SECTION1: REVIEW OF KEY CONSTITUTIONAL PROVISIONS REGARDING
THE COURT SYSTEM
As said above, there are several Constitution provisions related to the Court System. The Constitution and other laws are clear about the ordinary courts and specialized courts. Ordinary courts are the Supreme court, the High court and the Intermediary courts and the primary courts.
Specialised courts are Commercial courts, and the Military courts. Military courts comprise the Military Tribunal and the Military High Court – see previous chapter.
SECTION 2. Rwandan Commercial justice system
2.1. Background and chronology of the establishment of commercial courts in Rwanda
As said, the Rwandan judicial system comprises ordinary and specialized courts. Ordinary courts include the Supreme Court, the High Court, Intermediate Courts and Primary Courts. Specialized courts include Gacaca Courts, Military Courts, and Commercial Courts.
The long process that led to the establishment of commercial courts can be summed up in the following table.
Table 1: Chronology of the establishment of commercial courts in Rwanda
|Creation of the Rwandan Law Reform Commission||May 2001|
|Law Reform Commission drafts new laws||July 2001-December 2003|
|Law Reform Commission presents new laws to the Cabinet||January 2004|
|Parliament adopts new law on courts, judges and civil and criminal procedure||April-July 2004|
|Cabinet admits failure of assessors in enhancing commercial litigation||End of 2004-Early 2005|
|Cabinet establishes Business Law Reform Cell||October 2005|
|Superior Council of the Judiciary selects 22 local judges for the commercial courts||July-December 2005|
|Draft law establishing commercial courts adopted||December 2007|
|Draft law establishing commercial courts goes through legislative process||December 2007-March 2008|
|Eight local judges leave for specialized course in South Africa||February 2008|
|Publication of law establishing commercial courts. Procedural rules law is published the same day||March1, 2008|
|Law dealing with arbitration and conciliation in commercial matters enters into force||March 6, 2008|
|Swearing in of 2 Mauritian judges as President of the Commercial Court and President of the commercial court of Nyarugenge||May 2, 2008|
|Commercial courts become fully operational||March 15, 2008|
As indicated in the table above, on 16th December 2007, the Parliament enacted Law No. 59/2007 of 16/12/2007 establishing commercial courts and determining their organization, functioning and jurisdiction.
2.2. Organization structure of commercial courts
The Law provides for four commercial courts. Of the 4 courts, 3 are lower commercial courts, namely Nyarugenge Commercial Court, Huye Commercial Court and Musanze Commercial Court, and one is the Commercial High Court.
Judges of the Commercial Court consist of the President, the Vice President and at least five other judges. The President and the Vice President are appointed by a Presidential Order after approval by the Senate. They can only be removed from office in specific circumstances as provided for by the Constitution. Other judges of the Commercial Court along with judges of Commercial Courts are appointed by the President of the Supreme Court upon approval by the Superior Council of the Judiciary.
The President of the Commercial High Court and the President of the commercial court are responsible for the organization and effective performance of their respective courts.
In this regard, they shall take all necessary decisions for the speedy trial of cases by avoiding any factors which may cause delays in adjudicating the cases. In particular, they are responsible for organizing and determining the functioning of their courts including monitoring the performance and conduct of judicial personnel.
2.3. Jurisdiction of commercial Courts
Commercial courts have a limited jurisdiction. Such courts are competent to try commercial cases. In order to determine the jurisdictional scope of commercial courts, the Law provides a list of commercial matters. According to Article 3 of the Law establishing commercial courts, commercial matters refer to commercial, financial, fiscal and other matters closely related to them regarding:
- disputes arising from commercial contracts or commercial activities between
persons or business entities;
- disputes arising out of the use of negotiable instruments such as cheques, bills of exchange and promissory notes;
- disputes relating to transactions between persons and financial institutions;
- disputes related to liquidation, dissolution and recovery of limping business firms;
- cases related to insurance litigation but not including compensation claims arising out of road accidents by litigants who have no contract with the insurance firms;
- claim related to fiscal disputes;
- claims related to transport litigation;
- any dispute that may arise between persons who own or manage registered entities and commercial institutions and these include: members of the Board of directors;
- managers of the property of a bankrupt business firm.
- cases arising from bankruptcy;
- cases related to intellectual property including trademarks;
- cases related to registration and deregistration of businesses;
- cases related to appointment or removal of auditors responsible for auditing the books and accounts of a firm;
- cases related to competition and consumer protection.
