduced the copies of the invoices, annexure "**D**" and a letter dated 17th January, 2024 from the 1st Respondent to the Permanent Secretary, Ministry of Education and Sports confirming the supply of the equipment and requesting that the Applicant be paid, annexure **"E"** all attached to the affidavit in support. The Applicant also - 10 adduced annexures **"F"** a demand notice and a statutory notice all dated 30th August, 2024 duly served and received by the 1st and 2nd Respondents respectively, requesting for payment of the contract price.

The above evidence was not contested by the Respondents nor did they adduce any evidence to prove that the Applicant was paid the contract 15 price.

In the circumstances, I find that there exists an arbitrable dispute between the parties.

In the premises, issue No. 1 is answered in the affirmative.

Issue No.2: Whether the Court should appoint an arbitrator?

20 Applicant's submissions

Whilst relying on Part 4, **Clause 10** of the GCC, which provides for arbitration, Learned Counsel for the Applicant submitted that on several occasions, the Applicant engaged the Respondents to appoint an arbitrator but in vain.

25 Further, that **Clause 10.2** gives the time frame for which a party can transfer a dispute to CADER; however, that the Respondents have failed to heed to the Applicant's requests thereby frustrating the process of arbitration.

5 That since the parties have failed to agree on an arbitrator, the Applicant has a right to refer the matter to the appointing body, which is CADER as per **Section 11(4) of the Arbitration and Conciliation Act**.

However, that in the case of *International Development Consultants Ltd Vs Jimmy Muyanja and Others HCMA No. 133 of 2018*, **Hon.**

- 10 **Justice Ssekaana Musa** (as he then was) held that the power vested in CADER was exercisable by the Governing Council of CADER, and not by the Executive Director, as the practice had been at the time. That the dilemma was that, as of March, 2019 when the decision was passed, the Governing Council was not in place. - 15 Owing to the above, Learned Counsel submitted that as of 2025, the Minister has not yet appointed the members of the Governing Council to have the appointing authority fully constituted as per the Act.

That since CADER is not properly constituted, it is not in position to appoint an arbitrator and therefore, the Applicant seeks that Court

20 invokes its powers and appoints an arbitrator to have the dispute resolved as was the case in *Ambitious Construction Company Ltd Vs Uganda National Cultural Centre (supra)*.

In conclusion, Learned Counsel submitted that it is in the interest of justice that the proposed arbitrator, Mr. Kenneth Akampurira, is 25 appointed, since the Respondents do not object to his appointment.

## Analysis and Determination

As earlier noted, there exists an arbitrable dispute between the parties. In its affidavit in support of the application, the Applicant contends that he requested for the appointment of an arbitrator by the Respondents but 30 they have refused to respond.

- 5 According to annexure **"G"** attached to the affidavit in support, a letter dated 2nd December, 2024, the Applicant through its lawyers requested the Respondents to either appoint an arbitrator or agree to appoint Mr. Akampurira Kenneth, being proposed by the Applicant. - In their affidavit in reply, the Respondents contend that they responded to 10 the said letter vide annexure **"A"** attached to the affidavit in reply. However, I have perused the Court record and the affidavit in reply but the said letter was never attached. Therefore, the parties have failed to appoint an arbitrator.

To this, the Applicant now seeks to have an arbitrator appointed by Court 15 since CADER is not yet fully constituted.

- As stipulated by **Section 9 of the Arbitration and Conciliation Act**, the Courts shall not intervene in matters of the Act, except as provided. **Section 11 of the Arbitration and Conciliation Act** provides for the appointment of arbitrators. - 20 **Section 11(3)(b) of the Arbitration and Conciliation Act** provides that in case the parties fail to agree on the appointment of one arbitrator, the appointment shall be made, upon application of a party, by the appointing authority.

**Section 2(1)** thereof defines an appointing authority to mean an 25 institution, body or person appointed by the Minister to perform the functions of appointing arbitrators and conciliators.

I agree with the Applicant's averment that CADER is not yet fully constituted since it was dissolved as a legal entity and its functions integrated into the Ministry of Justice and Constitutional Affairs to 30 promote the National Alternative Dispute Resolution (ADR) Policy.

- 5 The above notwithstanding, on 23rd April, 2019, the International Centre for Arbitration and Mediation in Kampala (ICAMEK) was issued with an instrument by the Minister to appoint arbitrators and conciliators. This instrument designated ICAMEK as an appointing authority under the Arbitration and Conciliation Act. - 10 **Rule 14(1) of the ICAMEK (Arbitration) Rules, 2018** provides that ICAMEK shall be the appointing authority in all arbitral proceedings conducted under these Rules. Also, **rule 6(1) of the ICAMEK (Arbitration) Rules** provides that a party who intends to commence arbitration under these rules shall submit a written request for arbitration to the Registrar. - 15 **Rule 4(4)** further provides for the application of the Rules. Therefore, much as CADER is not fully constituted yet, the parties have the option of applying to have an arbitrator appointed by ICAMEK since it also has authority to appoint independent and impartial arbitrators. - Considering that arbitration aims at providing more expedient and cost-20 effective means of resolving disputes compared to litigation, it is the role of this Court to assist the parties by emphasizing their contractual arbitration agreement. The Court does not impose authority on the parties; but rather, it respects their autonomy and aids in the achievement of their interests. - 25 Therefore, I find it in the interest of justice to respect the parties' autonomy. The parties have the option of referring the dispute to ICAMEK as an appointing authority to appoint an arbitrator. The parties should however, fully cooperate in the process of appointing an arbitrator so as to set the arbitration in motion since there is a dispute between the parties 30 arising from the executed Contract.

Therefore, issue No. 2 is answered in the negative.

## 5 Issue No.3: What remedies are available to the parties?

Having found issue No. 2 in the negative, I hereby order that:

- 1. The dispute between the parties is referred to arbitration. The parties should agree to appoint an arbitrator within thirty (30) days from the date of this Ruling. In the event of failure, either party shall refer to 10 an appointing authority under the Arbitration and Conciliation Act to appoint an arbitrator. - 2. *Miscellaneous Cause No. 02 of 2025* is hereby dismissed. - 3. Each party shall meet its costs.

15 I so order.

Dated, signed and delivered electronically via ECCMIS this **19th** day of **June, 2025**.

Patience T. E. Rubagumya 20 **JUDGE** 19/06/2025