Arbitration is widely regarded as a preferred mechanism for resolving commercial disputes, offering parties a private, efficient, and often less adversarial alternative to litigation. Many commercial contracts typically include arbitration clauses to ensure that any disagreements are handled outside the courtroom. However, arbitration is fundamentally dependent on the existence of a dispute. Where a claim is admitted, such as a debtor acknowledging liability, the foundational requirement of a ‘dispute’ falls away. In such circumstances, the arbitration clause may become inoperative, and recourse to the courts may be both necessary and appropriate.

This article explores the limits of arbitral jurisdiction in Zambia, particularly in the context of admitted claims, and examines how local courts have approached this increasingly significant issue.

The Dilemma of No Dispute in Arbitration

Jurisdiction is the foundation of dispute resolution but where a claim is admitted, the arbitrator’s mandate ends before it begins. The jurisdiction of an arbitral tribunal is limited to matters where there is an existing dispute between the parties. An interesting challenge arises when a claim is fully admitted by the defendant in effect, no dispute exists between the parties on that claim. Can an arbitration clause compel a needless arbitral proceeding in such a case? Or, put differently, is an arbitration agreement rendered “inoperative” when there is no dispute to arbitrate?

One school of thought holds that any admission of liability effectively extinguishes the dispute, thereby removing the claim from the scope of the arbitration clause. On this view, if a defendant admits owing the amount claimed, there is no outstanding question for the arbitrator to determine. A court may then enter judgment on admission without undermining the arbitration agreement, since its purpose, to resolve disputes, no longer applies where no dispute remains. This perspective aligns with the proposition that arbitration presupposes the existence of a disagreement; when that prerequisite evaporates, the clause becomes inoperative in practical effect.

The learned author Andrew Tweeddale captures this principle when he stated the following in “A Practical Approach to Arbitration Law”,^[1]:

 “For there to be a reference to arbitration there needs to be a dispute. Where there is no dispute that was capable of compromise by accord or satisfaction there could be no reference to arbitration… if a party admits a claim then there is something which is capable of being compromised by accord and therefore, there is no dispute to found the jurisdiction of the arbitral tribunal”.^[2]

On the other hand, a more formalist view cautions against allowing courts to bypass arbitration because liability has been admitted. Even in the absence of a dispute on the core claim, there may remain ancillary issues such as interest, costs, or the timing of payment that fall squarely within the remit of the arbitral tribunal. Proponents argue that the tribunal should determine whether its jurisdiction has been ousted by an admission. They also stress the importance of party autonomy: where parties have contractually agreed to arbitrate all disputes, that agreement should be enforced according to its terms. Permitting recourse to the courts simply because the matter appears straightforward risks enabling forum-shopping and undermining the predictability that arbitration is intended to provide.

When the Court Takes Over - Lessons from Metalco on Admitted Claims and Forum Selection

While parties may bind themselves to arbitrate future disputes, that obligation is dependent on the existence of an actual disagreement. When no dispute exists the arbitration clause may no longer apply. This was clarified by the Court of Appeal in Metalco Industries Company Limited, Zalco Limited, Central Recycling Company Limited v First National Bank Zambia Limited and Firstrand Bank Limited.^[3]

In that case the Respondents (the plaintiffs in the court below), commenced foreclosure proceedings against the Appellants in respect to two legal mortgages. Under the facility agreement, which the Respondents did not intend to be read together with the mortgage deed and the deed of guarantee, it is stated all disputes arising out of, or in connection with the agreement, be referred to arbitration.^[4] The Appellants made an application to stay proceedings and have the matter referred to the Arbitral Tribunal for determination as stated in the facility agreement. The grounds of the appeal can be summarized as whether or not the facility agreement, which included the dispute resolution clause, would suffice as the commencement document over the contents of the mortgage deed and other securities.