Problems may arise from the determination of the jurisdiction of commercial courts based on a commercial list. Indeed, a list of commercial issues is not comprehensive and question of jurisdiction may arise in some cases so as to decide jurisdiction. Thus, it is necessary to formulate clear and efficient rules in order to avoid such problems.
As to the in-value jurisdiction of commercial courts, the Law provides that Commercial Courts deal with all commercial disputes with a value below 20 million Rwandan francs and non-monetary commercial matters. The Commercial High Court decides at first instance all cases with a value above 20 million Rwandan francs and hears appeals from interlocutory interim orders and judgments of the Commercial Courts at the first level. The Supreme Court hears appeals against decisions of the Commercial High Court.
The territorial jurisdiction of the Commercial High Court and Commercial Courts is provided in an annex to the Law establishing Commercial Courts.
2.4. Qualified judges for dealing with commercial litigation
Judges dealing with commercial litigation shall have sufficient experience in trade issues and the relevant laws of different business activities. For satisfactory and effective commercial litigation, it is important to train group of judges, lawyers and experts to deal with commercial litigations and legislations, and to set suitable training program for this end.
Considering that without improved professional standards the new commercial justice system would not be effective and efficient, the Government of Rwanda recognized the urgent need to have qualified judges to deal with commercial litigation. In this regard, Article 6 of the Law establishing commercial courts provides that, apart from permanent professional judges, Commercial Courts and the Commercial High Court shall have equally specialized judges operating on temporary basis and governed by an employment contract. In addition, the specialized judges may be of Rwandan nationality or of foreign nationality and shall be highly qualified in commercial law matters with experience of three years in judicial matters for those with at least a doctorate degree, and an experience of five years for those with a bachelor’s degree.
In order properly to staff the Commercial High Court and Commercial Courts, in May 2008, the Supreme Court succeeded in recruiting two Mauritian judges who were sworn in as President of the Commercial High Court and the Nyarugenge Commercial Court. These judges had the advantages of holding a mixed background in common law and civil law.
On the other hand, recruited judges undertook specialized studies in commercial law, the goal being to have specialized judges in all Commercial Courts and the Commercial High Court.
2.5. Proceedings relating to commercial cases
On 11th September 2007, the Parliament passed Law No. 45/2007 modifying and complementing No. 18/2004 of 20/06/2004 relating to the civil, commercial, labour and administrative procedure. The 2007 Law contains amendments to the law 2004. The law includes a new chapter on proceedings in commercial cases. This chapter comprises three sections on the initiation of a case, preliminary hearing and substantive hearing of the case, respectively.
INTIATION OF A CASE
The registrar receives and registers the claim in the commercial case register.
The plaintiff or his or her legal representative shall file a written commercial claim in form of a Plaint. The Plaint shall:
1° specify in form of conclusions the remedies sought;
2° identify the names of the parties to the suit or other persons connected to it; 3° contain a summary of the nature of the claim in form of short numbered paragraphs and indicating the grounds on which it is premised;
The plaint is accompanied by the following documents depending on their availability:
1° a list of witnesses and a brief summary of evidence each witness shall give;
2° an expert report that the plaintiff wishes to use as evidence; 3° any other document the plaintiff wishes to refer to.
The defendant must deliver a written statement of defence within 14 days of receiving the initial complaint.
An important innovation of the 2007 above-mentioned law is that the judge has a duty to organize, within 21 days of receiving the defendant’s answer to the complaint, a preliminary hearing with both parties. The preliminary hearing aims at making interlocutory orders on issues that may hinder the hearing of the case; it allows the judge to prepare for the proceedings and for the admittance of evidence. Also in the preliminary hearing, the judge may refer the parties to arbitrators or mediators in commercial matters; refer the matter to the mediation committee if the subject matter lies in its competence or jurisdiction; and pass a judgment in respect to a matter without going into the substantive hearing after consultative hearing after consulting to the parties.
After the preliminary hearing, a date for the substantive hearing is fixed and communicated to the parties.
RULES ON ADJOURNMENTS
The rules on adjournments – extra time to comply with procedural requirements – are meant to avoid delaying tactics. It is in this line that there shall be no adjournment of a preliminary hearing unless a sufficient reason is presented to court at least five working days before the hearing date.
The law also addresses the issue of the adjournment of a case. In this regard, the trial judge may at his or her own discretion or upon request of any of the parties adjourn the case or take any order deemed necessary. If the judge grants a party extra time and it later turns out the request was not genuine and meant only to delay the process, the judge can impose damages, which must be paid before the next hearing. If they are not paid, a further penalty applies.
