Tanzania: Rewriting the rules? Mediation, jurisdiction and consequential orders in Tanzanian arbitration law

The decision of the Court of Appeal in M/S Hodi (Hotel Management) Company Limited v M/S Jandu Plumbers Limited (Civil Appeal No. 396 of 2022) [2025] TZCA 138 (28 February 2025) (Hodi) is of particular significance to arbitration practitioners and parties operating under contracts with multi-tiered dispute resolution clauses.

Facts

The appellant, M/S Hodi (Hotel Management) Co. Ltd, and the respondent, M/S Jandu Plumbers Ltd, entered into a contract on 18 December 2007 for the rehabilitation and upgrading of Mount Meru Hotel. The contract was governed by the First Edition (1999) of the FIDIC Conditions of Contract and incorporated a multi-tiered dispute resolution mechanism requiring, inter alia, referral of disputes to mediation before arbitration.

Clause 20.2 of the contract stipulated:

‘… Should the parties fail to such agreement within a further period of fourteen days, the matter may within a further period of fourteen days be referred by either party without legal representation to a mediator selected by and agreed on by the parties. The mediator shall within a period of twenty-eight days of receipt of the written representation of the parties, give his opinion in writing and furnish the Employer and Contractor each with a copy thereof… The said opinion shall be final and binding on the parties unless either party within fourteen days of receipt thereof disputes the same by written notice to the other.’

Following disagreements over delays and alleged non-performance, the respondent terminated the contract and, contrary to the dispute resolution clause, initiated proceedings before the High Court in Civil Case No. 3 of 2010. These proceedings were subsequently stayed to allow for arbitration, pursuant to the arbitration clause.

Before the arbitrator could proceed, the respondent raised a jurisdictional objection, contending that the arbitrator lacked jurisdiction since the mediator had not issued a written opinion as required under Clause 20.2. The arbitrator adjourned the proceedings to enable mediation to occur. A closure report was subsequently issued by the mediator, stating that the mediation had failed. Based on this report, and at the request of the respondent, the arbitrator assumed jurisdiction and proceeded to hear the matter.

In the resultant award, the respondent’s claims were dismissed in their entirety, and the appellant’s counterclaims were allowed.

Dissatisfied with the outcome, the respondent filed a petition in the High Court (Miscellaneous Civil Cause No. 3 of 2020) seeking to set aside the award, citing eighteen errors on the face of the record. Among the grounds raised was that the arbitrator had not been properly vested with jurisdiction due to the absence of a reasoned opinion from the mediator.

The High Court (Gwae, J.) allowed the petition, set aside the arbitral award, and ordered that the matter be re-arbitrated before a new arbitrator following proper compliance with the mediation process envisaged under Clause 20.2.

Issues on Appeal

Aggrieved with the decision of the High Court, the appellant appealed to the Court of Appeal (Court). The Court confined itself to two issues for determination:

• Whether the mediator had provided a ‘written opinion’ sufficient to clothe the arbitrator with jurisdiction.
• Whether the High Court properly exercised its mandate in setting aside the arbitral award and ordering re-arbitration.

Held

• The Court interpreted the term ‘opinion’ to mean a written expression of views, judgment, or professional advice. It held that the mediator’s closure report – merely stating that mediation had failed – was conclusory and lacked any reasoning or professional evaluation. It did not satisfy the contractual requirement of a ‘written opinion’ under Clause 20.2. Consequently, the failure to provide a reasoned opinion had the effect of depriving the arbitrator of jurisdiction. The Court concluded that such non-compliance affected both the admissibility of the dispute to arbitration and the jurisdiction of the arbitrator to determine it.
• The appellant argued that, based on the decision in Mvita Construction Company v Tanzania Harbours Authority [2006] TLR 22 (Mvita), the respondent had waived its right to object to the arbitrator’s jurisdiction by not raising the issue before the tribunal. The Court rejected this contention, holding that jurisdiction is a point of law that can be raised at any stage of proceedings, including on appeal.
• The Court endorsed the High Court’s decision to order re-arbitration as a necessary and logical consequence of setting aside the award. Without such an order, the parties would have been left in procedural limbo.

