Settling Disputes Through Arbitration Kenya

Settling Disputes Through

Arbitration

In

Kenya

Kariuki Muigua, Ph.D., FCIArb

Chartered Arbitrator

Settling Disputes Through Arbitration in Kenya

© Kariuki Muigua, February, 2017

3rd Edition

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ISBN 978-9966-046-12-3

i

Table of Contents

Dedication .................................................................................................................. v

Acknowledgments ................................................................................................... vi

Author’s Note .......................................................................................................... vii

List of Abbreviations ............................................................................................. xiv

Chapter One ............................................................................................................... 1

Introduction to Arbitration and ADR ................................................................... 1

1.1 Introduction to Arbitration ................................................................................ 1

1.2 Attributes of Arbitration ..................................................................................... 3

1.3 Types of Arbitration ............................................................................................ 8

1.4 Arbitration in the Kenyan Context .................................................................. 13

1.5 Other Dispute Management Mechanisms ..................................................... 16

1.6. Conclusion ......................................................................................................... 34

Chapter Two ............................................................................................................ 35

Arbitration Agreement .......................................................................................... 35

2.1 Introduction ........................................................................................................ 35

2.2 A General Overview of the Arbitration Agreement ..................................... 35

2.3 The Arbitration Clause ..................................................................................... 37

2.4 Contractual Requirements in Arbitration Agreements ................................ 39

2.5 Formal Requirements of an Arbitration Agreement .................................... 41

2.6 Drafting an Effective Arbitration Agreement ................................................ 51

Chapter Three .......................................................................................................... 53

Stay of Legal Proceedings for Arbitration ......................................................... 53

3.1 Introduction ........................................................................................................ 53

3.2 Arbitration Agreement does not Bind Parties to Arbitration Only ............ 54

3.3 Conditions for Grant of Stay of Proceedings for Arbitration ...................... 55

3.4 Conclusion .......................................................................................................... 72

ii

Chapter Four ............................................................................................................ 73

Commencing an Arbitration and the Appointment of an Arbitral Tribunal

............................................................................................................................. 73

4.1 Introduction ........................................................................................................ 73

4.2 Notice of Arbitration ......................................................................................... 73

4.3 Appointment of Arbitrators ............................................................................. 76

4.4 Choosing an Arbitrator ..................................................................................... 80

4.5 Challenge of the Arbitral Tribunal .................................................................. 86

4.6 Procedure in Challenging the Arbitrator ....................................................... 87

4.7 Termination of the Office of the Arbitrator ................................................... 88

4.8 Immunity of the Arbitrator .............................................................................. 89

4.9 Withdrawal of Arbitrator ................................................................................. 89

4.9.1 Aftermath of Challenge or Termination of Arbitrators ............................. 89

Chapter Five ............................................................................................................. 91

Jurisdiction and Powers of an Arbitrator ........................................................... 91

5.1 Introduction ........................................................................................................ 91

5.2 Defining Jurisdiction and the Powers of an Arbitrator ................................ 91

5.3 Types of Jurisdiction ......................................................................................... 94

5.4 Jurisdiction of the Courts in Arbitration ........................................................ 95

5.5 Prerequisites of Jurisdiction of an Arbitrator ................................................ 96

5.6 Sources of Jurisdiction and Powers ................................................................. 97

5.7 Jurisdiction and Powers of the Arbitrator under the Arbitration Act, 1995

............................................................................................................................. 99

5.8 Limitations on the Jurisdiction and Powers of the Arbitrator .................. 106

Chapter Six ............................................................................................................. 109

Modes of Opposing and Challenging Arbitration Reference ..................... 109

6.1 Introduction ...................................................................................................... 109

6.2 Objection when there is no Valid Arbitration Agreement ......................... 109

6.3 Objection when Dispute is not contemplated under the Arbitration

Agreement ........................................................................................................ 113

6.4 Objection on Basis that Reference is Time-Barred ...................................... 117

iii

6.5 Challenge of Appointment of Arbitrators .................................................... 118

6.6 Challenging the Jurisdiction of the Arbitrator(s) ........................................ 120

Chapter Seven ....................................................................................................... 122

Preparation for Arbitration Proceedings .......................................................... 122

7.1 Introduction ...................................................................................................... 122

7.2 Preliminary Meeting ....................................................................................... 122

7.3 Arbitrator’s Directions .................................................................................... 124

7.4 Pleadings in Arbitration ................................................................................. 126

7.5 Pre-Arbitration Hearing Procedures ............................................................. 129

7.6 Interlocutory Applications in Arbitration .................................................... 130

Chapter Eight ......................................................................................................... 136

Arbitration Hearing.............................................................................................. 136

8.1 Introduction ...................................................................................................... 136

8.2 Arbitration Hearing ......................................................................................... 136

8.3 Opening the Hearing....................................................................................... 137

8.4 Summary of Procedure at the Arbitration Hearing .................................... 137

8.5 Key Aspects of the Arbitration Hearing ....................................................... 138

Chapter Nine ......................................................................................................... 146

Arbitral Awards, Costs and Interest ................................................................. 146

9.1 Introduction ...................................................................................................... 146

9.2 Arbitral Award ................................................................................................ 146

9.3 Formal Requirements of the Award ............................................................. 150

9.4 Types of Awards .............................................................................................. 152

9.5 Costs in Arbitration ......................................................................................... 154

9.6 Interest ............................................................................................................... 157

Chapter Ten ........................................................................................................... 159

Role of the Court in Arbitration ........................................................................ 159

10.1 Introduction .................................................................................................... 159

10.2 Court’s Intervention in Arbitration: The General Principle .................... 160

iv

10.3 Role of the Court before Reference to Arbitration .................................... 171

10.4 The Role of the Court during Arbitration .................................................. 174

10.5 Role of the Court after Arbitration .............................................................. 178

10.6 A Critique on the Role of the Court in Arbitration ................................... 179

10.7 Conclusion ...................................................................................................... 185

Chapter Eleven ...................................................................................................... 187

Post-Hearing Steps in Arbitration ..................................................................... 187

11.1 Introduction .................................................................................................... 187

11.2 Setting aside the Arbitral Award ................................................................ 187

11.3 Recognition and Enforcement of Arbitral Award..................................... 192

11.4 Determination of Questions of Law and Appeals .................................... 199

Chapter Twelve ..................................................................................................... 201

Arbitration Practice in Kenya ............................................................................. 201

12.1 Introduction ................................................................................................... 201

12.2 The Nature of Arbitration as a Profession ................................................. 201

12.3 How to Become an Arbitrator in Kenya ..................................................... 204

12.4 The Future of Arbitration in Kenya ............................................................ 206

Bibliography ........................................................................................................... 210

Appendix A ............................................................................................................ 221

Agenda for Preliminary Meeting ........................................................................ 221

Appendix B ............................................................................................................. 225

Order For Directions No 1 .................................................................................... 225

Index ........................................................................................................................ 228

v

Dedication

Dedicated to those who dare to dream and keep hope alive in the face of

adversity, pain and discouragement.

You are the true heroes.

vi

Acknowledgments

My profound thanks to Paul Musyimi, Francis Kariuki, Mbiriri Nderitu,

Ngararu Maina, all Kariuki Muigua & Co. staff members and all others whom

I had the honour to work with.

This book would not have been written without the insights and inspirations

that came out of the numerous discussion sessions with my colleagues at the

Chartered Institute of Arbitrators Kenya Branch. I finally, and most

importantly, wish to sincerely appreciate the unwavering support and

understanding given to me by my family during the period I have been

working on this book.

To all of you, I extend my deepest appreciation.

vii

Author’s Note

The first edition of this book was informed by the realisation that, despite the

accelerated development and growth of Alternative Dispute Resolution (ADR)

as part of the access to justice framework in Kenya, there was little literature

on the subject, especially arbitration. The scope for the application of

arbitration was extensively widened by the 2010 Constitution which requires

various national laws to incorporate Alternative Dispute Resolution

mechanisms, including negotiation, mediation and arbitration in settlement of

disputes. The book was, therefore, a response to the need to fill that void and

also to create awareness not only among the general public, being the

consumers of justice, but among the practitioners of arbitration as well.

With ADR having been entrenched in our Constitution, there was a need to

encourage the public to exploit the many viable opportunities that the use of

Alternative Dispute Resolution mechanisms in managing conflicts affords.

There was also the need to encourage more students and professionals to

acquire skills and expertise in these mechanisms. Thus, the book is meant to

take the readers through the process of arbitration in a simplified, yet

comprehensive manner, with the latest key amendments and case law on

arbitration in Kenya.

It is worth noting that in a society such as ours, effective, flexible and

expeditious conflict management mechanisms, such as arbitration, are

essential in boosting development. Protracted disputes are costly and may not

augur well in light of the current developmental needs. Arbitration offers such

an opportunity especially in the commercial world, hence the need to ensure

that more people understand and appreciate the process. I have practised

arbitration for a number of years, both as a representative of parties and as the

presiding arbitrator. I can attest to the fact that arbitration has the capacity to

be flexible, fast and expeditious if the parties are willing to make it so. It is

widely used in settling commercial disputes.

viii

The need for another edition of this book was informed by the post-2010

Constitutional developments particularly in the areas of ADR and the case law

emerging from our courts. This brought about the necessity to take stock. It

evaluates how the courts have addressed some of the issues arising from the

practice of arbitration in Kenya. It also discusses some of the concerns that may

arise in future, especially in the relationship between arbitration practice and

the constitutional bill of rights.

I recommend this book to ADR students, teachers and tutors of ADR, ADR

practitioners and to the general public interested in acquiring knowledge on

the various ADR mechanisms in Kenya and their role in resolving or settling

disputes occurring in everyday life. This book will additionally be a useful

guide for legislators as it addresses key areas in arbitration practice that are in

dire need of reform. What is more, international commercial arbitration has

taken root in Kenya in recent years, hence the need to equip students and

practitioners with the basic knowledge in their quest for expertise in the area.

In addition, this book has a place as a core textbook for the popular Entry

Course in Arbitration, offered by Chartered Institute of Arbitrators-Kenya

around East Africa and for postgraduate students of international commercial

arbitration, to whom it will offer basic foundational knowledge.

Arbitration is still fairly misunderstood in Kenya. It has been made as

structurally complex as litigation by current practitioners, thus making it

unattractive to those who would want to utilise it. However, dissemination of

information to the public on the use of arbitration as a dispute settlement

mechanism is on the rise and this will go a long way in popularising and

demystifying it.

It is the way of the future, for access to justice and economic growth to be

realised in Kenya.

Kariuki Muigua, February 2017

ix

CASES

Anne Mumbi Hinga v Victoria Njoki Gathara, [2009] eKLR. ......................... 147,178

Anne Wangui Ngugi & 2,222 Other v Edward Odundo, C.E.O Retirement Benefits

Authority, [2015] eKLR, petition No. 57 of 2014. .................................................... 4

Barlany Car Hire Services Limited-v-corporate Insurance Limited, HCCC

(Milimani) No. 1249 of 2000. .................................................................................. 68

Bernard Karweru Gathuri v Joyce Wangari & another, [2007] eKLR, Civil Case 23A

of 1991. ...................................................................................................................... 82

Boyes-v-Gathure (1969) E.A. 385 .............................................................................. 70

Brace Transport Corporation of Monrovia, Bermuda v Orient Middle East Lines Ltd

AIR 1994 SC 1715. .................................................................................................. 193

British Oil & Cake Mills -v- Horace Battin & Co , (1922) 13 LL LR 443 .............. 141

Buckeye Check Cashing, Inc. v Cardegna et al, 546 U.S (2006). ............................... 50

Channel Tunnel Group Ltd v. Balfour Beatty Construction Ltd [1993] A.C. 334

............................................................................................................................. 59,173

Chappel-v-North [1891] 2 Q.B 252. .......................................................................... 66

Chevron Kenya Limited-v-Tamoil Kenya Limited, HCCC (Milimani) No. 155 of

2007. ........................................................................................................................... 57

Christ for All Nations v. Apollo Insurance Co. Ltd [2002]2 EA 366 ...................... 111

CMC Holdings Ltd & Another v Jaguar Land Rover Exports Limited [2013] eKLR

.................................................................................................................................. 132

Coppee-Lavalin SA/NV-v-Ken-Ren Chemicals and Fertilizers Ltd, [1994] 2 All ER

465. ........................................................................................................................... 161

David Onyango Oloo v The Attorney general, [1987] K.L.R 711 .......................... 170

Deekay Contractors Ltd v Construction & Contracting Ltd, [2004] eKLR. ........... 123

Dickson Mukwelukeine v. Attorney General & 4 Others Nairobi High Court Petition

No. 390 of 2012 .......................................................................................................... 14

Diocese of Marsabit Registered Trustees v Technotrade Pavilion Ltd, [2014] eKLR,

Civil Case No. 204 of 2013. ..................................................................................... 61

Don-wood Co. Ltd-v-Kenya Pipeline Ltd, HCCC No. 104 of 2004. ...................... 132

Eagle Star Insurance Company Limited-v-Yuval Insurance Company Limited, [1978]

Llods Rep. 357. ......................................................................................................... 62

Eastern Seaboard Concrete Construction Co., Inc., et al v Gray Construction Inc., et

al., District of Maine , Civ. No. 08-37-P-S, United States of America. ....... 149,164

Edward Muriu Kamau & 4 others all trading as Muriu, Mungai & Co. Advocates v

John Syekei Nyandieka, [2014] eKLR. ................................................................ 81,118

x

Edwin Journeys-v-Thyssen (GB) Ltd [1991] 57 Build. L.R 116 .............................. 67

Epco Builders Limited-v-Adam S. Marjan-Arbitrator & Another Civil Appeal No.

248 of 2005....................................................................................................... 106, 166

Esmailji vs Mistry Shamji Lalji & Co. [1984] KLR 150. .......................................... 55

Fakes-v-Taylor Woodrow Construction Limited [1973] Q.B. 436 ............................ 67

Family Bank Limited v Kobil Petroleum Limited, ELC No. 651 OF 2010, at High

Court of Kenya. ........................................................................................................ 38

Forster-v-Hastings Corporation, (1903) 87 LT 736. ............................................... 131

Fox -v- P. G. Wellfair Ltd, [1981] 2 Lloyd's Rep 514 ............................................ 142

Gladys Mwaniki (Regional Club) & 6 others v Gordon Oluoch & 7 others [2015]

eKLR. ......................................................................................................................... 14

Glencore Grain Ltd v TSS Grain Millers Ltd, [2002] 1 KLR 606 .......................... 189

H.ford & Co. Limited-v-Compagnie Furness (France), [1922] 2 KB 797. ........ 68, 118

Hall Street Associates, L. L. C., Petitioner vs Mattel, Inc., 552 U. S. – (2008). ..... 148

Hanif Sheikh v Alliance Nominees Limited & 17 others, [2014] eKLR, Civil Suit No.

241of 2012.................................................................................................................. 60

Harbour Assurance v Kansa General International Insurance, [1993] 1 Lloyd’s Rep

455 (CA). ................................................................................................................... 49

Heyman v Darwins, (1942) 72 L1 L Rep 65 (HL). .................................................. 48

Heyman& Another-v-Darwins Ltd, (1942) AC 356 ............................................... 110

James Heather – Hayes v African Medical and Research Foundation (AMREF), [2014]

eKLR. ........................................................................................................................... 4

James Muhando Mwangi-v-B.O.G Premier Academy & Another, HCCC (Milimani)

No. 78 of 2001. .......................................................................................................... 70

Jones v National Coal Board, [1957] 2 QB 55; Denning LJ, 1957: 63). ................. 141

Jordeson & Co -v- Stora Kopparbergs Bergslags A/B , (1931) 41 LL LR 201 ......... 141

Joseph W. Karanja & another v. Geoffrey Ngari Kuira, [2006] eKLR. ................... 142

Kamlesh Mansukhlal Damji Pattni and Goldenberg International Limited v the

Republic, High Court Misc. Application No. 322 of 1999 and No. 810 of 1999.

.................................................................................................................................. 184

Kenya Airports Parking Services Ltd & Another v Municipal Council of Mombasa,

[2009] eKLR. ............................................................................................................. 50

Kenya Pipeline Company Limited v Kenya Oil Company Limited & another, [2015]

eKLR, Misc Civil Case No 357 of 2014. ................................................................. 86

Kenya Seed Co. Limited-v-Kenya Farmers Association Limited, HCCC (Nairobi)

No. 1218 of 2006. ...................................................................................................... 65

xi

Kenya Shell Limited v Kobil Petroleum Limited, Civil Appeal (Nairobi) No. 57 of

2006. ................................................................................................................. 150, 177

Kihuni v Gakunga & Another, [1986] KLR 572. .................................................... 140

Kundan Singh Construction Ltd v Kenya Ports Authority, H.C.C.C No. 794 of 2003

(Milimani, unreported). ........................................................................................ 195

Lloyd & Others v Wright and Dawson v Wright [1983] QB 1065. ....................... 153

Lofty v Bedouin Enterprises Ltd, EALR (2005) 2 EA, pp. 122-127......................... 61

Marchese v Marchese, [2007] OJ No 191. ................................................................. 28

Mohammed Gulam Hussein Fazal Karmali & anor v. The Chief Magistrate’s Court

Nairobi & anor, [2006] eKLR. ................................................................................... 43

Ndyanabo vs Attorney General [2001] 2 EA 485 .................................................... 168

Nedermar Technology by Ltd v Kenya Anti-Corruption Commission & Another,

[2006] eKLR. ............................................................................................................. 50

Niazsons (K) Ltd v China Road and Bridge Corporation (K) [2001] 2 E.A. 502. ..... 56

Okenyo Omwansa George and Another –vs- The Attorney General and 2 Others,

Petition No. 126 of 2011. ........................................................................................... 6

Owners of the Motor Vessel “Lillian S” v Caltex Oil (Kenya) Ltd [1989] KLR C.A.

1. .......................................................................................................................... 93,181

Palmers Corrosion Control Ltd v Tyne Dock Engineering Ltd [1997] EWCA Civ

2776. ........................................................................................................................... 67

Pamela Akora Imenje-v-Akora ITC Intenational Ltd & Another, HCCC (Milimani)

No. 368 of 2005. ........................................................................................................ 58

Patel-v-Patel, [1998] 3 WLR 322. ............................................................................. 65

Peter Muema Kahoro & Another-v-Benson Maina Githethuki, [2006]

HCCC(Nairobi) No. 1295 of 2005. ......................................................................... 54

R. – v – Sussex Justices Ex parte Mc Carthy [1924] 1KB. 256 ................................... 7

Rawal-v-The Mombassa Hardware Ltd, [1968] E.A. 398. ........................................ 54

Republic v. Mohamed Abdow Mohamed, Criminal Case No. 86 of 2011 (May,2013)

...................................................................................................................... 33, 46, 115

Sadrudin Kurji & another v. Shalimar Limited & 2 Others, [2006] eKLR. ........... 163

Safaricom Limited v Ocean View Beach Hotel Limited & 2 Others, [2010] eKLR. .. 99

Seven Twenty Investments Limited v Sandhoe Investment Kenya Limited, [2013]

eKLR, Civil Suit No 359 of 2013. .......................................................................... 132

Shamji v. Treasury Registrar, Ministry of Finance, [2002] 1 EA, 269. .................... 95

Spencon Kenya Limited v. Harman Marwa & 2 others, [2008]eKLR. ................... 119

Stephen Okero Oyugi v. Law Society of Kenya, [2005]eKLR. ................................ 115

xii

Structural Construction Co. Ltd v International Islamic Relief Organization [2006]

eKLR. ....................................................................................................................... 195

TM AM Construction Group (Africa) v. Attorney General, HCCC (Milimani) No.

236 of 2001…………………………………………………………………………..59

Tononoka Steels Limited v. E. A. Trade and Development Bank (PTA Bank), 2 (2000)

EA 536. .................................................................................................................... 165

UAP Provincial Insurance Company Ltd v Michael John Beckett [2013] eKLR, Civil

Appeal No. 26 of 2007. ............................................................................................ 71

Victoria Furniture Limited-v-African Heritage Limited & Another, HCCC

(Milimani) No. 904 of 2001 ..................................................................................... 64

William Oluande v. American Life Insurance Co. (K), (2006) eKLR. ...................... 74

Zachary Olum and Anor v Attorney General, (1) [2002] 2 EA 508 ....................... 169

STATUTES

Advocates Act, Chapter 16 of the Laws of Kenya, Government Printer, Nairobi

.................................................................................................................................. 107

Arbitration Act 1996 of the United Kingdom (UK) ............................................ 15

Arbitration Act, Act No. 4 of 1995(2009), (Government Printer, 2009, Nairobi).

........................................................................................................................ 1, 53, 162

Arbitration Rules, 1997 in Legal Notice No. 58/97 ............................................ 121

Children Act, No. 8 of 2001, Laws of Kenya (Government Printer, Nairobi,

2001) ......................................................................................................................... 182

Civil Procedure Act, Cap 21, Laws of Kenya ( Government Printer, Nairobi,

2010); .......................................................................................................................... 14

Civil Procedure Rules 2010, Legal Notice No. 151 of 2010, 10th September,

2010, The Civil Procedure Act (Cap. 21). (Government Printer, Nairobi, 2010).

............................................................................................................................ 13, 180

Community Land Act, No. 27 of 2016 ( Government Printer, Nairobi, 2016) 98

Cooperative Societies Act, Chapter 490 of the Laws of Kenya, Government

Printer, Nairobi ......................................................................................................... 98

Elections Act, No. 24 of 2011, (Government Printer, Nairobi, 2011) ............... 11

Environment and Land Court Act No. 19 of 2011 (Government Printer,

Nairobi, 2011) ........................................................................................................... 11

Evidence Act, Chapter 80, Laws of Kenya, Government Printer, Nairobi. ...... 101

Industrial Court Act, No. 20 of 2011 ( Government Printer, Nairobi, 2011) ... 11

xiii

Intergovernmental Relations Act, No. 2 of 2012. Revised Edition 2012

(Government Printer, Nairobi, 2012) .................................................................... 11

Kenya Airports Authority Act , Chapter 395 of the Laws of Kenya, Government

Printer, Nairobi ......................................................................................................... 98

Land Act , No. 6 of 2012 ( Government Printer, Nairobi, 2012) ........................ 11

Limitation of Actions Act, Cap. 22 of Laws of Kenya, Government Printer,

Nairobi .................................................................................................................... 117

Mediation (Pilot Project) Rules, 2015, Legal Notice No. 197 of 2015, Kenya

Gazette Supplement No. 170, 9th October, 2015, pp. 1283-1291 (Government

Printer, Nairobi, 2015). ............................................................................................ 19

Nairobi Centre for International Arbitration Act No. 26 of 2013, Laws of Kenya

(Government Printer, Nairobi, 2013). ................................................................. 207

UK Arbitration Act (Cap. 23), 1996. ...................................................................... 59

LIST OF CONVENTIONS & TREATISES

Convention on the Recognition and Enforcement of Foreign Arbitral Awards

330 UNTS 38; 21 UST 2517; 7 ILM 1046 (1968) .................................................... 42

Model Law, United Nations document A/40/17, Annex I ................................. 45

UNCITRAL Rules , General Assembly resolution 65/22 UNCITRAL

Arbitration Rules as revised in 2010 ..................................................................... 74

United Nations, Charter of the United Nations, 24 October 1945, 1 UNTS XVI. .. 1

xiv

List of Abbreviations

ADR Alternative Dispute Resolution

Arb-Med Arbitration- Mediation

BATNA Best Alternative to a Negotiated Agreement

CIArb Chartered Institute of Arbitrators

CIArb (k) Chartered Institute of Arbitrators-Kenya

CPD Continuous Professional Development

ICC International Chamber of Commerce

ICSID International Centre for Settlement of Investment Disputes

KLR Kenya Law Reports

LCIA London Court of International Arbitration

Med-Arb Mediation – Arbitration

NCIA Nairobi Centre for International Arbitration

UNCITRAL United Nations Commission on International Trade Law

Introduction to Arbitration and ADR

1

Chapter One


1.1 Introduction to Arbitration

Arbitration is one of the mechanisms that are commonly referred to as

alternative dispute resolution mechanisms (ADR). These mechanisms are set

out in Article 33 of the Charter of the United Nations. This is the legal basis for

the application of alternative dispute resolution mechanisms in disputes

between parties be they States or individuals. Article 33 of the United Nations

Charter outlines the various conflict management mechanisms that parties to

any dispute may resort to. It provides that the parties to a dispute shall, first

of all seek a solution by negotiation, enquiry, mediation, conciliation,

arbitration, judicial settlement, resort to regional agencies or arrangements, or

other peaceful means of their own choice.1

Arbitration is a process subject to statutory controls, whereby formal disputes

are determined by a private tribunal of the parties’ choosing.2 It arises where

a neutral third party is appointed by the parties or an appointing authority to

determine the dispute and give a final and binding award. The Arbitration

Act, 1995 (2009) (hereinafter Arbitration Act, 1995) defines arbitration to mean

“any arbitration whether or not administered by a permanent arbitral

institution.”3 The definition thus includes all types of arbitration that can be

envisaged in society. However, the Act is not very elaborate and regard has to

be had to other sources for the definition of the term ‘arbitration’.

1 United Nations, Charter of the United Nations, 24 October 1945, 1 UNTS XVI. 2 Gould, N., Dispute Resolution in the Construction Industry: An Evaluation of British Practice: A

Department of the Environment, Transport and the Regions Partners in Technology Research Project,

(Thomas Telford, 1999), p. 84. 3 The Arbitration Act, Act No. 4 of 1995(2009), (Government Printer, 2009, Nairobi).


2

According to Khan4, arbitration is a private consensual process where parties

in dispute agree to present their grievances to a third party for resolution. It is

an adversarial process and in many ways resembles litigation. According to

Stephenson,5 Lord Justice Raymond provided a definition some 250 years ago

which is still considered valid today:

An arbitrator is a private extraordinary judge between party and party, chosen

by their mutual consent to determine controversies between them, and

arbitrators are so called because they have arbitrary power; for if they observe

the submission and keep within their due bonds, their sentences are definite

from which there lies no appeal.6

In defining arbitration between States, the International Law Commission

states that arbitration between states is the procedure for the settlement of

disputes between states by a binding award on the basis of law and as a result

of an undertaking voluntarily accepted.”7

Arbitration is basically a mechanism for the settlement of disputes, which

usually takes place in private, pursuant to an agreement between two or more

parties, under which the parties agree to be bound by the decision to be given

by the arbitrator according to law, or if so agreed, other considerations after a

full hearing, such decision being enforceable at law.8

The person appointed by the parties to arbitrate between them and resolve

their differences is referred to as an arbitrator. An arbitrator is defined as a

4 Khan, F., Alternative Dispute Resolution, A paper presented Chartered Institute of Arbitrators-

Kenya Branch Advanced Arbitration Course held on 8-9th March 2007, at Nairobi. 5 Stephenson, R., Arbitration Practice in Construction Disputes, (Butterworths, London,

1998), p. 123. 6 Totterdill, B., An Introduction to Construction Adjudication: Comparison of Dispute

Resolution Techniques. (Sweet & Maxwell, London, 2003), p. 21. 7 Wallace, R.M.M., International Law: A Student Introduction, (Sweet & Maxwell,

London, 1997), p. 282. 8 Barnstein, R. The Handbook of Arbitration Practice: General Principles (Part 2) (Sweet &

Maxwell, London, 1998), p. 313.


3

legal arbitrator; a person appointed by two parties to settle a dispute, arbitrate,

and decide by arbitration, judge between two parties to a dispute (usually at

the request of the two parties).9

1.2 Attributes of Arbitration

Arbitration is a practical mechanism of dispute settlement that has been tested

over the years.10 It has a number of attributes. Firstly, arbitration is a private

process that enjoys a lot of confidentiality. The parties have autonomy over the

arbitrator and the process and thus the outcome may be mutually acceptable

to the parties. Parties select an arbitrator privately and proceedings are also

held privately, with no onlookers except the parties to the dispute. This aspect

of confidentiality is highly valued by individuals/disputants, as it avoids

washing their dirty linen in public. The confidential nature of the proceedings

additionally prevents the award or deliberations from being published in the

press without the approval of the parties.11

Secondly, the panel or the individual will be chosen directly by the parties.

They will, therefore, choose a person of integrity who is knowledgeable and

experienced in the matter at hand. Parties will consequently have maximum

confidence in him or her. This is unlike litigation where parties cannot choose

their own judge and where judges are only experts at law and are not

specialized in the issues in dispute.12

Since arbitration is private and consensual, it is possible to select an arbitrator

who can devote all the time needed to it and thereby dispose of the case with

9 Oxford Advanced Learners Dictionary, 5th ed. (Oxford University Press, London,

1995), p. 49. 10 See generally, ‘Merits of Mediation- the London Court of International Arbitration,’ LCIA

website <www.lcia.com> [accessed on 3/8/06]; see also Chartered Institute of Arbitrators UK

<www.ciarb.co.uk> [Accessed on 3/09/2009]. 11 Cf. generally, Reuben, R.C., ‘Confidentiality in Arbitration: Beyond the Myth,’ U. Kan. L. Rev.,

54, 2005, p.1255. 12 ‘Merits of Mediation- the London Court of International Arbitration,’ LCIA website, op cit.


4

expedition. Similarly, the parties are able to make themselves available at short

notice and do whatever they are ordered to do.13 Also, with speed and

flexibility, the overall costs in arbitration may be less than those incurred in

litigation. Indeed, the need for expeditious disposal of matters in ADR was

reiterated in the case of James Heather – Hayes v African Medical and Research

Foundation (AMREF)14 where the Court stated that one of the unique features of

the Industrial Court is that parties can access justice expeditiously, at a minimal cost

and without too many legal hurdles. While employers are encouraged to adopt ADR

at the work place, they are expected to do it in a way that facilitates the quick resolution

of disputes rather than cause delay (emphasis added).15 Thus, ideally, the aim of

any arbitrator should be the expeditious and cost effective disposal of matters

brought before them. However, arbitral tribunals or arbitrators have to be paid

for their services.16 Lawyers and party representatives also have to be paid and

for this reason, arbitration can potentially end up being expensive.17

The issue of the high cost of arbitration was raised in the case of Anne Wangui

Ngugi & 2,222 Other v Edward Odundo, C.E.O Retirement Benefits Authority18

where the petitioners alleged violation of their right to access justice under

13 Ibid. 14 James Heather – Hayes v African Medical and Research Foundation (AMREF), [2014] eKLR. 15 James Heather – Hayes v African Medical and Research Foundation (AMREF) [2014] eKLR, para.

13; See also LeRoy, M.H. & Feuille, P., ‘When Is Cost an Unlawful Barrier to Alternative

Dispute Resolution-The Ever Green Tree of Mandatory Employment Arbitration,’ Ucla L.

Rev., 50, 2002, p.143. 16 See generally, Farkas, B., & Eiseman, N. M., ‘Stiffing the Arbitrators: The Problem of

Nonpayment in Commercial Arbitration,’ Harvard Negotiation Law Review, 2015. 17 ‘Merits of Mediation- the London Court of International Arbitration,’ LCIA website op cit.; See also

Budnitz, M.E., ‘The High Cost of Mandatory Consumer Arbitration,’ Law and Contemporary

Problems, 67(1/2), 2004, pp.133-166 at p. 134; 150-156; See also Higgins, F.J., et al., ‘Pitfalls in

International Commercial Arbitration,’ The Business Lawyer, 1980, pp.1035-1051 at pp. 1041-

1043; See also generally, Drahozal, C.R., ‘Arbitration Costs And Forum Accessibility:

Empirical Evidence,’ University of Michigan Journal of Law Reform, Vol. 41, No.4, Summer 2008,

pp. 813-841; See also Seidenberg, S., "International Arbitration Loses Its Grip," 1 April, 2010.

Available at

http://www.abajournal.com/magazine/article/international_arbitration_loses_its_grip 18 Anne Wangui Ngugi & 2,222 Other v Edward Odundo, C.E.O Retirement Benefits Authority, [2015]

eKLR, petition No. 57 of 2014.


5

Article 48 of the Constitution, as well as violation of Article 47 with regard to

fair administrative action. They further alleged that upon the enactment of the

Retirement Benefits Act, they were given by Section 46 an unfettered right to

lodge their complaint with the respondent without a precondition of going to

arbitration, which is an expensive affair. They claimed that as retirees, they

had no money to pay arbitrators and the law allows them free services under

Section 46. They also contended that the respondent was aware of the financial

impediment to arbitration but was using it to frustrate their access to justice.19

The respondent, however, argued that submission to a dispute resolution

process in the Scheme Rules was a statutory requirement under Regulation

7(v) of the Retirement Benefits (Occupational Retirement Benefits Scheme)

Regulations, 2000. It was his case therefore that the RBA could only adjudicate

upon disputes once the dispute resolution mechanism under the Scheme rules

has been followed. In his view, the refusal by the petitioners to submit to a

dispute resolution process such as arbitration on account of the expense was

untenable as the parties were not entitled to abandon the right forum at will

and subject to their convenience.20 It was his further contention that Article 159

(2) (c) of the Constitution encourages alternative dispute resolution. The

respondent submitted that the directive by the Authority for the petitioners to

submit to the dispute resolution process under the respective Scheme Rules

was consistent with the Constitution as well as the Act and thus, could not

amount to violation of their right of access to justice under Article 48.21

While the Court was not satisfied that the petitioners demonstrated any

violation of their rights by the respondent, this case demonstrates some of the

real issues that may clog arbitration practice in future.After confidentiality,

flexibility is perhaps the most attractive attribute of arbitration. Being a private

and a consensual process, arbitration can be very flexible.22 There are no formal

19 [2015] eKLR, petition No. 57 of 2014, paras 1 &16. 20 Ibid, para. 33. 21 Ibid, para. 34. 22 See Stipanowich, T.J., ‘The Arbitration Penumbra: Arbitration Law And The Rapidly


6

or unchangeable rules like those found in the courts. Parties and arbitrators

are free to adopt flexible procedures and rules which suit everybody.23 In the

courts, one needs an advocate to represent him. Lawyers are expensive. In

arbitration, one may appear in person or send a lawyer or representative or,

indeed, anyone that one chooses. It is part of the flexibility attribute.24

Arbitration limits appeals against awards a fact which impacts positively on

expediency of the arbitral process. Except in the most blatant cases of bad

arbitrating, the arbitrator’s award will be final and binding on the parties.25

Where the law allows appeals, it will usually be in cases of disregard of

principles of natural justice or the express agreement of the parties.26

In arbitration, there is minimum emphasis on formality, which encourages

expeditious disposal of matters. Procedure in courts is founded on rules of

practice some of which are of great antiquity. Many others are very detailed,

written in archaic language and quite technical from a legal standpoint. It

requires an experienced lawyer to apply them correctly. This may defeat access

to justice, as propounded in the case of Okenyo Omwansa George and Another –

vs- The Attorney General and 2 Others27, where it was held: “Access to justice is a

broad concept that defies easy definition. It includes the enshrinement of rights in the

law; awareness of and understanding of the law; easy availability of information

pertinent to one’s rights; equal right to the protection of those rights by the law

enforcement agencies; easy access to the justice system particularly the formal

adjudicatory processes; availability of physical legal infrastructure; affordability of

Changing Landscape of Dispute Resolution,’ Nevada Law Journal, Vol. 8, Fall, 2007, pp. 427-

473, at p. 432. 23 ‘Merits of Mediation- the London Court of International Arbitration,’ LCIA website op cit.; See also

Mentschikoff, S., ‘The Significance of Arbitration—A Preliminary Inquiry,’ Law and

Contemporary Problems 17, No. 4 (1952), pp. 698-710 at p. 699. 24 Ibid. 25 The Arbitration Act, 1995. s. 35 thereof provides the grounds of setting aside an arbitral

award. 26 Ibid, s. 39. 27 Okenyo Omwansa George and Another –vs- The Attorney General and 2 Others, Petition No. 126

of 2011.


7

legal services; provision of a conducive environment within the judicial system;

expeditious disposal of cases and enforcement of judicial decisions without delay

(emphasis added).”

In arbitration, however, these rules do not necessarily apply. The rules to apply

will be either those agreed upon by the parties or some institutional procedural

rules, like those of the Chartered Institute of Arbitrators (UK) or the London

Court of International Arbitration.