At the substantive hearing of the merits, the parties present their evidence. The trial judge may during this hearing, after examining the evidence of witnesses or their opinions, make an order whether such evidence is sufficient. He may also encourage skilled people on the subject matter to seek dialogue with the parties with the view of making them settle the matter or appoint an expert to examine on behalf of court any report of skilled persons or other evidence presented to court and to report to court on a date fixed by the trial Judge.
Upon request by the parties, the trial judge may pass judgment based on the written submissions or written submissions or any other evidence without a hearing.
INCREASED EFFICIENCY OF COMMERCIAL COURTS
As provided for by Article 11 of the law establishing commercial courts, the President of the Supreme Court set up a Committee to advise her on expeditious disposal of commercial cases. The Committee consists of 11 members: 4 judges (one from each commercial court and one from the Commercial High Court); one person representing the Ministry of Justice; one person from Rwanda Development Board; one advocate from the Bar Association; one from the Chamber of Industry; one from banks and another one from professional services. Members of the Committee should hold office for a period of 3 years.
As an Order of the President of the Supreme Court spells it out, the Committee shall have the following attributions:
- Analyse the reasons that may cause the delay in the adjudication of commercial cases and advise on measures to remedy that
- Advise on modifications of the law to be carried out so that commercial cases are tried expeditiously
- Analyse the gaps in providing various services to people who come to the commercial courts and provide advice on how to fix that.
- To perform any other duty assigned to the Committee or as the Committee may determine in the furtherance of its mission
The committee found out that according to reports prepared by the Commercial High Court, adjudication of commercial cases is generally speedy. However, after a thorough review of the Law on Commercial Courts and the Law relating to civil, commercial, labour and administrative procedure, the Committee found out that there are some shortcomings that have to be addressed in order to avoid an accumulation of new arrears.
SECTION 3. Arbitration
In Rwanda, new law on commercial arbitration and conciliation was established in 2008 as Law n° 005/2008 of 14/02/2008 on arbitration and conciliation in commercial matters.
Article 3 (2) of Rwandan law on arbitration defines arbitration as “a procedure applied by parties to the disputes requesting an arbitrator or a jury of arbitrators to settle a legal, contractual or another related issue‟.
Arbitration refers to a process in terms of which the parties to a dispute voluntarily and jointly ask a third party, the arbitrator, to hear both sides of their dispute and make an award that they undertake in advance will be final and binding. The fact that the arbitrator settles the dispute by making a legally binding award distinguishes arbitration from mediation and negotiation. For this reason, arbitration is more similar to litigation, as both are command processes where a decision is imposed on the parties, in contrast to negotiation, which is consensual in nature. But, in contrast to litigation, the arbitrator`s award arises from the consent of parties to accept the award, not from the power of the court imposing an order.
- Significant features of arbitration
Four significant features of commercial arbitration are singled out for now, although they will be the subject of a brief comment later. These features are :
- The agreement to arbitrate;
- The choice of arbitrators;
- The decision of the arbitral tribunal;
- The enforcement of the award.
The agreement to arbitrate
An agreement by parties to submit to arbitration any dispute or difference between them is the starting point of the process in both national and international arbitration. If there is to be a valid arbitration, there must first be a valid agreement to arbitrate. Arbitration is a contractual process in the fact that it is based on an agreement between the parties, by opposition to some cases where arbitration is imposed in statute, such as provided for in Switzerland by article 89 of the Statute on health care insurance for disputes between doctors and health insurers, or as provided in France by Article 761-5 of the labour law code for certain disputes in the field of journalism.
The Rwandan law on arbitration defines the arbitration agreement. The long Article 9 of the above-mentioned law provides:
“Arbitration agreement is an agreement by both parties to submit to arbitration all or certain disputes which arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not. An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement. The arbitration agreement shall be in writing. An arbitration agreement is in writing if its content is recorded in any form, whether or not the arbitration agreement or contract has been concluded orally, in a written form basing on the conduct of the parties themselves, or based on other means. The requirement that an arbitration agreement be in writing is met by an electronic communication if the information contained therein is accessible so as to be used for subsequent reference; Electronic communication refers to any communication that parties make by means of data message; Data message refers to any information written, sent, received or stored by electronic, magnetic, optical and other means, including, but not limited to, electronic data interchange (EDI), electronic mail, telegraph, telex or telefax. Furthermore, an arbitration agreement is in writing if it is contained in an exchange of statements of claim and defence in which the existence of an agreement is alleged by one party and not denied by the other. The reference
in a contract to any document containing an arbitration clause constitutes an arbitration agreement in writing, provided that the reference is such as to make that clause part of the contract”.
