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Case Comment: Bekimpilo Gumbo v The Gas Boys (Pvt) Ltd and The Honourable Mr David Whatman; HH 194/22 By David Kanokanga*

4 Sep 2022 8:58 PM | Anonymous

This is a short commentary on the below-named judgment by the Harare High Court, Zimbabwe, after it held that an arbitrator’s positive ruling on jurisdiction made as a preliminary question is an award that can be set aside in terms of Article 34 of the Model Law.   

CaseBekimpilo Gumbo v The Gas Boys (Pvt) Ltd and The Honourable Mr David Whatman; HH 194/22       

THE FACTUAL MATRIX 

In May 2019, the applicant and the first respondent signed a commercial agreement in which the first respondent leased haulage trucks to the applicant. The applicant failed to meet his part of the bargain resulting in a dispute between the parties, which was referred to arbitration in terms of the parties' agreement. The second respondent was appointed as the arbitrator. In response to the first respondent’s claim, the applicant, in his statement of defence, raised preliminary objections challenging the jurisdiction of the arbitrator on the basis that the agreement between the parties was unlawful. The alleged unlawfulness of the contract was that it was denominated in South African Rand in contravention of the laws of Zimbabwe. The first respondent countered by contending that there is no law in Zimbabwe that prohibits the denomination of contractual obligations in foreign currency or the receipt of payments in foreign currency. 

The arbitrator directed the parties to file legal arguments. After considering the parties' submissions, the arbitrator ruled that the preliminary challenge must fail. As such, it is so ruled[1] 

THE APPLICATION 

Aggrieved by the arbitrator’s aforesaid award, the applicant filed a court application with the High court in terms of Article 34(2)(b)(ii) of the Model Law, which is an annexure to the Arbitration Act (Chapter 7:15) 

Article 34(2) of the Model Law provides that: 

(2) An arbitral award may be set aside by the High Court only if- 

(b) the High Court finds, that—

(i)---or

(ii) the award is in conflict with the public policy of Zimbabwe 

THE APPLICANT’S CASE 

The applicant contended that the arbitrator had issued an award that is not only a contravention of statute but is also shocking, palpably iniquitous, and manifestly injurious to the public policy of Zimbabwe. He sought the setting aside of the award. 

THE FIRST RESPONDENT’S CASE 

The first respondent opposed the application. It raised a preliminary objection that the arbitrator had not issued an award as contemplated by the Arbitration Act (Chapter 7:15). Because the arbitrator’s decision does not constitute an arbitral award, the High court had no jurisdiction under article 34 of the Model Law. 

THE JUDGMENT 

The issue which loomed large in the preliminary objection was whether the second respondent sitting as an arbitrator made an arbitral award that would entitle the High court to review its decision[2]. In the present case, the applicant attached to his application as annexure F a document titled" Adjudication and Ruling in terms of Article 16(3) of the Model Law-Preliminary objection to Jurisdiction". That document purports to deal with the objection to the second respondent’s jurisdiction, which was raised by the respondent applicant in the arbitral proceedings. After discussing various issues, the second respondent, in the penultimate paragraph of the ruling, proceeded to state in unequivocal terms that: 

Accordingly, the preliminary challenge must fail. As such, it is so ruled.[3] 

As already indicated, the substance of the second respondent’s decision is that he ruled on the dispute as a preliminary question and made the determination that he had the jurisdiction to preside over the proceedings.[4] 

The learned Judge also stated that therefore, my comprehension is that the existence of a dispute is central in establishing whether an award has been made in arbitral proceedings. If there is a dispute and the arbitrator makes a formal pronouncement on resolving that dispute, that decision constitutes an award.[5] 

DISPOSITION 

When all is said and done, it is apparent that the applicant seeks for the court to emasculate the arbitrator of his power and competence to rule on issues to do with his jurisdiction. Yet the arbitrator is within his powers to decide on his own jurisdiction. An arbitration agreement is not unlawful even where the remainder of the agreement may be declared unlawful. It is up to the arbitrator to decide those issues. The parties must go back to enable the second respondent to continue the proceedings. 

Accordingly, it is ordered that the application be and is hereby dismissed.[6] 

AN ANALYSIS OF THE JUDGMENT 

Was Article 34 applicable in this matter? 

The court stated that the substance of the second respondent’s decision is that he ruled on the dispute as a preliminary question and made the determination that he had the jurisdiction to preside over the proceedings[7].The arbitrator’s decision was made in terms of Article 16(3) of the Model Law, which provides as follows: 

(1) The arbitral tribunal may rule on its jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement. For that purpose, an arbitration clause that forms part of a contract shall be treated as an agreement independent of the other terms of the contract. A decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause. 