It can thus be rightly stated that the overriding rules of arbitration are those

rules which will enable justice to be rendered between the parties with

minimum formality and with expedition. These rules will be found in what is

called “rules of natural justice.”28 The application of the rules of natural justice

as a minimum starting point ensures that justice is done and seen to be done.29

Despite all the positive attributes inherent in the arbitration process,

arbitration has practicability restrictions.30 Internationally though, it is

probably the most acceptable and effective method of resolving disputes, and

more so those arising over natural resources. As already pointed out, Article

33 of the Charter of the United Nations outlines the various conflict

management mechanisms that parties to any dispute may resort to, including

arbitration. This attests to the importance of arbitration as a dispute settlement

mechanism at the international fora.

At the national level, in Kenya, arbitration is enshrined in the Constitution.31

The process of arbitration is governed by statute, the Arbitration Act, 1995. The

Act does not envisage the application of the arbitration process in an informal

28 Ibid, sec. 19 which provides for fair hearing in arbitration proceedings. 29 See the dictum of Lord Heward in R. – v – Sussex Justices Ex parte Mc Carthy [1924] 1KB. 256

where the Judge observed: - “Justice should not only be done but should manifestly and

undoubtedly be seen to be done.” 30 See generally, Stipanowich, T.J., ‘Arbitration: The “New Litigation,”’ University Of Illinois

Law Review, Vol. 2010, No.1, pp. 1-60. 31 Article 159 of the Constitution of Kenya 2010, (Government Printer, 2010, Nairobi).


8

setting, for instance, in a rural area, with the intention of applying the same to

local problems, such as disputes over land. The Act envisages a highly

formalised type of arbitration since it requires an arbitration agreement to be

in writing, and in essence, to be signed by the parties.32 Thus, while cognisant

of the fact that arbitration may take several forms, including informal ones, the

scope of this book is restricted to the formal type of arbitration as provided for

under Kenya’s Arbitration Act, 1995.

1.3 Types of Arbitration

There are different types of arbitration which include: ad hoc, institutional,

statutory, look-sniff, flip-flop, documents–only, domestic and international.33

In every situation, parties are required to determine which type of arbitration

is appropriate or relevant for their case.34 While it is acknowledged that all the

foregoing types of arbitration have their distinct merits and demerits, this book

does not critically discuss each of them separately but instead looks at the

arbitration process in a general manner, focusing on the common aspects of

the process.

Parties to a contract may agree to have their future disputes settled by an

arbitral tribunal operating under the auspices of an arbitral institution and

applying that institution’s procedural rules, or by an independent arbitrator(s)

who may not necessarily be associated with any arbitral institution. Such an

arbitrator conducts the arbitration process under procedural rules agreed

upon by the parties. The first type of arbitration is referred to as institutional

arbitration while the second one is referred to as Ad hoc Arbitration.

32 Arbitration Act 1995, s. 4. 33 Hasan, Z., ‘Law of Arbitration’ September 2011, available at

https://zulkiflihasan.files.wordpress.com/2008/06/week-2.pdf [Accessed on 4/12/2015]. 34 Copi, et al, ‘Chapter 3: Forms of Arbitration, p. 31, para. 3-2. Available at

http://faculty.law.lsu.edu/toddbruno/Vis/Chapter%203.pdf [Accessed on 4/12/2015].


9

Institutional arbitration is an arbitration administered by a specialist

institution, where parties incorporate the rules of the selected institution into

their Arbitration hearing by reference.35 Such rules are expressly formulated

for arbitrations conducted under the administration of the relevant institution.

Ad hoc Arbitration is one that is not administered by an institution as the

arbitration agreement does not specify an institutional arbitration, and may

encompass domestic or international commercial arbitration.36 The parties

then have to determine all aspects of the arbitration like the selection and

manner of appointment of the arbitral tribunal, applicable law, procedure for

conducting the arbitration and administrative support without assistance from

or recourse to an arbitral institution.37 It is, however, noteworthy that an Ad

hoc Arbitration does not necessarily require the parties to start from scratch

and draft their own rules. They can use the rules of an arbitration institution

without submitting the dispute to that institution.38

Ad hoc arbitration is mostly used where one of the parties is a State or State-

entity or parastatal since they are usually reluctant to submit to institutional

arbitration for sovereignty reasons.39 It has also been observed that Ad hoc

arbitration undoubtedly preceded institutional arbitration since, long before

the emergence of permanent organizations providing professional services

that facilitate arbitration proceedings, Ad hoc Arbitration had been in

existence for hundreds or even thousands of years.40 However, institutional

35 Rubino-Sammartano M, ‘International Arbitration,’ p. 3, (Ashurst Quick guides, 2011).

Available at https://www.ashurst.com/doc.aspx?id_Resource=4643 [Accessed on 3/12/2015]. 36 Rajoo S, ‘Institutional and Ad Hoc Arbitrations : Advantages and Disadvantages’ The Law

Review, 2010, pp. 547-558 at p. 548. 37 Ibid, p. 548. 38 Stanley C, ‘Traps for the Unwary: The Pitfalls of Ad Hoc Arbitration,’ Trusts & Trustees, Vol.

18, No. 4, May 2012, p. 338. 39 Copi, et al, ‘Chapter 3: Forms of Arbitration, op cit, p. 35. 40 Zangh, T., ‘Enforceability of Ad Hoc Arbitration Agreements in China: China’s Incomplete

Ad Hoc Arbitration System,’ Cornell International Law Journal, Vol. 26, 2013, pp. 363-399, p.

364.


10

arbitration remains more popular especially among business entities, possibly

due to the procedural certainty that comes with institutional affiliation.41

There exists a wide array of literature from both proponents and opponents of

each of the processes. Each of the above types of arbitration has their share of

advantages and disadvantages. It is thus upon the parties to agree whether

they will engage in institutional or Ad hoc Arbitration, although they may

need expert advice on selecting the most suitable one, particularly during the

drafting of the arbitration clause or agreement. For instance, it has been argued

that Ad hoc Arbitration, is usually done through the application of the

UNCITRAL Model Rules on Arbitration and requires that the parties establish

and manage, as well as participate in, the arbitration.42 However, such an

approach places a substantial burden upon the parties to cooperate in the

circumstances of dispute, which expectation is likely to be unrealistic.43

On the other hand, arbitral institutions are said to have a good professional

track record and have significant experience in the administrative aspects of

arbitrations.44 Therefore, unless the parties themselves have substantial

expertise in the arbitration process, institutional arbitration is preferable.45

Also, an award rendered under the auspices of a recognized arbitral institution

may have a greater likelihood of enforcement for reasons of institutional

reputation, depending on the choice by the parties.46

41 Ibid, p. 364. 42 Carbonneau, T.E., ‘The Exercise of Contract Freedom in the Making of Arbitration

Agreements,’ Vandebilt Journal of Transnational Law, Vol. 36, 2003, pp. 1189-1232 at p. 1207. 43 Ibid.; See also generally, Leahy, E.R., & Kenneth, J. P., "Sanctions to Control Party

Misbehavior in International Arbitration," Va. J. Int'l L. 26 (1985): 291; See also generally,

Frade, C.,"Mitigating conflict in arbitration clauses through language," LSP and professional

communication (2001-2008) 2, no. 1 (2002). 44 Ibid; see also Greenberg, S., et al., International Commercial Arbitration: An Asia-Pacific

Perspective, (Cambridge University Press, 2011), p.27. 45 Ibid. 46 Ibid; See also Higgins, F.J., et al., ‘Pitfalls in International Commercial Arbitration,’ The

Business Lawyer, op cit., 1051.


11

Statutory arbitration is one that originates from a mandatory provision in an

Act of Parliament, without necessarily requiring a pre-existing arbitration

agreement between the parties. Most of the post-2010 Constitution of Kenya

statutes have provisions on the use of ADR mechanisms.47 The Constitutional

provision that one of the guiding principles in exercise of judicial authority is

encouraging the use of ADR and TDR, may arguably also give rise to statutory

arbitration.48

“Look-sniff arbitration‟ or “quality arbitration‟ is defined as a combination of

the arbitral process and expert opinion, where the parties select the arbitrator

on the basis of his or her specialized knowledge, expertise and experience in a

particular area of business or trade.49 The relevant question arising from the

dispute is whether the commodity delivered complies with the quality

specification or agreed sample, and thus, such questions of pure quality are

arguably best resolved by experts in the field by way of an arbitral procedure.50

It has been observed that look-sniff arbitrations depend on technical skills in a

particular trade.51 Further, the procedures are governed largely by the customs

of the trade and there are usually no lawyers, witnesses or arguments.52

This type of arbitration can certainly save parties a lot of time and trouble in

hiring an independent expert witness, as would be the case if they decided to

resort to litigation.

47 See Civil Procedure Rules, Order 46, Rule 20 on court referral of matters to ADR; See also S.

20, Environment and Land Court Act No. 19 of 2011 (Government Printer, Nairobi, 2011); S.

15(4), Industrial Court Act, No. 20 of 2011 ( Government Printer, Nairobi, 2011); S. 34,

Intergovernmental Relations Act, No. 2 of 2012. Revised Edition 2012 (Government Printer,

Nairobi, 2012); S. 4, Land Act , No. 6 of 2012 ( Government Printer, Nairobi, 2012); S. 17(3),

Elections Act, No. 24 of 2011, (Government Printer, Nairobi, 2011); Rule 11, Supreme Court

Rules, No. 7 of 2011 (Government Printer, Nairobi, 2011). 48 Art. 159(2) (c). 49 Rajoo S, ‘Trade Disputes Solving Mechanisms,’ p. 18, available at http://sundrarajoo.com/wp-

content/uploads/2009/10/Trade-Disputes-Solving-Mechanisms-Poram-Course-July-2009-docx1.pdf

[Accessed on 4/12/2015]. 50 Ibid, p. 18. 51 Tay, C.S.K., Resolving Disputes by Arbitration: What You Need to Know, (NUS Press, 1998), P.

67. 52 Ibid.


12

Flip-flop arbitration or pendulum arbitration (also known as baseball

arbitration) is a type of arbitration where parties formulate their cases

beforehand and then they invite the arbitrator to choose one of the two.53 The

arbitrator then makes an award in favour of one party and the other must

clearly lose. The award cannot be somewhere in between.54 The arbitrator is

requested to make an award by adopting, without modification, one of the

parties’ respective final positions, and this is mostly used when the parties

differ only over a monetary amount.55

Documents-only arbitration is defined as an arbitration that is based on the

Claim Statement, statement of Defence and a written reply by the claimant, if

any.56 A documents-only procedure is lauded as being most appropriate where

all the evidence relevant to the dispute is contained in documents, including

expert reports, and there is no need for oral testimony from witnesses.57

However, it can also be appropriate where the dispute involves simple issues

of fact and opinion.

According to the Arbitration Act, 1995, an arbitration is domestic if the

arbitration agreement provides expressly or by implication for arbitration in

Kenya: and at the time when proceedings are commenced or the arbitration is

entered into— where the arbitration is between individuals, the parties are

nationals of Kenya or are habitually resident in Kenya; where the arbitration

is between bodies corporate, the parties are incorporated in Kenya or their

53 Universal Law Series, Arbitration & ADR, (Universal Law Publishing, Dec 1, 2009), p. 17. 54 Ibid, p. 17. 55 Droog, D.D., ‘Baseball Arbitration of Commercial & Construction Disputes (Part I)’ (Shipley

Snell Montgomery Shipley Snell Montgomery, 2015). Available at

http://www.shipleysnell.com/baseball-arbitration-of-commercial-construction-disputes-part-i/

[Accessed on 4/12/2015]. 56 Universal Law Series, Arbitration & ADR, op cit, p. 17. 57 Chartered Institute of Arbitrators, Practice Guideline 5: Guidelines for Arbitrators regarding

Documents-Only Arbitrations, 06 December 2011, para. 2.1. Available at

https://www.ciarb.org/docs/default-source/practice-guidelines-protocols-and-rules/international-

arbitration-guidelines-2011/2011documentsonlyarbitration.pdf?sfvrsn=10 [Accessed on

5/12/2015].


13

central management and control are exercised in Kenya; where the arbitration

is between an individual and a body corporate — the party who is an

individual is a national of Kenya or is habitually resident in Kenya; and (ii) the

party that is a body corporate is incorporated in Kenya or its central

management and control are exercised in Kenya; or the place where a

substantial part of the obligations of the commercial relationship is to be

performed, or the place with which the subject matter of the dispute is most

closely connected, is Kenya.58

On the other hand, an arbitration is international if— the parties to an

arbitration agreement have, at the time of the conclusion of that agreement,

their places of business in different states; one of the following places is

situated outside the state in which the parties have their places of business—

the juridical seat of arbitration is determined by or pursuant to the arbitration

agreement; or any place where a substantial part of the obligations of the

commercial relationship is to be performed or the place with which the subject-

matter of the dispute is most closely connected; or the parties have expressly

agreed that the subject-matter of the arbitration agreement relates to more than

one state.

1.4 Arbitration in the Kenyan Context

Arbitration in Kenya is recognized under the Constitution, the Arbitration Act

1995, the Arbitration Rules, Civil Procedure Act and the Civil Procedure Rules

201059. The Constitution, under Article 159, provides that in exercising judicial

authority, the courts and tribunals should be guided by certain principles.

One of these principles is that alternative forms of dispute resolution including

reconciliation, mediation, arbitration and traditional dispute resolution

mechanisms should be promoted provided that they do not contravene the Bill

58 S. 3(2), Act No. 4 of 1995 (2009). 59 Civil Procedure Rules 2010, Legal Notice No. 151 of 2010, 10th September, 2010,

The Civil Procedure Act (Cap. 21). (Government Printer, Nairobi, 2010).


14

of Rights, they are not repugnant to justice and morality nor do they result in

outcomes that are repugnant to justice or morality, and they are not

inconsistent with the Constitution or any written law.60 This has been

reaffirmed by the Kenyan Courts in various cases, such as, Gladys Mwaniki

(Regional Club) & 6 others v Gordon Oluoch & 7 others61, where the Court stated

that ‘Courts and Tribunals cannot be said to be promoting alternative dispute

resolution mechanisms when they readily entertain disputes which ought to

be resolved in other legal forums…..where there is an alternative remedy and

procedure available for the resolution of the dispute that remedy ought to be

pursued and the procedure adhered to.’62 In Dickson Mukwelukeine vs. Attorney

General & 4 Others63,the Court held that ‘alternative dispute resolution

processes are complementary to the judicial process and by virtue of Article

159(2)(c) of the Constitution of Kenya, 2010, the Court is obligated to promote

these modes of alternative dispute resolution and further that it is not

inconsistent with Articles 22 and 23 to insist that statutory processes be

followed particularly where such processes are for the specific purpose of

realising, promoting and protecting certain rights. Accordingly the Court is

entitled to either stay the proceedings until such a time as the alternative

remedy has been pursued or bring an end to the proceedings before the Court

and leave the parties to pursue the alternative remedy.’

The Constitution has therefore elevated the importance of arbitration in

resolving disputes in the Kenyan context and the policy on management of

conflict is bound to shift to encourage ADR and other traditional means of

conflict management.

Section 59 of the Civil Procedure Act64 provides that all references to

arbitration by an order in a suit, and all proceedings there under, should be

60 Article 159 (2) (c) of the Constitution of Kenya, op.cit. 61 Gladys Mwaniki (Regional Club) & 6 others v Gordon Oluoch & 7 others [2015] eKLR. 62 Gladys Mwaniki (Regional Club) & 6 others v Gordon Oluoch & 7 others [2015] eKLR, para. 17. 63 Nairobi High Court Petition No. 390 of 2012. 64 Civil Procedure Act, Revised Edition 2010(2008), Government Printer, Nairobi.


15

governed in such manner as may be prescribed by rules. Order 46 of the Civil

Procedure Rules, inter alia, provides that at any time before judgment is

pronounced, interested parties in a suit who are not under any disability may

apply to the court for an order of reference wherever there is a difference.

The Arbitration Act, 1995, is in many respects similar to the Arbitration Act

1996 of the United Kingdom (UK). In section 1, the UK Act states that the

provisions of the part should be founded on the following principles and

should be construed accordingly:

i. The object of arbitration is to obtain the fair resolution of disputes by

an impartial tribunal without unnecessary delay or expense.

ii. The parties should be free to agree on how their disputes are resolved,

subject only to such safeguards as are necessary in the public interest.

From the foregoing principles, it can be deduced that much of the formalities

associated with filing and prosecuting matters in court can possibly be avoided

in arbitration since even the Kenyan Act ensures that parties retain their

autonomy in most matters, including venue, language of arbitration and

procedures. These attributes are not present in the judicial process.

The Arbitration Act, 1995 contains provisions relating to arbitral proceedings

and the enforcement of the ultimate awards by the court. The Act further deals

with the recognition and enforcement of arbitral awards irrespective of the

state in which it was made subject to certain limitations.65 The refusal to

enforce can be on the grounds of incapacity, lack of jurisdiction and public

policy. The import of this is that arbitration process is better placed to help

parties in different jurisdictions to go round the national courts and laws in

their quest to have disputes amicably settled, with minimal technicalities and

65 Ibid, sec. 37.


16

limitations. It can, thus, be seen that arbitration has vast potential as a conflict

management mechanism.

The distinction between local, private and public international arbitration

becomes somewhat blurred. However, in cases involving a private party and

a state, we find processes that combine features of both public and private

arbitration, or shift uncertainly between the two (arbitrations under

International Centre for Settlement of Investment Disputes (ICSID) are good

examples of arbitrations of this kind).

Nonetheless, arbitration as practised in Kenya is increasingly becoming more

formal and cumbersome as lawyers enter the practice of arbitration.

Representation of parties by lawyers has seen delay tactics and importation of

complex legal arguments and procedures into the arbitral process. For

example, the Act does not help matters as it leaves much leeway for parties

bent on frustrating the arbitral process to make numerous applications in

court. It is hardly feasible to describe arbitration in Kenya as cost effective,

informal and expeditious. Arbitration in Kenya may, thus, not be the amicable

dispute management mechanism in certain disputes which are complex and

involving people’s livelihood, such as environmental conflicts.

1.5 Other Dispute Management Mechanisms

While this book is mainly concerned with the practice of arbitration in Kenya,

it is necessary to briefly mention the other mechanisms that parties to a dispute

can resort to in seeking access to justice. This is in recognition of the fact that

arbitration may not be the panacea for access to justice, and the choice of

mechanism is largely dependent on the nature of the dispute, the parties’

relationship, parties’ financial ability and their agreement regarding

management of any arising disputes.66 That is why this book does not advocate

66 See generally, Liebermant, J.K. & Henrytt, J.F., ‘Lessons from the Alternative Dispute


17

for arbitration as the only dispute settlement mechanism available but

encourages disputants to understand the nature of their dispute before settling

on the most appropriate method.

i. Litigation

Litigation or judicial settlement is a coercive dispute settlement mechanism

that is adversarial in nature, where parties to a dispute take their claims to a

court of law to be adjudicated upon by a judge or a magistrate. The judge or

magistrate gives a judgment which is binding on the parties, subject only to

statutory right of appeal. In litigation, the parties to the dispute have minimum

or no control at all over the forum, the process and outcome of the process and

as such the outcome may not satisfy both parties.

The judicial authority in Kenya is exercised by the courts and tribunals.67

Litigation has its advantages in that precedent is created and issues of law are

interpreted.68 It is also useful where the contract between the parties does not

stipulate a consensual process and the parties cannot agree on one, the only

alternative is litigation. Through litigation, it is possible to bring an unwilling

party into the process and the result of the process be enforceable without

further agreement.69 Litigation should therefore, not be entirely condemned as

it comes in handy, for instance, where an expeditious remedy in the form of

an injunction is necessary.

Resolution Movement,’ The University of Chicago Law Review, Vol. 53, 1986, pp. 424-439; See

also Hensler, D.R., ‘Science in the Court: Is There a Role for Alternative Dispute Resolution?’

Law and Contemporary Problems, Vol. 54: No. 3, Summer 1991, pp. 171-193. 67 See Art. 159 of the Constitution of Kenya, [Government Printer, Nairobi, 2010]. 68 See the argument by Calkins, R.M., ‘Mediation: A Revolutionary Process That Is Replacing

the American Judicial System,’ Cardoza Journal of Conflict Resolution, Vol. 13, No. 1, 2011; cf.

Ray, B., ‘Extending The Shadow Of The Law: Using Hybrid Mechanisms To Develop

Constitutional Norms In Socioeconomic Rights Cases,’ Utah Law Review, No. 3, 2009, pp. 797-

843, p. 799. 69 See generally, Dispute Resolution Guidance, available at

http://www.ogc.gov.uk/documents/dispute resolution.pdf, [Accessed on 05/01/2012].


18

The Constitution provides that the national courts and tribunals should do

justice to all irrespective of status; justice should not be delayed; alternative

forms of dispute resolution should be promoted and justice should be

administered without undue regard to procedural technicalities.70 Courts in

Kenya, however, have encountered many problems related to access to justice,

for instance, high court fees, geographical location, complexity of rules and

procedure and the use of legalese.71 The court’s role is also ‘dependent on the

limitations of civil procedure, and on the litigious courses taken by the parties

themselves.’72

Dispute settlement through litigation can take years before the parties get

justice in their matters due to the formality and resource limitations placed on

the legal system by competing fiscal constraints and public demands for

justice; litigation is sometimes slow and expensive and it may lose the

commercial and practical credibility necessary in the corporate world. It is

against this background that this book explores how litigation can be

complemented with the effective use of arbitration in facilitating access to

justice.

ii. Negotiation

Negotiation involves the parties meeting to identify and discuss the issues at

hand to arrive at a mutually acceptable solution without the help of a third

party. It has also been described as a process involving two or more people of

either equal or unequal power, meeting to discuss shared and/or opposed

interests in relation to a particular area of mutual concern.73 The focus of

negotiations is the common interests of the parties rather than their relative

power or position. The goal is to avoid the overemphasis of how the dispute

70 See Art. 48 &159 (2) of the Constitution of Kenya. 71 ‘Strengthening Judicial Reform in Kenya; Public Perceptions and Proposals on the Judiciary

in the new Constitution,’ ICJ Kenya, Vol. III, May, 2002. 72 Ojwang, J.B., “The Role of the Judiciary in Promoting Environmental Compliance and

Sustainable Development,” Kenya Law Review Journal, Vol. 1, No. 19, 2007, pp. 19-29 at p.29. 73 See generally, “Negotiations in Debt and Financial Management”, United Nations Institute of

Training and Research, (UNITAR), (December 1994).


19

arose and to create options that satisfy both mutual and individual interests.

The aim in negotiations is to arrive at "win-win" solutions to the dispute at

hand. Negotiation is an informal process and one of the most fundamental

methods of dispute resolution, offering parties maximum control over the

process.

According to Mwagiru74, the negotiation phase is the one during which the

parties hammer out an agreement, or even agree to disagree and it is during

this stage that the core issues of the conflict are negotiated or bargained. It has

been said that negotiation leads to mediation in the sense that the need for

mediation arises after the conflicting parties have attempted negotiation, but

have reached a deadlock.75

iii. Mediation

Mediation is a continuation of the negotiation process in the presence of a third

party. Mediation is a voluntary, non-binding dispute resolution process in

which a neutral third party helps the parties to reach a negotiated settlement

which, when reduced into writing and signed by all the parties, becomes

binding.76 The Kenyan Civil Procedure Act77 defines mediation as an informal

and non-adversarial process where an impartial mediator encourages and

facilitates the resolution of a dispute between two or more parties, but does

not include attempts made by a judge to settle a dispute within the course of

judicial proceedings. Another definition by Moore78 is that Mediation is the

intervention into a dispute or negotiation by an acceptable, impartial and

neutral third party, who has no authoritative decision-making power to assist

74 Mwagiru, M., Conflict in Africa; Theory, Processes and Institutions of Management, (Centre for

Conflict Research, Nairobi, 2006), p. 115. 75 Ibid. 76 Fenn, P., “Introduction to Civil and Commercial Mediation”, in Chartered Institute of

Arbitrators, Workbook on Mediation, (CIArb, London, 2002), p.10. 77 S.2, Civil Procedure Act, Cap 21, Laws of Kenya ( Government Printer, Nairobi, 2010);

Mediation (Pilot Project) Rules, 2015, Legal Notice No. 197 of 2015, Kenya Gazette

Supplement No. 170, 9th October, 2015, pp. 1283-1291 (Government Printer, Nairobi, 2015). 78 Moore, C., The Mediation Process: Practical Strategies for Resolving Conflict, (Jossey-Bass

Publishers, San Francisco, 1996), p. 14.


20

disputing parties in voluntarily reaching their own mutually acceptable

settlement of the issues in dispute.” Greenhouse79 says that;

“Mediation is simple enough to describe: it is a triadic mode of dispute

settlement, entailing the intervention of a neutral third party at the invitation

of the disputants, the outcome of which is a bilateral agreement between the

disputant...”

Mwagiru, in defining mediation, states that it is a continuation of the

negotiation process by other means whereby instead of having a two way

negotiation, it now becomes a three way process: the mediator in essence

mediating the negotiations between the parties.80

A mediator is one "who comes between the conflicting parties with the aim of

offering a solution to their dispute and/or facilitating mutual concessions." He

must be acceptable to both parties and should have no interest in the dispute

other than achievement of a peaceful settlement.81 Ott82 observes that the

presumed effectiveness of the mediator derives from the diverse functions he

can serve in a conflict situation. For instance, he can change for the better the

behaviour of the disputants just by being present. The mediator’s role in such

a process is to assist the parties in the negotiations and they cannot dictate the

outcomes of the negotiation.83 As such, mediators may play a number of

79 Greenhouse, C.J., “Mediation; A Comparative Approach”, Man, New Series, Vol. 20, No. 1,

Royal Anthropological Institute of Great Britain and Ireland, (Mar., 1985), pp. 90-114, p. 90. 80 Mwagiru, M., Conflict in Africa; Theory, Processes and Institutions of Management, op.cit, pp.

115-116. 81 Barkun, M., "Conflict Resolution through Implicit Mediation," Journal of Conflict Resolution,

VIII (June, 1964), p. 126 82 Ott, M.C., “Mediation as a Method of Conflict Resolution: Two Cases”, International

Organization, Vol. 26, No. 4, The University of Wisconsin Press, Autumn, 1972, pp. 595-618, at

p. 597. 83 Muigua, K., Resolving Environmental Conflicts through Mediation in Kenya Ph.D Thesis, 2011,

Unpublished, University of Nairobi, p.43; See also Moore, C., The Mediation Process: Practical

Strategies for Resolving Conflict, op cit, p. 14.


21

different roles, and may enter conflicts at different levels of development or

intensity.84 Ott quotes Arthur Meyer who observes that:

“The mediator is a catalytic agent. The mere presence of an outsider, aside

from anything he may do or say, will cause a change, and almost certainly a

change for the better, in the behaviour of the disputing parties. . . Progress has

been made through the mediator's presence, though that presence has brought

nothing more than temperate speech.”85

Though approached from differing perspectives, all the definitions seem to

agree that mediation is a negotiation process in which parties (disputants) are

assisted by a third party known as a mediator. It would seem from the above

discussion therefore that mediation can only be understood as an aspect of the

general structure and process of negotiation.

Mediation can be classified into two forms namely: mediation in the political

process and mediation in the legal process. This dichotomy (legal and political

process) is based on various variables. It is a typology founded on the

differentiation between a dispute and a conflict.86 It is however beyond the

scope of this book to discuss these typologies.87

Mediation prides itself as being a flexible, confidential, cost-effective and

speedier process of settling disputes. It affords the parties in dispute autonomy

over the mediator, over the fora for mediation, over the process and over the

outcome of the mediation.

84 Moore, C., The Mediation Process: Practical Strategies for Resolving Conflict, (3rd ed., San

Francisco: Jossey-Bass Publishers, 2004). Summary written by Tanya Glaser, Conflict

Research Consortium, Available at

http://books.google.com/books/about/The_Mediation_Process.html?id=8hKfQgAACAAJ> [Accessed

on 8/03/2014]. 85 Meyer, A., "Function of the Mediator in Collective Bargaining," Industrial and Labor Relations

Review, XIII, No. 2 (January, 1960), p. 161. 86 Burton, J., Conflict: Resolution and Prevention, (London: Macmillan, 1990), pp. 2-12. 87 For a further and comprehensive discussion on this, see Muigua, K., Resolving Conflicts

through Mediation in Kenya. (Glenwood Publishers Ltd, Nairobi, 2012), Chap.5, pp. 66-77.


22

iv. Conciliation

Conciliation is a process in which a third party, called a conciliator, restores

damaged relationships between disputing parties by bringing them together,

clarifying perceptions, and pointing out misperceptions. The difference

between mediation and conciliation is that the conciliator, unlike the mediator

who is supposed to be neutral, may or may not be totally neutral to the

interests of the parties. Successful conciliation reduces tension, opens channels

of communication and facilitates continued negotiations. Frequently,

conciliation is used to restore the parties to a pre-dispute status quo, after which

other ADR techniques may be applied. Conciliation is also used when parties

are unwilling, unable, or unprepared to come to the bargaining table.

v. Convening

Convening serves primarily to identify the issues and individuals with an

interest in a specific controversy. The neutral, called a convenor, is tasked with

bringing the parties together to negotiate an acceptable solution. This

technique is helpful where the identity of interested parties and the nature of

issues are uncertain. Once the parties are identified and have had an

opportunity to meet, other ADR techniques may be used to resolve the issues.

vi. Early Neutral Evaluation

Early Neutral Evaluation88 is a private and non-binding technique where a

third party neutral (often legally qualified) gives an opinion on the likely

outcome of a trial as the basis for settlement discussions.89 Early Neutral

Evaluation involves an informal presentation by the parties to a neutral with

respected credentials for an oral or written evaluation of the parties' positions.

The evaluation may be binding or non-binding.

Although settlement is not the primary objective, the purpose of early neutral

evaluation is to promote settlement discussions at an early stage in the

88 Fenn, P., “Introduction to Civil and Commercial Mediation”, op. cit, p. 15. 89 Ibid


23

litigation process, or at the very least, to assist parties to avoid the significant

time and expense associated with further steps in litigation of the dispute.90

The opinion can then be used as a basis for settlement or for further

negotiation. The aim of a neutral evaluation is to test the strength of the legal

points in the case. It can be particularly useful where the dispute turns on a

point of law. It is therefore not useful where, on the facts of a case, the dispute

does not turn on a technical point of law.

Many courts require early neutral evaluation, particularly when the dispute

involves technical or factual issues that lend themselves to expert evaluation.

It may also be an effective alternative to formal discovery in traditional

litigation.

vii. Facilitation

Facilitation improves the flow of information within a group or among

disputing parties. The neutral, called a facilitator, provides procedural

direction to enable the group to effectively move through negotiation towards

agreement. The facilitator's focus is on the procedural assistance to conflict

management, compared to a mediator, who is more likely to be involved with

substantive issues. Consequently, it is common for a mediator to become a

facilitator, but not the reverse.

viii. Fact-Finding or Neutral Fact-Finding

Fact-Finding or Neutral Fact-Finding is an investigative process in which a

neutral "fact finder" independently determines facts for a particular dispute

usually after the parties have reached an impasse. It succeeds when the

opinion of the neutral carries sufficient weight to move the parties away from

impasse and it deals only with questions of fact, not interpretations of law or

policy. The parties benefit by having the facts collected and organized to

facilitate negotiations or, if negotiations fail, for traditional litigation.

90 Building Disputes Tribunal, New Zealand.

Available at <http://www.buildingdisputestribunal.co.nz/.html> [Accessed on 13/10/2015].


24

ix. Mediation Arbitration (Med-Arb)

Med-Arb is a combination of mediation and arbitration, where the parties

agree to mediate but if that fails to achieve a settlement, the dispute is referred

to arbitration.91. Initially, a neutral third party mediates a dispute until the

parties reach an impasse. After the impasse, a neutral third party issues a

binding or non-binding arbitration decision on the cause of the impasse or any

unresolved issues. The disputing parties agree in advance whether the same

or a different neutral third party conducts both the mediation and arbitration

processes.

With the third party umpire using both mediation and arbitration, albeit each

at a time, the Med-Arb process is intended to allow the parties to profit from

the advantages of both procedures of dispute settlement.92 It has been asserted

that through incorporating mediation and arbitration, Med-Arb, therefore,

strikes a balance between party autonomy and finality in dispute settlement.93

Some scholars and practitioners have argued that it is best to have different

persons mediate and arbitrate. However, at times the same person acting as

mediator “switches hat” to act as the arbitrator.94 The risk in such a scenario is

that the person mediating becomes privy to confidential information during

91 Osborne, C., Civil Litigation 2007-2008: Legal practice course guides; 2007-2008, (Oxford

University Press, 2007), p. 461; Lowe, D., & Leiringer, R., (eds), Commercial Management of

Projects: Defining the Discipline, (John Wiley & Sons, 2008), p. 238; Chartered Institute of

Arbitrator, ADR, Arbitration, and Mediation, (Author House, 2014), p. 247. 92 De Vera C,‘Arbitrating Harmony: Of Culture and Rule of Law in the Resolution of

International Commercial Disputes in China’ Columbia Journal of Asian Law, Vol. 18, No.1,

2004, 149, p. 156. 93 Bridge, C., ‘Mediation and Arbitration - Are They Friends or Foes?’ Paper Prepared For Bani /

Rodyk & Davidson Conference Shangri-La Hotel Jakarta, 1 November 2012, p. 13. Available at

http://campbellbridge.com/wp-content/uploads/2012/12/MEDIATION-AND-ARBITRATION.pdf

[Accessed on 3/12/2015]; Chornenki BGA & Linton, H, ‘Should Lawyers Be Recommending

More Mediation-Arbitration ? Is It Really Mandatory Mediation ?’ The Lawyer’s Weekly,

December, 2005. 94 Lieberman, A., ‘MED-ARB: Is There Such a Thing?’ Attorney At Law Magazine, (Greater

Phoenix Edition), available at

http://www.attorneyatlawmagazine.com/phoenix/med-arb-is-there-such-a-thing/ [Accessed on

01/12/2015].


25

the mediation process and may be biased if he transforms himself into an

arbitrator.

The other risks have been identified as obtaining less-than-optimal assistance

from the third party due to different competencies’ requirement for mediation

and arbitration.95 This is because the arbitrator’s strength is believed to be in

intellectual analysis and evaluation, while the mediator’s strength is in

balancing the legal evaluation with the creative work necessary to meet the

parties’ underlying business, personal and emotional interests.96 There is also

the risk of delay should the mediation fail; it will take some time to get the

arbitration back on track, especially if a party decides a different neutral is

needed to serve as the arbitrator.97

The other question that has been raised is whether procedural fairness

requirements may tie the mediator-arbitrator’s hands in the mediation and

impede (or preclude) private caucusing.98 This may be attributed to the fact

that the person mediating becomes privy to confidential information during

the mediation process especially during caucusing. The information so

obtained is likely to affect their objectivity in arbitration. It may also raise

issues of breach of confidentiality, thus affecting acceptability of the outcome.99

This regards the question of whether the Med-Arbitrator will remain

unaffected as an arbitrator after engaging in caucuses and becoming privy to

95 Ibid. 96 Ibid. 97 Ibid. 98 ‘Agreements to engage in ‘med-arb’ now enforceable in Ontario,’ ADR Bulletin of Bond

University DRC, op cit. 99 Baril, M.B. & Dickey, D, ‘MED-ARB: The Best of Both Worlds or Just A Limited ADR Option?

(Part Two),’ August 2014. Available at

http://www.mediate.com/pdf/V2%20MED-

ARB%20The%20Best%20of%20Both%20Worlds%20or%20Just%20a%20Limited%20ADR%20O

ption.pdf [Accessed on 2/12/2015].