The Court of Appeal dismissed the appeal, holding that the arbitral tribunal lacked jurisdiction due to the absence of a dispute. In paragraph 7.21 of the judgment, the Court endorsed the reasoning of the High Court, which had found that “[t]he claim was admitted except for the issue of interest and the 2^nd Respondent as an agent. There was therefore no dispute to found the jurisdiction of the arbitral tribunal.” It was held by the Court that the Respondents’ admission of the debt evidences that no dispute to the claims exists and without a dispute, the Arbitral Tribunal’s jurisdiction is ousted.^[5] Accordingly, the Court held that once the debt was admitted, there was no live controversy to refer to arbitration.

Though the courts revel in the complexity of a well-framed dispute, an admitted claim renders the matter as clear and as unambiguous as a traffic light stuck on green.

The Court’s finding in the causam supra does not obstruct the freedom to contract, nor does it undermine party autonomy. Instead, it steers the contractual vessel along a sound legal course, anchoring enforcement in judicial oversight where appropriate. The ruling affirms that courts will give effect to arbitration agreements—so long as there is something left to arbitrate.

Arbitration clauses are crafted to expedite the resolution of disputes. They are not, however, a catch-all mechanism. An admitted claim is a piece that simply does not fit into the puzzle of arbitral procedure. Where there is no genuine disagreement jurisdiction shifts back to the courts, which are vested with the authority to enforce obligations that are no longer in issue.

That said, even where liability is not contested, performance may still be withheld. A refusal or failure to pay can itself raise a residual dispute as to whether a remedy is due, when it should be rendered, or in what form. In Halki Shipping Corporation v Sopex Oils Ltd [1998] 1 WLR 726, the English Court of Appeal held that: 

“A ‘dispute’ exists when one party asserts a claim and the other party, by words or conduct, refuses to accede to it.”

This principle remains relevant in Zambia. The Court of Appeal in Metalco quoted with approval from Tweeddale’s text:

“For there to be a reference to arbitration there needs to be a dispute. Where there was no dispute that was capable of compromise by accord or satisfaction there could be no reference to arbitration… if a party admits a claim then there is something which is incapable of being compromised by accord and therefore there is no dispute to found the jurisdiction of the arbitral tribunal" 

Nonetheless, a difficulty presents itself in applying the test of dispute capable of compromise by accord or satisfaction to a refusal to pay a non-contested debt. It is therefore left to be argued that there is a dispute (defined as above) and that dispute that be resolved by accord or compromise, and therefore still arbitrable. But that is a narrow window. The broader position remains once a claim is truly admitted, the jurisdiction of the arbitral tribunal begins to recede.

Conclusion

For practitioners, the implications of an admitted claim in an arbitration context are significant. If you represent a claimant with a strong, essentially uncontested claim, you might prefer a swift court judgment (to save time and costs) rather than initiating arbitration. Conversely, a defendant who initially admitted liability might later try to retract or litigate peripheral issues, leading to confusion about forum. The current approach suggests a pragmatic middle line where courts will enforce arbitration agreements faithfully where a genuine dispute exists, but they are willing to recognize when an arbitration clause no longer serves a purpose due to a full admission or settlement.

Bibliography

Cases

1. Metalco Industries Company Limited, Zalco Limited, Central Recycling Company Limited v First National Bank Zambia Limited and Firstrand Bank Limited- (Appeal 222 of 2021) [2022] ZMCA 16 (15 March 2022); and
2. Halki Shipping Corporation v Sopex Oils Ltd [1998] 1 WLR 726.

Books

1. Tweeddale, A. A Practical Approach to Arbitration Law (Blackstone Press 1999).

Footnotes

^[1] Andrew Tweeddale A Practical Approach to Arbitration Law Blackstone Press 1999.

^[2] Andrew Tweeddale A Practical Approach to Arbitration Law Blackstone Press 1999.

^[3] (Appeal 222 of 2021) [2022] ZMCA 16 (15 March 2022).

^[4](Appeal 222 of 2021) [2022] ZMCA 16 (15 March 2022).

^[5](Appeal 222 of 2021) [2022] ZMCA 16 (15 March 2022).