(2)  A plea that the arbitral tribunal does not have jurisdiction shall be raised no later than the submission of the statement of defence. A party is not precluded from raising such a plea by the fact that he has appointed or participated in, the appointment of an arbitrator. A plea that the arbitral tribunal is exceeding the scope of its authority shall be raised as soon as the matter alleged to be beyond the scope of its authority is raised during the arbitral proceedings. The arbitral tribunal may, in either case, admit a later plea if it considers the delay justified. 

(3)   The arbitral tribunal may rule on a plea referred to in paragraph (2) of this article either as a preliminary question or in an award on the merits. If the arbitral tribunal rules on such a plea as a preliminary question, any party may request, within thirty days after having received notice of that ruling, the High Court to decide the matter, which decision shall be subject to no appeal; while such a request is pending, the arbitral tribunal may continue the arbitral proceedings and make an award. 

The court handed down its judgment on 25th March 2022. A month before, on the 24th February 2022, the Supreme Court of Zimbabwe had handed down judgment in a similar matter. It stated that the article distinguishes between a ruling and an award by pointing out that the arbitral tribunal can make the ruling on the preliminary question or make such a ruling in its award on the merits. It is, therefore, clear that the ruling is not an award as it can be made on the merits and that while the issue of the ruling is pending in the High Court, the Arbitrator can continue with the proceedings and make an award. A ruling on jurisdiction is, therefore, distinct and different from an award.[8]A reading of Articles 16(3), 31(7), 32(1), 33, and 34 establishes that rulings on the arbitral tribunal’s jurisdiction and the existence of arbitral agreements are not awards.[9] 

The High Court being subordinate to the Supreme Court is bound by Supreme Court judgments. The judgment in question flies in the face of a Supreme Court judgment. To that extent, it is erroneous. 

Even without the aforesaid Supreme court judgment, the court having correctly stated that the arbitrator had ruled on the dispute as a preliminary question and made the determination that he had jurisdiction to preside over the proceedings, should have seen that Article16(3) lays out a path to challenge such a ruling. Recourse against such a ruling is in terms of Article 16(3) and not article 34. 

Article 16(3) also presents a question of whether, after a tribunal rules that it has jurisdiction, the party contesting the jurisdiction must immediately challenge that ruling under Article 16(3).  Or whether it can wait until a final award is made and raise the argument when seeking to set aside or annul the award under article 34. The majority view is that a party must challenge the tribunal’s jurisdictional ruling within the thirty-day limit allowed under article 16(3), and that if it fails, it will be precluded from doing so in an annulment or setting-aside action under article 34.[10] 

Commentators maintain that by laying out a path to challenge the arbitrator's positive jurisdictional ruling, Article 16(3) requires the challenge to be raised within the requisite time period. If one does not raise the challenge under Article 16(3), the ruling becomes binding[11] 

Based on the aforesaid, the judgment in question can be criticized for: 

(1)  Contradicting a judgment of the Supreme Court of Zimbabwe when the High Court of Zimbabwe is subordinate to the Supreme Court of Zimbabwe.

(2)  Confusing a ruling with an award. The Supreme Court stated that Article 16(3) consistently refers to the arbitrator’s decision on jurisdiction as a ruling, and in the end, distinguishes it from a decision made at the termination of the proceedings, which it refers to as an award.[12]

(3)  Allowing the challenge proceedings under article 34 of the Model Law -when no such proceedings are maintainable against a positive jurisdictional ruling made as a preliminary question in terms of Article 16(3) of the Model Law.

(4) Ignoring the path to challenge an arbitrator’s positive jurisdictional ruling, which is set out in Article 16(3) 

_______________________

*Partner, Kanokanga & Partners Law Firm. Harare, Zimbabwe.

[1] HH 194/22 at page 4

[2] HH 192/22 at page 3

[3] HH192/22 at page 4

[4] HH 192/22 at page 5

[5] HH 194/22 at page 4

[6] HH 194/22 at page  12

[7] HH 194/22 at page 5

[8] Riozim Limited  and RM Enterprises(Pvt)Ltd v Maranatha Ferrochrome(Pvt)Ltd  and Justice November Tafuma Mtshiya SC 30/22 at pages 9-10

[9] Ibid at page 13

[10] Michael Polkinghorne, Alvaro Peralta, Hazel Levent and Gwen Wackwitz-Competence  of Arbitral Tribunal To Rule on Its Jurisdiction-Uncitral Model Law On International Commercial Arbitration-A Commentary-page 310 at para 4.3

[11] See Born, International Commercial Arbitration(Kluwer,2014)(n.61)p1105

[12] Riozim Limited  supra at page 9





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