26

confidential, perhaps intimate, emotional, personal, or other "legally"

irrelevant information.100

It has, however, been suggested that in reaching an ultimate arbitration

decision, the Med-Arbiter has to be sensitive as to how to use, or if to use at

all, the knowledge that he or she may have gained in confidence during the

mediation phase of the process.101 Despite the concerns for confidentiality, it

is asserted that unlike normal arbitration, parties have to know, and to release,

the Med-Arbiter from the normal restraints of an arbitrator’s prohibitions of ex

parte contact.102 This is important considering that mediation views such

contacts as essential to come up with an award that addresses the parties’

interests.103

Certainly, not all matters are suitable for med-arb mechanism.104 For instance,

it has been argued that cases with any of the following issues are likely not

appropriate for Med-Arb: domestic violence or power imbalance that cannot

be remedied by the presence of counsel; difficulty in obtaining financial

disclosure; a need to bind third parties; party(ies) can’t afford the cost of a third

professional; party(ies) will not respect court orders or arbitral awards; one

party is represented by competent counsel and the other is not; an unhappy

party is likely to abandon the process or use the arbitrator’s fees as leverage;

and a case that requires the arbitrator to determine a novel point of law.105 It

100 De Vera C, ‘Arbitrating Harmony: Of Culture and Rule of Law in the Resolution of

International Commercial Disputes in China’ Columbia Journal of Asian Law, op cit, p. 158. 101 Kagel J, ‘Why Don’t We Take Five Minutes ? Med-Arb After 40 : More Viable than Ever’ 241,

2013, p.246. Available at http://naarb.org/proceedings/pdfs/2013-241.PDF [Accessed on

2/12/2015]. 102 Ibid. 103 Ibid. 104 Baril, M.B. & Dickey, D, ‘MED-ARB: The Best of Both Worlds or Just A Limited ADR Option?

(Part Two),’ op cit. 105 Wolfson, L., ‘When Med-Arb Goes Bad,’ p.1, available at

http://www.riverdalemediation.com/pdfs/articles/When_Med-Arb_Goes_Bad.pdf [Accessed on

1/12/2015]; cf. Lavi, D, Divorce Involving Domestic Violence: Is Med-Arb Likely to be the Solution?

Pepperdine Dispute Resolution Law Journal, Vol. 14, Iss. 1, pp. 91-151, 2014.


27

is, therefore, imperative that the Mediator-Arbitrator identify the most

appropriate matters before taking up any matter recommended for med-arb.

It is argued that it is also important to let the parties know at the outset that

particularly sensitive information, which they might identify in their

deliberations with the Med-Arbiter as to matters not to be shared with the

opposition, would be used only in mediation and would be ignored in

arbitration.106 That way, parties may gain confidence in the process and

chances of the parties readily accepting the outcome are enhanced.

Yet, some authors argue that to find an adequate settlement in the arbitration

phase of the process, the Med-Arbitrator will need to use his understanding of

the relationship between the parties during the mediation phase, or use his

prior knowledge of their respective underlying interests.107 This presents

conflicting views on what the Med-Arbiter should do. However, what is more

important for the third party who is retained to conduct both phases of the

process is to ensure that information gathered in either phase is used sparingly

and only for purposes of balancing the interests of the party. They must

scrupulously guard their reputation of impartiality and independence as

either the mediator or an arbitrator in the process. The debate out there is

whether this is really possible and therefore, med-arb practitioners must

always be aware of these misgivings about the process.

There are those who still hold that the Mediation/Arbitration process can be

an effective alternative dispute resolution method if parties, counsel, and

neutrals alike understand the pros and cons of merging the two processes and

the nuances inherently involved in the resultant combination.108

106 Ibid. 107 De Vera C, ‘Arbitrating Harmony: Of Culture and Rule of Law in the Resolution of

International Commercial Disputes in China’ Columbia Journal of Asian Law, op cit, pp. 156-

157. 108 Flake, RP, ‘The Med / Arb Process : A View from the Neutral’s Perspective,’ ADR Currents:

The Newsletter of Dispute Resolution Law and Practice, June, 1998, p. 1; See also Weisman, MC,


28

In other jurisdictions, such as Ontario, Med-Arb has been used to resolve

family matters.109 In Marchese v Marchese110, the Court held that an agreement

to submit to med-arb was enforceable in Ontario despite a provision in the

domestic arbitration statute that prohibits arbitrators from conducting any

part of an arbitration as a mediation.111 Med-Arb is also said to be on the rise

in the Asian region where it is incorporated into business contracts.112 There is

also evidence of the process being used in labour disputes, where it is believed

that the med-arb process was developed in response to the demand that major

labor disputes be resolved through “compulsory arbitration.”113

In Kenya, the process has not yet been the subject of court discussion, although

it is not expressly endorsed or prohibited, in its hybrid form. Arguably, Med-

Arb should be encouraged, in light of the current constitutional dispensation

that allows parties to explore as many ADR and TDR mechanisms as possible.

However, the requirements for procedural fairness and confidentiality must

be observed by the med-arbiter in this jurisdiction, since they are jealously

guarded by the Arbitration Act, 1995.

Parties should be able to appreciate the challenges that are likely to arise in

Med-Arb before settling for it. To facilitate this, the proposed Mediator-

‘Med/Arb-A Time And Cost Effective Hybrid For Dispute Resolution,’ Michigan Lawyer's

Weekly, October 10, 2011. Available at http://www.wysr-law.com/files/med-arb_-

_a_cost_effective_hybrid_for_dispute_resolution.pdf [Accessed on 1/12/2015]. 109 ‘Agreements to engage in ‘med-arb’ now enforceable in Ontario,’ ADR Bulletin of Bond

University DRC, vol. 10, No. 6, August/September 2008. 110 Marchese v Marchese, [2007] OJ No 191. 111 Ibid. 112 Volling, S., ‘Mediation-Arbitration Is There a Method or Is It Madness,’ (Corrs Chambers

West Garth, September, 2012). Available at

http://www.corrs.com.au/thinking/insights/mediation-arbitration-is-there-a-method-or-is-

it-madness/ [Accessed on 3/12/2015]. 113 See Telford, ME, ‘Med-Arb : A Viable Dispute Resolution Alternative,’ (Industrial Relations

Centre Press, Canada, 2000), available at

http://irc.queensu.ca/sites/default/files/articles/med-arb-a-viable-dispute-resolution-

alternative.pdf [Accessed on 3/12/2015]; See also Haight, R., ‘Two Hats Are Better than One:

How Utilizing Med-Arb for Termination Provision Disputes Can Result in a Win-Win

Situation,’ Resolved: Journal of Alternative Dispute Resolution, Vol. 4, Iss. 1, Spring 2014, p. 12.


29

Arbitrator should be well trained in both mediation and arbitration. They

should also be able to advise the parties accordingly on the consequences of

taking up Med-Arb as the conflict management mechanism of choice.

x. Arbitration-Mediation (Arb-Med)

Arb-Med114 is where parties start with arbitration and thereafter opt to resolve

the dispute through mediation. Arb-Med begins with the parties presenting

their case to the neutral third-party arbitrator who renders a decision, which

is not revealed, and then the parties commence a standard mediation

facilitated by the same person.115 If they are able to resolve their issues, the

arbitration award is discarded. If the parties are unable to resolve the issue in

mediation, the arbitration award is revealed and generally becomes binding.116

It is best to have different persons mediate and arbitrate. This is because a

person arbitrating may have made up his mind as to who is the successful

party and thus be biased during the mediation process if he or she transforms

himself/ herself into a mediator. The same ethical issues of caucus

communications and confidentiality, the parties' perception of impartiality of

both the mediator and the arbitrator, and the tendency to have a more

restrained mediation process because of inhibitions of the parties to be openly

candid are also likely to arise in this process.117 The arbitrator-mediator should,

thus, be knowledgeable in both processes so as to effective handle the

foregoing ethical issues as well as delivering satisfactory outcomes.

xi. Mini-trial

Mini-trial is a dispute resolution technique which provides an opportunity for

a summary presentation of evidence by lawyer or other fully informed

representative for each side to decision makers, usually a senior executive

from each side. After hearing presentations from both sides, the panel asks

114 See Dispute Resolution Guidance, op. cit. 115 Weisman, MC, ‘Med/Arb-A Time And Cost Effective Hybrid For Dispute Resolution,’

Michigan Lawyer's Weekly, October 10, 2011, op cit, p. 2. 116 Ibid. 117 Ibid.


30

clarifying questions and then the facilitator assists the senior party

representatives in their attempt to negotiate a settlement.118

"Mini-trial" is not a small trial; it is a sophisticated and structured settlement

technique used to narrow the gap between the parties' perceptions of the

dispute and which "facts" are actually in dispute.

This hybrid technique can occur with or without a neutral's assistance, but

neutrals frequently facilitate the processes for presentation of evidence and

discussion among the decision makers and serve as a mediator to reach a

settlement. Mini-trials can be more expensive than other ADR techniques

because the cost of even presenting summary evidence to senior executives is

high. Therefore, this process is generally reserved for significant cases

involving potential expenditure of substantial time and resources in litigation.

xii. Ombudsman (Ombudsperson)

An Ombudsman (Ombudsperson) is an organizationally designated person

who confidentially receives, investigates, and facilitates resolution of

complaints. The ombudsman may interview parties, review files, and make

recommendations to the disputants, but normally is not empowered to impose

solutions. Ombudsmen often work as management advisors to identify and

recommend solutions for systemic problems in addition to their focus on

disputes from individual complainants.

xiii. Peer Review Panels or Dispute Resolution Panels

Peer Review Panels or Dispute Resolution Panels use groups or panels to

conduct fact-finding inquiries, assess issues and present a workable resolution

to resolve disputes. The panel is often composed of two or more neutral

subject matter experts selected by the disputing parties. Decisions of the panel

may or may not be binding, depending on the advance agreement of the

118 Lowe, D. & Leiringer, R., Commercial Management of Projects: Defining the Discipline, op cit.,

p.239.


31

parties. This method attempts to resolve disputes at their inception to avoid

traditional litigation.

xiv. Private Judging

Private Judging, also called "rent-a-judge", is an approach midway between

arbitration and litigation in terms of formality and control of the parties. The

parties typically present their case to a judge in a privately maintained

courtroom with all the accoutrements of the formal judicial process. Private

Judges are frequently retired or former "public" judges with subject matter

expertise. This approach is gaining popularity in commercial situations

because disputes can be concluded more quickly than under the traditional

court system.

xv.Hybrid ADR

Hybrid ADR is any creative adaptation of ADR techniques for dispute

resolution. ADR has found its niche as an adjunct to traditional litigation

because of the financial and emotional cost as well as the other aggravations

of formal litigation. Processes leading to less litigation cost or risk may be

considered ADR, regardless of the labels used to identify them. The

distinguishing characteristic is that the techniques enable parties to acquire

sufficient information to evaluate litigation risk and voluntarily negotiate

resolution directly with each other. The techniques can be applied in any

sequence as long as the parties are moving in good faith toward resolution of

all or part of a dispute.

xvi. Adjudication

Adjudication is defined under the CIArb (K) Adjudication Rules as the dispute

settlement mechanism where an impartial, third-party neutral person known

as an adjudicator makes a fair, rapid and inexpensive decision on a given

dispute arising under a construction contract.119 Adjudication is an informal

process, operating under very tight time scales (the adjudicator is supposed to

119 Chartered Institute of Arbitrators, The CIArb (K) Adjudication Rules, Rule 2.1.


32

reach a decision within 28 days or the period stated in the contract),120 flexible

and inexpensive process, which allows the power imbalance in relationships

to be dealt with so that weaker sub-contractors have a clear route to deal with

more powerful contractors. The decision of the adjudicator is binding unless

the matter is referred to arbitration or litigation.121 Adjudication is thus

effective in simple construction dispute that need to be settled within some

very strict time schedules.

The demerits of adjudication are that it is not suitable to non-construction

disputes; the choice of the adjudicator is also crucial as his decision is binding

and it does not enhance relationships between the parties.

In adjudication within a community setting, the elders, Kings or Councils of

Elders summon the disputing parties to appear before them and orders are

made for settlement of the dispute.122 The end product of adjudication is

reconciliation, where after the disputants have been persuaded to end the

dispute, peace is restored.123

xvii. Traditional Justice Systems/ Traditional Dispute Resolution

Mechanisms

It is noteworthy that there is an overlap between the forms of ADR

mechanisms and traditional justice systems.124 Communities in Kenya and in

Africa in general, have engaged in informal negotiation and mediation since

time immemorial in the management of conflicts. Informal justice systems

which constitute the most accessible forms of conflict management utilise

localised norms derived from customary law.125 The current Constitution of

120 Ibid, Rule 23.1. 121 Ibid, Rule 29. 122 Ajayi, A.T. & Buhari, L.O., “Methods of Conflict Resolution in African Traditional Society,”

An International Multidisciplinary Journal, Ethiopia, Vol. 8 (2), Serial No. 33, April, 2014, pp. 138-

157, at p. 150. 123 Ibid, p. 150. 124 Ibid, pp.20-21. Art. 159 (2) treats traditional justice systems as part of ADR. 125 Kamau, W., “Customary Law and Women’s Rights in Kenya.” p. 1.Available at


33

Kenya recognises culture as the foundation of the nation and as the cumulative

civilization of the Kenyan people and nation.126

Effective application of traditional conflict resolution mechanisms in Kenya

and across Africa can indeed strengthen access to justice for all, including

those communities which face obstacles to accessing courts of law, and whose

conflicts, by their nature, may pose difficulties to the court in addressing

them.127 Restorative justice in the field of criminal justice is lauded especially

in relation to young offenders since it is seen as a paradigm shift in criminal

justice, away from dominant punitive to therapeutic paradigms, emphasizing

instead the reintegration of offenders and potential offenders into their

communities.128

It has been observed that in Tanzania, customary and religious laws are both

recognised alongside state law, an indication of the decisive role of state in

validating each body of law while attempting to reconcile customary laws with

national laws and international laws.129

The traditional justice systems can effectively be used alongside the formal

systems in giving people a forum for access to justice.

http://theequalityeffect.org/wp-

content/uploads/2014/12/CustomaryLawAndWomensRightsInKenya.pdf [Accessed on

27/08/1015]. 126 Art. 11(1). 127 See the Kenyan case of Republic v. Mohamed Abdow Mohamed, Criminal Case No. 86 of 2011

(May,2013), High Court at Nairobi, 128 Johnstone, G., Restorative Justice: Ideas, Values, Debates, (Willan, 2002). Available at

http://books.google.co.ke/books?id=Fu5GKPqVUnAC&printsec=references&dq=adr+and+political+e

mpowerment&lr=&vq=%22The+Possibility+of+Popular+Justice%22&source=gbs_citations_module

r&cad=5 [Accessed on 25/02/2015]. 129 Derman, B., et. al. (Eds), Worlds of Human Rights: The Ambiguities of Rights Claiming in Africa,

(BRILL, 2013), p. 198.


34

1.6. Conclusion

This chapter was an introduction to arbitration and ADR mechanisms

generally. It has addressed the main attributes of arbitration that make it an

effective mechanism in resolving disputes. Arbitration is one of the alternative

dispute resolution mechanisms in common use in the modern world. It has

widely been used in settling disputes both at the international and at the

national levels since antiquity. It has, for example, been used in the business

or commercial field, family disputes, environmental disputes and in other

minor disputes.

Since arbitration is now enshrined in the Constitution of Kenya 2010, its

positive attributes could be used to make it an effective mechanism in

resolving disputes in the Kenyan context. It is, thus, hoped that the policy

framework on resolution of conflicts in Kenya is bound to shift to encourage

ADR and other traditional means of conflict management.

This chapter has also briefly looked at the other forms of dispute management

in common use today. The next chapter discusses the arbitration agreement as

the basis of arbitration.

Arbitration Agreement

35

Chapter Two


2.1 Introduction

As already indicated in the previous chapter, arbitration is a dispute

management mechanism that is based on the agreement of the parties. Thus,

for arbitration to ensue, there must exist an agreement to arbitrate between the

parties. Typically, parties agree to arbitrate by executing an agreement or

contract which has an arbitration clause or a stand-alone arbitration

agreement.

In this Chapter, the arbitration agreement, which is the basis of arbitration, is

discussed. The chapter makes an introduction to arbitration agreements and

clauses and critically examines their salient features. The basic contractual

requirements regarding an arbitration agreement as a contract as well as the

formal requirements of an arbitration agreement are explored.

2.2 A General Overview of the Arbitration Agreement

An arbitration agreement is the basis of all arbitrations. It is basically an

agreement whereby the parties undertake that specified matters arising

between them shall be resolved by a third party acting as an arbitrator and that

they will honour the decision (award) made by that person.1 An arbitration

agreement has also been defined as an agreement to submit present or future

disputes to arbitration.2 The Arbitration Act defines an arbitration agreement

as an agreement by the parties to submit to arbitration all or certain disputes

1 Turner, W., “Arbitration Agreements”, Arbitration, 66(3) (2000), 230. 2 Sourced from, http://www.unctad.org/en/docs/edmmisc232add39_en.pdf, [accessed on

04/03/2012].


36

which have arisen or which may arise between them in respect of a defined

legal relationship, whether contractual or not.3

As a consequence, therefore, an Arbitration Agreement is a written contract in

which two or more parties agree to use arbitration, instead of the courts, to

decide all or certain disputes arising between. This Agreement may have been

established between the parties as a term of their original contractual

negotiations. Alternatively, the parties may also agree to arbitrate at the time

the dispute arises. In other words, arbitration agreements may be ad hoc or may

relate to a future dispute. In the former case, the arbitration agreement is

sometimes called a submission. Arbitration conducted under arbitration

agreement is sometimes called reference or arbitral proceedings.

Arbitration agreements are basically of two types. The first one arises where

there is a clause in the contract in which parties to the contract undertake to

submit to arbitration the disputes that may arise in relation to that contract.

This is commonly referred to as an arbitration clause. An arbitration clause is

thus meant to address disputes which the parties anticipate may arise at the

time of entering the contract and do not exist when the agreement is executed.

The second one arises where the parties to a dispute that has already arisen

submit the dispute to arbitration. This type of an arbitration agreement is

sometimes referred to as a submission agreement. It arises where there is no

binding agreement to arbitrate, the parties to a dispute are willing to arbitrate

and as such enter into an “ad hoc” agreement to have the dispute arbitrated

upon. It applies to conflicts that have already arisen and entails an accurate

description of the subject matters to be arbitrated.

In some cases, the law may require the execution of a submission agreement

even where there is already an arbitration clause in existence. In such cases,

3 Sec. 3 (1) of the Arbitration Act, Act No. 4 of 1995, Government Printer, Nairobi.


37

one of the purposes of the submission agreement is to complement the generic

reference to disputes by a detailed description of the issues to be resolved.

Agreements negotiated between the parties at the time of the original contract

may provide for specifics regarding the Arbitration process. For example, the

number, qualification and process for selecting arbitrators may be defined

with particularity. Rules of procedure, award of fees, rights of appeal and

requirements for a written judgment are also commonly specified in the

Agreement. Such Agreements are enforceable as a matter of contract law.

Amendment at the time the dispute arises typically requires agreement

between the parties.

Agreements to arbitration established at the time the dispute arises can

address similar issues and provide the parties with an opportunity to tailor the

arbitration process to the particular dispute.4 An arbitral agreement may

incorporate institutional rules chosen by the parties to be used in the

anticipated arbitration. Where such rules are incorporated, the presumption is

usually that they apply as published at the date of the arbitral proceeding and

not those existing when the agreement is concluded.5

2.3 The Arbitration Clause

In most cases, the arbitration agreement is generally a clause in a larger

contract providing that any disputes arising between the parties will be

resolved through arbitration. The disputes may be about the performance of a

specific contract, a claim of unfair or illegal treatment in the workplace, a faulty

product, or just about anything else. People are free to agree to arbitrate just

about anything they could litigate. Essentially, an arbitration clause requires

that disputes arising out of contracts and transactions thereof be resolved

through arbitration. The arbitration clause must be valid so as to be respected

4 See generally, Carbonneau, T.E., The Exercise of Contract Freedom in the Making of

Arbitration Agreements,’ op cit. 5 See generally, Bunge SA v Kruse [1990] 2 Lloyd’s Rep. 142 (CA).


38

by the parties and the dispute in question must be within the ambit of the

arbitration clause.

In Family Bank Limited versus Kobil Petroleum Limited6 the contract between the

plaintiff and the defendant provided that “Any dispute with regard to any matter

in connection with this contract...be referred to arbitration”. The court, noting that

the arbitration clause thereof was valid, stated that where parties have agreed

to oust the jurisdiction of the court and rather go to arbitration, that has to be

respected by both of them and the court since it is they [the parties] who know

better how to resolve their disputes and that it has to be shown that the dispute

in question is within the arbitration clause. It has been observed that the

requirement that the parties to an arbitration agreement honour their

undertaking to submit to arbitration any disputes covered by their agreement

entails the consequence that the courts of a given country are prohibited from

hearing such disputes.7 Furthermore, if seized of a matter covered by an

arbitration agreement, the courts will often be required, under the applicable

rules, to refer the parties to arbitration, a principle recognized in most modern

arbitration statutes as well as in international conventions.8

At times arbitration clauses can be simple stating that claims will be settled

according to applicable arbitration rules and then enforced by a local court or

more complex, controlling a large number of matters regarding the conduct of

the process and the how to treat the final award.9 The arbitration clause can

also be mandatory or voluntary with the consequence that the arbitrator's

decision may be binding or nonbinding.10

6 Family Bank Limited v Kobil Petroleum Limited, ELC No. 651 OF 2010, at High Court of Kenya. 7 Gaillard, E., "Prima Facie Review of Existence, Validity of Arbitration Agreement," TDM 2

(2006), available at www.transnational-dispute-management.com/article.asp?key=704.

[Accessed on 10/01/2017]. 8 Ibid. 9 Repa, B.K., “Arbitration Basics,” Nolo.com, http://www.nolo.com/legal-

encyclopedia/arbitration-basics-29947.html. [Accessed on 10/01/2017], 10 See Bennett, S.C., ‘Non-Binding Arbitration: An Introduction,’ Dispute Resolution Journal,

61(2), 2000, p.22.

http://www.nolo.com/legal-


39

An arbitration clause may make the arbitration either mandatory or voluntary.

A dispute that is subject to mandatory arbitration must be resolved through

arbitration. In voluntary arbitration, both sides in a dispute agree to submit

their disagreement to arbitration after it arises, and after they have evaluated

other options for resolving it.

In a binding arbitration, the arbitrator's decision is final. It may not be reviewed

or overturned by a court except in very limited circumstances, such as when

fraud or misuse of power has been involved. In a nonbinding arbitration,

either party may reject the arbitration award and demand a trial instead.

Parties often treat nonbinding decisions as an independent assessment of the

strengths and weaknesses of a potential lawsuit, with the aim of fostering a

settlement. But even in such cases, the arbitration agreement will often provide

that the award may become binding if the parties agree to it or wait longer

than a stated time to ask that the case be returned to court.

2.4 Contractual Requirements in Arbitration Agreements

Arbitration agreements are contracts just like any other contract. As such they

must meet certain basic requirements to be valid. These are the requirements

that are necessary for a contract to be valid and are discussed as hereunder:-

1. An agreement which usually consists of an offer and an acceptance of

that offer. A contract arises when an offer to make a contract is

accepted. An offer contains a promise, for example, "I will agree to

arbitration of the dispute” and a request for something in return, for

instance, a promise by the other party not to prosecute his rights in

court. The acceptance consists of an assent by the party to whom the

offer is made, showing that the person agrees to the terms offered.

Such an offer may be terminated in a number of ways before

acceptance. For example, the party making the offer may cancel it (a

revocation), or the party to whom the offer is made may reject it. When

the party to whom the offer is made responds with a different offer,


40

called a counteroffer, the original offer is terminated. Then the

counteroffer may be accepted by the party making the original offer.

2. The agreement must have consideration, which is something

bargained for and given in exchange for a promise. A contract must

entail a bargain. This implies that each party to the contract gives up

something, or promises to, in exchange for something given up or

promised by the other party. This is called consideration. In a

hypothetical example, the consideration on one side could be the

promise to pay Kshs. 5,000,000/= for a car and on the other, the promise

to deliver a car. Only with rare exceptions does a promise by one party,

without some form of consideration being extended by the other party,

result in a contract or other enforceable obligation, regardless of the

sincerity of the promise. This is usually so in the case of contracts under

deed. Although each party must extend consideration to the other in

order to form a contract, the value of the consideration need not be

equal.

3. The parties must have the capacity or legal ability to contract. In other

words, for a contract to be enforceable it must be between competent

parties. A contract with a person who has been adjudicated insane is

likely to be declared void. A contract involving a minor (a person

under 18) is not enforceable unless the contract is for necessities such

as food, lodging, or medical services, in which case he or she may be

held responsible for the reasonable value of what was purchased.

Further, persons suffering from a disability such as intoxication from

drugs or liquor, or insane persons not adjudicated insane, usually may

void a contract if the other party knows or should have known of the

disability and if the consideration received is returnable.

4. The subject matter of the contract must be legal. An agreement to break

the law would be illegal, for example. The contract must not be vitiated

by common law or statute. If a purported contract requires an illegal


41

act, the result is a void contract. Parties to an illegal contract have no

standing in court. Not only are contracts requiring criminal acts illegal,

so are contracts requiring commission of a tort (a breach of civil law

such as misrepresentation or trespass) or those in breach of public

policy. Although public policy is difficult to define, it includes some

serious breaches of conventional morality or ethics.

5. Some contracts must be in proper form. Even though courts will

enforce an oral contract, some categories of contracts must be in writing

to be legal. For instance, arbitration agreements are invariably required

to be in writing.

2.5 Formal Requirements of an Arbitration Agreement

In addition to the contractual requirements, in determining the validity of an

arbitration agreement, one must take into account the specific conditions

required by the applicable arbitration statute law. In Kenya, the formal

requirements of an arbitration agreement are outlined in Section 4 of the

Arbitration Act. The Act provides that an arbitration agreement may be in the

form of an arbitration clause in a contract or in the form of a separate

agreement. An arbitration agreement must be in writing. It is in writing if it is

contained in a document signed by the parties; an exchange of letters, telex,

telegram, facsimile, electronic mail or other means of telecommunications

which provide a record of the agreement or 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 party.11 The formal requirements are explored in the

ensuing discussion.

11 Sec. 4 (3) of the Arbitration Act, op.cit


42

i. The Arbitration Agreement must be in Writing

The law provides that an arbitration agreement or arbitration clause must be

in writing. An arbitration agreement is in writing if signed by parties or

involves an exchange of letters, telex, telegram, facsimile, electronic mail or

other means of telecommunications which provide a record of the agreement

or 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 party.12

An arbitration agreement by reference is also possible, provided the contract

making the reference is in writing and the reference makes the clause referred

to part of that contract.13 Where there is no binding agreement to arbitrate,

parties to a dispute who are willing to arbitrate usually enter into an “ad hoc”

agreement, also referred to as a submission agreement, to arbitrate the same.

ii. The Arbitration Agreement need not be Signed

Under the Model Law and the New York Convention14, the arbitration

agreement is required to be signed by the parties. The requirement that

arbitration agreement be signed has been criticized as a disadvantage in

relation to more modern laws that do not consider the signature a validity

requirement. The Kenyan law does not expressly state that the agreement need

not be signed as is the case in the English Arbitration Act, 1996.15

The Kenyan law provides that an agreement is in writing if it is contained in a

document signed by the parties or is an exchange of letters, telex, telegram,

facsimile, electronic mail or other means of telecommunications which provide

a record of the agreement; or is an exchange of statements of claim and defence

in which the existence of an agreement is alleged by one party and not denied

12 Ibid, S. 4(2). 13 Ibid, S. 4. 14 Convention on the Recognition and Enforcement of Foreign Arbitral Awards 330 UNTS 38;

21 UST 2517; 7 ILM 1046 (1968) 15 The English Arbitration Act, 1996provides in Sec. 5.2 (a) thereof that there is an agreement in

writing if the agreement is made in writing, whether or not it is signed by the parties.


43

by the other party.16 For example, in the case of a telex, it is hardly possible that

the parties will have signed the document. The only problem arises in that

without the signature it may be difficult to prove that the party against whom

it is invoked consented to it.

iii. Mutual Consent of the Parties

The equivalent of the offer and acceptance requirement in the case of an

arbitration agreement is the parties’ consent. The law requires that the

intention of the parties to submit to arbitration must unequivocally arise from

the agreement; the fact that the parties have resolved to refer disputes arising

out of a legal relationship. For instance, the New York Convention (Article II.1)

requires that in their agreement the parties “undertake to submit to

arbitration” their disputes. The mutual consent here implies that the

agreement must contain a mandatory, rather than permissive, undertaking.

Mutual consent to refer disputes arising out of a legal relationship to

arbitration reemphasises the degree of party autonomy exhibited by parties in

entering into the arbitral process. Further, the agreement must provide for

arbitration, rather than another process of dispute resolution. The arbitration

agreement must also have been entered into voluntarily. Hence, where the

agreement is induced by error or is a consequence of fraud, coercion or undue

influence, there has been no real consent and the agreement to arbitrate is not

valid. A court cannot interfere with the arbitral process or party autonomy.

The Act17 which is modelled on the UNICITRAL Model Law prevents the

courts from interfering with the arbitral process of party autonomy.

In Mohammed Gulam Hussein Fazal Karmali & anor v. The Chief Magistrate’s Court

Nairobi & anor,18 the court stated that where the parties in unequivocal terms

have provided for the means to resolve disputes between them, that is, by

16 Sec. 4, Arbitration Act, 1995. 17 Ibid, s. 10. 18 Mohammed Gulam Hussein Fazal Karmali & anor v. The Chief Magistrate’s Court Nairobi & anor,

[2006] eKLR.


44

arbitration in London under the Rules of the London Court of International

Arbitration (LCIA), the effect is that the parties had by a consensual process

agreed to resolve any dispute or differences arising from the agreements by

arbitration and that the court had a responsibility to uphold party autonomy.

The court noted that the responsibility to uphold party autonomy arises from

the fact that Kenya has ratified the UNCITRAL Model Law which requires the

State and the courts to uphold the principle of party autonomy in resolving

commercial disputes and where there is an arbitration agreement.

iv. Tacit Agreement to Arbitrate

The Kenyan Arbitration Act envisages a scenario where an arbitration

agreement may arise from the 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.19 This provision borrows from the legal principle that consent can be

inferred when a party “does what he would not have done, or does not do

what he would have done if he did not intend to accept the proposal.” The

plaintiff’s decision to submit the case to arbitration and consented to by the

defendant, may validly be considered a tacit agreement to arbitrate.

Further, the Act provides that a party who knows that any requirement under

the arbitration agreement has not been complied with and yet proceeds with

the arbitration without stating his objection may be deemed to have waived

the right to object. In other words, a party may waive his right to object lack of

arbitration agreement or invalidity of the same.20

v. The Arbitration Agreement Must refer to a Defined Legal Relationship

There must be a legal relationship between the parties that may have given or

may give rise to the controversies submitted to arbitration. As per Section 3 of

the Arbitration Act, the relationship need not be contractual and may, thus, be

19 sec. 4, Arbitration Act, 1995. 20 Ibid, sec. 5.


45

either contractual or non-contractual.21 This requirement is also outlined in

both the New York Convention22 and the Model Law.23 The gist of the

requirement is that the arbitration agreement must refer to differences which

have arisen or which may arise between parties in respect of a defined legal

relationship.

This means that the arbitration agreement must refer to a concrete and specific

legal relationship between the parties. As a result, an arbitration agreement

written in terms too ambiguous or generic and which does not restrict its scope

to the disputes arising from a particular juridical relation, would not be

acceptable. For instance, the parties could not agree to submit to arbitration

“any dispute that could arise between them” since such a clause could be

questionable entailing a waiver of the court’s jurisdiction in too generic and

indiscriminate terms.

vi. The Arbitration Agreement must be on Arbitrable Subject Matters

In order to be valid and enforceable, the subject matters of the arbitration

agreement must be arbitrable. As a general rule, matters are arbitrable when

they refer to economic or disposable private rights. This implies that there is a

limitation as to the nature of matters to which parties may agree to submit to

arbitration. The rationale of this limitation is that arbitration is a dispute

resolution system arising out of an agreement of the parties. Hence, it is a

private mechanism of dispute resolution and individuals who are not public

officers are engaged to arbitrate.

In the past, arbitration may not have been allowed to intervene where the

subject matter of the dispute is such as affects public or general interests as

jurisdiction in such matters has been the preserve of the judiciary. Matters

affecting public interest include criminal offences, public interest disputes

amongst others. However, this may change with time, as witnessed in Republic

21 Ibid. 22 Article II.1 of the New York Convention. 23 Article 7.1 of the Model Law, United Nations document A/40/17, Annex I


46

v. Mohamed Abdow Mohamed24, where a murder case was settled though ADR.

The jury is still out there as to their suitability in dealing with criminal matters.

Only where disputes entail private rights and do not affect the general public

are the parties at liberty to waive the right to engage the judiciary and use

arbitration. This is done through an arbitration agreement whereby it is agreed

that conflicts referring to such rights may be settled by these “private judges”

(arbitrators) who do not belong to the judiciary.

The 1995 Act does not directly lay out the requirement for arbitrability.

However, there are some matters which are universally agreed to be beyond

the scope of arbitration. In particular, among other claims, most countries

disallow arbitration of disputes that are criminal in nature25, disputes

concerning intellectual property, competition (anti-trust) claims, real estate,

domestic relations and franchise relations. An arbitration agreement in respect

of these types of disputes may not be enforceable.

vii. Separability of the Arbitration Agreement

The concept of separability means that the validity of the arbitration clause

does not depend on the validity of the remaining parts of the contract in which

it is contained; as long as the arbitration clause itself is validly entered into by

the parties and worded sufficiently broadly to cover non-contractual disputes,

an arbitrator may declare a contract invalid but still retain jurisdiction to

decide a dispute as to the consequences of the invalidity.

By treating arbitration agreements as distinct from the main contract,

separability rescues many arbitration agreements from failing simply because

they are contained in contracts the validity of which is questioned. This

principle is provided in the Model Law as follows:

24 Criminal Case No. 86 of 2011 (May, 2013), High Court at Nairobi. 25 See the Kenyan case of Republic v. Mohamed Abdow Mohamed, Criminal Case No. 86 of 2011

(May, 2013), High Court at Nairobi.


47

“The arbitral tribunal may rule on its own jurisdiction, including any

objections with respect to the existence or validity of the arbitration

agreement. For that purpose, an arbitration clause which forms part of a

contract shall be treated as an agreement independent of the other terms of the

contract. A decision by the tribunal that the contract is null and void shall

not entail ipso jure the invalidity of the arbitration clause.”26

Schwebel justifies the separability doctrine on four grounds as outlined

below:27

i. When parties enter into an arbitration agreement which is widely

phrased, they usually intend to require that all disputes, including

disputes over the validity of the contract, are to be settled by

arbitration. This may be an implied term of the contract. Applying the

separability doctrine thus gives effect to the will of the parties.

ii. If simply by denying that the main contract is valid one party can

deprive the arbitrator of competence to rule upon that allegation, this

provides a loophole for parties to repudiate their obligation to

arbitrate. This defeats one of the main advantages of choosing

arbitration over litigation as a means of dispute settlement: speed and

simplicity without the time and expense of the courts.

iii. There is a well-established legal fiction that when parties enter into a

contract containing an arbitration clause, they are really entering into

two separate agreements: the principal agreement containing their

substantive obligations, and the arbitration agreement which provides

for the settlement of disputes arising out of the principal agreement. In

this situation, if the principal agreement is alleged to be void, there is

no question about the validity of the arbitration agreement since it is

an independent contract.

26 Article 16(1) of the Model Law, op.cit. 27 Schwebel, S.M., International Arbitration: Three Salient Problems (1987) ch 1,1–13.


48

iv. It is a widespread practice that courts usually review only arbitral

awards and not the merits of disputes which are meant to be arbitrated.

However, if we do not accept the separability doctrine, courts would

be forced to do this very thing.

In Heyman v Darwins28 the separability doctrine was clearly enunciated by the

House of Lords. The defendants were steel manufacturers who alleged that

the plaintiffs, who were their selling agents, had improperly involved them in

certain liabilities. They refused to pay commission due to the plaintiffs. The

plaintiffs instituted a court action against the defendants, but the defendants

applied to court for the action to be stayed, contending that the dispute should

be dealt with under the arbitration clause in the contract.

