1. I have considered the Chamber Summons Application dated 5th December, 2023 together with the supporting affidavit sworn on even date and the replying affidavits sworn in opposition to the same dated 5th February, 2024 and 8th February, 2024 together with the rival submissions made by the parties and applicable law.
2. The applicant is seeking a stay of court proceedings pursuant to section 6 of the Arbitration Act.
3. Section 6 of the Act provides as follows:
Stay of legal proceedings
(1)
A court before which proceedings are brought in a matter which is the subject of an arbitration agreement shall, if a party so applies not later than the time when that party enters appearance or otherwise acknowledges the claim against which the stay of proceedings is sought, stay the proceedings and refer the parties to arbitration unless it finds—
(a)
that the arbitration agreement is null and void, inoperative or incapable of being performed; or
(b)
that there is not in fact any dispute between the parties with regard to the matters agreed to be referred to arbitration.
(2)
Proceedings before the court shall not be continued after an application under subsection (1) has been made and the matter remains undetermined.
(3)
If the court declines to stay legal proceedings, any provision of the arbitration agreement to the effect that an award is a condition precedent to the bringing of legal proceedings in respect of any matter is of no effect in relation to those proceedings.
4. Based on the above, it is evident that the only inquiry required of the court prior to granting a stay of court proceedings is to ensure the following: that the application has been taken as the first step in the legal proceedings; that the applicant has not acknowledged the claim, and by doing so, waived its right to continue with the arbitral process; that there is a valid arbitration agreement; and that the dispute falls within the jurisdiction of the arbitral tribunal.
5. Further, the language in Section 6 of the Act is couched in mandatory terms, the implication being, that unless there is non- compliance by the Applicant with the same, this court is obliged to grant a stay of proceedings.
6. I have considered the evidence on the record and having heard the submission of counsel, I am satisfied that the above grounds have been met.
7. On the first ground, I find that the applicant has not waived its right to arbitration because no substantive steps have been taken so far to acknowledge the court proceeding. A substantive step, in essence, is the filing and serving of a defence. This has not been done.
8. I do not think that entering appearance is a substantive step. Further, I am of the view that in some scenarios, even responding to an application seeking injunctive orders, may not always be construed as a substantive step, because applications seeking interim orders are contemplated and permitted by the Arbitration Act both before, and during the arbitral process. Such applications are often utilized by a claimant prior to the composition of the arbitral tribunal.
9. In such a situation, as is the case in the present matter, the respondent to the arbitration may have no choice but to respond to the application in court. In my view, so long as the respondent to the application has not filed its substantive defence to the Plaint and, thereafter, seeks to, at the first opportunity, refer the matter to arbitration, I am of the view that it may not be deemed to have waived its right to arbitration, and has not always in such a situation, necessarily acknowledged the court process. This is because, at that point, there is no arbitral tribunal capable of hearing the application, and failure to respond may prejudice its rights. It is for this reason that arbitration proceedings contemplate interim applications prior to the composition of the tribunal as a means of supporting the arbitral process.
11. Therefore, in short, substantive steps, ought to be regarded, by and large, as the filing of pleadings. And in the present matter no pleadings have been filed by the applicant in court in response to the plaintiff’s Plaint. The court record speaks for itself in this regard.
12. As regards the submission that the 2nd defendant is not a party to the arbitration agreement, it is not lost on me that, he is a director in the third defendant. In any event, separate claims may be instated against that party if need be, and if he is not genuinely a party to the arbitration agreement.
13. As regards the next limb, whether or not an agreement to arbitrate exists between the parties, looking at the exhibits attached, at BO 1A, an agreement exists between the Ahmed Isa and Persea Investments Ltd. Paragraph 10 contains an arbitration clause to that effect. Further, Exhibit BO 1A is an agreement between Persea Investments Ltd and Saharasky Ltd, the same contains an arbitration clause at paragraph 5 of the said agreement.
14. As regards the argument that elements of fraud may be raised during the proceedings, which are not capable of being resolved by way of arbitration; I do not think that this court ought to predetermine that question. At present, on balance, it appears to me that there is a dispute between the parties which falls within the scope of the agreement to arbitrate. I say so cautiously, bearing in mind that the tribunal, once formed, and with the benefit of all the information before it, ought to be given the liberty to draw its own conclusions relating to the scope of its jurisdiction in the first instance.
15. Finally, looking at the nature of the Plaint and the proceedings that have taken place so far, it is not lost on me that the Plaintiff and the 1st and 2nd Defendants are all Directors in the 3rd Defendant. To my mind, in such a scenario, leave of the court is required to either commence or continue such a suit as a derivative action. No such leave has been sought or granted, and therefore, the consequence of the same is twofold; first the applicant could not have taken substantive steps to acknowledge the claim; because, and second, at present, there is no proper suit before this court.
16. Based on the reasons set out above, I find that the test as set out above has been met and I find that the application is with merit. The orders of the court are as follows:
a. Proceedings before the court are hereby stayed in order to facilitate the arbitral proceedings.
b. The Applicant shall have the costs of the application.
c. The file is accordingly marked as closed.