The appeal was dismissed.

Analysis

Mediation as a confidential, party-led process: tension with the Court’s construction

• At the heart of the dispute was the interpretation of Clause 20.2 of the FIDIC-based contract, which required the mediator to issue a ‘written opinion’. The Court interpreted this to mean a reasoned, substantive opinion – akin to a professional judgment or recommendation – which it deemed a condition precedent to arbitral jurisdiction.
• This interpretation is in stark conflict with the conventional understanding of mediation. Mediation is, by nature, a party-led and facilitative process. Mediators do not render determinations or engage in the evaluative or adjudicatory assessment of the merits of a dispute. More importantly, mediators are generally bound by confidentiality and non-disclosure obligations, which bar them from disclosing the substance of discussions or making evaluative comments.
• By demanding a reasoned opinion from the mediator, the Court effectively imposes an adjudicatory character on what is fundamentally a non-adjudicative process. The outcome is a functional contradiction: a mediator is expected to preserve confidentiality while simultaneously producing a reasoned, binding opinion that may vest jurisdiction in a subsequent arbitral tribunal.

Absurdity in clause construction: a cautionary tale for drafters

• The Court’s interpretation of Clause 20.2 also leads to a construction that is wholly unworkable and inconsistent with the role of a mediator. A requirement for a mediator to issue a binding written opinion that confers jurisdiction on an arbitral tribunal fundamentally misunderstands the mediator’s function and places them in an untenable position.
• For arbitration practitioners and contract drafters, Hodi serves as a cautionary illustration of the importance of:
  • the legal effect of intermediate stages in multi-tiered clauses;
  • ensuring that obligations imposed on third-party neutrals (e.g., mediators) are consistent with their procedural role; and
  • ensuring that jurisdictional preconditions are framed with clarity.

Apparent departure from Mvita: re-examining waiver of jurisdictional objections

• The appellant relied on the Court’s earlier decision in Mvita, which held that a party’s failure to object to jurisdiction before the tribunal is deemed to have waived that objection. However, in Hodi, the Court rejected the waiver argument and held that jurisdiction is a point of law that can be raised at any time, including for the first time on appeal.
• This divergence highlights an immense inconsistency in the Court’s jurisprudence. The Court never interrogated Mvita in the judgment; it made no attempt to distinguish it, limit its application, or overrule it. This leaves a glaring uncertainty in the doctrine of waiver in arbitral proceedings.
• It is crucial to note that both Hodi and Mvita were rendered under the repealed Arbitration Act. As such, their authority under the current legislative framework is limited. Under the current legislative framework, a party is explicitly barred from challenging the jurisdiction of an arbitrator in court if that objection was not raised during the arbitration itself.

Consequential orders beyond the repealed Arbitration Act

• Under section 16 of the repealed Arbitration Act, the High Court was empowered only to set aside an award in cases of misconduct or where the award had been improperly procured. The statute did not expressly authorise the court to make further directions such as ordering re-arbitration.
• The Court of Appeal, however, upheld the High Court’s issuance of a consequential order for re-arbitration, reasoning that it was necessary to provide direction and avoid procedural deadlock.
• While this may be viewed as a pragmatic exercise of judicial discretion, it does raise legitimate questions as to whether the High Court acted beyond its statutory remit. The proper course would have been to leave the matter to the parties to reinitiate arbitration, if they so wanted, in accordance with their contractual arrangement.

The Court’s approach reflects a broadening of judicial remedial powers in supervision of arbitration but also blurs the line between supervisory and interventionist functions. It may unfortunately encourage future courts to adopt similarly expansive views on remedial discretion, even in the absence of statutory authority.