The House of Lords found that the parties had entered into a valid and binding

contract, and that the difference that had arisen related only to whether either

side had breached the contract or whether circumstances had arisen which

discharged one or both parties from further performance. In such a situation,

the arbitration clause was valid and applicable. Lord Macmillan, with whom

Lord Russell of Killowen agreed, approved the severability doctrine in the

following terms:

I venture to think that not enough attention has been directed to the true

nature and function of an arbitration clause in a contract. It is quite distinct

from other clauses. The other clauses set out the obligations which the parties

undertake towards each other hinc inde (from different directions), but the

arbitration clause does not impose on one of the parties an obligation in favour

of the other. It embodies the agreement of both parties that, if any dispute arises

with regard to the obligations which the one party has undertaken to the other,

such dispute shall be settled by a tribunal of their own constitution.29

28 Heyman v Darwins, (1942) 72 L1 L Rep 65 (HL). 29 Ibid.


49

On his part Lord Wright stated that:

[An arbitration agreement] is collateral to the substantial stipulations of the

contract. It is merely procedural and ancillary, it is a mode of settling disputes,

though the agreement to do so is itself subject to the discretion of the court. All

this may be said of every agreement to arbitrate, even though not a separate

bargain, but one incorporated in the general contract.30

In Harbour Assurance v Kansa General International Insurance,31 all three judges

of the Court of Appeal held that if the arbitration clause is not directly

impeached, an arbitration agreement is, as a matter of principles legal

authority, capable of surviving the invalidity of the contract so that the

arbitrator has jurisdiction to determine the initial validity of the contract.

Hoffmann LJ rejected the argument that an arbitration clause contained in a

contract which is void ab initio must necessarily be invalid. Thus, the prevailing

legal position on separability is that an arbitration agreement contained in a

main contract is severable and has a life of its own. If appropriately worded, it

confers jurisdiction on the arbitrator even to rule that the main contract is void

ab initio. The arbitrator only lacks jurisdiction if the arbitration agreement itself

is alleged to be invalid or non-existent.32

In determining the validity and enforceability of the Arbitration Agreement,

the doctrine of separability as enunciated under section 17 (a) of the Act is

important. This provision requires the arbitration clause to be treated as an

agreement independent of the other terms of the contract and to survive the

termination by breach of any contract of which it is part. Even if the underlying

contract is void, parties are presumed to have intended their disputes to be

resolved by arbitration. In the case of Kenya Airports Parking Services Ltd &

30 Ibid. 31 Harbour Assurance v Kansa General International Insurance, [1993] 1 Lloyd’s Rep 455 (CA). 32 Ibid.


50

Another v Municipal Council of Mombasa33 the learned Honourable Mr. Justice

Kimaru noted that:

“… the principle of separability of an arbitration agreement has thus been

given judicial stamp of approval and is applicable even where one of the parties

is challenging the validity or legality of the agreement itself and that the law

vests jurisdiction to determine the validity of the agreement on the arbitrator.”

The learned Judge in his judgment above cited with approval the case of

Buckeye Check Cashing, Inc. v Cardegna et al,34 in which the U.S Supreme Court

found that the Arbitrator has jurisdiction to hear challenges to a contract

containing an arbitration clause and in limiting the role of courts to ruling on

validity of arbitration clauses. By giving the arbitrator the power to rule on the

validity of a contract, the court not only affirmed the prominent role of

arbitration in the system of dispute resolution, but also made it far more

difficult for a party who has agreed to arbitrate to avoid its obligations by

claiming that the contract is void and thus having a case that should otherwise

be arbitrated, heard by an already overloaded judiciary.

In this regard, Buckeye echoes a very important sentiment that has long been

established: “Contracts to arbitrate should not be avoided by allowing one

party to ignore the contract and resort to the courts. Such a course could lead

to prolonged litigation, one of the very risks the parties, by contracting for

arbitration, sought to eliminate.”35

The doctrine of separability of the arbitration agreement was again in focus in

the case of Nedermar Technology by Ltd v Kenya Anti-Corruption Commission &

Another36 where in acknowledging that the doctrine had been internationally

33 Kenya Airports Parking Services Ltd & Another v Municipal Council of Mombasa, [2009] eKLR. 34 Buckeye Check Cashing, Inc. v Cardegna et al, 546 U.S (2006). 35 United States Supreme Court Decides Role of Court and Arbitrators in Challenges to Validity

of Contracts Containing Arbitration Clauses, August 8, 2006-New Jersey, USA. Available at

<http://www.hg.org/articles/article_1522.html> [Accessed on 5/01/2017]. 36 Nedermar Technology by Ltd v Kenya Anti-Corruption Commission & Another, [2006] eKLR.


51

recognised and reflected in section 17 of the Arbitration Act 1995, the court

emphatically stated that the arbitration agreement is separate from the

underlying contract and survives the termination of that contract. The court

further noted that an arbitration clause which forms part of the contract (as

was in that particular case) shall be treated as an independent agreement from

the other terms of the contract and a decision by the arbitral tribunal that the

contract is null and void shall not itself invalidate the arbitration clause.

2.6 Drafting an Effective Arbitration Agreement

The content of an arbitration agreement can have an enormous impact upon

the rights of contracting parties.37 It has been observed that while one of the

strengths of arbitration is its adaptability to the particular circumstances of the

parties and the dispute, there is need to take caution of the various aspects of

arbitration process, as highlighted elsewhere in this chapter, to ensure that the

desires of the parties are fulfilled without unnecessary delays or costs.38 Some

of the mistakes that arise in drafting arbitration clause include but are not

limited to: failure to specify whether arbitration outcome will be binding or

non-binding; failure to design a clause that fits the circumstances of the

transaction and the needs of the parties; a clause that expresses an agreement

to arbitrate, but fails to provide guidance on how to or where to do so; drafting

a clause that is excessively detailed; an arbitration clause with unrealistic

expectations; and a clause that incorporates litigation or court procedural

rules.39 Ambiguous or defective arbitration agreements can lead to lengthy

litigation challenging jurisdiction both at the outset and when enforcement of

the award is sought.40

37 Carbonneau, T.E., ‘The Exercise of Contract Freedom in the Making of Arbitration

Agreements,’ op cit., p. 1200. 38 See Townsend, J.M., ‘Drafting arbitration clauses: Avoiding the 7 deadly sins,’ Dispute

Resolution Journal, Vol. 58, No. 1, (Feb-Apr 2003), pp. 28-36. 39 Ibid. 40 ‘Chapter 8: Drafting of the Arbitration Agreement,’ p.166. Available at

http://faculty.law.lsu.edu/toddbruno/Vis/Chapter%208.pdf [Accessed on 5/01/2017].


52

There is need to ensure that the foregoing mistakes are avoided because, as it

has been contended, the most important clause in any contract is the dispute

resolution clause for so many reasons, not the least of which is that the way

contracting parties manage any dispute, disagreement or controversy that

arises in the course of implementing the contractual agreement, would

invariably determine their future commercial relationship.41 Arbitration

agreements have a symbolic standing: they represent a gateway to private

adjudication and they codify the parties' intent regarding dispute resolution.42

As such, drafters of these clauses/agreements should not deny the parties this

opportunity to have disputes dealt with according to their wishes. Finality,

enforceability and functionality-in terms of economy, efficiency, and

effectiveness should be key considerations in the process of coming up with a

valid agreement to arbitrate.43

This chapter has discussed a number of issues that should be clearly addressed

in the agreement to avoid ambiguity and non-recognition or non-enforcement

of the arbitration clause.

41 Funmi, R., ‘Drafting the Dispute Resolution Clause: The Midnight Clause,’ p.1. Available at

http://nigerianlawguru.com/articles/arbitration/DRAFTING%20THE%20DISPUTE%20RES

OLUTION%20CLAUSE.pdf [Accessed on 5/01/2017]. 42 Carbonneau, T.E., ‘The Exercise of Contract Freedom in the Making of Arbitration

Agreements,’ op cit., p. 1193. 43 Ibid, p. 1206.

Stay of Legal Proceedings for Arbitration

53

Chapter Three


3.1 Introduction

An application for stay of proceedings in many cases is one of the steps that

precede the commencement of arbitration proceedings. The other is usually

the appointment of an arbitral tribunal and complications that may arise with

respect to the appointment of an arbitrator, such as challenging the

appointment of arbitrators or challenge of jurisdiction.

An application for stay of proceedings limits the avenues available for an

aggrieved party who is party to an arbitration agreement such that if he wants

to pursue his claims, he can only do so by arbitration. The justification is that

arbitration agreements (that is, agreements to refer disputes to arbitration) are

mainly contractual undertakings by parties to settle disputes out of the court

and with the help of an arbitrator. As such, the courts, by staying legal

proceedings are merely enforcing and giving the force of law to what parties,

exercising their freedom to contract, have chosen and agreed to be bound by.

The necessity of stay of proceedings arises where the parties have a valid

arbitration agreement and upon a dispute arising on a matter covered by the

same, one party goes to the court in breach of the Arbitration agreement.

Parties commence court action despite arbitration agreement for a number of

reasons. The action may be inadvertent, because s/he challenges the existence

or validity of the arbitration agreement or merely to breach the arbitration

agreement. An application for stay of the legal proceedings is what Section 6

of the Act1, avails the other party if it is to give effect to the arbitration

agreement.

1 Arbitration Act, Act No. 4 of 1995, Government Printer, Nairobi. “(1) A court before which

proceedings are brought in a manner 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 files any pleadings or takes any


54

3.2 Arbitration Agreement does not Bind Parties to Arbitration Only

An arbitration clause or arbitration agreement in a contract is not an

impediment to resolving disputes in court until a party objects. In Rawal-v-The

Mombassa Hardware Ltd2 it was held that an arbitration agreement does not

limit or oust the jurisdiction of the court to grant reliefs sought by way of a

Plaint. In the case of Peter Muema Kahoro & Another-v-Benson Maina Githethuki3

the Plaintiff had filed a suit seeking to enforce an agreement for sale of land by

way of permanent injunction and in addition, applied and was granted ex-

parte temporary injunction pending inter-partes hearing of the application.

The said agreement contained an arbitration clause under which parties had

undertaken to refer any dispute arising to a single arbitrator appointed by the

Law Society of Kenya. The Defendant entered appearance and in addition filed

grounds of opposition against the application for injunction. The Defendant

then brought an application seeking to strike out the plaintiff’s suit and the

application thereof on the ground that the court was not seized of jurisdiction

to try the matter.

The learned counsel for the Defendant argued in support of the ground that

the Plaintiff, having failed to invoke fully the arbitration agreement clause, the

court had no jurisdiction to entertain the suit and/or the application as the

reliefs sought by the Plaintiff were best sought under Section 7 of the

other step in the proceedings, 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. 2 Rawal-v-The Mombassa Hardware Ltd, [1968] E.A. 398. 3 Peter Muema Kahoro & Another-v-Benson Maina Githethuki, [2006] HCCC(Nairobi) No. 1295 of

2005.


55

Arbitration Act. The Plaintiff in response cited the Rawal case [supra] arguing

that an arbitration clause does not limit or oust the jurisdiction of the court and

that the Defendant had taken steps in the suit.

The court ruled in favour of the Plaintiff and held that striking out the suit was

beyond the ambit of Section 6 of the Arbitration Act. The court further held

that the Defendant, having failed to move the court in appropriate time under

Section 6 to refer the matter to arbitration and instead taking steps in the

proceedings, waived his right to rely on and invoke the arbitration agreement.

Thus, the Defendant’s application to strike out the suit and/or stay the

proceedings was dismissed with costs.

From the foregoing legal authorities, parties to an arbitration agreement can

choose to ignore that agreement and file proceedings in a court of law.

However, if one of the parties is desirous of effectuating the arbitration

agreement when the other has gone to court, then the former may seek an

order of the court under Section 6 of the Arbitration Act staying the court

proceedings. The grant of the order of stay of legal proceedings under section

6 leaves the initiator of the court proceedings with no option but to follow the

provisions of the arbitration agreement if he wishes the dispute to be resolved.

3.3 Conditions for Grant of Stay of Proceedings for Arbitration

In granting stay of proceedings, courts generally have regard to certain

principles as outlined in the Court of Appeal case of Esmailji vs Mistry Shamji

Lalji & Co.4 as follows:

“ . . . before the court will exercise its discretion and make an order staying the

proceedings, the applicant must satisfy the court not only that he is, but also

that he was at the commencement of the proceedings ready and willing to do

everything necessary for the proper conduct of the arbitration. ”

4 Esmailji vs Mistry Shamji Lalji & Co. [1984] KLR 150.


56

In Niazsons (K) Ltd V China Road and Bridge Corporation (K)5 the court once again

outlined the basic aspects that must be satisfied before grant of stay of

proceedings in the following terms:

“The court will then be obliged to consider three basic aspects. First, whether

the Applicant has taken any step in the proceeding other than the steps allowed

by the said section. Second, whether there are any legal impediments on the

validity, operation or performance of the arbitration agreement. Third,

whether the suit indeed concerns a matter agreed to be referred.”

i. There must be a Valid and Enforceable Arbitration Agreement

First, in order to succeed in an application for stay of legal proceedings for

arbitration, the applicant must prove the existence of an arbitration agreement

which is valid and enforceable.6 The rationale here is that to stay proceedings

where there is no valid Arbitration Agreement would otherwise amount to

driving the claimant to the seat of justice as s/he cannot get redress by

enforcing the arbitration agreement.

In the Court of Appeal case of Esmailji vs Mistry Shamji Lalji & Co (supra).7, the

Hon. Law J.A. observed that the party moving for a stay has to show that

the dispute is within a valid and subsisting arbitration clause and that it is only

when that has been achieved that the burden of showing cause why effect should not

be given to the agreement to submit is upon the party opposing the application for stay.

The validity or otherwise of an arbitration agreement has to be determined by

the court seized of the matter.

The court in the Niazsons (K) Ltd case, supra, stated that whether or not an

arbitration clause or agreement is valid is a matter the court seized of a suit in

5 Niazsons (K) Ltd v China Road and Bridge Corporation (K) [2001] 2 E.A. 502. 6 In fact, sec. 6(1) (a) of the Act, op.cit, stipulates that court refuse to grant stay of proceedings

where ‘the arbitration agreement is null and void, inoperative or incapable of being

performed’. 7 at p.155.


57

which a stay is sought is duty bound to decide. The doctrine of separability is

important here in the sense that it enables the arbitration clause to survive the

termination by breach of any contract of which it is part.8 Even if the

underlying contract is void, the parties are presumed to have intended their

disputes to be resolved by arbitration. If the arbitration agreement’s validity is

questioned, the court should endeavour to ascertain the same before staying

the proceedings. At least, it should stay the proceedings pending the

determination of the issue of validity.

Section 6 of the Act is to the effect that the court shall grant stay unless, inter

alia, it finds that the arbitration agreement is null and void, inoperative or

incapable of being performed. The arbitration agreement is null and void or

inoperative if for example, it is inconsistent with a law or is incapable of being

performed. The court will also not stay proceedings if it finds that there is no

dispute between the parties on matters agreed to be arbitrated. The ideal

policy for the court under this condition is anything but unequivocal. For

instance, it is not clear whether the court should lean towards giving effect to

the Arbitration Agreement as far as possible or vice-versa.

ii. Applicant must be a Party to the Arbitration Agreement

Secondly, the applicant for stay must be a party to the arbitration agreement

or at least a person claiming through a party e.g. a personal representative or

trustee in bankruptcy. This requirement is in view of the doctrine of privity of

a contract which is to the effect that only parties to a contract can enforce it and

a stranger to a contract cannot enforce it. In Chevron Kenya Limited-v-Tamoil

Kenya Limited9, the Learned Azangalala found that the Defendant was not a

party to the agreement enshrining the arbitration agreement on the basis the

matter was sought to be stayed and consequently referred the matter to

arbitration. He therefore refused to stay the proceedings, inter alia, on that

ground, stating in the ruling that:

8 Ibid, Sec. 17(1) (a) of the Arbitration Act, op.cit. 9 Chevron Kenya Limited-v-Tamoil Kenya Limited, HCCC (Milimani) No. 155 of 2007.


58

“To my understanding of [section 6(1)] of the Act, only a party to the

arbitration agreement has the right to apply for stay proceedings. As

demonstrated above, the defendant is not a party and was [therefore] not

entitled to lodge this application.”

Indeed, it seems that only the Defendant is permitted to apply for stay of

proceedings under Section 6 of the Act. In Pamela Akora Imenje-v-Akora ITC

Intenational Ltd & Another,10 the learned Waweru, J held that the provisions of

Section 6(1) of the Act are available only to the Defendants. Therefore the judge

ruled that the application to stay the suit by the Plaintiff was misconceived as

the Plaintiff, having chosen to file the suit, she could not purport to later have

recourse to Section 6(1) of the Act.

The judge’s conclusion was based on what he considered to be the plain and

obvious impression of the wording of subsection 6(1) of the Act. Therefore, the

Plaintiff having made her bed, as it were, she was bound to lie on it. She chose

to file a suit; she had to stand or fall by it.

iii. Dispute within Scope of the Arbitration Clause

The dispute which has arisen must fall within the scope of the Arbitration

Clause. The draftsmanship in vogue in Kenya today is to have the arbitration

clause as wide and comprehensive as possible. However, there arise instances

where the parties intended only some limited disputes to be referred to

arbitration. In such an instance, the party opposing the arbitration may argue

that the dispute is not covered by the arbitration agreement and, therefore, the

court action is not in breach of the same. The court is bound to stay the

proceedings unless, inter alia, it finds:

“that there is not in fact any dispute between the parties with regard to the

matters referred to arbitration.”11

10 Pamela Akora Imenje-v-Akora ITC Intenational Ltd & Another, HCCC (Milimani) No. 368 of 2005. 11 Sec. 6(1) (b) of the Arbitration Act, op. cit.


59

In TM AM Construction Group (Africa) v. Attorney General12 the plaintiff opposed

the application for stay, inter alia, on the basis that the Attorney General was

in fact making an application under section 6 of the Arbitration Act as a

delaying tactic as there was not in fact a dispute about the claim. It was

submitted that the Attorney General took long and did not do anything and

thus was precluded under section 6 (1) (b) of the Arbitration Act. The Attorney

General claimed that there was a dispute between it and the respondent that

deserved to be referred to arbitration.

The respondent stated that there was not in fact any dispute between the

parties with regard to matters agreed to be referred to arbitration. The court

found that there was failure by the Attorney General to tender any evidence

showing that there was in fact any dispute between the parties and that this

meant that no basis had been established to show that a dispute in fact existed

to justify staying the proceedings and referring the proceedings to arbitration.

The provisions of the Act are not clear on whether an applicant can stay part

of the proceedings where the other parts are not subject of the agreement. For

example, in a suit involving both torts and contract claims and the scope of

arbitration is confined to contractual agreement, it is not clear whether one can

be granted a stay for the contractual claim only. Similarly, there is uncertainty

as to what the courts are to do in case of an Alternative Dispute Resolution

clause as opposed to an arbitration one. With such a clause, usually the dispute

cannot be referred to arbitration immediately without first exhausting the

other agreed methods. It is proposed that the position of the House of Lords

in Channel Tunnel Corporation Ltd and others-v-Balfour Beatty Construction Ltd13

that that should not prevent the court from staying the proceedings, a position

adopted in UK Arbitration Act of 1996,14 should be the norm.

12 TM AM Construction Group (Africa) v. Attorney General, HCCC (Milimani) No. 236 of 2001. 13 Channel Tunnel Corporation Ltd and others-v-Balfour Beatty Construction Ltd, [1993] 1 Lloyd’s

Rep. 291, HL. 14 Sec. 9(2) of the UK Arbitration Act 1996.


60

In the case of Hanif Sheikh v Alliance Nominees Limited & 17 others15, the Court

authoritatively stated that ‘it is clear that there is a distinction between referral of a

dispute for determination through the process of arbitration or other methods of

alternative dispute resolution. Whilst the court can on its own motion refer matters

for determination to other alternative dispute resolution mechanisms pursuant to the

provisions of Order 46 Rule 20 of the Civil Procedure Rules, it cannot purport to refer

the dispute between the parties to arbitration due to the consensual nature of arbitral

proceedings.’16 (Emphasis added). This may be an indication of the Court’s

acknowledgment of the difficulty and uncertainty involved.

iv. No Answer to the Substantive Claim

The party making the application for stay must not have taken steps in the

proceedings to answer the substantive claim. For instance, the party must not

have served defence or taken another step in the proceedings to answer the

substantive claim. The rationale of this requirement is to ensure that stay of

proceedings for reference to arbitration is not used as a delay tactic by the

defence. The reasoning is that by taking steps to answer the substantive claim,

the party submits or is at least taken to be submitting to the jurisdiction of the

court and electing to have the court to deal with the matter rather than insisting

on the right to arbitration.17

Under the Arbitration Act, a party wishing to enforce the arbitration

agreement in a situation where the other party has initiated court proceedings

must apply to the court not later than the time when that party enters

appearance or takes the appropriate procedural step to acknowledge the legal

proceedings against that party.18

15 Hanif Sheikh v Alliance Nominees Limited & 17 others, [2014] eKLR, Civil Suit No. 241of 2012. 16 Ibid, para. 25. 17 Sutton, D.J., et al, Russell on Arbitration, op. cit, p. 301. 18 Sec. 6 (1) of the Arbitration Act, op.cit, as amended in 2009. Previously a party could only

benefit from sec. 6 if he applied before entering of appearance or filing of any pleadings or

taking of any other step in the proceedings.


61

In Lofty v Bedouin Enterprises Ltd19, the Court of Appeal Judges stated:

“We respectfully agree with these views, so that even if the conditions set out

in paragraphs (a) and (b) of Section 6 (1) are satisfied the Court would still be

entitled to reject an application for stay of proceedings and referral thereof to

Arbitration, if the application to do so is not made at the time of entering an

appearance or if no appearance is entered, at the time of filing any pleadings

or at the time of taking any step in the proceedings.” (Emphasis added)

The Court, in the case of Diocese of Marsabit Registered Trustees v Technotrade

Pavilion Ltd20, also stated that:

‘…the requirement in section 6(1) of the Arbitration Act is not a mere

technicality which can be diminished by Article 159(2) (d) of the

Constitution as claimed by the Applicant. It is a substantial legal matter

which aims at promoting and attaining efficacious resolution of

disputes through arbitration by providing for stay of proceedings but

only where a party desirous of taking advantage of an arbitration

clause in a contract has applied promptly for stay of proceedings and

made a request to have the matter referred to arbitration. Needless to

state that arbitration falls in the alternative forms of dispute resolutions

which under Article 159(2) (c) of the Constitution should be promoted

by courts except in so far as they are not inconsistent with any written

law. By these provisions of the Constitution and the fact that the

process of arbitration is largely consensual, a party who fails to adhere

to the law such as section 6(1) of the Arbitration Act forfeits his right to

apply for and have the proceedings stayed or matter referred to

arbitration. And for all purposes, such is an indolent party who should

19 Lofty v Bedouin Enterprises Ltd, EALR (2005) 2 EA, pp. 122-127. 20 Diocese of Marsabit Registered Trustees v Technotrade Pavilion Ltd, [2014] eKLR, Civil Case No.

204 of 2013.


62

not be allowed to circumvent the desire and right of the other party

from availing itself of the judicial process of the court.’

In Eagle Star Insurance Company Limited-v-Yuval Insurance Company Limited21,

Lord Denning MR was of the view that to merit refusal of stay, the step in the

proceedings must be one which “impliedly affirms the correctness of the [Court’s]

proceedings and the willingness of the defendant to go along with the determination

by the courts instead of arbitration”.

In other words, the conduct of the applicant must be such as to demonstrate

election to abandon the right to stay in favour of the court action proceeding.

However, the courts in Kenya have opted to interpret the provisos to Section

6 of the Act strictly and will not stay proceedings unless the application was

filed at the time of filling the memorandum of appearance.

In the case of Chevron Kenya Ltd-v-Tamoil Kenya Limited, supra, the learned

judge relied on and upheld Lord Denning’s dictum above. In this case, an

application for stay was opposed, inter alia, on the ground that the Defendant

took steps in the proceedings contrary to section 6(1) of the Arbitration Act.

According to the counsel for the Plaintiff, the Defendant was not entitled to

apply for stay of the proceedings having filed a notice of appointment

unaccompanied by the application.

According to the Plaintiff’s counsel, the application for stay should have been

lodged not later than when the notice of appointment of advocates was filed.

The application had been filed two days after the Notice of Appointment and

the Plaintiff’s counsel was of the view that as a result, it was barred by Section

6(1) of Arbitration Act, 1995. The Counsel for the Defendant on his part

contended that the filing of a Notice of Appointment of Advocates did not

constitute taking a step in the proceedings as to disentitle the defendant from

applying for stay of proceedings under section 6 of the Arbitration Act, 1995.

21 Eagle Star Insurance Company Limited-v-Yuval Insurance Company Limited, [1978] Llods Rep.

357.


63

The learned counsel submitted that the Notice of Appointment could not be

construed as a step taken in the proceedings. At least in the counsel’s view, it

was not the kind of “steps taken in the proceedings” envisaged under Section

6(1) of the Arbitration Act. The counsel further argued that for an act to

amount to a ‘step taken in the proceedings’ it must be one that acknowledges

the jurisdiction of the court to entertain the dispute.

The learned judge agreed with the Defendant’s counsel on the point holding

that a notice of appointment of advocates cannot be described as a step taken

in the proceedings so as to deprive a Defendant of recourse under section 6(1)

of the Arbitration Act for stay of proceedings. In the judge’s view, a notice of

appointment of advocates does exactly that: informs the court and the other

side that the Defendant will from the date of the notice be acting through the

named counsel. As such, a notice of appointment of advocates does not, in

itself, acknowledge the jurisdiction of the court to determine the dispute.

The court applying the standard set by Lord Denning in the dictum above

found that a notice of appointment is not a step in the proceedings that

impliedly affirms the correctness of the proceedings and the willingness of the

Defendant to go along with the determination of the court instead of

arbitration.

In the leading case of TM AM Construction Group (Africa) (supra), an application

for stay of proceedings under Section 6 of the Act had also been opposed for

having been filed after the defendant had entered appearance. The plaintiff in

this case had instituted the suit against the Attorney General on 21st January

2001. The learned Attorney General then entered appearance on the 15th March

2001. The application for stay of proceedings was then made on the 25th April

2001. Mbaluto J held that an applicant was obliged to apply for a stay ‘not later

than the time when he entered appearance’. The court thus found that the Attorney

General had lost the right to rely on the arbitration clause because if the

Attorney General was to rely on it he was obliged to make an application

under section 6 not later than when he entered appearance.


64

The decision in foregoing TM AM case was followed by Victoria Furniture

Limited-v-African Heritage Limited & Another.22 This case involved third-party

proceedings where the third-party sought a stay of ‘all the proceedings’ and

reference to arbitration under, inter alia, Section 6 of the Arbitration Act. The

applicant had been served with a Third Party Notice to which it had made an

appearance on 10.8.2001. However, the applicant did not file the application

for stay until 11.10.2001.

The Court in this latter case held that the clear position was that if a party

wishes to take advantage of an arbitration agreement under section 6(1) of the

Arbitration Act, he was obliged to apply for a stay ‘not later than the time when

he;

(a) enters appearance; or

(b) files any pleadings; or

(c) takes any other steps in the proceedings.’

In the court’s view, the above means that if a party takes any of the steps above

without at the same time applying for a stay of proceedings, then s/he losses

the right to subsequently make the application. The court in so holding upheld

the decision in TM AM Construction Group Africa case (supra) on the same point.

The learned Mbaluto J in the latter case reasoned that if the section were to be

interpreted to mean that a party could file an appearance or take the two other

steps and then wait for some time before applying for stay of proceedings, the

phrase ‘not later than the time he entered appearance or etc’ would not only

be superfluous but also meaningless. In any case, the court found that in the

instant case there was delay of more than 31 days after appearance had been

made which situation, in the court’s view, was not contemplated under Section

6 (1) of the Arbitration Act.

22 Victoria Furniture Limited-v-African Heritage Limited & Another, HCCC (Milimani) No. 904 of

2001


65

The matter of what time an application for stay must be lodged was settled in

the recent case of Kenya Seed Co. Limited-v-Kenya Farmers Association Limited.23

Justice Visram upholding the decision of the court in TM AM Construction Case

and finding that section 6 was not clear cut, concluded that the correct position

on the time to lodge an application was that:

“A party wishing for the proceedings to be stayed and the matter referred to

arbitration under an arbitration agreement must apply not later than the time

he enters appearance (if indeed he enters appearance) or not later than the time

he files any pleadings (if he does not enter appearance) or not later than the

time he takes any other steps in the proceedings (if he does not enter appearance

or file any pleadings).”

However and as indicated above, section 6 (1) of the Arbitration Act has now

been amended. It now provides that a party seeking a stay must apply not later

than the time when that party enters appearance or takes appropriate

procedural steps to acknowledge the legal proceedings against that party.24

It is however, not clear what would happen if the party has indicated that it

still intends to seek stay despite the act. For instance, if a party seeks leave to

defend and stay of default judgement, is he to be taken as taking steps in the

proceedings as to preclude his/her entitlement to a stay? The Court of Appeal

of England in Patel-v-Patel25 thinks not. It is to be noted that an action to resist

interim injunction is not a step in proceedings. Applications for interim

applications are interlocutory proceedings whereas the steps proscribed have

to be taken in substantive proceedings.

v. Stay against a Counterclaim or Set Off

Even where the stay is sought against a counterclaim or set off, the rule on

prohibition to taking steps in proceedings still applies with equal force, so that

23 Kenya Seed Co. Limited-v-Kenya Farmers Association Limited, HCCC (Nairobi) No. 1218 of 2006. 24 Sec. of the Arbitration Act 1995 as Amended in 2009. 25 Patel-v-Patel, [1998] 3 WLR 322.


66

the party seeking stay of the counterclaim must not have filed a defence/reply

to the counterclaim or at least any pleading after the counterclaim. The

applicant must also not have filed an application to strike out the counter-

claim or taken any other steps in the proceedings.26

The court in the Victoria Furniture Case (supra) also grappled with the issue of

whether stay of proceedings will be granted where a third party, not party to

the arbitration agreement, is involved. In that case, the arbitration agreement

was only applicable as against the Defendant and the third party to the

exclusion of the Plaintiff.

The application for stay was opposed on the ground that the suit would

ultimately, and in any event, have to be determined by the Court. The court

upheld the opposition on the point finding that apart from the Defendant and

the applicant, there was another party involved, namely the Plaintiff. The court

reasoned that as such, whether or not either of the Defendant or applicant was

liable, the matter will still have to come back to court for final adjudication as

between either of them and the Plaintiff. The court further reasoned that the

process of arbitration could only decide the issue of who, between the

Defendant and the applicant was liable, but not the issue of liability to the

plaintiff. The court also found that there were several questions of law to be

resolved in the case.

The court then upheld the following grounds as captured in Emden & Gills

Building Contracts and Practice as further grounds a court may consider in

refusing to stay proceedings and refer a matter to arbitration27:

1. where there are questions of law involved;

2. where there is multiplicity of proceedings and (it is necessary to avoid)

inconsistent findings of facts;

26 See generally, Chappel-v-North [1891] 2 Q.B 252. 27 Emden & Gills, Building Contracts and Practice, (7th Edition, Butterworths, London, 1969),

p.363.


67

3. where the arbitration is appropriate, (as was obviously the case in the matter)

for only a part of the dispute.

The court concluded that it would be a miscarriage of justice to parties if the

proceedings were stayed and the matter referred to arbitration. In other words,

the court ruled that a stay may be refused where there are questions of law

involved; where there is multiplicity of proceedings and (it is necessary to

avoid) inconsistent findings of facts; and where the arbitration is appropriate,

for only a part of the dispute e.g. in third party proceedings as was the case in

the matter. The position seems to be that where a third party is involved, the

court may refuse to stay the proceedings as the case will only be appropriate

for only a part of the dispute. It is noteworthy that the position in UK has

changed and involvement of a third party is no longer a reason to refuse stay.28

What if the suit is brought by a claimant who is a pauper and who can show

the court that he is not in a position to afford arbitration? Generally, the

position in UK is that the poverty of the Defendant is not a ground for staying

arbitration unless the same has been brought about by the breach of contract

on the part of the Defendant.29 The court has been enjoined to take into account

whether or not the Plaintiff would be unable to receive legal aid for arbitration

proceedings.30 In addition, the court may also consider taking into account the

ability of the Plaintiff to fund the take-off of the arbitration process.

vi. Issue of the Contractual Limitation Period

There is also the issue of the contractual limitation period which may arise as

a ground for stay or preliminary point. In Barlany Car Hire Services Limited-v-

28 See generally, Palmers Corrosion Control Ltd v Tyne Dock Engineering Ltd [1997] EWCA Civ

2776. 29 At least this was the position taken by the court in Fakes-v-Taylor Woodrow Construction Limited

[1973] Q.B. 436. 30 Edwin Journeys-v-Thyssen (GB) Ltd [1991] 57 Build. L.R 116.


68

corporate Insurance Limited31, an application for stay pending reference to

arbitration was accompanied by a request that filing of the Defence be stayed

pending the determination by the court on a preliminary point of law; whether

the Plaintiff was disentitled to any claim having failed to refer its claim to

arbitration within 12 months of the Defendant’s disclaimer of liability.

The arbitration agreement provided that if the Defendant company disclaimed

liability to the Insured for any claim, such claim be referred to arbitration

within 12 calendar months from the date of the disclaimer. The Plaintiff failed

to properly institute the arbitration process and more than 12 months lapsed.

The defendant therefore argued that it was now too late for the Plaintiff to

arbitrate and indeed even too late to claim at all.

The court held that it was also late for the Plaintiff to appoint an arbitrator or

claim, there having been no reference to arbitration within 12 months of the

repudiation. The court agreed with the Defendant that the clause imposing the

contractual deadline was a condition precedent to a valid claim as was held in

the case of H.ford & Co. Limited-v-Compagnie Furness (France)32 where a clause

in similar effect was upheld. The court cited the following holding in that case

with approval:

“Therefore as the jurisdiction of the arbitrator was only given to him by the

consent of the parties and the parties agreed that the arbitrator if appointed at

all should be appointed within a certain time, it seems to me to follow that as

that time has elapsed, neither party had power to appoint an arbitrator unless

the other party consented.”33

The court therefore upheld the Defendant’s argument that there was no longer

any cause of action; the matter was time barred and that no application had

31 Barlany Car Hire Services Limited-v-corporate Insurance Limited, HCCC (Milimani) No. 1249 of

2000. 32 H.ford & Co. Limited-v-Compagnie Furness (France), [1922] 2 KB 797. 33 Ibid. p. 810.


69

been made to extend the limitation period if that were possible. The court

upheld the comments in the 4th Edition of Halsbury Laws of England Vol. 2

Para. 515 and held that the said comments answered the Plaintiff’s suggestion

that the matter was governed by Section 4 of the Limitation of action Act. The

court was of the view that the said Section 4 of the Act merely gives a

maximum time limit within which a suit may be brought. Para. 515 of the

Halsbury Laws of England provides that:

“The parties to an arbitration agreement may, if they wish, contract that no

arbitration proceedings shall be brought after the expiration of some shorter

period than that applicable under the statute.”

3.4 Procedure of Application for Stay of Proceedings

Generally, the procedure for application for stay of proceedings takes the same

form as the procedure for all applications done before arbitration hearing. The

party seeking stay of legal proceedings and/or interim measures moves the

court in the manner provided under rule 2 of the Arbitration Rules 1997. Rule

2 of the Arbitration Rules 1997 provides that an application under Section 6

and 7 of the Act shall be made by summons in the suit. The chamber

summons34 for application for stay of the proceedings, as a matter of practice,

is usually accompanied by a supporting affidavit annexing the arbitration

agreement.

Arbitration Rules, 1997 provide that the Civil Procedure Rules apply where

appropriate. There being no provision on whether to annex a supporting

affidavit or not in the rules, recourse is had to the Civil Procedure Rules on

Motions and other applications. Order 51 Rule 4 provides that where any

34 The Summons is called Chamber Summons because usually the application for stay of

proceedings is heard in the Judge’s Chambers (his office) rather than the open court.

however, under the new Civil Procedure Rules 2010, Order 51 thereof all applications to

court are by motion and shall be heard in open court unless the court directs the hearing to

be conducted in chambers or unless the rules expressly provide.


70

motion is grounded on evidence by affidavit, a copy of any affidavit to be used

shall be served.

Some judges are of the view that if you move the court using a wrong

procedure the error is fatal to the application, so that where instead of a

chamber summons one prefers a notice of motion, the application may be

struck-out though there are conflicting decisions on this. However, with the

new Civil Procedure Rules 2010, it is unlikely such defect will prejudice the

application as now concerns for substance outweigh those of procedure.35 In

James Muhando Mwangi-v-B.O.G Premier Academy & Another36 an application for

stay of proceedings under section 6 of the Arbitration Act was opposed on the

ground that, inter alia, it did not comply with the requirements of Rule 2 of the

Arbitration Rules.

