THE MANDATORY GATEWAY: Nature And Function Of The Arbitration Clause In Tanzanian Contract Law
This article analyses the nature and mandatory function of the arbitration clause within commercial contracts in Tanzania, focusing on its jurisdictional effect as clarified by the Court of Appeal of Tanzania (CAT) in Serengeti Breweries Limited vs. Monaban Trading & Farming Co. Limited (Civil Appeal No. 52 of 2023) [2025] TZCA 1149. The analysis asserts that the arbitration clause is not a substantive obligation but a mandatory procedural agreement that serves as a jurisdictional precondition to litigation. The article concludes that failure to adhere to the agreed-upon dispute resolution mechanism, as established in the Serengeti Breweries case, renders any subsequent court proceeding incompetent and null from the outset.
Introduction
The Arbitration Clause is defined as a ubiquitous feature of sophisticated commercial agreements, reflecting the global trend toward private dispute resolution. It functions as a contractual promise to resolve future disputes through arbitration rather than conventional court litigation.
Despite the clear contractual obligation, parties frequently attempt to bypass the clause by filing a suit directly in court. This common practice raises a critical legal issue: What is the true jurisdictional and procedural weight of an arbitration clause in Tanzanian law, and what are the legal consequences for a party that attempts to circumvent it?
The arbitration clause is a mandatory, self-executing agreement on procedure that operates as a fundamental jurisdictional bar in Tanzanian commercial law; its non-observance is a fatal procedural error that nullifies any court proceedings initiated prematurely.
Roadmap
The article will first delineate the unique legal nature of the arbitration clause, distinguishing it from substantive contract terms. It will then discuss its dual function upon contract execution and dispute accrual. Finally, it will analyze the Serengeti Breweries judgment as a critical precedent establishing the jurisdictional consequences of circumventing this mandatory procedural gateway.
Unique Legal Nature: Agreement on Procedure
The arbitration clause possesses a nature distinct from the core, substantive obligations of a contract (e.g., duty to pay, duty to deliver goods, etc.). This is to say that the clause is purely an agreement on procedure.
Furthermore, the clause does not define the commercial duties whose breach leads to damages. Instead, its singular purpose is to define the forum and method for settling disputes arising from those duties. This is because it is procedural, the remedy for its breach is not damages, but specific enforcement by an action to stay court proceedings under the relevant Arbitration Act provisions.
This distinction underscores the clause’s independence, often recognized under the doctrine of separability, where the clause remains valid even if the main contract is challenged as provided under section 12 of the Arbitration Act [Cap. 15 R.E 2023] as the law emphasis that the arbitration clause whether or not in writing is treated as a distinct agreement the law states: –
The Dual Function of the Clause
The function of the arbitration clause is activated at two critical junctures, imposing a continuous mandate on the parties:
The Jurisdictional Issue: Nullification of Court Proceedings
The Serengeti Breweries judgment is definitive on the consequences of bypassing the arbitration clause.
First and foremost, the court had to determine the validity of proceedings initiated directly in the High Court despite the contract mandating negotiation followed by arbitration. Furthermore, the Court of Appeal established that the arbitration clause functions as a mandatory jurisdictional precondition. By filing suit without initiating or completing the agreed-upon arbitration steps, the party commits a “serious error.” This failure means the suit was filed in violation of a binding procedural agreement between the parties, effectively rendering the court proceedings premature.
Thus, the Court of Appeal held that the breach transforms the entire court process including the judgment and decree into a nullity. The suit is deemed incompetent from the outset because the court’s jurisdiction was conditionally ousted by the parties’ prior contractual agreement. This strong judicial policy reinforces the principle of pacta sunt servanda (agreements must be kept and honoured) concerning dispute resolution methods.
The only limited exceptions to this mandatory function are cases where the clause is demonstrably non-applicable to the specific dispute or where a party can show “good reason” to override the agreement, which courts interpret narrowly.
Conclusion.
The Serengeti Breweries decision provides an emphatic confirmation that the arbitration clause in a Tanzanian contract is a mandatory jurisdictional gateway. It is an agreement on procedure that vests the initial authority to resolve the dispute in a private tribunal, subject only to the limited oversight of the court as the court cannot interfere in any agreement between the parties and enforce what the parties have not agreed due to the principle of privity to contracts. Failure to adhere to the clause by commencing court action prematurely is a fatal procedural flaw that deprives the court of its jurisdiction over the matter as the jurisdiction of the court is always the matter of the law, thus nullifying the entire judicial process.