The choice of arbitrators
One of the features of that distinguishes arbitration from litigation is the fact that the parties to an arbitration are free to choose their own tribunal. Sometimes, it is true; this freedom is unreal, because the choice may be delegated to a third party such as an arbitral institution. However, where the freedom exists, each party should make sensible use of it. A skilled and experienced arbitrator is one of the key elements of a fair and effective arbitration.
The decision of the arbitral tribunal
It is not uncommon for a settlement to be reached between the parties in the course of arbitral proceedings. However, if the parties cannot resolve their dispute, the task of arbitral tribunal is to resolve the dispute for them by making a decision, in the form of a written award.
An arbitral tribunal does not have the powers or prerogatives of a court of law, but it has a similar function to that of the court in this respect, namely that it is entrusted by the parties with the right and the obligation to reach a decision which will be binding upon them.
The power to make binding decisions is of fundamental importance. It distinguishes arbitration as a method of resolving disputes from other procedures, such as mediation and conciliation which aim to arrive at a negotiated settlement. The procedure that must be followed in order to arrive at binding decision by way of arbitration may be described as judicial. An arbitral tribunal is bound to act fairly and impartially as between the parties, giving each party a reasonable opportunity of putting his case and dealing with that of his opponent.
The enforcement of the award
Once an arbitral tribunal has made its award, it has fulfilled its function and its existence comes to an end. The tribunal`s award, however, gives rise to important and lasting legal consequences. Although it is the result of a private arrangement and is made by a private arbitral tribunal, the award constitutes a binding decision on the dispute between the parties. If it is not carried out voluntarily, the award may be enforced by legal proceedings both locally (that is to say, in the place in which it was made) and internationally.
The registration or deposit of award is a sine qua non requirement for an award to be recognized an enforced in Rwanda. However, no fee is paid for that registration or deposit for recognition of arbitral awards sought in Rwanda.
According to article 395 of the law establishing Commercial, civil, social and administrative procedure code, the party seeking recognition shall deposit the duly authenticated original award or duly certified copy thereof; and the original agreement or duly certified copy thereof award at the president of the higher instance court`s office and request the executory stamp on the deposited award. Article 396 of the same law, states that the President has 8 days to make a decision concerning that recognition.
In 2008 Rwanda ratified the New York convention on Recognition and Enforcement of foreign arbitral awards and became the 143rd State party to the convention.
The New York convention provides for a simpler and effective method of enforcement of obtaining recognition and enforcement of foreign awards. It is mainly due to the provisions of the New York convention that arbitration has become a very attractive alternative to traditional litigation. It is one of the widest accepted international conventions. It has significantly simplified the enforcement of foreign awards and harmonized the national rules for the enforcement of foreign awards.
- Matters excluded from arbitration
The subject matter of a dispute must be arbitrable in order for legitimate arbitration to take place. According to article 47 para 5 of Rwandan law on arbitration provides that a party can appeal against an award if:
“The award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or contains decisions on matter beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not submitted, only that part of the award which contains decisions on matters not submitted to arbitration may be set aside”.
Arbitration is not permissible in following matters:
- Matrimonial causes;
- Matters relating to status;
- Criminal cases
- Difference between arbitration and litigation
There are a number of important differences between arbitration and litigation, namely Cost and Expeditiousness; Confidentiality; Flexibility; Impartiality.
Cost and Expeditiousness
It is a common, albeit not always true assumption, that arbitration is cheaper and less time consuming than litigation. Can arbitration be faster and less expensive? The answer to this question is ‘most certainly.’ However, this is not always the case. Arbitration just like any other adversarial process may be expensive and time consuming especially if one of the parties is willing and able to spend considerable resources to defend its position and can exploit dilatory tactics to his or her benefit. In some aspects, the very characteristics that make arbitration more appealing than litigation are the same aspects that frame its disadvantages. For instance, the fact that it is flexible and dependant on the mutual consent of both parties may create time delays and incidental costs.