The argument in that case was that Rule 2 requires that an application under

Section 6 (and 7) of the Arbitration Act be made by summons in the suit while

the application was headed “Chamber Summons” but took the form of a

Notice of Motion.

The Respondent’s Counsel was of the view that that was a defect which could

not be cured by an amendment and urged for the dismissal of the application.

However, the court held that the chamber summons, though wrongly taking

the form of a Notice of Motion, did not invalidate the application which the

rules require to be made. The court reasoned that the defects manifested were

in form only and not substance and the respondent was not prejudiced

thereby.37

35 See generally, Sec. 1A of the Civil Procedure Act, Government Printer, Nairobi; which provides

that the overriding objective of this Act and the rules made hereunder is to facilitate the just,

expeditious, proportionate and affordable resolution of the civil disputes governed by the

Act. 36 James Muhando Mwangi-v-B.O.G Premier Academy & Another, HCCC (Milimani) No. 78 of 2001. 37 The High Court here was following the decision of the Court of Appeal in Boyes-v-Gathure

(1969) E.A. 385 where the court held that use of the wrong procedure does not invalidate the

proceedings unless the same goes to jurisdiction and/or it caused prejudice to the other party.


71

Generally, there is no requirement for reference to arbitration to have started

before application for stay of proceedings. Before the 2009 amendment to the

Arbitration Act, a party was at liberty to commence arbitral proceedings

despite the pendency of a stay of proceedings application. The position was

supported in that while the application for stay is pending, arbitration may

still be commenced and an arbitral award made.38 This provision appeared to

be justified given the frequent delay witnessed in our court system. The new

subsection now provides that proceedings before the court shall not be

continued after an application for stay of proceedings has been made and the

matter remains undetermined.39

The current efforts by the Kenyan Courts to promote the use of ADR and

arbitration in particular were also affirmed in the case of UAP Provincial

Insurance Company Ltd v Michael John Beckett,40 where the Court stated that

‘Section 6 of the Arbitration provides an enforcement mechanism to a party

who wishes to compel an initiator of legal proceedings with respect to a matter

that is the subject of an arbitration agreement to refer the dispute to

arbitration.’41 The only enquiry that the court undertakes and is required to

undertake under Section 6(1) (b) of the Arbitration Act is to ascertain whether

there is a dispute between the parties and if so, whether such dispute is with

regard to matters agreed to be referred to arbitration.42

An application for stay of proceedings may also be justified under the

provisions of the Constitution of Kenya 2010, which generally recognises the

use of Alternative Dispute Resolution Mechanisms (ADR) in conflict

management by Kenyan courts.43 It provides that in exercising judicial

38 Sec. 6(2) of the Act. This section was however deleted by the 2009 Amendment. 39 This is the new sec. 6 (2) of the Act that was inserted vide the 2009 Amendment to the

Arbitration Act. 40 UAP Provincial Insurance Company Ltd v Michael John Beckett [2013] eKLR, Civil Appeal No. 26

of 2007. 41 Ibid, para.16. 42 Ibid, para. 17. 43 Art. 159(2).


72

authority, the Kenyan courts are to be guided by key principles which include,

inter alia, promotion of alternative forms of conflict management including

reconciliation, mediation, arbitration and traditional dispute resolution

mechanisms.44

The Environment and Land Court Act, 201145 also provides for the application of

ADR and empowers the court to adopt and implement on its own motion with

the agreement of or request of the parties any appropriate mechanism such as

mediation, conciliation and TDR mechanisms in accordance with Article

159(2) (c) of the Constitution. Further, the Act provides that in cases where

ADR is a condition precedent to any proceeding before the Court, the court

must stay proceedings until such condition is fulfilled.46

3.4 Conclusion

As highlighted above, an application for stay of proceedings is merely

incidental to the arbitration procedure, given that it is a measure of recourse

against parties who opt to disregard the arbitration agreement and lodge court

proceedings. Where successful, an order for stay of proceedings is issued

requiring the parties to the dispute to take steps to commence arbitration

proceedings, say, through appointment of arbitrators. Even where an

application for stay of proceedings is not necessary, in order to commence

arbitration proceedings, the parties must take the necessary steps to formally

appoint arbitrators to handle their dispute. In the next chapter, the salient

issues surrounding the appointment of arbitrators as part of the pre-arbitration

processes are examined.

44 Art. 159(2) (c). 45 Environment and Land Court Act 2011, No. 19 of 2011, (Government Printer, Nairobi, 2011). 46 Ibid, s.20.


73

Chapter Four


4.1 Introduction

As already noted in previous chapters, arbitration is a dispute resolution

process whereby a private and neutral person is chosen to arbitrate a

disagreement between the disputants. The private and neutral person who

undertakes the arbitration is known as the arbitrator. As a matter of fact, the

arbitrator is appointed as per the parties’ agreement or, in default, as provided

for by the law.

This chapter will first discuss the aspect of communication of a notice of

arbitration to commencement of arbitration. The various modes of appointing

arbitrators and the relevant legal provisions will then be explored. The factors

to be considered in choosing an arbitrator will be discussed at length. The

discussion will then turn to issues incidental to the appointment of arbitrators

such as challenge of arbitral tribunal, immunity of arbitrators, withdrawal of

arbitrators, termination of arbitrators and the aftermath of challenge and

termination of arbitrators.

4.2 Notice of Arbitration

It is by a notice of arbitration that the claimant invokes the arbitration clause.

Read together with the arbitration agreement, a notice of arbitration

determines the scope and jurisdiction of the arbitrator. It also forms part of the

mechanism for constituting the tribunal, in that, if the reference is to a sole

arbitrator, the claimant gives notice to his opponent calling upon him to concur

in the choice of a nominee, and if the agreement contemplates a tribunal of two

arbitrators, one appointed by each side, with an umpire or third arbitrator


74

chosen by the two appointees.1 This position was approved in the case of

William Oluande v. American Life Insurance Co. (K)2.

The mode of commencing arbitration depends on the applicable rules of

arbitration. Needless to say, the Rules applicable to court proceedings have no

application in arbitration. If an institution has been specified in the arbitration

agreement, then the rules of that given institution will apply to determine the

mode of commencing arbitration. If there is no institution, then the arbitration

is ad hoc and the way to go about such a case is to look to the rules applicable

to arbitrations at the seat of arbitration. In this case, if the arbitration is to take

place in Kenya, then in the absence of an agreement between the parties, the

applicable law is the Arbitration Act, 1995.

If the seat of arbitration is outside Kenya, then notwithstanding that the

substantive law of the contract may be Kenyan law, the procedural rules for

commencing and conducting the arbitration will be the law of the seat of

arbitration unless some other procedural rules have been agreed to.

The Kenyan Arbitration Act, 1995 does not stipulate the mode of commencing

arbitration. The Kenyan position seems to draw from the approach taken

under the Model Law3 which too does not set out a form for the notice or

demand for arbitration. However, as good practice, one may follow either the

UNCITRAL Rules4 or the rules of one of the Arbitration process such as the

Chartered Institute of Arbitrators so that it cannot be said that an improper or

incomplete notice was given.

As per the Rules of the Chartered Institute of Arbitrators, Kenya Branch, a

party wishing to commence arbitration therein and to have an arbitrator

1 Mustill, M.J., & Boyd, S.C., Law and Practice of Commercial Arbitration in England, (2nd ed.

Butterworths, London, 1989), p. 13. 2 William Oluande v. American Life Insurance Co. (K), (2006) eKLR. 3 Model Law, United Nations document A/40/17, Annex I. 4 UNCITRAL Rules, General Assembly resolution 65/22 UNCITRAL Arbitration Rules as

revised in 2010.


75

appointed by the Institute is required to send to the Secretary a written request

for the appointment of an arbitrator. The request for the appointment of an

arbitrator shall include or be accompanied by the names and addresses of all

parties to the arbitration.

If the arbitration agreement calls for party nomination of arbitrators, the name

and address (and telephone, telex and fax numbers if known) of the Claimant’s

nominee, copies of the contractual documents under which the arbitration

arises with particular reference to the arbitration clause which is invoked and

any separate submission or reference to any agreement out of, or in relation to,

which the dispute arises.

It shall also include a brief statement of the nature and circumstances of the

dispute and an indication of the value of the subject matter; a statement of any

matters on which the parties have previously agreed as to the conduct of the

arbitration; any particular qualification or experience which the parties wish

the Arbitral Tribunal to possess and a statement that the machinery in the

contract document relating to the appointment of an Arbitrator has been fully

complied with. The party wishing to commence arbitration under these rules

is also required to confirm to the Secretary that copies have been sent to all the

other parties.5

Under the UNCITRAL Arbitration Rules, the notice of arbitration is to include

a demand that the dispute be referred to arbitration; the names and addresses

of the parties; identification of the arbitration agreement that is invoked;

identification of any contract or other legal instrument out of or in relation to

which the dispute arises or, in the absence of such contract or instrument, a

brief description of the relevant relationship; a brief description of the claim

and an indication of the amount involved, if any; the relief or remedy sought;

5 Rule 1 of the Rules of the Chartered Institute of Arbitrators, Kenya Branch.


76

and a proposal as to the number of arbitrators, language and place of

arbitration, if the parties have not previously agreed thereon.6

In addition, the notice of arbitration may also include a proposal for the

designation of an appointing authority; a proposal for the appointment of a

sole arbitrator; and a notification of the appointment of an arbitrator if it is a

three person panel.7

4.3 Appointment of Arbitrators

In most cases, the arbitration agreement will provide for the mode of

appointment and the preferred number of arbitrators.8 The default number as

provided under the Act is a single arbitrator.9 However, with the 2009

Amendment to the Act, where the arbitration agreement provides for the

appointment of two arbitrators, then, unless a contrary intention is expressed

in the agreement, the agreement shall be deemed to include a proviso that the

two arbitrators shall appoint a third arbitrator immediately after they are

themselves appointed.10 The appointment provisions of the 1995 Act all

operate only where there is no agreement to the contrary or where the parties

cannot actually operate what they have agreed.

i. Appointment of Arbitrators by the Parties

The law is clear that the parties are free to agree on the procedure for

appointing the arbitrator or arbitrators, including the procedure for

appointing any chairman or umpire. In this case, the parties can agree to

appoint either a sole arbitrator; a tribunal of two arbitrators who then appoint

an umpire in reserve; a tribunal of three arbitrators; or even a tribunal of more

6 UNCITRAL Arbitration Rules as revised in 2010, Article 3 (3). 7 Ibid, Article 3 (4). 8 Sec. 12(1) and (2), Arbitration Act, 1995. 9 Ibid, Sec. 11. 10 Ibid, sec. 11 (3).


77

than three arbitrators with or without an umpire.11 The odd number ensures

that majority decisions are achievable.12 This is the case even when the

arbitration agreement provides for the appointment of two arbitrators only. In

such a case, unless a contrary intention is expressed in the agreement, the

agreement shall be deemed to include a proviso that the two arbitrators shall

appoint a third arbitrator immediately after they are themselves appointed.13

In arbitration with three arbitrators, each party is to appoint one arbitrator and

the two arbitrators so appointed are in turn to appoint the third arbitrator. In

case of arbitration with two arbitrators, each party is entitled to appoint one

arbitrator. If it is arbitration with one arbitrator, the parties agree on the

arbitrator to be appointed. Where the parties have not agreed on the procedure

for appointment, there are provisions that apply in default.

ii. Appointment by an Institution

Where the parties have not agreed on the appointment modality or there is a

breach of the agreement in respect of appointments, one of the parties may

request the appointment of an arbitral tribunal by an institution, if any is

designated, in the arbitration agreement or agreed upon after the dispute has

arisen. Only if this avenue fails or it is not contemplated in the agreement

and/or agreed upon after the dispute arises may the parties appoint an arbitral

tribunal.

Indeed, although arbitration is intended to be a voluntary process, once a

dispute has arisen, it is still possible to see parties disagreeing on the

appointment of an arbitral tribunal. Parties may attempt to obstruct the

appointments to delay the arbitration. This can frustrate the arbitration

11 For an in-depth discussion of each of the tribunals, see Mustill M.J & Boyd S.C, The Law and

Practice of Commercial Arbitration in England ( 2nd ed., Butterworths, London and Edinburgh,

1989) p. 171-192. 12 See generally, sec. 12 of the Arbitration Act, 1995 (Kenya) and sections 15-27 of the

Arbitration Act, 1996 (UK). 13 sec. 11 (3), Arbitration Act, 1995.


78

agreement.14 The provision of appointment of arbitrators by institutions (also

called appointing authorities) provides a means of breaking deadlocks that

render agreements inoperable.15 Many arbitration rules provide for the

appointment of arbitrators by institutions if the tribunal is not constituted

within a prescribed period.

In this regard, appointment of arbitrators by institutions is not just a fallback

mechanism; it is useful in several cases which includes where the appointment

of sole arbitrators is necessary under the agreement, or under arbitral rules.16

The advantage of this mode of appointing arbitrators is that such institutions

usually have a better overview of the suitability of arbitrators.17 This is relevant

given that a skilled and experienced arbitrator is a key element in a fair and

effective arbitration as ‘arbitration is only as good as the arbitrators’.18 Therefore,

the choice must be made carefully. In order to avoid a deadlock, parties should

insist on prior agreement as to the appointing institution especially in ad hoc

arbitrations where there is no institutional framework to provide for the

same.19

iii. Appointment of an Arbitrator by Court

With the recent amendment to the Arbitration Act, 2009 the role of the Court

in appointing arbitrators has been limited in that it can only grant an

application to set aside an appointment where it is satisfied that there was a

good cause for the failure or refusal by the party in default to appoint his

14 Lew, J., Comparative International Commercial Arbitration, 237, [London: Kluwer Law

International, 2003]. 15 Redfern, A., et al, Law and Practice of International Arbitration, (4th ed.), 6, (London: Sweet &

Maxwell, 2004), p. 225. 16 The London Court of Arbitration (LCIA) Arbitration Rules, 1998, Article 5, [Entry into effect:

01.01.1998]. 17 See generally, Bishop, D., & Lucy, R., "Practical Guidelines For Interviewing, Selecting And

Challenging Party-Appointed Arbitrators In International Commercial Arbitration,"

Arbitration international, 14, No. 4 (1998), pp. 395-430. 18 Redfern, A., et al, Law and Practice of International Arbitration, op.cit. 19 Ibid, at p. 240.


79

arbitrator in due time. The jurisdiction here is vested exclusively on the High

Court of Kenya.20

Before the 2009 Amendment to Section 12 of the Arbitration Act, the High

Court could appoint an arbitral tribunal where there was no agreement on

appointment between the parties, where there was a failure to appoint a sole

arbitrator and where there was a failure to appoint one of the agreed two

arbitrators.

In essence, the law provides that where parties to an arbitration agreement are

to appoint an arbitrator and one party defaults in making the appointment by

indicating his unwillingness to do so, or fails to make the appointment within

the time allowed under the arbitration agreement; or fails to do so within a

reasonable time, where the arbitration agreement does not limit the time

within which an arbitrator must be appointed by a party, the other party,

having duly appointed an arbitrator, may give notice in writing to the party in

default that he proposes to appoint his arbitrator to act as sole arbitrator.21

Where the party in default does not make the required appointment and notify

the other party that he has done so, the other party may appoint his arbitrator

as sole arbitrator and in that case, the award of such arbitrator is binding on

both parties as if he had been so appointed by agreement.22

Nevertheless, the defaulting party may, upon notice to the other party, apply

to the High Court within fourteen days to have such an appointment set

aside.23 The law gives the High Court jurisdiction to grant the application only

if it is satisfied that there was good cause for the failure or refusal of the party

in default to appoint his arbitrator in due time.24 However, if the High Court

20 Sec. 12 (4) and (5) of the Arbitration Act, op. cit. 21 Ibid, sec. 12 (3). 22 Ibid, sec. 12 (4). 23 Ibid, sec. 12 (5). 24 Ibid, sec. 12 (6).


80

grants the application, it may, by consent of the parties or on the application

of either party, appoint a sole arbitrator.

The High Court is required to consider the qualifications, independence and

impartiality of the tribunal. The court is also to take into account the wisdom

of appointing an arbitrator other than a fellow national of the parties or one of

the parties.25 The decision of the High Court in respect of such application is

final and not subject to appeal.26

4.4 Choosing an Arbitrator

It cannot be gainsaid that arbitration is as good as the arbitrator(s) handling

it.27 The choice of the arbitrator is thus an important consideration, especially

if some of the key merits of arbitration over other methods of dispute

resolution are to be preserved. In other words, it is always essential for the

parties to an arbitration agreement to always select an arbitrator who is well-

versed in the area of dispute. An arbitrator can make or break your case.

Choosing an arbitrator is much like selecting a lawyer.

The only difference is that the decision of the arbitrator affects both parties

since once chosen, he does not represent the party choosing him or her but is

supposed to act impartially and independent of all parties to the arbitration,

even the appointing party. The other difference between choosing an

arbitrator and choosing a lawyer is that in the former case, you can affect the

choice of the other party either by opposing it or confirming the same.

If a party has genuine concerns against the arbitrator chosen by the opposite

party or the two arbitrators (in case of umpire), he is free to oppose the

appointment of such arbitrator provided he does that within the requisite time

25 Ibid, Sec. 12(9). This is requisite in international arbitration where if the arbitrator comes from

one party’s country, there is likelihood that his/his impartiality will not be guaranteed. 26 Ibid sec. 12 (8) 27 Redfern, A., et al, Law and Practice of International Arbitration, op.cit.


81

as specified under the law. The following are some key considerations

provided under the law for parties to make in choosing an arbitrator:

i. Experience and Relevant Qualifications

Whether or not an arbitrator is qualified to arbitrate the dispute is one of the

key grounds for challenging the arbitrator(s) under the Arbitration Act, 1995.

Thus, it is imperative that the arbitrator chosen is qualified to handle the

dispute at hand. At times it becomes necessary to screen the arbitrators for any

given dispute according to where their expertise lies. Experience is also a key

trait for parties to look for when choosing an arbitrator. If the arbitrators are

rather inexperienced, they will be less likely to negotiate terms that you infer.

It is also important to pay attention to what the arbitrators have studied and

whether or not they have access to knowledge in various niches of dispute

settlement0020by arbitration.

The challenge in choosing arbitrators may be met by choosing arbitrators

through a reputable institution, such as the Chartered Institute of Arbitrators

(Kenya Branch). The institute insists that one has to gain enough experience to

become a full member and in order to be recommended as an arbitrator.

The staff of such arbitration institutions can help a great deal where the parties

are looking for particular qualifications, by recommending members who

have the specific track record the parties to arbitration are looking for. For

instance, in the case of Edward Muriu Kamau & 4 others all trading as Muriu,

Mungai & Co. Advocates v John Syekei Nyandieka28, one of the points of contention

was qualifications of the Arbitrator who would be able to resolve the issues in

the dispute completely and conclusively. The parties had agreed to rely on the

chartered Institute of Arbitrators-Kenya to appoint a qualified arbitrator for

them. The Court was of the opinion that there is nothing which makes it

imperative that the arbitrator should have industry-specific knowledge as

28 Edward Muriu Kamau & 4 others all trading as Muriu, Mungai & Co. Advocates v John Syekei

Nyandieka, [2014] eKLR.


82

matters raised are not industry-specific which will need for particular

qualifications on the custom, terminology and standard forms of contract used

only in the specific industry.29 This was informed by the position that the law

and the arbitration rules recognize only arbitrators who are accordingly

accredited and certified by the relevant arbitrators’ professional associations

on satisfying their requisite qualifications. And where there is specialist

technical knowledge or industry expertise is resolved by the calling in expert

witness, as provided in the Arbitration Act, 1995 Section 27(1).30

A key consideration in determining the requisite experience and qualifications

of arbitrators is the fact that the remuneration of the arbitrator depends on the

rank of the arbitrator. An associate arbitrator charges less and is ideal for

simple disputes. Chartered Institute of Arbitrators member, fellow or

chartered arbitrators are usually experienced members who charge fees

commensurate with their rank and compensate the same with diverse

experience in arbitration.

ii. Language

Arbitration is utilized globally in settling disputes and it is important,

therefore, that the arbitrator chosen can speak the language agreed upon by

the parties or at least one understandable to both parties. In the Kenyan case,

it is recommended that the arbitrator be able to speak and write in English or

Swahili although in other cases, other language preferences may arise.

However, awards are mostly rendered in English.

Language is an essential asset in understanding what is happening in and

during the process. In Bernard Karweru Gathuri v Joyce Wangari & another31, one

of the grounds upon which the Applicant sought to have an arbitral award set

aside was that the arbitrator used Kiswahili language during the proceedings,

a language that the applicant was not well versed with. Although the Court

29 Ibid, para. 13. 30 Ibid, para.12. 31 Bernard Karweru Gathuri v Joyce Wangari & another, [2007] eKLR, Civil Case 23A of 1991.


83

allowed the Application, it stated that this ground could not be sustained since

the Court did not find any substance in the applicant’s allegation that he was

denied an opportunity to testify or that proceedings were conducted in a

language which he was not familiar with. This was because it was evident that

the applicant participated in the arbitration proceedings by extensively

questioning the witnesses.

It is advisable that parties and arbitrator(s) settle the issue of language at the

outset of the process to avoid such scenarios as the one in the foregoing case.

Where parties fail to choose, in general, most institutional rules leave the

language to the discretion of the arbitrators.32 Mostly, the arbitration is

conducted in the language of the contract.33 If parties prefer the arbitration to

be conducted in a certain language, but also want documents or witness

statements be admitted in a different language, they should specify so in the

arbitration agreement.34

It can be distracting to choose an arbitrator who is qualified in the niche of

dispute that is being handled, but who does not speak the native language. In

such a case there could arise some miscommunication. Such an arbitrator may

be challenged under Section 15 of the 1995 Act for inability or failure to act

where the language barrier renders him unable to arbitrate the dispute at

hand.

iii. Nationality

The law clearly stipulates that unless otherwise agreed by the parties, a person

may not be precluded by reason of his nationality from acting as an

arbitrator.35 However, the parties may agree that the nationality of the

32 ‘Chapter 8: Drafting of the Arbitration Agreement,’ op cit., p.174. 33 Ibid. 34 Ibid. 35 See sec. 12 (1) of the Act, op. cit. However, s. 12(9) provides that the High Court in appointing

an arbitrator should have due regard to any qualifications required of an arbitrator by the

agreement of the parties and to such considerations as are likely to secure the appointment

of an independent and impartial arbitrator and, in the case of a sole or third arbitrator, shall


84

arbitrator be different from theirs. It is dependent on the contract, the location,

the nationality, the organization or association that is holding the arbitration

meeting.

The parties should carefully check what the arbitration clause and any

applicable arbitration rules provide as to the nationality of the arbitrator. The

issue of nationality is particularly relevant in international commercial

arbitration. For example, the ICC Arbitration Rules provide that the sole

arbitrator or the chairman of the Arbitral Tribunal “shall be of a nationality other

than those of the parties.”36

iv. Conflict of Interest

The issue of conflict of interest centres around the ability of the arbitrator(s) to

decide the dispute fairly based on the facts and law as presented. The

Arbitration Act 1995 requires any person who is approached in connection

with his possible appointment as an arbitrator to disclose any circumstances

likely to give rise to justifiable doubts as to his impartiality or independence.37

Similarly, where such grounds arise after appointment, the arbitrator is

obligated to disclose any such circumstances to the parties without delay

unless the parties have already been informed of them by him.38

In essence, it is crucial to make sure that the appointed arbitrator is not

disqualified by reason of conflict of interest either with either party to the

arbitration or the subject matter of the dispute. Issues of conflict of interest of

the arbitrator are usually a big deal breaker and in fact can definitely cause the

take into account the advisability of appointing an arbitrator of a nationality other than those

of the parties (emphasis added). 36 Article 9(5), available at, www.iccarbitration.org, [accessed on 08/03/2012]. See also Article 6

(1) of The LCIA Arbitration Rules which provides that “Where the parties are of different

nationalities, a sole arbitrator or chairman of the Arbitral Tribunal shall not have the same

nationality as any party unless the parties who are not of the same nationality as the proposed

appointee all agree in writing otherwise, “available at www.lcia.org. [Accessed on

08/03/2012]. 37 Sec. 13 (1) of the Arbitration Act, op. cit. 38 Ibid, Sec. 13 (2).


85

arbitration agreement to be declared null and void by a court of law. Thus, to

be on the safe side, parties should appoint impartial and independent

arbitrators who understand their role and the rules they are bound by in

dispensing justice fairly and equally.

v. Personality and Character

Although this is not stipulated as a legal issue, it is important that the arbitrator

has the “gravitas” or “presence”. This is, the ability to command respect from

the co-arbitrators, counsel, witnesses and the parties. The candidate must also

have a demonstrated track record for diligence, not only in organizing and

conducting hearings but also in turning out the final written award. The

arbitrator should be diligent and be able to manage a caseload and in some

circumstances, be able to say no to new assignments that may interfere with

present ones.

One of the methods for assessing whether the arbitrator possesses the requisite

traits is by interviewing the potential arbitrator. However, in such cases

consideration should be had to the information disclosed to the arbitrator since

he may not qualify if it turns out that the interviewing process has endangered

his or her confidentiality. The Chartered Institute of Arbitrators has in place

guidelines on interviewing prospective arbitrators.39 The guidelines provide

that in assessing the interviewee’s suitability in relation to expertise,

experience, language proficiency and conflict of interest status, certain matters

may be discussed. These include the names of the parties in dispute and any

third parties involved or likely to be involved; the general nature of the

dispute; sufficient detail, but no more than necessary, of the project to enable

both interviewer and interviewee to assess the latter’s suitability for the

appointment; the expected timetable of the proceedings; the language,

governing law, seat of and rules applicable to the proceedings if agreed, or the

39 Practice Guideline 16: The Interviewing of Prospective Arbitrators, Chartered Institute of

Arbitrators (UK).


86

fact that some or all of these are not agreed and the interviewee’s experience,

expertise and availability.40

In assessing the interviewee’s experience and expertise, questions may be

asked to test his/her knowledge and understanding of the nature and type of

project in question; the particular area of law applicable to the dispute and

arbitration law, practice and procedure. However, the guidelines provide that

the specific circumstances or facts giving rise to the dispute, the positions or

arguments of the parties and the merits of the case should not be discussed

either directly or indirectly.41

4.5 Challenge of the Arbitral Tribunal

As a general rule, an arbitrator cannot be discharged unless doubts have arisen

as to their competence, neutrality or independence. All the same, the parties

are free to agree on how to challenge the arbitral tribunal. The grounds for

challenging arbitrators are provided for under the Act. An arbitrator may be

challenged only if circumstances exist that give rise to justifiable doubts as to

his impartiality and independence, or if he does not possess qualifications

agreed to by the parties or if he is physically or mentally incapable of

conducting the proceedings or there are justifiable doubts as to his capacity to

do so.42 This was the issue in the case of Kenya Pipeline Company Limited v Kenya

Oil Company Limited & another43, where the Applicant sought, inter alia,

removal of Arbitrator and stay of proceedings owing to lack of impartiality in

the conduct of the arbitral proceedings. The Court stated that the

circumstances which constitute justifiable doubt as to impartiality of the

arbitrator need not necessarily relate to the substantive dispute at hand but

they should be of such nature as to impeach the integrity of the arbitrator or

40 Ibid. 41 Ibid. 42 Sec. 13 (3), Arbitration Act, 1995. 43 Kenya Pipeline Company Limited v Kenya Oil Company Limited & another, [2015] eKLR, Misc

Civil Case No 357 of 2014.


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would create real apprehension in the eyes of a reasonable person that justice

will not be done by the arbitrator in the dispute at hand.

The Act limits the ability of either party to challenge the arbitrator(s) whom

they have appointed. Thus, neither party may discharge the arbitrator that it

has appointed, or in whose appointment it has taken part, unless it has

discovered a reason to doubt the arbitrator’s independence after the

appointment.44 In other words, a party may challenge an arbitrator appointed

by him, or in whose appointment that party has participated only for reasons

of which he becomes aware after the appointment.

The rationale here is to avoid a situation where a party appoints an arbitrator

intending to challenge him/her later in the course of the arbitral proceedings

as a delaying tactic. There is a need therefore to be cautious in making an

appointment as challenging such an appointment is restricted by the law.

4.6 Procedure in Challenging the Arbitrator

An application challenging an arbitrator must be submitted to the tribunal

within 15 days from the date when the applicant learns of the formation of the

tribunal or the reasons justifying such a challenge. The aggrieved party is

required to write to the arbitral tribunal stipulating the reasons for the

challenge. If the challenged arbitrator does not withdraw from office or the

other party agrees to the challenge, the tribunal shall decide the matter.45

If the challenge, whether in the manner agreed by the parties or after decision

by the tribunal, does not succeed, the challenging party may within 30 days

after being notified of the decision to reject the challenge apply to the High

Court for it to determine the matter.46 The arbitrator who was challenged is

entitled to appear and be heard before the High Court determines the

44 Sec. 13 (4), Arbitration Act, 1995. 45 Ibid, Sec. 14 (2). 46 Ibid, Sec. 14 (3).


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application.47 The High Court may confirm the rejection of the challenge or

may uphold the challenge and remove the arbitrator.48 The decision of the

High Court on the challenge shall be final and is not subject to appeal.49

While an application challenging an arbitrator is pending before the court, the

parties may commence, continue and conclude arbitral proceedings but the

award in such proceedings shall not take effect until the application is

decided.50 Thus, while such decision is pending in the High Court, the

challenged arbitrator may continue the arbitral proceedings and even make an

award. However, such an award shall be void if the application is successful.

But nevertheless, a stay of the proceedings may be granted by the tribunal.

4.7 Termination of the Office of the Arbitrator

There are various reasons for which the office of the arbitrator may terminate

as provided for under the Act. In the first place, an arbitrator’s office will

terminate in the event of his/her inability to perform the functions of the office

of arbitrator or for any other reason fails to conduct the proceedings properly

and with reasonable dispatch, if he withdraws from his office or if the parties

agree in writing to the termination of the mandate.51 In the case of inability or

failure to perform, any party is entitled to apply to the High Court to decide

on the termination of the mandate.52

The decision of the High Court in such an application is final and is not subject

to appeal.53 It is the position under the law that where an arbitrator withdraws

47 Ibid, Sec. 14 (4). 48 Ibid, Sec. 14 (5). 49 Ibid, Sec. 14 (6). 50 Ibid, Sec. 14 (8). 51 Ibid, Sec. 15 (1). 52 Ibid, Sec. 15 (2). 53 Ibid, Sec. 15 (3).


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from his office or a party agrees to the termination that shall not amount to

acceptance of the ground cited for the challenge or removal.54

4.8 Immunity of the Arbitrator

An arbitrator is not liable for anything done or omitted to be done in good faith

in the discharge or purported discharge of his functions as an arbitrator.55 This

immunity extends to a servant or agent of an arbitrator in respect of the

discharge or purported discharge by such a servant or agent, with due

authority and in good faith, of the functions of the arbitrator. The only

exception to the immunity is in case of any liability incurred by an arbitrator

by reason of his resignation or withdrawal.

4.9 Withdrawal of Arbitrator

The law of arbitration in Kenya also allows arbitrators to withdraw. In such a

case, unless otherwise agreed by the parties, an arbitrator who withdraws

from his office may, if prior notice has been given to the parties, apply to the

High Court to grant him relief from any liability thereby incurred by him and

to make such order as the court thinks fit with respect to his entitlement (if

any) to fees or expenses or the repayment of any fees or expenses already

paid.56 The High Court may at its discretion, if it is satisfied that in the

circumstances it was reasonable for the arbitrator to resign, grant relief on such

terms as it may think fit. The decision of the High Court shall be final and shall

not be subject to appeal.57

4.9.1 Aftermath of Challenge or Termination of Arbitrators

As a general rule, on an application challenging an arbitrator or for removal of

the same, the court may grant the application or dismiss it. In the former

54 Ibid, Sec. 15 (4). 55 Ibid, Sec. 16B (1). 56 Ibid, Sec. 16A (1). 57 Ibid.


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instance, the court will remove the arbitrator against whom the application is

made and leave the matter of replacement to be undertaken as per the agreed

procedure of appointment. In addition, especially where the issue is raised in

the application, the court may declare the arbitrator’s entitlement to fees and

expenses or otherwise.58 In the same breath, the High Court may direct

repayment and/or restitution by the arbitrator of any fees and/or expenses

already disbursed to him/her.59

In the instance of termination of an arbitrator’s mandate, another arbitrator

shall be appointed as per the procedure applicable for appointment. The law

stipulates instances where proceedings may be held afresh and when the

proceedings may be upheld. Generally, orders and ruling of an arbitral

tribunal are to be preserved despite change of composition of the tribunal

except if successfully challenged by the parties. This is meant to ensure

movement in arbitration.60

With respect to the fate of the arbitration proceedings already held upon

successful challenge and discharge or the arbitrator, much depends on the

agreement of the parties. In default, where a sole arbitrator or the Chairperson

of the arbitral tribunal is replaced, any hearing previously held is to be held

again. Further, where an arbitrator, other than a sole arbitrator or the

Chairperson of the arbitral tribunal is replaced, any hearings previously held

may be held afresh at the discretion of the arbitral tribunal.

In any case, the Authority of an arbitrator is personal and ceases on their

death.61 This means such authority may not be perpetuated through personal

representative or proxy.

58 Ibid. 59 The Act does not specifically provide for this but the agreement between the tribunal and

parties on remuneration will invariably provide for this. 60 Sec. 15, Arbitration Act, 1995. 61 Ibid, Sec. 16 (4).

Jurisdiction and Powers of an Arbitrator

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Chapter Five


5.1 Introduction

This chapter discusses issues touching on the jurisdiction and powers of an

arbitrator under the laws of Kenya. Essentially, an arbitrator must have

jurisdiction to act on his/her appointment and proceed to preside over

arbitration hearings and render a valid arbitral award. The arbitrator also

needs some specific powers to be able to execute his mandate and other related

functions without limitations.

The jurisdiction and powers of the arbitrator will be discussed at length in this

chapter with special emphasis being on the aspects of the same as provided

for under the Arbitration Act, 1995. The Chapter deals, inter alia, with the

definition of jurisdiction and power, jurisdiction of the court, types of

jurisdiction, jurisdiction and powers of the arbitrators under the Arbitration

Act, 1995 and the limitations on the jurisdiction and powers of the arbitrator.

Where arbitration is undertaken under an institution, the jurisdiction and

powers of the arbitrator may be provided for under the Rules of such

institution with necessary statutory limitations. For instance, the Rules of the

Chartered Institute of Arbitrators (1998) provide for jurisdiction and powers

of an arbitrator specifically under Rule 16 thereof.1

5.2 Defining Jurisdiction and the Powers of an Arbitrator

There is a very close relationship between jurisdiction and power relative to a

dispute resolution tribunal. Indeed, it is difficult to differentiate between these

two words given that in most cases the words are used interchangeably. Most

dictionary definitions of jurisdiction are in terms of powers available to the

1 Chartered Institute of Arbitrators, Arbitration Rules, (Kenya Branch), June 1998.


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tribunal. Also in most cases, authorities do not make any attempt to

distinguish one from the other. The best approach in differentiating

jurisdiction and powers is to define the two terms.

Jurisdiction (from the Latin ius, iuris meaning "law" and dicere meaning "to

speak") is the practical and legal authority granted to a formally constituted

legal body to deal with and make pronouncements on legal matters.2

Jurisdiction may also refer to the subject matter a tribunal/court/authority is

allowed by law to address. Thus, if the tribunal does not have jurisdiction, no

action can be taken.

According to the Black's Law Dictionary, jurisdiction is "the legal right by

which judges exercise their authority." Also, "it exists when a court has

cognizance of a class of cases involved, proper parties are present, and point

to be decided is within powers of court." In many cases, when the term

"jurisdiction" is used with reference to a tribunal proceeding, it usually

connotes power. The Collins Law dictionary defines jurisdiction as the

competence to hear and decide a case or make a certain order. It also connotes

the territorial limits or scope within which that competence can be exercised.

On the other hand, power is defined under the Merriam-Webster as either “the

ability to act or produce an effect” or “legal or official authority, capacity, or

right.”3 Collins Law Dictionary defines power as legal discretion, as opposed

to a duty, to carry out or refrain from carrying out any act. In essence, power

is the capacity, ability, control, influence or devises vested in or exercisable by

someone to carry out a task. The opposite of powers is duties or obligations.

