In my opinion all argument going around about not to pay Dowan are largely based the doctrine of public policy. In an ideal world, once parties pursuant to their agreement decide to submit their disputes to an arbitral tribunal, they have invariably agreed to be bound by the tribunal's decision. However, in reality the unsuccessful party may wish to evade carrying out the award. To this end the New York Convention to which Tanzania is a party provides a remedy for the successful party.
Under the New York Convention, a foreign arbitration award is enforceable in a similar way to an award issued in Tanzania (that is, by depositing the award with the High Court and obtaining a writ of execution). If the award is not registered with the High Court, it cannot be executed. The successful party can enforce his award not only in the courts of the seat of arbitration but also in the courts where the unsuccessful party has its assets.
The crucial is whether once an award has been issued by a recognised arbitral tribunal, such award be appealed or challenged in the local courts.
Arbitration awards are final, binding and subject to no appeal on the merits. However, awards can be challenged in actions of nullity. They can also be declared null and void. Grounds for nullity include:
1) Lack of jurisdiction.
2) Breach of public policy.
3) Failure to grant a party a right of defence.
4) Excluding the application of the agreed law governing the merits of the claim.
I am more interested on the doctrine of breach of public interest and whether it apply to dowan case. For the successful party to an arbitral agreemnet to enforce his award, the award must pass the public policy test of the enforcement state in order for it to be enforced in that state. The New York Convention provides that an enforcement State may refuse to recognize and enforce an award if it contravenes the public policy of that state. Under our Arbitration Act, one of the conditions for enforcement of foreign award is that its enforcement must not be contrary to the public policy or the law of Tanzania.
However, the problem is what constitutes the public policy of the enforcement state? Can the doctrine of public policy as provided by these provisions be used successfully to nullify the Dowan award? The public policy exception is a highly controversial exception to the enforcement of an award. The proper scope and application of the public policy exception is still debatable. Our Arbitration Act does not even define this phrase.
In addition, the doctrine of public policy had be interpreted narrowly in many jurisdictions. In Egerton, Justice Truro wrote: "No subject can lawfully do that which has a tendency to be injurious to the public or against the public good which must be termed, as it sometimes has, the policy of the law or public policy in relation to the administration of the law." However, in Fender, Justice Atkin admonished judges to exercise extreme caution in regards to the doctrine: "the doctrine (of public policy) should be invoked only in clear cases, in which the harm to the public is substantially incontestable, and does not depend upon the idiosyncratic inferences of a few judicial minds."
In an English case of Westacre Investment Inc V Jugoimport-SPDR Holding Co Ltd, the parties entered into a contract governed by Swiss law, for the purpose of selling military equipment to Kuwait. The respondent contended in the arbitral proceedings that the contract was a legal nullity because it involved the claimants bribing different Kuwaiti representatives.
This contention was rejected by the arbitrators and an award was rendered in favour of the claimants. The respondent sought to set aside the award upon an application to the Swiss court. Upon refusal of the Swiss court to set aside the award, the respondent sought to have the award set aside in England.
The respondent contended in the lower court that since the contract involved the applicant trying to buy influence from Kuwaiti representatives, it contravened English public policy. Upon rejection at the lower court, the respondent appealed. The appeal court held that a contract involving
buying of influence would only be contrary to English domestic public policy if the contract will contravene the domestic public policy of the country where it is to be performed.
It is universally accepted that contracts seeking to enforce a contract obtained by fraud is against public policy. I believe this is the same in Tanzania, so basiing on the evidence available for the alleged bribe and/or corruption one could argue that alleged contract between Tanesco and Dowan was obtained by bribe and/or fraud and ask the court to nulify it. Evidence will be needed to substantiate this.
The next issue is who can challenge the registration and enforcement of the award in the Hight Court?
As party to the agreement, Tanesco can challenge the enforecement. Whether wanaharakati will be able to rely on public policy to challenge the enforcement is doubful, because they are not privy to the agreement. Third parties can be bound by an arbitration clause under general principles of agency and contract law.
The general law is that an arbitral award cannot be challenged by a third party to the arbitral proceedings by way of a third-party recourse. Only a party to the arbitration may bring proceedings to obtain the setting-aside of an award or to challenge the recognition of a foreign award by local courts.
However recent trend in others countries appears to allow third parties to challenge the award. In Russia, for example, the views taken by the Constitutional Court (likely prompted by an evidently corrupt procedure) opened the door for third parties to challenge arbitral awards by claiming that the outcome affects their rights. According to the rulling, ‘an interested party may appeal to the court for protection of its rights' and ‘a person whose rights are affected by a court decision may challenge such decision'. However, I don't this represents the Tanzanian law.
However, how about wanaharakati using the '‘traditional principles' which allow enforcement against non-parties to the contract through ‘assumption, piercing the corporate veil, alter ego, incorporation by reference, third-party beneficiary theories, waiver and estoppel? Can these be used to challenge the award?