Legal Analysis of the Effectiveness of Arbitration Clauses in Investment Contracts in Tanzania and the United States of America

Abstract

Arbitration clauses are central to the allocation of dispute-resolution risk in investment contracts. Their practical value, however, depends on more than formal recognition: the agreement must be valid, sufficiently certain, procedurally workable, and capable of being implemented within the applicable legal framework. This article examines the effectiveness of arbitration clauses in investment contracts in Tanzania through doctrinal legal analysis and a focused comparison with the United States. It relies on legislation, international instruments, judicial decisions and legal scholarship. The analysis considers the Arbitration Act, Cap. 15 R.E. 2023, relevant subsidiary legislation, investment legislation, the New York Convention, the ICSID Convention and the United States Federal Arbitration Act. It argues that Tanzania has a general statutory foundation for arbitration, but the effectiveness of investment clauses still depends on careful drafting, coherent choices concerning the seat, governing law, rules and scope of disputes, and predictable judicial support. The US experience demonstrates the value of the interaction between legislation, jurisprudence and institutional rules, although its framework cannot simply be transplanted into Tanzania. The article recommends investment-specific model clauses, clearer drafting guidance, continued professional development and consistent judicial treatment of arbitration agreements.