In the context of arbitration, power of the arbitrator goes hand in hand with

duties or obligations of the arbitrator.

2 Available at, www.civilprocedure.uslegal.com [accessed on 08/03/2012]. 3 Available at, www.merriam-webster.com, [accessed on 08/03/2012].

http://www.civilprocedure.uslegal.com/

http://www.merriam-webster.com/


93

Courts have also addressed the question of jurisdiction. The Court of Appeal

of Kenya had the opportunity to define and discuss jurisdiction in the

landmark case of Owners of the Motor Vessel “Lillian S” v Caltex Oil (Kenya) Ltd.4

In that Case, Nyarangi, JA stated as follows on jurisdiction:-

“Jurisdiction is everything. Without it, a court has no power to make

one more step. Where the court has no jurisdiction, there would be no

basis for a continuation of proceedings pending other evidence. A

court of law downs its tools in respect of the matter before it the

moment it holds the opinion that it is without jurisdiction. ...It is for

that reason that a question of jurisdiction once raised by a party or by

a court on its own motion must be decided forthwith on the evidence

before the court. It is immaterial whether the evidence is scanty or

limited. Scanty or limited facts constitute the evidence before the court.

A party who fails to question the jurisdiction of the court may not be

heard to raise the issue after the matter is heard and determined.”

The court in the above case referred to the definition of Words and Phrases

Legally Defined5 as authority for its assertion on jurisdiction. Jurisdiction is

defined as follows:-

“By jurisdiction is meant the authority which a court has to decide

matters that are litigated before it or to take cognizance of matters

presented in a formal way for its decision. The limits of authority are

imposed by the statute, charter, or commission under which the court

is constituted, and may be extended or restricted by the like means. If

no restriction or limit is imposed the jurisdiction is said to be unlimited.

A limitation may be either as to the kind and nature of the actions and

matters of which the particular court has cognizance or as to the area

over which the jurisdiction of an inferior court or tribunal depends on

4 Owners of the Motor Vessel “Lillian S” v Caltex Oil (Kenya) Ltd [1989] KLR C.A. 1. 5 Volume 3:1-Np. 113.


94

the existence of a particular state of facts, the court or tribunal must

inquire into the existence of the facts in order to decide whether the

facts exist. Where a court takes it upon itself to exercise a jurisdiction

which it does not possess, its decisions amounts to nothing.

Jurisdiction must be acquired before judgment is given.”

5.3 Types of Jurisdiction

Tribunals have various types of jurisdiction, and all relate to the power - either

power over persons or power to hear and decide particular kinds of cases.

Courts have two types of jurisdiction: subject matter jurisdiction and in

personam jurisdiction. Subject matter jurisdiction relates to a tribunal's authority

to decide a particular class of case. For example, Family Law Courts decide

cases that only touch on marriage, divorce and succession. Criminal courts

handle only criminal cases while a tax tribunal handles disputes touching on

payment and remission of taxes. Children courts are restricted only to matters

whose subject matter relates to aspects touching on children.

As per Constitution of Kenya 2010, Article 170(5), the Kadhi’s court can only

handle disputes that relate to personal issues of persons who profess the

Muslim faith.6 Subject matter jurisdiction may also connote limitation of the

jurisdiction of the given court to a particular monetary value. This usually

applies to lower courts (mainly magistrate courts) which have a fixed

monetary jurisdiction and do not have the power to hear cases outside their

jurisdictional parameters.

Persona or personal jurisdiction is a bit trickier - it relates to the authority of a

court to have a person appear before it and adjudicate his or her rights.

Personal jurisdiction is largely territorial. For a proper exercise of jurisdiction,

a court must have a meaningful connection to the party before it, either by way

of residence within the court's territory, involvement in a transaction or

6 Constitution of Kenya 2010, Art. 170(5).


95

controversy within the court's geographic limits, or some other connection to

the forum.

The law does not allow a court to exercise jurisdiction where it would cause

unreasonable cost or inconvenience. An example would be a suit brought by a

party in a Nairobi Court against a Kisumu resident based on a car accident

which happened in Kisumu City. The court in Nairobi would not have the

power to render a binding judgment on the local defendant. The only court

having jurisdiction would be the one located in Kisumu, the site of the

accident. The Constitution mandates that jurisdiction, like power itself, must

be exercised judiciously.

5.4 Jurisdiction of the Courts in Arbitration

The fundamental principle, embodied in the Arbitration Act 1995 (the Act), is

that where there is a valid arbitration clause, all issues falling within the

jurisdiction of the arbitrators should be decided by the tribunal, and the court

should not intervene.

This legal proposition was well captured in the case of Shamji v. Treasury

Registrar, Ministry of Finance7 where the court stated that it is a well settled

proposition that where a dispute between the parties has been referred to the

decision of a tribunal of their choice, the court should direct that the parties go

before the specified tribunal other than interfere with the party’s choice of that

forum. However, the court has powers in support of the arbitral process and

limited jurisdiction in respect of challenges to awards.8

In addition, even where parties have a valid arbitration clause in place,

nothing would stop either party from resorting to court proceedings to access

remedies, provided the other party does not object to and stay court

proceedings within the stipulated time. It suffices to say that courts have

7 Shamji v. Treasury Registrar, Ministry of Finance, [2002] 1 EA, 269. 8 Sec. 17, Arbitration Act, 1995.


96

jurisdiction in matters which are subject to valid arbitration agreement until

either party alerts the court of the arbitration agreement within reasonable

time and seeks to enforce the same. Jurisdiction of the court in arbitration will

be discussed in great detail in Chapter Ten which deals with the role of the

court in arbitration.

5.5 Prerequisites of Jurisdiction of an Arbitrator

Jurisdiction of an arbitrator precedes any powers or action that can be carried

out by an arbitrator. Unless the arbitrator has jurisdiction, he cannot purport

to act as he has no legal basis to deal with the matter at all. The jurisdiction of

the arbitrator derives from the agreement of the parties. The following

conditions should therefore be met for the arbitrator to have jurisdiction to

arbitrate:-

i. There must be a binding agreement to arbitrate. This is because parties

express their consent to the arbitration and the arbitrator’s jurisdiction

through the arbitration agreement. Thus, for the arbitrator to have

jurisdiction in any given matter, the contract in question must have an

arbitration clause or the parties have agreed “ad hoc” to arbitrate. Even

where there is an arbitration agreement, the same grants jurisdiction

only as far as the arbitrator acts within the scope of the authority vested

under the agreement. This position was approved in the case of William

Oluande v. American Life Insurance Co. (K)9, where the court found that

the scope and jurisdiction of the arbitrator was determined by a clear

reading of the arbitration agreement read together with a notice of

arbitration.

ii. The arbitrator must have been validly appointed. The validity of the

arbitrator implies that he or she derives his jurisdiction from the

arbitration agreement which is binding on the parties. In this regards,

9 [2006]eKLR.


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the proper procedure for appointment must have been followed; the

arbitrator must have been appointed by the right appointee (if one is

designated) and the appointee must have the prescribed qualifications

if any.

iii. There must also be a dispute which the parties had agreed to arbitrate. The

dispute should also be arbitrable. Further, the issue in dispute should

have been one that had been contemplated by the parties in the

agreement to arbitrate as the subject of a reference. In the William

Oluande case (supra),10 the court cited from the decision of the High

Court of Tanzania in Shamji v. Treasury Registrar, Ministry of Finance11

where the following was stated concerning disputes referred to

arbitration;

“As a matter of general principle, it has been settled that where a dispute

between the parties has by agreement to be referred to the decision of a

tribunal of their choice, the court would direct that the parties should go

before the specified tribunal and should not resort to the courts. The

parties herein very clearly chose arbitration to be the modality of settling

their disputes but the petitioners want to resile from what was previously

agreed upon, on the pretext that there was fraud and

misrepresentation....I am not inclined to revoke the submission of the

parties to arbitration. ‘Any dispute’ should not be read as excluding

disputes involving fraud or misrepresentation. It is not the function of

the court to rewrite and insert provisions...which the parties could have

agreed to deal with in a situation which might arise.”

5.6 Sources of Jurisdiction and Powers

The arbitrator’s jurisdiction and powers emanate from a number of different

sources. These include:-

10 Ibid. 11 [2002] 1 EA, 269.


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i. The arbitration agreement. Jurisdiction of the arbitrator is mainly derived

from the contract between parties who consent to arbitrate their

disputes. This position was upheld in the William Oluande case (supra)12

where the court observed, inter alia, that the scope and jurisdiction of

the arbitrator was determined by a clear reading of the arbitration

agreement between the parties.

ii. Statute. Jurisdiction of the arbitrator may also derive from the law

whereby the law stipulates that certain types of disputes may be

arbitrated. For instance, the jurisdiction of the arbitrator to decide on

its jurisdiction is derived from Section 17 of the Arbitration Act, 1995.

Other laws which provide for arbitration include the Cooperative

Societies Act,13 and the Kenya Airports Authority Act14 among others.15

iii. Common Law. The common law is relevant in that the arbitrator is

bound by precedents, that is, the thrust of the cases decided by superior

courts. Superior courts in Kenya (or courts of record) are the Supreme

Court, the Court of Appeal and the High Court. These are the courts

that are vested with powers to make “precedents” which are binding

on lower courts and persuasive to courts of equal rank. For instance,

the arbitrator’s jurisdiction is limited or prescribed by authorities

declaring the law regarding limits of jurisdiction under section 17 of

the Arbitration Act.

iv. Customs of Trade. Customs of trade in some special trades such as

commodities markets, marine and insurance where long held

traditions, rules, procedures and settlement of disputes find their way

12 [2006] eKLR. 13 Cooperative Societies Act, Chapter 490 of the Laws of Kenya, Government Printer, Nairobi. 14 Kenya Airports Authority Act, Chapter 395 of the Laws of Kenya, Government Printer, Nairobi. 15 See also S. 20, Environment and Land Court Act 2011; S. 15(4), Industrial Court Act, 2011; S. 34,

Intergovernmental Relations Act; S. 4, Land Act 2012; S. 17(3), Elections Act, 2011; Rule 11,

Supreme Court Rules, 2011; Community Land Act, No. 27 of 2016 ( Government Printer,

Nairobi, 2016)., s.41.


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into mainstream arbitration in determining the jurisdiction of the

arbitrator. In most cases, customs of trade apply where the arbitration

agreement, statute and common law are not clear. In such instances,

the arbitrator’s powers and jurisdiction will be bound by rules peculiar

to the trade in question.

5.7 Jurisdiction and Powers of the Arbitrator under the Arbitration Act, 1995

There are a number of provisions in the Arbitration Act, 1995 that talk about

the jurisdiction and powers of the arbitrator. These legal provisions are

explored further in the ensuing discussion:

i. Perpetual Jurisdiction of the Arbitrator

The jurisdiction of the arbitrator does not lapse with the death of the

appointing party. Section 8 of the Act provides that the authority of the

arbitrator is not revoked by the death of any party to the arbitration or the

party appointing him. However, if the dispute in question was in the nature

of a personal claim, the jurisdiction of the arbitrator will clearly expire on the

party’s death. The essence of perpetual jurisdiction of the arbitrator is to ensure

that the death of a party does not unnecessarily halt arbitration against the

party to the detriment of other parties to the arbitration.

ii. Kompetenz Kompetenz

Section 17 of the Act provides that the arbitral tribunal may rule on its own

jurisdiction or on objection to its own jurisdiction. In this regard, the arbitral

tribunal may, inter alia, rule on its own substantive jurisdiction, as to whether

(a) there is a valid arbitration agreement (b) the tribunal is properly

constituted; and (c) what matters have been submitted to arbitration in

accordance with the arbitration agreement. In Safaricom Limited v Ocean View

Beach Hotel Limited & 2 Others16 Nyamu J, in observing that the principle of

kompetenz kompetenz as envisaged in section 17 of the Act gives the arbitral

16 Safaricom Limited v Ocean View Beach Hotel Limited & 2 Others, [2010] eKLR.


100

tribunal the power to rule on its own jurisdiction and deal with the subject

matter of the arbitration, gave the following brief exposition of the section;

“The section gives an arbitral tribunal the power to rule on its own

jurisdiction and also to deal with the subject matter of the arbitration. It

is not the function of a national court to rule on the jurisdiction of an

arbitral tribunal except by way of appeal under Section 17(6) of the

Arbitration Act as the Commercial Court in this matter purported to

do. In this regard, I find that the superior court did act contrary to the

provisions of Section 17 and in particular violated the principle known

as “Competence/Competence” which means the power of an arbitral

tribunal to decide or rule on its own jurisdiction. What this means is

“Competence to decide upon its competence” and as expressed elsewhere

in this ruling in German it is “Kompetenz/Kompetenz” and in French it is

“Competence de la Competence”. To my mind, the entire ruling is

therefore a nullity and it cannot be given any other baptism such as

“acting wrongly but within jurisdiction.”

iii. Issue Interim Protection Measures

As per section 18 of the Arbitration Act, the arbitrator may, at the request of a

party, order such interim protection measures as the arbitral tribunal may

consider necessary in respect of the subject-matter of the dispute, with or

without an ancillary order requiring the provision of appropriate security in

connection with such a measure. The arbitrator may also order any party to

provide security in respect of any claim or any amount in dispute or order a

claimant to provide security for costs.17 The jurisdiction of the arbitral tribunal

in this regard is similar to that of the High Court in civil proceedings before it.

The jurisdiction includes the power to issue relevant orders of protection

including injunctions and orders to dispose of perishable goods among others.

17 Sec. 18, Arbitration Act, 1995.


101

iv. Master of Procedure

Where the parties have failed to agree on the procedure to be followed in the

conduct of the arbitral proceedings18, the arbitrator is entitled to conduct the

arbitration in the manner he considers appropriate having regard to the need

to avoid unnecessary delay or expense and while affording the parties a fair

and reasonable opportunity to present their cases.19 A clear reading of section

20 of the Arbitration Act reveals that the arbitrator’s jurisdiction as a master of

procedure is subject to the agreement of the parties on procedure which would

otherwise be binding on the arbitrator.

The arbitrator is given latitude to conduct the arbitration proceedings as s/he

deems fit in event of default of agreement by the parties on the arbitral

procedure. The only condition guarding this freedom of the tribunal is the

requirement of equal treatment of all parties and the need to give parties full

opportunity to present their case.20 The implication is that arbitrators are not

bound by procedural laws the same way they are bound by substantive laws.21

But even with this proviso, most arbitration proceedings still ape the court

procedures. There is need to change this state of affairs if arbitration is to pride

itself as an expeditious dispute settlement process.

v. Determination of Evidence

Under Section 20(3), the arbitrator has the power to determine the

admissibility, relevance, materiality and weight of any evidence and to

determine at what point an argument or submission in respect of any matter

has been fairly and adequately put or made. In essence, the arbitrator has the

power to determine the applicable rules of evidence in the arbitral process. In

exercising this evidentiary discretion, the arbitral tribunal enjoys freedom

from the reins of the provisions of the Evidence Act22 which ordinarily regulate

18 Ibid, Sec. 20 (1). 19 Ibid, Sec. 20 (2) of the Act. 20 Ibid. 21 See Dugan, C., et al., Investor-State Arbitration (OUP USA, 2011), p.92. 22 Evidence Act, Chapter 80, Laws of Kenya, Government Printer, Nairobi.


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matters of procedure in judicial proceedings. By giving the parties the leeway

in Section 20 (1) of the Act to freely agree on the procedure to be followed by

the arbitral tribunal, the Act excludes the application of the Evidence Act in

arbitration.

Evidence is admissible where the tribunal finds it is useful in helping in the

trial of fact and which cannot be objected to on the basis that it is irrelevant,

immaterial, or violates the rules against hearsay and other objections.

Relevancy is the tendency of a given item of evidence to prove or disprove one

of the legal elements of the case or to have probative value to make one of the

elements of the case likelier or not. On the other hand, materiality of evidence

has to do with the relationship between evidence and the issues raised at trial.

If an issue is important in the determination of the outcome of a case, the

evidence offered to prove that issue is considered to be material. Essentially,

relevant evidence is that which is used to prove or disprove an issue at trial

which is considered to be material evidence. Irrelevant evidence is

inadmissible. Material evidence can be either direct or circumstantial.

Direct evidence is evidence that, if believed by a tribunal, establishes the

proposition for which it is offered. Direct evidence comes from someone's

personal observation or knowledge and can prove the issue at hand without

any additional presumption or inference. Example of direct evidence would

be a surveillance video of a person robbing a bank or a tape recorded

confession by a suspect. On the other hand, circumstantial evidence requires a

tribunal to make an inference to establish the proposition that evidence is

offered as proof of an assertion of fact. An example of circumstantial evidence

is a witness testifying that he saw a person charged with murder standing over

a body holding a bloody knife. This evidence would require a judge or jury to

infer that the person holding the bloody knife committed the murder.

The weight of evidence is based on the believability or persuasiveness of

evidence. The probative value of evidence depends on the persuasiveness of


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their testimony. For example, a witness may give uncorroborated but

apparently honest and sincere testimony that commands belief, even though

several witnesses of apparent respectability may contradict her. The question

for the tribunal in such scenario is not which side has more witnesses, but what

testimony they believe.

vi. Amendment of Submissions

The arbitral tribunal, like a court of law, has jurisdiction to determine whether

to accept or decline amendments or supplements to submissions i.e. pleadings

in arbitration.23 In essence, the arbitrator has powers to allow or decline

amendment of pleadings in arbitration unless parties have otherwise agreed.

Section 24(3) of the Act gives the arbitrator power to decline or allow

amendments or supplements to pleadings.

The arbitral tribunal is further given discretion to decline amendments where

they are likely to result in delay in the arbitral proceedings. This discretion is

necessary because it enables the tribunal to limit the ability of a party bent on

delaying the arbitral process from doing so while relying on unwarranted

amendments or supplements to submissions. This jurisdiction of the arbitral

tribunal is subject to the agreement of the parties.

vii. Termination of Proceedings

As per Section 26 of the Act, the arbitrator may terminate proceedings for want

of prosecution where the claimant defaults in communicating his/her claim

within the period agreed upon by the parties or determined by the arbitral

tribunal. If the respondent is the party in default, the tribunal is to continue

the proceedings without taking the default as an admission of the claimant’s

allegations.24 Thus, the tribunal will require the claimant to prove its case as

against the respondent and forbid summary awards.

23 Sec. 24(3), Arbitration Act, 1995. 24 Arbitration Act, 1995, sec. 26 (b).


104

The arbitrator also has authority to order the arbitration to proceed ex-parte

where a party fails to appear despite grant of adjournments by the arbitrator

and notices of hearings being served.25 The arbitrator may also make an award

on the evidence put before him if a party fails to appear or produce documents.

This power aims to ensure that a party who senses defeat does not frustrate

the arbitration. In exercising this discretion, the arbitrator must exercise due

caution and ensure that all reasonable effort is expended to give the

absconding party an opportunity to attend.

Where the claimant fails to prosecute his/her claim, the arbitrator may make

an award dismissing that claim or give directions, with or without conditions,

for the speedy determination of the claim and if a party fails to comply with

any order or direction, peremptory orders may be issued to the same effect

prescribing a time frame within which to comply with the order.26 Where there

is non-compliance with a peremptory order of the tribunal as to providing

security for costs, the tribunal may dismiss the claim.27

If a party has failed to comply with any other peremptory order, the tribunal

is at liberty to direct that that party shall not be entitled to rely on any

allegation or material that was the subject-matter of the order. The tribunal

may also draw such adverse inferences from the non-compliance as the

circumstances allow or proceed to make an award on the basis of such

materials as have been provided to it or make such order as it thinks fit

regarding the payment of costs of the arbitration incurred as a result of the

non-compliance.28

viii. Power to Appoint Expert Witness

The arbitrator may appoint one or more experts to report to it on specific issues

and require either party to give the expert any relevant information or provide

25 Ibid, Sec. 26 (c). 26 Ibid, sec. 26 (e). 27 Ibid, sec. 26 (f). 28 Ibid, sec. 26 (g).


105

access to any relevant documents, goods or other property for inspection.29

However, this discretion is limited and/or may be overtaken by parties’

agreement on involvement of experts in the dispute.

ix. Power to Request assistance in taking Evidence

The power of the arbitrator is limited in that s/he cannot compel a witness to

give evidence. However, the arbitrator or a party with the approval of the

arbitrator can seek assistance of the High court in taking evidence for use at

the arbitral hearing. In such circumstances, the High Court has discretion to

execute the request within its competence and its rules on taking evidence.30

The High Court’s assistance in this instance includes issuing summons to the

witness to secure attendance of the witness if the witness is within Kenya and

refuses to attend and give evidence. If such a witness refuses to attend even

after such summons, he will be liable to be punished for contempt of court.

The High Court may also order examination of a witness on oath before an

officer of the court or any other officer. Where the witness is outside the

jurisdiction, the court may order the issue an order for the taking of evidence

by commission or request for examination of a witness outside the

jurisdiction.31

x. Powers to Act on the Arbitral Award

The arbitrator may correct any computation errors, clerical or typographical

errors or any other errors of a similar nature in an award on his/her own

motion or upon request by any party.32 The correction is to be done within 30

days after receipt of the award unless a different time has been agreed upon

by the parties. The aim of this power is to eliminate the necessity to constitute

a new tribunal just to tackle an error that does not go to the substance of the

29 Arbitration Act, 1995, sec. 27. 30 Order 18 of the Civil Procedure Rules 2010. 31 Sec. 28, Arbitration Act, 1995. 32 Ibid, Sec. 34(3).


106

award.33 This power is reserved for accidental additions or omissions and

clerical errors.

In the same vein, and based on agreement of the parties, an arbitrator may be

called upon by either party to give an interpretation to a specific part of the

award. The arbitral tribunal also has power upon request by a party to make

an Adjournment of hearing as to the claims presented but omitted from the

main award within 60 days of the request. The party requesting for an

additional award must give notice in writing to the other party before making

that request. In addition, arbitral tribunal is given power under Section 34(6)

of the Act to extend time limits provided under the Act for correction,

interpretation and additional awards.

5.8 Limitations on the Jurisdiction and Powers of the Arbitrator

Firstly, under Section 15, the authority of the arbitrator will cease if he fails to

act or proceed. In addition, if the arbitrator withdraws or resigns or the

challenge to his appointment or jurisdiction succeeds, his jurisdiction ceases

or is limited accordingly.

The arbitrator is enjoined under Section 19 of the Act to treat the parties with

equality. This section in conjunction with Sections 12 and 13 requiring an

arbitrator to maintain independence and impartiality have been interpreted as

aimed at guaranteeing a fair hearing in arbitration proceedings.34

The Act also provides for the immunity of the arbitrator in the exercise of his

jurisdiction. As per Section 16B of the Act, an arbitrator is not liable for

anything done or omitted to be done in good faith in the discharge or

purported discharge of his functions as an arbitrator. This immunity extends

33 The civil procedure equivalent is the power given to courts to correct minimal errors in

judgements after issue. 34 See Githinji JA’s dissenting judgment in Epco Builders Limited-v-Adam S. Marjan-Arbitrator &

Another Civil Appeal No. 248 of 2005.


107

to a servant or agent of an arbitrator in respect of the discharge or purported

discharge by such a servant or agent, with due authority and in good faith, of

the functions of the arbitrator. The only exception to the immunity is in case of

any liability incurred by an arbitrator by reason of his resignation or

withdrawal.

The arbitrator is enjoined, in default of the parties’ agreement, to give

directions on certain administrative matters of the arbitration preferably at the

preliminary stages of the arbitration. As per section 21, the arbitrator is given

the wherewithal to decide the place of the arbitration. The arbitrator also

decides the language of the arbitration if the parties fail to agree and may order

translations where necessary.35

The arbitrator also has the duty to set time limits for submission of claims and

defence if parties default in agreeing on the matter.36 On its part, Section 25 (1)

and (2) of the Act bids the arbitrator to determine what form, oral or written,

the arbitration shall take. The arbitrator is required to give sufficient notices of

any hearing, meeting or inspection. Nevertheless, a party may require holding

of oral proceedings at any time unless parties have agreed to hold no hearings.

A party to arbitral proceedings may appear in person or be represented by any

other person of his or her choice.37 This is unlike in court proceedings where a

party can only be represented by an advocate having a valid practicing

certificate.38

The arbitrator is also bound to decide the dispute in accordance with the

chosen law and without being bound by the rules of law if the parties expressly

authorize him to do so. Further, the arbitrator shall decide the arbitral dispute

35 sec. 23, Arbitration Act, 1995. 36 Ibid, Sec. 24(1). 37 Ibid, Sec. 25 (5). 38 Sec. 13 of the Advocates Act, Chapter 16 of the Laws of Kenya, Government Printer, Nairobi.


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in accordance with the terms of the particular contract and in accordance with

usages of the applicable trade where the parties authorize him by agreement.39

The arbitral proceedings terminate once the parties settle the dispute. In such

a case, the settlement is to be recorded as an award by the arbitrator unless the

parties object. With respect to the award, the arbitrator is enjoined to render

the same in writing. The award must also be signed by the arbitrator(s) and be

reasoned unless the parties agree otherwise. The arbitrator is also enjoined to

determine the costs and expenses of the arbitration unless the parties state

otherwise.40 As per Section 33 of the Act, the arbitrator is bound to determine

the arbitral proceedings if the parties agree or if the continuance of the same

becomes unnecessary or impossible.

39 Sec. 19, Arbitration Act, 1995. 40 Ibid, Sec. 32.

Modes of Opposing and Challenging Arbitration Reference

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Chapter Six


6.1 Introduction

This chapter discusses issues relevant and related to opposing arbitration

references. In particular, it discusses at length issues relating to challenging the

appointment of the arbitral tribunal and the jurisdiction of the arbitral tribunal.

In essence, it addresses the teething issues that may come about before and

after commencement of the arbitration process. In arbitration proceedings,

parties are likely to raise a number of objections. These could be that there is

no binding arbitration agreement between parties, objection on whether the

dispute is within the scope of the arbitration agreement, objection that the

reference is time-barred, challenges to the appointment of arbitrators and

challenges to the jurisdiction of the arbitral tribunal.1

These objections and/or matters are not necessarily preliminary per se but the

law encourages their disposal as soon as possible.2 Each of these objections will

be discussed in turn.

6.2 Objection when there is no Valid Arbitration Agreement

The Arbitration Act 1995 requires the existence of an arbitration agreement as

a condition precedent for the commencement of arbitration under it. The

rationale is that arbitration is mainly a private and contractual arrangement

between the parties for resolution of a given dispute or potential dispute(s).

Further, as already established in the previous chapter, the jurisdiction of the

arbitrator mainly emanates from the arbitration agreement and therefore

without it the arbitrator may have no jurisdiction at all.

1 This list is not necessarily exhaustive as parties can, theoretically, raise objections on anything

in the arbitration proceedings they find objectionable. 2 Sec. 5 of the Arbitration Act, No. 4 of 1995, Government Printer, Nairobi.


110

The only exceptions where an agreement between the parties is not insisted

upon are those limited to arbitration on motion of the court, for example, in

case stated instances or when arbitration is a result of a statutory fiat as is the

case in statutory arbitrations.3 But even in these instances, the parties’

agreement is esteemed to the extent that parties are called upon to agree on

details of the arbitral process such as the venue, procedure, and evidence to be

called among other matters.4 In Heyman& Another-v-Darwins Ltd5 Lord

MacMillan stated as follows on arbitration agreement:

“… an arbitration clause in a contract … is quite distinct from other clauses.

The other clauses set out the obligations which the parties undertake towards

each other, but the arbitration clause does not impose on one of the parties an

obligation in favour of another. It embodies the agreement of both parties that

if any dispute arises with regard to the obligations which either party has

undertaken to the other, such disputes shall be settled by a tribunal of their

own constitution.”

The law requires an arbitration agreement, for validity, to be in writing.6 An

arbitration agreement may take the form of an independent contract or an

arbitration clause7 or even an Alternative Dispute Resolution (ADR) clause.8

An arbitration agreement will be in writing for purposes of this requirement if

signed by parties or involves an exchange of letters, telex, telegram, facsimile,

electronic mail or other telecommunication means providing a record of the

agreement.9

3 The New Labour Laws make ADR a condition precedent to accessing the industrial courts

and before undertaking industrial action. 4 Ibid. 5 Heyman& Another-v-Darwins Ltd, (1942) AC 356 at p. 373. 6 Sec. 4(2), Arbitration Act, 1995. 7 Ibid, Sec. 4(1), Arbitration Act, 1995. 8 However, such a clause must provide for arbitration as one of the proposed methods,

whether in alternative or succession, for resolution of the dispute. 9 Sec. 4(3), Arbitration Act, 1995.


111

However, it seems that a party can take a chance with the arbitration process

where s/he is not sure of the validity of the arbitration agreement. According

to the Act, an arbitration agreement is presumed where the same is alleged in

the statement of claim and not denied by the other party. 10 But a problem may

arise where the other party opts to challenge the jurisdiction at the point of

filling the award as the same ought to be accompanied by the original

arbitration agreement or a duly certified copy of it.11

An arbitral award may also be set aside if it can be shown that the arbitration

agreement was not valid under the law to which the parties have subjected

themselves to or the laws of Kenya. It could also not be valid where the

arbitration agreement was not in writing.12 An award may also be set aside if

it is contrary to public policy considerations. This was the position taken in

Kenya Shell Limited v. Kobil Petroleum Ltd13 which approved the decision of

Ringera J (as he then was) in Christ for All Nations v. Apollo Insurance Co. Ltd 14

where he stated as follows;

“although public policy is a most broad concept incapable of precise

definition…an award could be set aside under section 35 (2) (b) (ii) of the

Arbitration Act as being inconsistent with the public policy of Kenya if it was

shown that either it was:

a) Inconsistent with the constitution or other laws of Kenya, whether

written or unwritten; or

b) Inimical to the national interest of Kenya; or

c) Contrary to justice and morality.”

10 Ibid. 11 Sec. 36(3) (b), Arbitration Act, 1995. 12 Ibid, sec. 35(2) (a) (ii). 13 Kenya Shell Limited v. Kobil Petroleum Ltd, [2006] eKLR. 14 Christ for All Nations v. Apollo Insurance Co. Ltd [2002]2 EA 366.


112

An arbitration agreement by reference will be sufficient as a basis for reference

to arbitration. However, the law requires that the contract making the

reference be in writing and that the reference makes the clause referred to part

of that contract.15 Even where there is no binding agreement to base an

arbitration process, a party may cajole the other to enter an “ad hoc”

agreement to arbitrate the dispute at hand.16

It is also not a problem that the arbitration agreement or clause was part of an

agreement that has been found null and void. The doctrine of separability

guarantees an arbitration clause/agreement life and enforceability after the

parent agreement has ceased enjoying validity. The doctrine is important here

in the sense that it enables the arbitration clause to survive the termination by

breach of any contract of which it is part.17 Even if the underlying contract is

void, the parties are presumed to have intended their disputes to be resolved

by arbitration.

It is in the arbitration agreement that each party agrees to reference of disputes

to arbitration.18 There is no arbitration unless both parties to a dispute have

agreed to arbitration or in other words unless there are ‘bilateral rights of

reference.’ If the arbitration agreement’s validity is questioned, the arbitral

tribunal should endeavour to ascertain the same before proceeding. The logic

of this proposal is that even if the arbitration progresses to an award, the same

may still be set aside for invalidity; for instance, if the arbitration agreement is

inconsistent with a law or is incapable of being performed. It may also be

invalid for missing the elements outlined above and which are mandatory for

every arbitration agreement for the same to be valid.

Objections with respect to the validity of the arbitration agreement may be

raised in a number of instances. In the first place, it may be raised in opposition

15 Sec. 4(4), Arbitration Act, 1995. 16 See also sec. 5(5) of the UK Arbitration Act (Cap. 23), 1996. 17 Sec. 17(1) (a), Arbitration Act, 1995. 18 Davies LJ in Baron-v-Sunderland Corp [1966] 1 All ER 349 at 351.


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to an application for stay of legal proceedings where a suit on a matter has

already been lodged in courts and the defendant alleges the matter ought to

be arbitrated. In this case, if the court upholds the objection on a finding that

there is no valid arbitration agreement, the claimant will be entitled to sustain

his suit in a court of law.

In the alternative, the issue of validity of the arbitration agreement may also

be raised as a ground for challenging the jurisdiction of the arbitrator under

section 18 of the Act. Further, the issue of the validity of the arbitration

agreement may be raised in an application seeking to set aside the award or

opposing recognition of the award as it is one of the recognized grounds under

the Act.19

6.3 Objection when Dispute is not contemplated under the Arbitration

Agreement

The matter of whether or not the instant dispute is contemplated for arbitration

under the relevant arbitration agreement may appear rather academic but it

usually arises especially where parties had restricted the scope of reference to

arbitration to only particular species on their disputes. It is also the case that

arbitration does not resolve all disputes under the sun. The broad and practical

question that arises when such objection is raised is whether the disputes in

the anticipated arbitration can be challenged as not being contemplated by the

parties for reference to arbitration.

Arbitration, being a private process, only deals with civil disputes and does

not venture into matters of public law.20 Arbitration is, actually, dedicated to

commercial disputes although even political agreements may provide for

19 See sec. 33(2) (i) and (ii), Arbitration Act, 1995. 20 See Githinji JA’s dissenting judgement in Epco Builders Limited-v-Adam S. Marjan-Arbitrator &

Another Civil Appeal No. 248 of 2005.


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arbitration.21 Essentially, the orders made in arbitration and the arbitral award

are personal and do not seek to bind the whole world, at least until filed,

recognized and enforced by the High Court of Kenya.22 Since arbitration is

based on an agreement by the parties, the matters referred to arbitration must

fall in the class of disputes the parties had agreed on or can contract to refer to

arbitration.

In addition, the dispute which has arisen must fall within the scope of the

Arbitration clause. The draftsmanship in vogue in Kenya today is to have the

arbitration clause as wide and comprehensive as possible. However, there are

instances where the parties intend that a limited scope of disputes be reserved

for reference to arbitration. In such an instance, the party opposing the

arbitration may argue that the dispute is not covered by the arbitration

agreement and therefore the arbitration is baseless.

In TM AM Construction Group (Africa) v. Attorney General,23 one of the issues

that arose for determination was whether there was in fact a dispute in the

claim. The defendant claimed that there was a dispute between parties which

deserved to be referred to arbitration. The court found that there was failure

by the defendant to tender any evidence showing that there was in fact any

dispute between the parties. The court was of the view that that meant no basis

had been established to show that a dispute in fact existed to justify staying

the proceedings and referring the proceedings to arbitration.

There are also matters that cannot be arbitrated whether or not the parties had

agreed to arbitrate them. These include matters that are not civil or at least

21 Ford-Kenya dispute was taken to arbitration. Kenya Football Federation has also in the past

referred a dispute between its leaders to arbitration. 22 Judicial orders are either in personam (applying as between parties e.g. in contracts) or in rem,

binding and enforceable as against the whole world. 23 HCCC (Milimani) No. 236 of 2001.


115

have a public interest dimension and include divorce,24 criminal matters,25

issues of status (e.g. determining a person’s sanity) or the liquidation of a

company.26 Thus arbitration of the foregoing matters will be objectionable on

the basis that these are matters that cannot be arbitrated. The court in Stephen

Okero Oyugi v. Law Society of Kenya27 had no difficulties in finding that certain

matters such as criminal law issues and tortuous liability arising from

negligence and defamation do not fall within the spheres of arbitration as

issues of both crime and tort have been strictly defined by law and are

entrusted to the courts to adjudicate upon them.

The court therein firmly stated that arbitration deals with issues that are

essentially contractual, that is, disputes over matters in respect of which the

parties may compromise and bargain on their own interests. In the past,

arbitration has not been applied in the sphere of criminal law and tort law such

as negligence and defamation, since the beacons of both criminal law and tort

law are strictly defined by law and entrusted to the courts to adjudicate upon.

However, the position with regard to criminal matters may be changing with

time.28 The opposition as to the applicability of ADR in criminal matters has

since been challenged. In the case of Republic v. Mohamed Abdow Mohamed29, the

accused was charged with murder but pleaded not guilty. On the hearing date,

24 Marriage is an important unit of the society and the state, as well as the society, has an interest

in its termination process. As such, the spouses cannot be allowed to arbitrate and deny the

public a say. 25 The state, and not the complainant, is usually the party against the suspect. The prosecution

of crimes is done for the benefit of and protection of the public, so that privatization of the

process through arbitration may fail to reassure the public that the state is acting on crime.