Although litigation has been described as ‘a machine in which you enter as a pig and come out as a sausage’. one would not be far from right by defining some international arbitration procedures in the same way. Moreover, it is not uncommon for lawyers to take control of the proceedings in complex international commercial arbitrations. This may come about as a result of the arbitrators’ efforts to instil trust in the arbitration process. Arbitrators give both parties the opportunity to fully present their case. Unlike in litigation where a case could summarily be dismissed, arbitration does not have the remedies found in judicial systems that are created to limit the development of frivolous cases. Consequently, there are no measures such as motions to dismiss or motions for summary judgment. The non-existence of such measures is an advantage for the claimant but a rather costly disadvantage for a defendant confronted with an unwarranted claim.
Furthermore, another factor that could lead to the high cost of arbitration is the number of extensions granted by arbitrators. Arbitrators are often very generous with the amount of time they grant parties to submit various pleadings. While this may be in line with making sure that both parties are treated fairly or that due process is adhered to, the result is that it amounts to significant delays in conducting the arbitration.
Additionally, there is usually a great amount of difficulty in arranging a timetable that will accommodate the schedule of the members of the arbitral tribunal, the legal representatives or witnesses, if the situation warrants it.
Moreover the panel of arbitrators for complex international commercial contracts is usually three; each of whom has to be well paid hence increasing the cost of arbitrations. This cannot be compared to the minimal court fees one encounters in litigation.
Although a party who has the intention to drag out the arbitration, may have a great chance of doing so particularly at the commencement of the proceeding, the cost of arbitration is often a great advantage if parties co-operate and keep expenses to a minimum.
Many people view the private nature of arbitration as a main advantage. Due to the fact that court proceedings are open to the public; many business people prefer arbitration to litigation. Unless otherwise agreed, awards in arbitral proceedings are confidential and the proceedings are closed to the public. This is considered important especially to parties who wish to protect trade secrets. Moreover, in the interest of protecting present or future commercial transactions, many business people deem any publicity of an on-going dispute as detrimental to their reputation.
The arbitration process is hailed for its inherent procedural flexibility. Unlike court proceedings which are rigid, arbitral proceedings offer greater flexibility in international commercial transactions. Parties get to choose their own arbitrators, in addition to having the independence to customize the arbitration proceedings to suit their wishes. Although parties may choose an already established arbitral institution with its own set of rules of procedure, the parties have a choice to decide on whether or not they want a totally different procedure that better serves their needs. If both parties cooperate and decide that they both want a speedy arbitration, the flexibility of arbitration can be used to their advantage to achieve that goal. Moreover, parties may even choose to have ‘fast track’ arbitration – an option that is offered by institutions such as the International Chamber of Commerce and the London Court of International Arbitration.
Another reason for the preference of arbitration over litigation by business parties is that many legal problems arise due to the possibility of several legal systems clashing hence complicating matters even more. It may be hard for the parties to find the most ideal place to file their suit. This may lead to a party embarking on a venture in search of a jurisdiction that may be more sympathetic to its interests. ‘Forum-shopping’ as this venture is often called, may be based on the search for a jurisdiction that is likely to be biased in favour of the party choosing that jurisdiction (for instance the anticipation of large amounts in damage awards).
Should the national courts of different countries claim to have jurisdiction over the same dispute, parallel litigation in more than one court may be a consequence, which would not only affect the parties heavily in costs but could potentially force them to defend themselves in multiple courts concurrently; not to mention the ordeal of having to cope with ‘competing anti-suit injunctions.’ This was the case in Laker Airways Ltd V. Sabena Belgium World Airlines. Furthermore, if the problem of conflict of jurisdiction is not resolved, the various courts presiding over the dispute may render conflicting judgments on the same matter.
One of the main reasons parties opt for arbitration over litigation is the fear the national courts will be biased in favour of their own citizen or the advantage of the home litigant in issues such as knowing the system, procedural rules, etc. Therefore, proceeding on the assumption that the arbitral tribunal will be fair and impartial and will not take the nationality of the parties into consideration, parties choose arbitration over litigation.
If any of the parties reasonably suspects that an arbitrator lacks the necessary degree of objectivity or that the arbitrator will not be fair and impartial in performing his duties, then that party can object on those grounds. Some have posited this as a disadvantage of arbitration in that a party can use this as a delaying tactic by ‘raising unwarranted objections’ or attempt to disturb what could otherwise be a smooth arbitration proceeding by filing an application midway through the proceedings. However this may not be something to worry about depending on whether the parties’ arbitration is under the auspices of an institution with rules safeguarding against such conduct. Institutions such as the International Commercial Court (ICC) have rules where parties have to follow certain procedures in making such objections (which have to be well founded). Moreover, those objections have to be made in within a specific period if the party’s application is to be considered on the specified grounds.