And the orders given in criminal matters cannot be enforced in a private setting. 26 Company matters that bear a public interest aspect where the state seeks to protect creditors

from unscrupulous companies and their officers in promotion of commerce and investment.

If parties were permitted to arbitrate in liquidation, the resultant award would hardly apply

in rem as it would only be enforceable against parties to arbitration only. 27 Stephen Okero Oyugi v. Law Society of Kenya, [2005] eKLR. 28 Republic v. Mohamed Abdow Mohamed, Criminal Case No. 86 of 2011 (May, 2013). 29 Criminal Case No. 86 of 2011 (May, 2013), High Court at Nairobi.


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the court was informed that the family of the deceased had written to the

Director of Public Prosecutions (DPP) requesting to have the murder charge

withdrawn on grounds of a settlement reached between the families of the

accused and the deceased respectively. Subsequently, counsel for the State on

behalf of the DPP made an oral application to have the matter marked as

settled, contending that the parties had submitted themselves to traditional

and Islamic laws which provide an avenue for reconciliation. He cited Article

159 (1) of the Constitution which allowed the courts and tribunals to be guided

by alternative dispute resolution including reconciliation, mediation,

arbitration and traditional dispute resolution mechanisms.

The issues were whether a murder charge can be withdrawn on account of a

settlement reached between the families of an accused and the deceased; and

whether alternative dispute resolution mechanisms as espoused by the

Constitution of Kenya, 2010 extended to criminal matters. It was held that

under article 157 of the Constitution of Kenya, 2010, the Director of Public

Prosecutions is mandated to exercise state powers of prosecution and may

discontinue at any stage criminal proceedings against any person; and that the

ends of justice would be met by allowing rather than disallowing the

application. The application was thus allowed and the accused person

discharged.

This case has however drawn both criticism and approval in equal measure

and thus the legal position is far from settled.30 The debate on the applicability

of ADR mechanisms in criminal justice is a worldwide one. For instance, it has

been observed that criminal justice may either be retributive or restorative.

While retributive theory holds that the imposition of some form of pain will

vindicate, most frequently deprivation of liberty and even loss of life in some

cases, restorative theory argues that “what truly vindicates is

acknowledgement of victims’ harms and needs, combined with an active effort

30 See Bowry, P., ‘High Court opens Pandora’s Box on criminality’, Standard Newspaper,

Wednesday, 12 June 2013. Available at

http://www.standardmedia.co.ke/?articleID=2000085732 [Accessed on 20/03/2014].


117

to encourage offenders to take responsibility, make right the wrongs, and

address the causes of their behavior.”.31 Further, the conventional criminal

justice system focuses upon three questions namely: What laws have been

broken? Who did it? And what do they deserve? From a restorative justice

perspective, it is said that an entirely different set of questions are asked: Who

has been hurt? What are their needs? And whose obligations are these?32

The answers to the foregoing questions may have an impact on how the whole

process is handled and further the decision on which one to use depends on

such factors, as other laws that may only provide for retributive justice in some

of the criminal cases while at the same time limiting use of restorative justice.

Whichever the case, what remains clear is that restorative justice in criminal

matters considered serious, which may involve use of ADR more than use of

litigation may have to wait a little longer.

6.4 Objection on Basis that Reference is Time-Barred

Parties often place limits in the arbitration agreement as to when a party may

refer a dispute to arbitration. In any event, the Limitation of Actions Act

applies to arbitrations with the same force as it applies to litigation.33 The issue

of limitation of action of the arbitration and the contractual limitation period

usually arise as a preliminary point. In Barlany Car Hire Services Limited-v-

corporate Insurance Limited34, the arbitration agreement provided that if the

Defendant company disclaimed liability to the insured for any claim such

claim be referred to arbitration within 12 calendar months from the date of the

disclaimer. The Plaintiff had failed to properly institute the arbitration process

and more than 12 months had lapsed. The defendant therefore argued that the

Plaintiff was now too late to arbitrate and indeed even too late to claim at all.

31 Umbreit, M.S., et al, ‘Restorative Justice In The Twenty first Century: A Social Movement Full

Of Opportunities And Pitfalls’ Marquette Law Review, Vol. 89, 2005, pp. 251-304, p. 257. 32 Ibid, p. 258. 33 Limitation of Actions Act, Cap. 22 of Laws of Kenya, Government Printer, Nairobi. 34 Barlany Car Hire Services Limited-v-corporate Insurance Limited, HCCC (Milimani) No. 1249 of

2000.


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The court held that the Plaintiff was indeed too late to appoint an arbitrator

or claim there having been no reference to arbitration within 12 months of the

repudiation. The court agreed with the Defendant that the clause imposing the

contractual deadline was a condition precedent to a valid claim as was held in

the case of H. Ford & Co. Limited-v-Compagnie Furness (France)35 where a clause

to similar effect was upheld. The court cited with approval the following

holding in that case:

“Therefore as the jurisdiction of the arbitrator was only given to him by the

consent of the parties and the parties agreed that the arbitrator if appointed at

all should be appointed within a certain time, it seems to me to follow that as

that time has elapsed, neither party had power to appoint an arbitrator unless

the other party consented.”36

The court therefore upheld the Defendant’s argument that there was no longer

any cause of action; the matter was time barred and that no application had

been made to extend the limitation period if that were possible.

6.5 Challenge of Appointment of Arbitrators

One of the approaches for opposing arbitration reference is through Section 13

of the Act which provides the grounds for challenging the appointment of an

arbitrator. The appointment of the arbitrator may be challenged on the ground,

inter alia, that he does not possess the qualifications agreed to by the parties37

or there is a reason to believe that the arbitrator may not act impartially or

independently in arbitrating the matter at hand. As a matter of fact, a party

may challenge an arbitrator appointed by him only on those grounds which

came to his knowledge after the appointment has been made.38

35 H. Ford & Co. Limited-v-Compagnie Furness (France), 1922 2 KB 797. 36 Ibid. p. 810. 37 See the case of Edward Muriu Kamau & 4 others all trading as Muriu, Mungai & Co. Advocates v

John Syekei Nyandieka [2014] eKLR where one of the points of contention was qualifications

of the Arbitrator who would be able to resolve the issues completely and conclusively. 38 See generally, sec. 13 of the Arbitration Act, 1995.


119

Such was the case in Spencon Kenya Limited v. Harman Marwa & 2 others39 where

the court [Lesiit J] held that it is only the High Court which has jurisdiction to

determine the issue of the process of the appointment of an arbitrator if the

application is based on the ground that a party or a third party or an institution

has failed to perform the function entrusted to it under such procedure as per

the agreement of the parties. The court reasoned that Sections 13 and 14 of the

Act address the issue of the impartiality, independence or qualifications of the

arbitrator and do not apply to an application challenging the process of the

appointment of an arbitrator. The court found that since the application was

challenging the process of the appointment of the arbitrator, it is only the High

Court which has jurisdiction to determine the issue of the process of

appointment of the arbitrator.

As regards procedure, the parties are at liberty to agree on a procedure for

challenging an arbitrator. If there is no agreement on this point or the parties

have failed to agree, then the procedure to be followed is that the party

wishing to present the challenge has to inform the Arbitral Tribunal of the

matter. This should be done within 15 days after becoming aware of the

constitution of the Arbitral Tribunal or after becoming aware of any

circumstances of challenge. If the other party agrees to the challenge and the

arbitrator does not voluntarily withdraw, the Tribunal shall decide the matter.

The party who challenged the award may appeal the decision of the arbitral

tribunal to the High Court whose decision shall be binding on the matter.40 The

party who challenged the arbitrator may also challenge the award and also

make an application for the setting aside of the award in accordance with the

Act.41 The salient issues in challenge of appointment of arbitrators were

discussed extensively in Chapter 4 on Appointment of Arbitrators.

39 Spencon Kenya Limited v. Harman Marwa & 2 others, [2008]eKLR. 40 Ibid. 41 sec. 35 of the Arbitration Act, 1995.


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6.6 Challenging the Jurisdiction of the Arbitrator(s)

The law allows under Sections 13 - 17 of the Act for the challenge of the

jurisdiction of the Arbitral tribunal. In most cases, a challenge to jurisdiction

arises over the validity of an arbitration agreement which is basically an attack

on the whole basis on which the tribunal purports to act. For example, a

challenge may question the legality or proper execution of the arbitration

agreement, or assert a waiver of the right to arbitrate or failure to observe

certain requirements in the underlying contract with respect to assignment or

time limits.

Alternatively, the challenge may concern the tribunal’s jurisdiction over

certain subject matters, or questions as to whether some of the claims before

the tribunal are included within the scope of the arbitration agreement, or

relate to a question regarding the capacity of a party at the time of entering

into the arbitration agreement or whether the tribunal has gone beyond the

particular questions submitted to it for settlement. When such a challenge

arises, its resolution is critical because it determines whether or not the

arbitration can go ahead.

Generally, the doctrine of “kompetenz kompetenz” gives the arbitral tribunal the

wherewithal to rule on its own jurisdiction. Such ruling may encompass

matters including the existence or validity of the arbitration agreement.42 The

fact that a party has appointed or participated in appointing an arbitrator is

not a bar to challenging the jurisdiction of the arbitral tribunal.43

It is desirable therefore that any challenge to jurisdiction should be resolved as

early as possible. The Act requires that a plea of lack of jurisdiction should be

raised not later than the submission of the statement of defence.44 Where the

plea is exceeding of jurisdiction, the same should be raised as soon as the

42 Arbitration Act, 1995, Sec. 17 (1). 43 Ibid, sec. 17 (4). 44 Ibid, Sec. 17 (2).


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matter alleged to be in excess of authority is raised in the arbitral proceedings.45

However, the arbitral tribunal has the discretion to admit a later plea where it

considers the delay justified.46

The arbitral tribunal has two options open to it when the question of

jurisdiction is raised by a party. It may rule on the matter as a preliminary

question or wait to address it in an arbitral award on the merits.47 The ruling

of the arbitral tribunal in the former instance may be challenged by the

aggrieved party by way of an application to the High Court. Such application

must be made within 30 days of notice of the award48 and the decision of the

High Court shall be final.49

While the application is pending before the superior court, the parties may

commence, continue and conclude arbitral proceedings, but no award in such

proceedings should take effect before that application is decided, since such

an award would be void if the application succeeds.50 An application

challenging the jurisdiction of the arbitral tribunal to the High Court is made

by originating summons which are returnable on a fixed date before a judge

in chambers and must be served on all parties to the arbitration and the arbitral

tribunal at least 14 days before the return date.51 Any other application

resulting from the originating summons should be made by summons in the

same cause and served on all parties at least seven days before the fixed

hearing date.52

45 Ibid, Sec. 17 (3). 46 Arbitration Act, 1995, Sec. 17 (4). 47 Ibid, Sec. 17 (5). 48 Ibid, Sec. 17 (6). 49 Ibid, sec. 17 (7). 50 Ibid, Sec. 17 (8). 51 Rule 3(1) of the Arbitration Rules, 1997 in Legal Notice No. 58/97, The Arbitration Act, 1995. 52 Ibid, Rule 3(2).

Preparation for Arbitration Proceedings

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Chapter Seven


7.1 Introduction

This chapter deals with issues that are quite different except for the fact that

they all constitute part of what takes place in preparation for arbitration. The

chapter discusses what the arbitrator does upon appointment, in preparation

for commencement of the arbitral proceedings, namely, convening a

preliminary meeting and issuing directions pursuant to the meeting.

Issues relating to pleadings in arbitration are also explored. The various types

of pleadings used in arbitration and the relevant legal provisions touching on

them are discussed herein. The chapter also deals with pre-hearing procedures

that are related to pleadings in that they are used to enhance documentation

in arbitration. Here, issues relating to seeking further (and better) particulars,

discovery (disclosure and inspection) and amendment of pleadings are

examined.

Finally, interlocutory proceedings in arbitration and the steps taken under

Section 7 and Section 18 of the Act and application for security of costs are

examined. These come under preparation for arbitration proceedings because

they constitute steps that are taken mainly to compliment or augment the

arbitral process.

7.2 Preliminary Meeting

In essence, the arbitral tribunal is appointed to take such procedural powers

either as parties have agreed upon1 or, in default, of its choosing.2 The aim is

to enable it determine the substantive dispute between the parties and make

1 Sec. 20(1) of the Arbitration Act, 1995. 2 Ibid, Sec. 20(2).


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an arbitral award binding and final as against the parties. The arbitration laws

require the arbitrator to act fairly. Basically, this implies securing each party’s

right to a fair hearing. As such the arbitrator is under an obligation to give all

the parties equal and reasonable opportunity to present and ventilate their

case.3

In observing that the applicant should have been accorded an opportunity to

be heard before the arbitrator made an adverse decision against it, the court in

Deekay Contractors Ltd v Construction & Contracting Ltd4 stated as follows:

“I agree with Mr. Gautama that the rules of natural justice are crystal clear.

The arbitrator found against the applicant on a matter on which the parties

were not heard. Without belabouring the rules of natural justice, the applicant

should have been accorded an opportunity to be heard before the arbitrator

came to an adverse conclusion which was prejudicial to the applicant.”

However, even then, the arbitrator is in-charge of the arbitration proceedings

and must utilise his discretionary powers to ensure that parties do not abuse

the arbitral process to unnecessarily occasion delays. The arbitrator should

thus adopt such procedures as will limit delays, and by extension, reduce the

costs of arbitration.5

The arbitrator usually calls for a preliminary meeting with the parties and

sends the meeting’s agenda to accompany the notice for the meeting. The

utility of preliminary meeting is mainly to help clarify and make certain

matters arising under the arbitration so as to avoid misunderstandings and

delays in future. The preliminary meeting also provides a setting for each

3 Ibid, Sec. 19. 4 Deekay Contractors Ltd v Construction & Contracting Ltd, [2004] eKLR. 5 Ali, A., “Interlocutory (Intermediate) Matters” an unpublished paper presented at Chartered

Institute of Arbitrators-Kenya Branch entry course held at Nairobi on 20th and 21st August,

2007.


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party to assess the other’s case and an opportunity for them to narrow down

the dispute to specific issues amenable to a decision by the arbitrator.

This meeting gives each a chance to hear the other’s side of the story and,

therefore, be able to appraise the strengths and weaknesses of its case in

comparison with that of the opposing party. The arbitrator keeps the minutes

of the preliminary meeting. As a matter of procedure, a signed copy of the

minutes should be sent to each party for record purposes.6

7.3 Arbitrator’s Directions

Arbitrator’s directions are the means through which the arbitrator tells the

parties what they are to do in preparing for and presenting their cases.7 The

arbitrator(s) normally issue directions after the preliminary meeting

addressing issues of administrative interest that are not addressed fully or at

all in the party’s agreement.

Firstly, directions indicate the time table for the first stage of the arbitration

e.g. filing of pleadings, applications, discovery and inspection and seeking

further and better particulars. It is also the purpose of directions to set-out

matters relating to the general conduct of the arbitration. Here, the directions

address matters to do with addresses and mode of delivery of notice.

The directions also stipulate the procedures of party communications to the

arbitrator. For example, such communications should be copied to the other

party and that inter-party correspondences should not be sent to the arbitrator

as to avoid entangling the arbitrator in the dispute and cause him/her to lose

objectivity.

Directions also set-out the form the arbitration will take e.g. oral, documents

only or by inspection and the applicable rules of procedure and evidence. The

6 See Appendix A, for a complete list of the agenda for the preliminary meeting. 7 See Appendix B, for sample orders for directions.


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arbitrators also outline the limits of recoverable costs of arbitration through

directions. A party is at liberty to apply and challenge any matter contained in

the directions if s/he has a valid point in his/her favour. Parties are bound to

comply with the arbitrators directions failing which the arbitrator must give a

notice outlining the default and calling upon the party to remedy the same. In

the event of failure by the defaulting party to remedy or continuation of

default the law gives the arbitrator a number of options.

However, the arbitrator must exercise due caution and ensure all reasonable

effort is expended to give the defaulting party an opportunity to remedy the

state of affairs.8 For instance, the law allows an arbitrator to proceed ex-parte

where a party fails to appear despite grant of adjournments by the arbitrator

and notices of hearings being served.9 Thus, where even after such reasonable

efforts the party persists in absence or failure to produce, the arbitrator may

make an award based on the available evidence and notwithstanding the

absence or the failure by such party.10

In addition, the arbitral tribunal is entitled under section 26 (d) of the 1995 Act

to terminate arbitration proceedings for want of prosecution. This happens

where the claimant defaults in communicating his/her claim or fails to do so

within reasonable time. If the respondent is the party in default in filing

defence, submissions or evidence the tribunal may continue the proceedings

without taking the default as admission11. Thus the tribunal will require the

claimant to prove its case as against the respondent and forbids summary

awards.

Importantly, ‘party’s autonomy’ permits parties to agree on any matter. Where

parties have agreed on a given matter, the arbitrator should not give directions

or deviate from the same. By way of an exclusion agreement, for instance,

8 See Sec. 26, Arbitration Act, 1995. 9 Ibid, Sec. 26 (c). 10 Ibid, Sec. 26 (b). 11 Ibid.


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parties can agree to exclude or regulate certain rights left to their discretion

under the Act e.g. the right to appeal or apply to court for determination of

questions of law. In the event of such an exclusion agreement, then the parties

or their legal representatives may draft an exclusion agreement to that effect

which they jointly sign and serve to the notice of the arbitrator.12

7.4 Pleadings in Arbitration

The term “pleadings” in the context of arbitration is used loosely to imply all

documents that serve to identify issues in the party’s dispute to the arbitrators.

Having appointed the arbitrator and agreed on the procedure and other

matters, the parties need to identify the issues in dispute between them, as that

is the only way the arbitral tribunal can set out to arbitrate the matter and make

a decision. The parties identify issues between them by utilising methods that

have been adapted for raising claims and lodging defence against a claim. It

is through those methods that parties identify issues between them and

articulate their case and the remedies sought against the other party in the

arbitration. That way, each party becomes certain of his or her case and that of

the other party.

Consequently, certainty and finality are injected to the arbitration process as

the parties are bound by the issues they raise and cannot deviate from them or

amend the case without following due procedure.13 It would border on chaos

if parties were to have no written statement of their claim and defence, as on

every turn of evidence which is likely to be injurious to one’s case, a shift

would be expected on his previous claim or defence.

Parties are afforded diverse devices for identifying issues in the dispute

between them. The most popular are pleadings and statement of case.

However, parties may also opt to define issues arising for arbitration in a

schedule or even have correspondence stand in the place of statement of case.

12 Ali, A., “Interlocutory (Intermediate) Matters” op. cit. 13 See below on amendment of pleadings.


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i. Pleadings

Pleadings are inherited from litigation and court procedure. Generally, the

rules of procedure define pleadings as a brief summary of the facts of the claim

and defence against claim. Pleadings should not raise matters of evidence.

Similarly, parties ought not to plead the law.

The main pleadings are statement of claim, statement of defence and/or

counterclaim, statement of reply and/or counterclaim.14 As a rule of thumb,

pleadings should as far as possible be rendered in clear, concise and simple

language otherwise one risks to the opposite party and even the arbitrator

failing to grasp the gist of their case. However, pleadings as known to litigation

are limited in that they are only amenable to instances where parties have a

cause-of-action e.g. a claim for a piece of land or breach of contract.

The Act seems to endorse pleadings in that it requires the claimant to state the

facts supporting his claim, the points at issue and the relief or remedy sought.

Similarly, the respondent is directed to state his defence in respect of the

particulars contained in the statement of claim. However, the parties are free

to agree on the contents of both statement of claim and defence. 15

ii. Statement of Case (Statement of Truth)

Pleadings have been criticised for their tendency, especially in the hands of

crafty lawyers, to cloud rather than clarify issues. The use of statement of case

can help cure this disadvantage. In this case, the claimant delivers to the

arbitral tribunal a statement of his/her case setting out in prose and narrative

form the material facts he relies on, any evidence he wishes to rely on and any

arguments of law that he intends to urge in support of the claim.

The statement is delivered within the period stipulated in the arbitral

tribunal’s directions. Then, within the period set for reply, the respondent

party delivers to the tribunal his/her statement of reply to the claimant’s claim.

14 For more details, see Order 2 of the Civil Procedure Rules 2010 titled “Pleadings Generally.” 15 Sec. 24 (1) Arbitration Act, 1995.


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The statement of reply/response invariably indicates which facts are accepted

and/or disputed, and the parts of the claim’s legal argument are accepted

and/or disputed. The statement of reply may also state the respondent’s

counterclaim as reply to the claimant’s or even outline a right to a set-off.16

The main advantage of statements of case is that they encourage flow and are,

therefore, easily understandable. By avoiding the format known to pleadings,

which has perfected the art of concealing rather than revealing facts to the

opponents, statements of case define issues before the tribunal and increase

expediency of the process.

The practice is to keep statement of case short and to the point. In fact, the

practice is that the tribunal gives directions if it prefers the statement of case

to exhaust the issues in the matter or merely to summarize and if the parties

are required to append their documentary evidence to the statement of case.17

iii. Defining issues in a schedule

This method is mainly used in building and construction arbitrations where

there are many issues or potential issues for decision. It seems most suited as

a supplement to the other methods rather than as a stand-alone method. The

claim on each issue, the defence and reply are set out in schedule form for the

arbitrator to see them all in one document and maybe one sheet of paper.18

iv. Correspondence between Parties as Statement of Case

Often, the parties to arbitration will have exchanged correspondence before

and after reference to arbitration regarding the matter in dispute in the hope

of reaching a settlement. Such correspondence from the claimant may become

the statement of claim upon order of the arbitrator, pursuant to an application

by the claimant. But the letters must be as few as possible, otherwise adopting

16 Ibid, See sec. 24 (1) and (2). 17 See also sec. 34(2) (C) of the Arbitration Act, 1996 (UK). 18 Bernstein, R., The Handbook on Arbitration Practice, (London: Sweet & Maxwell, 1998), p.132.


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them as statement of case may defeat the objective of expediting the arbitral

process.

If correspondence is adopted as the statement of case only, the defendant is

directed to deliver a statement of reply to the claim embodied in the

correspondence. In other instances, both claim and defence are set-out in the

correspondence and all an arbitrator needs to do is to give a direction

identifying those that outline the claim on the one hand and those that outline

the defence on the other.19

7.5 Pre-Arbitration Hearing Procedures

There are a number of pre-hearing procedures but the most outstanding are

seeking of further (and better) particulars, discovery (disclosure and

inspection) and amendment of pleadings.

i. Further and better particulars

Further and better particulars are mainly a delicacy for lawyers. They owe

their origin to the adoption of litigation practices into arbitration as they are

regularly used in the court process. Each party is entitled to request for

particulars to elaborate on the matters raised in its pleadings. So a party may

seek particulars in an instance where the other states that “it was settled

between the parties” without indicating the where, when and what of the

settlement.

Even where a party responds to the first request for particulars, the other may

press for further and better particulars. For instance, in a case where the reply

is that the settlement was for a set-off of the dispute, a request for further and

better particulars may be sought on what was the basis of the set-off and what

that other party’s claim was as against the other, so that they could end up

reaching a settlement for a set-off. It falls on the arbitrator to give directions on

19 Ibid.


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the necessity of the particulars after hearing the parties and keep each from

going beyond the original scope of the pleadings or arguments on record.

ii. Discovery (Disclosure and Inspection)

Each party is entitled to know the existence of all documents that are relevant

whether privileged or not, in possession, custody or power of the other party.

This helps limit instances of trial by ambush, one of the draw-backs of the

adversarial system. However, a party may only insist on and be allowed to

inspect those documents that are not privileged. The arbitrator is to give

directions on discovery and should restrict disclosure to only the relevant

documents.20

iii. Amendment of Pleadings

A party may need to amend pleadings on record. For instance, the need could

occur after the response to request for further and better particulars discloses

an issue not addressed in the present pleadings. The arbitrator may grant leave

to amend the pleadings unless the parties have agreed otherwise. Section 24(3)

of the Act gives the arbitrator the discretion to decline to allow amendments

or supplements to pleadings where they are likely to result in delays in the

arbitral proceedings.

7.6 Interlocutory Applications in Arbitration

As a matter of fact, arbitration proceedings witness diverse applications that

mainly seek conservatory and protective orders in respect of the subject matter

of arbitration. Essentially, these applications address the needs of the parties

for immediate and temporary protection of rights and property pending a

decision of the case on the merits by the arbitral tribunal.21 Invariably, the

orders seek to protect and/or conserve the subject matter of the arbitration

from dissipation. In other cases, for instance, in applications for orders of

20 Ali, A., “Interlocutory (Intermediate) Matters” op. cit. 21 Wagoner, D.E., “Interim relief in International Arbitration” Arbitration, Vol.62 (2), (1996), p.

131.


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security for costs, the aim is to ensure the rights granted at the conclusion of

the arbitration via the arbitral award are not in vain, that is, unenforceable.

Basically, the Arbitration Act provides for interlocutory applications, whether

before or during the arbitration process in section 7 and 18 of the Act. The

application for such interim reliefs may be before the arbitral tribunal or the

court where the tribunal is yet to convene or be constituted.

i. Interim Applications under Section 7 of the Act

The courts have wide powers to grant interim orders for the purpose of

preserving the status quo pending and during arbitration. Section 7 of the Act

limits parties’ freedom to contract any arbitration agreement that limits and/or

bars seeking interim measures of protection in court. Even though the

conservatory orders were not granted as the arbitration was not governed by

the Kenyan Arbitration Act, the court in Kenya Oil Company Limited & Another

v. Kenya Petroleum Refineries Limited22 noted that under section 7 of the

Arbitration Act, the High court is given power to issue an interim order of

injunction to protect the status quo of the matters under arbitration. The court

noted that the court’s jurisdiction therein was wrongly invoked and thus did

not grant the conservatory orders sought.

The jurisdiction to make such orders is the preserve of the High Court of

Kenya. The courts have jurisdiction to make such orders so as to preserve the

status quo of the subject-matter of the arbitration. These powers could include

preservation orders like attachment before judgment; interim custody or sale

of goods (e.g. those that are perishable) the subject matter of the reference or

for detention or preserving of any property or thing concerned in the reference;

appointing a receiver and interim injunctions. In Forster-v-Hastings

Corporation23 it was held that the court, in order to preserve the status quo in a

case where one of the parties to a contract had given a notice purporting to

22 [2010] eKLR. 23 Forster-v-Hastings Corporation, (1903) 87 LT 736.


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dismiss the contractors, could restrain the other party from acting on the notice

until judgement or further order, or until a reference to arbitration as provided

for by the contract.

In Don-wood Co. Ltd-v-Kenya Pipeline Ltd24, Ojwang J (as he then was) dealt with

an application for interim injunctive orders pending arbitration. The

Defendant in that case had declined arbitration and was doing everything to

avoid the obligations under the contract. The judge, in granting the orders

sought, found that the jurisdiction to grant the injunctive relief under Section

7 of the Arbitration Act was meant to preserve the subject matter of the suit

pending the determination of the issues between the parties.25

The provisions of Section 7 were also in consideration in the case of Seven

Twenty Investments Limited v Sandhoe Investment Kenya Limited26 where the

Court stated:

“Perusal of Section 7 of the Arbitration Act clearly shows that the issue

of whether or not there is a dispute or whether or not there would be

losses by either side would not be a factor for a court to take into

consideration when deciding whether or not it should grant an order

from interim measure of protection or injunction to safeguard the

subject matter of the arbitral proceedings. All that a court would be

interested in is whether or not there was a valid arbitration agreement

and if indeed the subject matter of the arbitral proceedings was in

24 Don-wood Co. Ltd-v-Kenya Pipeline Ltd, HCCC No. 104 of 2004. 25 See also CMC Holdings Ltd & Another v Jaguar Land Rover Exports Limited [2013] eKLR in which

the Court held:-

“The measures are intended to preserve assets or evidence which are likely to be wasted if

conservatory orders are not issued. These orders are not automatic. The purpose of an

interim measure of protection is to ensure that the subject matter will be in the same state as

it was at the commencement or during the arbitral proceedings. The court must be satisfied

that that the subject matter of the arbitral proceedings will not be in the same state at the time

the arbitral reference is concluded before it can grant an interim measure of protection.” 26 Seven Twenty Investments Limited v Sandhoe Investment Kenya Limited, [2013] eKLR, Civil Suit

No 359 of 2013.


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danger of being wasted or dissipated so as to preserve the same,

pending the hearing and determination of the arbitral reference.”

However, it is important to note that the law discourages the parties from

making parallel applications before the arbitral tribunal and/or the High

Court. Section 7 (2) of the Act enjoins the court to adopt any ruling or finding

by the arbitral tribunal on any relevant matter to the application as conclusive.

There is no question that the section applies even where the ruling is on a final

matter so as to prevent appeals on arbitral rulings on applications. The

rationale here is to prevent multiple applications, situations of delay

occasioned by applications, or parties seeking to clog and/or stall arbitral

proceedings by making frivolous applications under the section.

Indeed, the intention to have the determination on application for interim

measures by the arbitral tribunal as final and binding is captured under the

UNCITRAL Model Law on International Commercial Arbitration. The Model Law

has a provision to the effect that an interim measure issued by an arbitral

tribunal shall be recognized as binding and, unless otherwise provided by the

arbitral tribunal, enforced upon application to the competent court,

irrespective of the country in which it was issued, subject to the provisions of

Article 17 I.27 The decision on interim measures is therefore treated as an award

capable of enforcement by courts, unlike the decisions on preliminary order

which, although binding on the parties, are not subject to enforcement by a

court and do not constitute an award.28 Although Kenya’s Arbitration Act 1995

is based on the Model Law, the same is yet to be amended to reflect this

position. However, what is more important is that courts recognise the powers

of the arbitral tribunal to make a determination on applications for interim

measures.29

27 UNCITRAL Model Law on International Commercial Arbitration, Article 17 H (1). 28 Ibid, Article 17 C (5). 29 See generally, sec. 7 & sec. 18, Arbitration Act, 1995.


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ii. Interim Applications under Section 18 of the Act

Save where parties have otherwise agreed, the arbitral tribunal may at the

request of a party order the taking of interim protective measures towards the

subject-matter of the dispute by the relevant party as the tribunal deems

necessary.30 In that connection, the tribunal may require a party to provide

appropriate security for the measure requested for.

The Act gives the High Court power to enforce the peremptory orders of

protection given by the arbitral tribunal. In order to enforce such protective

measures or generally to exercise the power associated with the interim

protective measures, the tribunal or a party with approval of the arbitral

tribunal may apply for assistance from the High Court.31

The High Court has equal powers as possessed by the arbitral tribunal with

regard to interim measures of protection under the Act. In particular, the High

Court’s powers are the equivalent to the one it wields in civil proceedings

before it. However, the arbitral proceedings shall continue regardless of the

fact that such an application is pending in the High Court except where the

parties agree otherwise.32

iii. Application for Security for Costs

Although an application for orders for security for costs is provided for under

Section 18 of the Act, it is so special an order to merit consideration if only to

emphasise its utility and versatility. Given the enormity of costs that, at times,

attend arbitration, the law allows the arbitrator on application and, in limited

instances, to require security for costs from a party on application by the

opposite party.

The party applying may specify the preferred form of security whether cash

or bond or a guarantee. As in court proceedings, security for costs ensures that

30 Sec. 18 (1) (a) of the Arbitration Act, 1995. 31 Ibid, Sec. 18 (2). 32 Ibid, Sec. 18 (3).


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enforceability of an award for costs in favour of one party is not frustrated by

the inability to pay on the part of the party against whom they are made.

Section 18 (1) (c) of the Arbitration Act 1995 provides that unless the parties

otherwise agree the arbitral tribunal may on the application of a party order a

claimant to provide security for costs.

The arbitral tribunal is also given wide discretion to decide what measures are

necessary. In addition to Section 18 of the Act, Rule 16(C) 9 the Chartered

Institute of Arbitrators-Kenya Branch Arbitration Rules gives the tribunal

jurisdiction to make orders for security of a party’s costs and to secure all or

part of any amount in dispute in the arbitration. There is nothing that forbids

parties from agreeing on the issue of orders for security for costs or to allow

the arbitrator to make the orders.

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Chapter Eight

Arbitration Hearing

8.1 Introduction

This Chapter describes generally what takes place in an arbitration hearing. In

particular, the chapter entails a description of the procedure that is usually

followed from the opening to the closing of the arbitration proceedings. The

purpose of this chapter is to give a picture of what transpires in arbitration

hearing. The Chapter is also meant to discuss the key aspects of arbitration

proceedings which contrast it with litigation and other methods of dispute

management.

8.2 Arbitration Hearing

At the arbitration hearing, the claimant and the respondent normally give

evidence and/or call their witnesses for examination and cross-examination.

After the end of the evidence, both advocates make brief closing statements on

the evidence and the applicable law. However, there are matters that usually

arise and need to be resolved early on in the hearing. These matters include:

i. The rules of procedure under which the arbitration will be conducted

and the fact that it is private.

ii. Hours of sitting- as a matter of common sense, the arbitrator and the

parties can only concentrate fully for between 4 and 5 hours per day.

Some arbitrators operate on a 4 day week to allow time on the fifth day

to marshal evidence and attend other matters such as issuance of

directions.

iii. Parties may need to identify in writing the issues in dispute.

iv. Agreement on what form of evidence is to be taken. Pursuant to the

Arbitration Act the arbitral tribunal is empowered to administer an

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oath1 and the religious beliefs of the witnesses must be respected just

as happens to witnesses and advocates in proceedings before a court2.

The trend now is that a party or a witness should give his evidence on

affirmation which overcomes the problems of a multiplicity of

religious and other customs in oath taking.3

8.3 Opening the Hearing

The arbitrator will usually open the proceedings by introducing the parties

and the nature of the dispute at hand. Most likely, one or both parties will have

issues such as last minute amendments to the pleadings, applications for

adjournment (due to witnesses’ absenteeism) or requests for adjournment if

the parties are considering settlement. There may also be a challenge to the

jurisdiction of the arbitrator or an element of the case over which one party

considers that the arbitrator has no jurisdiction. Usually, the arbitrator will

deal with such matters straight away.

8.4 Summary of Procedure at the Arbitration Hearing

The normal sequence of events at the hearing is as follows:-

i. The Claimant opens his case by making an opening statement,

outlining his pleadings and the evidence he will call and if there is a

counter-claim he will state his defence to it.

ii. The Claimant then calls his witnesses in turn and examines them. In

some arbitrations this “evidence-in-chief” is done through witness’

proofs of evidence (e.g. written sworn evidence which the parties

affirm under oath before the arbitrator).

iii. The witnesses are then cross-examined by the Respondent and

subsequently re-examined by the Claimant on any matters raised in

1 Sec. 20 (5) of the Arbitration Act, 1995. 2 Ibid, sec. 20 (4). 3 Ibid, sec. 20 (5).

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cross-examination. However, leading questions are not allowed during

the cross-examination.

iv. The Respondent then makes his opening statement, sets out his defence

and puts forward his counter-claim if there is one.

v. The Respondent then calls his witnesses, examines them and offers

them too for cross-examination by the Claimant. He may then re-

examine them. In re-examination leading questions may not be asked.

vi. The Respondent then closes his case by reviewing his evidence and

makes his final submissions which are often written.

vii. This is then followed by the same exercise for the claimant.

viii. The arbitrator then closes the proceedings and gives notice of when he

will publish his award.

8.5 Key Aspects of the Arbitration Hearing

The following are the key aspects that attend arbitration hearing and

distinguish it from other forms of proceedings:-

i. Claimant to Open and Close Hearing

The claimant usually opens and closes the arbitration hearing. However, this

sequence can change where the Respondent decides not to put forward

evidence himself and in such circumstances, may claim the privilege of the last

word.

ii. Opening Statements.

Opening statements are usually, and should be, brief. Each party should

restrict itself at the opening to making references to the particular legal

precedents on which they intend to base their legal issues. However, a detailed

discussion of these should be reserved for final submissions.

iii. Principle of Natural Justice

The principle of natural justice requires that each party be accorded a sufficient

opportunity to present his or her case and to deal with any matter that may be

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raised against them. However, this does not include, as is sometimes said,

dealing with the case of the other party, but only deals with any matter that

may be against them. So, if an arbitrator is aware of something, or becomes

aware of something, whether it is a fact or law, or even his or her opinion, it

must be put to the parties if it is to be taken into account, and it is better that it

be put to the parties in any event.

iv. Examination of Witnesses

After taking the oath in the agreed form each witness is examined by the party

that called him/her. This is referred to as “examination-in-chief”. To save time

during the examination-in-chief, witnesses may produce written statements or

proofs of evidence whereupon the party introducing that witness confirms

that this is the evidence of the witness, highlights by examination of one or two

key issues and then allows the other party to cross-examine the witness. There

may be witnesses of fact and witnesses who give expert opinion.

It is important to note that the rules applicable in an examination-in-chief are

quite rigid and leading questions are not allowed during that examination.

However, in cross-examination leading questions are permissible. Cross-

examination is normally followed by re-examination which considers and

questions only those matters that arose during cross-examination. During re-

examination leading questions are also not allowed.

v. Expert evidence in arbitration.

Expert evidence is given by someone who has special knowledge to form

opinions of facts. Expert witnesses are present not primarily to help their

clients but to assist the arbitrator reach a proper conclusion. Experts are

appointed so as to report to the arbitral tribunal on specific issues to be

determined by it. The tribunal may also require a party to give the expert any

relevant information or to produce or provide access to any relevant

documents, goods or other property for inspection.4

4 Sec. 27 (1) of the Arbitration Act No. 4 of 1995, op. cit

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After delivery of his written or oral report, the expert is required under section

27 of the Act to participate in an oral hearing where the parties shall have an

opportunity to put questions to him and also present expert witnesses in order

to testify on the points at issue. Where experts are in conflict, it will be up to

the arbitrator to decide.

vi. Adversarial Procedure.

Arbitration is adversarial and the arbitrator is advised to intervene with

subtlety and in moderation during the conduct of the hearing. Adversarial

system of justice involves conducting legal action before the tribunal as a

contest between the parties to it with the judge (and where applicable the

arbitrator) playing merely passive role of an impartial observer. The

responsibility of conducting investigation, adducing evidence and examining

witnesses in the adversarial system falls on the parties.

The arbitrator in the adversarial system does not have a responsibility to

undertake investigations and is restricted in making his decision to rely only

on the evidence adduced by the parties before him and the inferences he makes

from it. The arbitrator is also not entitled to examine witnesses or ask questions

during proceedings except to clarify issues. In Kihuni v Gakunga & Another5 the

court held that:-

“A party cannot be heard to challenge issues referred to arbitration especially

in a case such as this where the parties and their respective advocates drew the

issues. The parties are deemed to know the real questions between them. The

arbitrators will consider evidence on issues which are referred to them”.

According to Lord Denning in Jones v National Coal Board, the key features of

the adversarial system may be surmised thus:

5 Kihuni v Gakunga & Another, [1986] KLR 572.

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`In the system of trial which we have evolved in this country, the judge sits to

hear and determine the issues raised by the parties, not to conduct an

investigation or examination on behalf of society at large, as happens, we

believe, in some foreign countries.’6

The opposite of the adversarial system of justice is the inquisitorial system of

justice which entails the tribunal taking a very active and direct role in

investigating the facts and the law in the case by ordering the carrying out of

investigations, examining witnesses and the adduction of evidence. It is also

called the investigative system because the judge is actively involved in

establishing the facts of the case at hand.

vii. Limitation on Reliance on the Arbitrator’s Expertise.

Arbitrators should not rely on their own expertise in defiance of the evidence

presented to them. If he forms a contrary view to the evidence presented by

both parties then he should make the parties aware of the fact. This aspect of

arbitration is an extension of the adversarial nature of arbitration and the

principle of natural justice.

In British Oil & Cake Mills -v- Horace Battin & Co7, Darling J highlighted the

importance of the special knowledge of the arbitrator thus:-

"The people who go to arbitration desire to have arbitrators or umpires who

will not decide on evidence alone, but will bring to the consideration of the

case a great deal of special knowledge."

Indeed, the position taken by Darling, J. is not strictly correct as the arbitrator's

knowledge is a form of evidence. In Jordeson & Co -v- Stora Kopparbergs

Bergslags A/B8 Branson J. is clearer on the matter:

6 Jones v National Coal Board, [1957] 2 QB 55; Denning LJ, 1957: 63). 7 British Oil & Cake Mills -v- Horace Battin & Co , (1922) 13 LL LR 443 at p. 444. 8 Jordeson & Co -v- Stora Kopparbergs Bergslags A/B , (1931) 41 LL LR 201 at p. 203.

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"Now, I think that the fact that this umpire was an expert in the timber trade

and was appointed because he was such an expert should not be lost sight of. I

think the parties must be taken to have assented to his using the knowledge

which they chose him for possessing; I do not say knowledge of special facts

relating to a special or particular case, but the general knowledge of the timber

trade which a man in his position would be bound to acquire. "

The point is that the Arbitrator applies his skill and knowledge, but not his

special knowledge of particular matters, at least not without some precautions.

In Fox -v- P. G. Wellfair Ltd, Dunn L.J.9 gave an example of the precaution which

an arbitrator with special knowledge should take:

" . . If the expert arbitrator, as he may be entitled to do, forms a view of the

facts different from that given in the evidence which might produce a contrary

result to that which emerges from the evidence, then he should bring that view

to the attention of the parties.”

viii. Arbitrator’s Notes

Unless the parties agree to a transcript of the hearing being provided by a

stenographer, then the arbitrator must keep a record of key points as the

hearing proceeds. However, this is a personal decision and the arbitrator is not

under duty to avail such notes to the parties. It has been found to be a failure

to adhere to the arbitral procedure where the arbitrator does not keep a record

of the proceedings and does not disclose the minute of the parties at the

preliminary meeting dispensing with that requirement. This was the case in

Joseph W. Karanja & another v. Geoffrey Ngari Kuira10 where the failure to disclose

a minute which recorded agreement of the parties at a preliminary meeting

that “the parties do not require a full transcript of the proceedings” was

viewed as a significant non-disclosure warranting a review.

9 Fox -v- P. G. Wellfair Ltd, [1981] 2 Lloyd's Rep 514 at p. 528. 10 Joseph W. Karanja & another v. Geoffrey Ngari Kuira, [2006] eKLR.

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While arbitrators are not under legal obligation to supply their arbitrator’s

notes to the parties, and any party who wishes to have the proceedings of the

Arbitration must hire a stenographer at their own cost, the constitutional

question that arises here is the right of the parties to obtain information

necessary for realization of justice. This may especially be an issue in

mandatory arbitration, for instance, statutory arbitration. Article 48 of the

Constitution obligates the State to ensure that justice is done and the same is

not defeated by a requirement for any fee to be paid. Article 35(1) of the

constitution provides that every citizen has the right of access to: information

held by the State; and information held by another person and required for the

exercise or protection of any right or fundamental freedom. Would the

arbitrator be thus compelled under this constitutional provision to provide a

copy of the arbitrator’s notes to any party who insists on his or her right to

access information as a constitutionally guaranteed right? This right has also

been legislated under Access to Information Act, 2016. This may become a major

issue to contend with in future.

ix. Tripartite Arbitrations

In some special cases, especially in building contracts where sub-contractors

are employed by the main contractors, it will be necessary to join the sub-

contractor in the dispute. However, this can only be done with the approval of

both the Claimant and the Respondent as the sub-contractor may not be privy

to the agreement between the employer and the contractor.

x. Where the Arbitration Contract is not Signed

It is not unusual for some agreements to be completed without a signed

contract. The question is, if there is no written agreement (or contract) can the

parties refer their differences to an arbitrator? The answer is “yes” but the

arbitrator should be vigilant to get the parties to expressly agree to arbitrate,

with his appointment detailed therein and signed by the parties.

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xi. Withdrawal of Instructions

Sometimes, one party will withdraw the instructions of his advocate. In such

circumstances, the arbitrator should adjourn the proceedings to give

reasonable time for that party to instruct another advocate with costs of the

adjournment being borne by him.

xii. Adjournment of Hearing

The reasons for adjournment range from the justifiable to blatant delay tactics

especially where one side feels the case is going against them. In most cases,

the arbitrator will adjourn the proceedings where there are justifiable reasons

and make an award as to the costs of the adjournment.

xiii. Non-Appearance of a Party

If a party fails to appear and despite several notices of adjournment and re-

fixing dates by the Arbitrator, he continues to do so, the arbitrator may be

forced to proceed ex-parte. However, in such instances, the arbitrator should

take reasonable effort to allow the reluctant party to attend. If the party persists

in the default, the arbitrator should issue a peremptory order advising the

party that in the event of him failing to attend, the hearing will continue in his

absence and an award made notwithstanding.

xiv. Offer to Settle Disputes

Parties should be encouraged to settle their dispute. An offer of settlement can

be “open” and/or “sealed” depending on whether it is revealed to the

arbitrator or not and may influence his decision. The sealed offers are further

divided into “without prejudice” offers and “without prejudice save as to

costs” offers.

Where the arbitrator faces a new situation or some facts demand a new

interpretation which he thought he could dispose of, he/she should not shy

away from adjourning the proceedings to obtain advice on that particular

point or to do research on a particular problem so as to give a correct ruling.

The arbitrator should also not shy from making decisions both on fact and law.

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In any case the arbitrator’s decision on facts is not appealable under the Act.

However, his decision on the law is appealable to the High Court but because

of the attendant delays and other hurdles in the court process that is why the

parties resort to arbitration.

Arbitral Awards, Costs and Interest

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Chapter Nine


9.1 Introduction

This chapter discusses what an arbitral award is, the statutory requirements

concerning arbitral awards as well as the provisions of the Arbitration Act,

1995 on arbitration costs and interest. The purpose of the chapter is to outline

the law and the contemporary issues relating to arbitral awards and to costs

and interest in arbitration relevant to the Kenyan scenario.

9.2 Arbitral Award

An arbitration award (or arbitral award) is a determination on the merits by

an arbitral tribunal in arbitration. In essence, an award is analogous to a

judgment in a court of law. It is referred to as an 'award' even where all of the

claimant's claims fail or the award is of a non-monetary nature. Arbitration is

particularly popular as a means of dispute settlement in the commercial

sphere. One of the reasons for doing so is that in international trade, it is often

easier to enforce an arbitration award in a foreign country than it is to enforce

a judgment of the court. Under the New York Convention 1958, an award

issued in a contracting state can generally be freely enforced in any other

contracting state.

Writing the Award follows the hearing of the parties and their witnesses and

is consequent upon logical examination and evaluation of the facts and

evidence adduced to determine whether liability exists and the proper remedy

in the circumstances. The purpose of the arbitral award is to inform the parties

of the arbitrator’s decision, enable the party to enforce it and if the other party

is aggrieved, to challenge it in court as provided for in Section 35 of the

Arbitration Act.


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There are both formal and substantive requirements that an arbitral award

should meet. This is due to the fact that an arbitral award is a documentary

instrument that has legal effect. The substantive requirements are that the

award should be cogent, complete, certain, final, enforceable and consistent.

These requirements were well articulated and discussed at length in Anne

Mumbi Hinga v Victoria Njoki Gathara,1 where the Court of Appeal observed as

follows:

“One of the grounds relied on to invite the superior courts intervention in not

enforcing the award was that of alleged violation of the public policy. Again

no intervention should have been tolerated firstly because one of the

underlying principles in the Arbitration Act is the recognition of an important

public policy in enforcement of arbitral awards and the principle of finality of

arbitral awards and secondly although public policy can never be defined

exhaustively and should be approached with extreme caution, failure of

recognition on the ground of public policy would involve some element of

illegality or that it would be injurious to the public good or would be wholly

offensive to the ordinary reasonable and fully informed member of the public

on whose behalf the State’s powers are exercised…”

The natural requirements may be summarized thus:

a) Cogent: The award must be compelling or convincing in its reasoning.

b) Complete: The award must deal with all issues properly submitted to

the arbitrator (exceptions may be a Partial Award or an additional

award)

c) Certainty: The award must state what has been decided, if it is a

declaratory award, and direct what is to be done and by whom, if it is

dispositive. There must be no scope for doubt. The aspect of certainty

also extends to the fact the award should be capable of performance.

1 Anne Mumbi Hinga v Victoria Njoki Gathara, [2009] eKLR.


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d) Finality: Section 32A of the Act provides that unless otherwise agreed

by the parties, an arbitral award shall be final and binding upon the

parties to it and that there shall be no recourse against the award except

as provided for in the Act. The Award must deal finally with all the

issues in the reference; nothing should be left to the decision of another,

although it is possible that the effect of an award may be contingent

upon some future event. Essentiality, finality implies that courts cannot

interfere with an arbitral award through judicial review.

In the Anne Mumbi Hinga case the court in addressing the requirement

as to finality of an arbitral award stated that finality as a concept in

arbitration is shared worldwide by States that have modelled their Acts

on the UNICITRAL Model Law like Kenya, and that the common

thread running through all these Acts is the restriction of judicial

review of arbitral awards and the confinement of review where

necessary and in line with the provisions of the Act. The court therein

noted that Sections 35 and 37 of the Arbitration Act are wholly

exclusive except where a particular provision invites for the court’s

intervention or facilitation.

It is instructive at this juncture to consider the United States’ Supreme

Court decision in Hall Street Associates, L. L. C., Petitioner vs Mattel, Inc.2

In that particular case the Court struck down an arbitration agreement

that allowed the courts to overturn an arbitration award that contained

legal errors or factual findings that were not supported by “substantial

evidence”. The Court recognized that where the parties attempt to

heighten the level of judicial scrutiny of arbitration awards the Federal

Arbitration Act (“FAA”) policy of allowing flexibility to the party’s

clashes with the equally important policies of finality and efficiency in

arbitration.

2 Hall Street Associates, L. L. C., Petitioner vs Mattel, Inc., 552 U. S. – (2008).


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The court argued that enhanced court review of arbitration awards,

“opens the door to the full-bore evidentiary appeals that render informal

arbitration merely a prelude to a more cumbersome and time-consuming

judicial review process.” The decision in the Hall Street case , therefore,

suggests that by entering into an arbitration agreement a party

necessarily gives up most of his/her rights of appeal and challenge to

the award in exchange for the virtue of finality of the award.

The requirement as to finality of an arbitral award was also considered

in Eastern Seaboard Concrete Construction Co., Inc., et al v Gray

Construction Inc., et al., District of Maine3 –where the First Circuit Court

of Appeals refused to intervene with a second award issued by an

arbitrator to clarify the initial award based on the finality policy. In this

case the court placed great emphasis on the limited scope of judicial

review of an arbitral award and inter alia held that courts “deferential

review of arbitration awards” extended to the arbitrators reasoning for

revisiting and clarifying his award. If an arbitrator says that he or she

intended to make a particular finding or ruling but inadvertently left it

out and stated it incorrectly the courts respect for arbitration, precludes

judicial second – guessing of the arbitrator.”

e) Enforceability: The award must be capable of being enforced. This

implies that, if for instance it is an award for payment of money, it must

clearly state the amount awarded, to whom it is to be paid and by

whom, when and in what currency. In other words, the award must

state what is to be done, by whom and for whom and in what time.

Enforceability of the award will be dealt with in great detail in Chapter

Eleven.

f) Consistency: Most importantly, the award ought to be consistent at the

internal level meaning that it should be clear as otherwise it is likely to

be unenforceable.

3 Eastern Seaboard Concrete Construction Co., Inc., et al v Gray Construction Inc., et al., District of

Maine , Civ. No. 08-37-P-S, United States of America.


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In addition, in order for the arbitral award to attract the benefits of support

and enforcement within a legal system, it must be substantively compliant. In

this regard, it must meet the following special requirements:-

i. Fraud: The award must not be obtained through fraud. Indeed, under

Section 35 of the Act, an arbitral award may be set aside by the High

Court where an applicant furnishes proof to the effect that the making

of the award was induced or affected by fraud, bribery, undue

influence of corruption.4

ii. Public Policy: The award must not be contrary to the public policy.

This proposition is contained in Section 35 (2) (ii) of the Act which

grants the High Court the power to set aside an arbitral award where

it is in conflict with the public policy of Kenya. The setting aside of an

arbitral award for being inimical to the public policy in Kenya was

considered in Kenya Shell Limited v. Kobil Petroleum Ltd5 which

approved the decision of Ringera J (as he then was) in Christ For All

Nations case6 discussed in Chapter 6 infra.

iii. Illegality: The arbitral award must not order a party to commit an

illegal act.

9.3 Formal Requirements of the Award

The minimal formal requirements of the award are provided for under Section

32 of the Act. As a general rule, an award is a legal document and it must

contain enough information to enable the court, if called upon, to enforce it

without the need for further inquiry. An award must be prepared with the

greatest care and as a matter of practice, there are some basic requirements.

4 Sec. 35 (2) (vi), Arbitration Act, 1995. 5 [2006] eKLR. 6 [2002]2 EA 366.


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Section 32 stipulates that an arbitral award shall be made in writing and shall

be signed by the arbitrator or the arbitrators.7 The law also provides that in

arbitral proceedings with more than one arbitrator, the signatures of the

majority of all the arbitrators shall be sufficient so long as the reasons for any

omitted signature are stated.8 If all the arbitrators do not sign the Award, at

least all the arbitrators supporting the Award ought to sign it.

Further, the arbitral award must be dated. The law provides that the arbitral

award shall state the date of the award. The award also should state the

juridical seat of arbitration as agreed by the parties pursuant to section 21 (1)

of the Act.9 This is necessary because the award is deemed to have been made

at that juridical seat.

The arbitral award is also supposed to be signed as the law provides that a

signed copy shall be delivered to each party.10 In Kenyan Law, there need be

no witnesses to the signatures of the arbitrators. However, this is mandatory

in some other jurisdictions which require an Award to be witnessed and even

others require it to be notarized.

The arbitral award also has to state the reasons upon which it is based. This is

provided for under Section 32(3) of the Act. The only exceptions are where the

parties have agreed that no reasons are to be given or where the award is an

arbitral award on agreed terms under Section 31 of the Act. An arbitral award

on agreed terms under Section 31 arises where during the proceedings the

parties settle the dispute and record that settlement if the parties so request

and the tribunal does not object. Where the parties settle the dispute this way,

the arbitral tribunal must terminate the proceedings.

7 Sec. 32 (1), Arbitration Act, 1995. 8 Ibid, sec. 32 (2). 9 Ibid, sec. 32 (4). 10 Ibid, sec. 32 (5).


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Finally, the law requires that the award be published to the parties unless the

arbitral tribunal has chosen to withhold it in line with the law until payment

of the expenses and fees of the tribunal11. Section 32(5) provides that a signed

copy of the award be delivered to each party. The best practice is to print at

least two master copies, one for each party, and to provide the parties with a

bound master copy and a set of loose pages for copying.

9.4 Types of Awards

There are different types of awards as per the Act:

i. Interim Award

Section 32(6) provides that an arbitral tribunal may, at any time, make a partial

award by which some, but not all, of the issues between the parties are

determined. Interim awards are sometimes known as partial awards. They are

often used:

a) where disputes can conveniently be divided into stages;

b) where the determination of preliminary issues may save the time and

cost of a prolonged reference;

c) Where the arbitrator’s award of costs is dealt with separately from the

substantive issues.

An example where an interim award may be suitable arises when there is a

question of whether or not a claim is time-barred under the Limitation of

Actions Act. If the claim is time-barred, there is then no need to proceed

further. Similarly, an interim award may obviate the need for a further pursuit

of the claim if a dispute as to the validity in principle of a claim is dealt with

as a preliminary issue.

Whereas an interim award does not determine all the matters in dispute

between the parties, all matters referred to in an interim award are determined

11 Ibid, Sec. 32 B (3).


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finally therein. It is noteworthy that the word ‘interim’ does not imply that

those matters decided in the interim award are subject to review. For example,

an interim award where liability is decided in respect of certain items of the

claim but not others, provides a final determination of those issues of liability.

Only quantum issues on those items are to be decided in another award.

ii. Provisional Award

Unlike the interim award, a provisional award is one which orders a part of a

claim or claims to be paid ‘on account’, subject to a final decision later. This

power is usually only available if the parties agree to confer it.

iii. Consent Award

The consent or agreed award incorporates the terms of a settlement which the

parties have negotiated before it reaches a hearing or an award. The purpose

of so doing is to clearly define the matters that have been so settled and to

define responsibility for costs. It then enables one party to take enforcement

proceedings when the other party fails to comply with the terms of the

settlement. The consent award formally brings the arbitration to a conclusion.12

iv. Final Award

Section 32A of the Act provides that unless otherwise stated, an award is

deemed to be final, and it concludes the reference. As soon as the arbitrator

has completed his award, his work as an arbitrator and his power and duty

ceases. He becomes functus officio, meaning that he has discharged his duty.13

Thus, it follows that thereafter he has no jurisdiction to deal with any question

or difficulty that may arise from his award. The exceptions to this are:

(i) where the award is merely an interim award and the arbitrator will

have to deal with other matters left to a final award.

12 Ibid, Sec. 31. 13 See Lloyd & Others v Wright and Dawson v Wright [1983] QB 1065.


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(ii) where the award is remitted to the arbitrator by the court for

reconsideration.

(iii) where the arbitrator corrects in an award, any computation errors,

clerical mistake or typographical errors or any other errors of a similar

nature under Section 34 of the Act.

(iv) where, under Section 34(4), a party upon notice in writing to the other

party and within 30 days after receipt of the arbitral award, requests

the arbitral tribunal to make an additional arbitral award as to claims

presented in the arbitral proceedings but omitted from the arbitral

award.

v. Additional Awards

Section 34(4) provides that unless otherwise agreed by the parties, a party may,

by giving notice in writing to the other party and within 30 days of receipt of

the arbitral award, request the arbitral tribunal to make an additional arbitral

award as to claims presented in the arbitral proceedings but omitted from the

arbitral award. Where the arbitral tribunal considers such a request to be

justified, it is to make the additional arbitral award within 60 days.14 However,

the arbitral tribunal may extend, if necessary, the period of time within which

it is to make the additional arbitral award.

9.5 Costs in Arbitration

The arbitration process invariably involves costs and expenses and the

questions of who bears the costs, how much is payable and when costs are to

be awarded are very delicate questions. The costs of arbitration, also called

costs of the award include: the arbitrator’s fees, costs of hiring the venue of

arbitration, costs of providing transcripts of the proceedings (where these have

been contracted), legal fees of advocates employed to advice on legal issues

and experts’ fees, disbursements and other allowances.

14 Sec. 34 (5), Arbitration Act, 1995.


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It is important that the arbitrator agrees with the parties on the method of

charging his fees before he accepts the appointment so as to avoid future

disagreements with the parties at the end of the proceedings. However, most

of the time, it is not feasible to agree on a lump sum because of the uncertainty

of the period that may be taken up by the matter. All the same, it is important

to agree on the rate of charges and the circumstances under which the charges

may be reviewed to allow the arbitrator the opportunity to keep his fees in line

with inflation, if the arbitration is extended for a long period of time. The

arbitrator usually takes a deposit from the parties so that the extent of his fees

and disbursements are covered at all times. Such deposits can be “topped-up”

from time to time.

The power of the arbitrator to award costs is provided for under Section 32B

of the 1995 Act. The arbitrator must satisfy himself that the arbitration

agreement is silent on costs and the legal provision on award of costs is subject

to party autonomy to stipulate otherwise. Thus, without agreement as

between parties, cost and expenses of arbitration are to be determined and

apportioned by the arbitral tribunal. The section defines costs as the legal and

other expenses of the parties, fees and expenses of the arbitration and legal and

other expenses of the arbitral tribunal.15 The arbitral tribunal may also exercise

discretion to determine and award other expenses related to the arbitration.

The law provides for award of costs at the award stage or after the award but

not before.16 The arbitral tribunal may also award costs by way of

supplementary award where the same was omitted in the main award. In

default of award of costs and expenses, each party is responsible for the costs

and expenses of the arbitration.17 This means that each party is responsible for

the legal and other expenses of that party and an equal share of the fees and

15 Ibid, Sec. 32B. 16 Ibid. 17 Ibid, sec. 32B (2).


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expenses of the arbitral tribunal and any other expenses relating to the

arbitration.18

The arbitrator normally calculates his charges on the agreed rate and

incorporates it in the Award. He then writes to the parties informing them that

the Award is ready for collection on payment of his fees. The Arbitrator has

lien on the award meaning that he can hold on to it as security for his fees

insisting on releasing it only if the parties make payments.19 As per Section 32B

(3) of the Act, the arbitral tribunal may withhold the delivery of an award to

the parties until full payment of the fees and expenses of the arbitral tribunal

is received.

If a disagreement arises on the amount of the arbitrator’s fees, parties may

apply to the High Court for taxation of the fees. In this regard, if the arbitral

tribunal has withheld the delivery of an award, a party to the arbitration may

after giving notice to the other party and to the arbitral tribunal deposit with

the court the fees and expenses demanded by the arbitral tribunal. Such a party

is then entitled to apply to the High Court for an order directing the manner

in which the fees and expenses properly payable to the arbitral tribunal shall

be determined.20

Upon such an application the High Court has the jurisdiction to determine the

fees and expenses which are properly payable and make the requisite order.

Upon such an order, the fees and expenses ordered to be paid shall be paid out

of the moneys deposited into court and the balance of those moneys, if any,

refunded to the applicant. The decision of the High Court on this kind of

application is final and not subject to appeal.21 Indeed, the parties cannot agree

to oust the right of the arbitrator to exercise lien on the award pending

payment of his costs and fees and/or the right of any party to apply to the High

18 Ibid. 19 Ibid, sec. 32 (5). 20 Ibid, Sec. 32B (4). 21 Ibid, Sec. 32B (6).


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Court for taxation of fees and expenses of the arbitrator.22 After taxation, the

arbitrator should lift his lien and release the Award.

9.6 Interest

As a matter of fact, the successful party in the arbitration should be reinstated

to where he was, in monetary terms, before the breach occurred. Given that

the value of money lapses with passage of time, the payment of interest is used

to rectify the situation. Thus, the party who has been kept out of his money is

awarded interest by the tribunal on the amount involved from the date it was

entitled to the money up to the time it got paid. The interest payable is either

simple or compound depending on the circumstances of the claim23.

Where what is sought is compound interest, the party seeking it is required to

adduce evidence, for example, to show that he took an overdraft facility from

a bank to perform the part of the contract affected by the breach. He may, thus,

be awarded compound interest to cover the actual interest amounts which

were charged by the bank in the case.

The Arbitration Act, 1995 had been silent on the awarding of interest by the

arbitral tribunal until the 2009 amendment introducing Section 32C which

provides thus:

“Unless otherwise agreed by the parties, to the extent that the rules of law

applicable to the substance of the dispute permit, an arbitral award may

include provision for the payment of simple or compound interest calculated

from such date, at such rate and with such rests as may be specified in the

award.”

In effect, Section 32C leaves the issue of determination of interest to be dealt

with by the operative law. However, this is subject to the agreement of the

22 Ibid, Sec. 32B (7). 23 Ibid, sec. 32C.


158

parties. As such, the arbitrator has the discretion to provide for interest,

whether simple or compound, in the arbitral award and at such a rate as

specified in the award. In other words, the amendment gave the arbitral

tribunal jurisdiction to award interest. Section 32C echoes section 49 of the

English Arbitration Act. In absence of agreement of the parties as to interest

payable and/or rate payable, section 49 gives the tribunal wide discretion to

award interest even on compound basis.

In effect, the amendment filled the lacuna which the Rules of the Chartered

Institute of Arbitrators-Kenya Branch had attempted to fill by providing in

Rule 16 B (12) that, where applicable, the arbitral tribunal has jurisdiction to

award interest.24

24 Khan, F., (2007) ‘Costs and Interest,” op cit.

Role of the Court in Arbitration

159

Chapter Ten


10.1 Introduction

This chapter discusses the role of the court in arbitration in Kenya as stipulated

under the Arbitration Act of 1995. The analysis centres on the provisions for

court intervention before, during and after arbitration hearing in Kenya. In

addition, necessary reforms as far as court intervention is concerned are

proposed.

The chapter begins with a discussion on the principle of court intervention in

arbitration in Kenya as enunciated in the Arbitration Act, 1995. The discussion

then turns to the specific legal provisions in the Arbitration Act, 1995 which

give the court power to intervene in arbitration. The law is discussed in the

context of the Kenyan case law and legal practice. A critical analysis of the role

of the court in arbitration in Kenya is also undertaken with a view to

establishing whether court intervention is a friend or a foe to the expeditious

and fair determination of arbitral matters.

As a matter of fact, there is consensus among the practitioners and scholars

that the court has a vital role to play in arbitration. It is said that without the

support of the court, arbitral proceedings may falter or be ineffective.1 This is

because in addition to their supportive role to the arbitral tribunal, the courts

also intervene to guarantee that the minimum requirements of procedural

fairness are maintained in arbitral proceedings. The discussion here is,

therefore, founded on the belief that courts have a vital role to play in

arbitration. Therefore, the only relevant question to ask is: to what extent is the

court to be allowed to intervene in arbitral proceedings?

1 Sutton, D.J., et al, Russell on Arbitration, (21st Ed., London: Sweet & Maxwell, 1997), para. 7-

001.


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10.2 Court’s Intervention in Arbitration: The General Principle

The principle applicable in discerning the role of the court in arbitration may

be gleaned from the various legal instruments that address this issue. The most

popular is the UNICITRAL Model Law on International Commercial

Arbitration which in Article 5 thereof provides as follows on the role of the

court in arbitration proceedings:

“In matters governed by this Law, no court shall intervene except where so

provided in this Law.”2

In effect, the Article limits the scope of the role of the court in arbitration only

to situations that are expressly contemplated under the Model Law. Further, it

seems the Model Law’s restriction on judicial intervention in arbitration as

stipulated under Article 5 is only in relation to “matters governed by” the

Model Law.3

On its part, the 1996 English Arbitration Act appears to be geared towards

reducing the court’s intervention to the greatest extent possible. The English

Act confers upon the court “powers exercisable in support of arbitral proceedings”

with the following three provisos:

i. if the case is one of urgency, the court may on the application of a party

or proposed party to the arbitral proceedings make such orders as it

thinks necessary for the purpose of preserving evidence or assets;

ii. if the case is not one of urgency, the court will only act on the

application of a party to the arbitral proceedings made with the

permission of the tribunal or with the agreement in writing of the other

parties; and

2 Article 5, UNCITRAL Model Law on International Commercial Arbitration, United Nations

document A/40/17, Annex I 3 See, for example, the New Zealand Law Commission, “Arbitration”, Report No 20, at Para.

293.


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iii. In any case, the court will only act if or to the extent that the arbitral

tribunal has no power or is unable for the time being to act effectively.4

Literally, the foregoing implies that the courts intervention in the United

Kingdom is restricted if it may result in unnecessary delay and expense in

arbitration. Further, the object of court intervention is limited to guaranteeing

the fair and impartial settlement of disputes. The courts are also not allowed

to take steps tending to limit the parties’ autonomy except if it is in the public

interest.5 In Coppee-Lavalin SA/NV-v-Ken-Ren Chemicals and Fertilizers Ltd,6 the

House of Lords highlighted three instances where the courts must inevitably

be involved in an arbitration.

First, are measures that involve purely procedural steps and which the arbitral

tribunal cannot give orders and/or enforce? For instance, issuing witness

summons to a third party or stay of legal proceedings commenced in breach

of the arbitration agreement. In the second place, we have measures meant to

maintain the status quo like granting of interim injunctions or orders for the

preservation of the subject matter of arbitration. Lastly, are those measures

which give the award the intended effect by providing the means for

enforcement of the award or challenging the same.7

Lord Mustill recognized the need for this balance in the English House of

Lords case of Coppee8 and stated thus:

“Whatever view is taken regarding the correct balance of the relationship

between international arbitration and national courts, it is impossible to doubt

that at least in some instances the intervention of the court may not only be

permissible but highly beneficial.”

4 Sec. 44 of the UK Arbitration Act, 1996. 5 Sutton, D.J., et al, Russell on Arbitration, op. cit, p. 3. 6 Coppee-Lavalin SA/NV-v-Ken-Ren Chemicals and Fertilizers Ltd, [1994] 2 All ER 465. 7 See Lord Mustill’s dicta in Coppee-Lavalin SA/NV case (supra) pp. 469-470, on the ideal court’s

approach in such intrusion. 8 Ibid.


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The law of arbitration the world over admits the notion that the role of the

court in arbitration is inevitable and almost universally provides for it.

Importantly, the law also appreciates the need to limit court intervention in

arbitration to a basic minimum. Thus, provisions on court intervention are

usually worded in the negative such that except where the law specifically

provides for court intervention, the court has no recognized basis for

intervening in the arbitration proceedings.9

The Kenyan position on the role of the court in arbitration is stated in section

10 of the Arbitration Act. The section states as follows:

‘Except as provided in this Act, no court shall intervene in matters governed

by this Act.”10

In effect, the Arbitration Act, 1995 restricts the jurisdiction of the court in

arbitration to matters provided for under the Act. At face value, section 10

permits two possibilities for court intervention in arbitration. On the one hand,

the courts are permitted to intervene in arbitration where the Act expressly

provides for or permits the intervention of the court. For instance, the court

intervention is permissible in matters touching on the appointment of a

tribunal as provided for under section 12 of the Arbitration Act, 1995. On the

other hand, the courts and particularly the High Court have inherent

jurisdiction to act in public interest.

The Court is, therefore, entitled to intervene in arbitration proceedings even

where it is not provided for expressly. Such intervention is justified if done in

the public interest. For instance, courts in Kenya entertain constitutional

applications and judicial review proceedings against arbitrators and the

arbitral tribunal in public interest.

9 Grant, T.K., “The Role of the Court in Arbitration Proceedings,” a paper presented at the

UNCITRAL-SIAC Conference “Celebrating Success”, held at the Pan Pacific Hotel,

Singapore, on22-23 September 2005, p. 2. 10 Sec. 10, Arbitration Act No. 4 of 1995, Government Printer, Nairobi.


163

The Kenyan Courts, however, have not been consistent with respect to the full

implication of section 10 regarding their role in arbitration. For instance, in

Sadrudin Kurji & another v. Shalimar Limited & 2 Others11 it was held that:

"...arbitration process as provided for by the Arbitration Act is intended to

facilitate a quicker method of settling disputes without undue regard to

technicalities. This however, does not mean that the courts will stand and

watch helplessly where cardinal rules of natural justice are being breached by

the process of arbitration. Hence, in exceptional cases in which the rules are

not adhered to, the courts will be perfectly entitled to set in and correct obvious

errors." (Emphasis added).

However, the Court of Appeal in Anne Mumbi Hinga v Victoria Njoki Gathara12

seems to suggest that courts may intervene in arbitration since public policy is

a concept that does not render itself to a clear definition and hence not

exhaustible. The Court stated as follows in that case:

“.....public policy can never be defined exhaustively and should be approached

with extreme caution, failure of recognition on the ground of public policy

would involve some element of illegality or that it would be injurious to the

public good or would be wholly offensive to the ordinary reasonable and fully

informed member of the public on whose behalf the State's powers are

exercised.”13

In addressing the requirement as to finality of an arbitral award the court in

the Anne Mumbi Hinga case [supra] stated that finality as a concept in arbitration

is shared worldwide by States that have modelled their Acts on the

UNICITRAL Model Law like Kenya, and that the common thread running

through all these Acts is the restriction of judicial review of arbitral awards

and the confinement of judicial review where necessary and in line with the

11 Sadrudin Kurji & another v. Shalimar Limited & 2 Others, [2006] eKLR. 12 Civil Appeal No. 8 of 2009. 13 Ibid, p. 25.


164

provisions of the Act. The court therein noted that sections 35 and 37 of the

Arbitration Act are wholly exclusive except where a particular provision

invites for the court’s intervention or facilitation.

In some jurisdictions the court’s intervention in arbitration is greatly restricted.

This is clearly demonstrated by considering the United States Supreme Court

decision in Hall Street Associates, L. L. C., Petitioner vs Mattel, Inc.14 In that

particular case the Court struck down an arbitration agreement that allowed

the courts to overturn an arbitration award that contained legal errors or

factual findings that were not supported by “substantial evidence”. The Court

recognized that where the parties attempt to heighten the level of judicial

scrutiny of arbitration awards the Federal Arbitration Act (“FAA”) policy of

allowing flexibility to the party’s clashes with the equally important policies

of finality and efficiency in arbitration.

The court argued that enhanced court review of arbitration awards, “opens the

door to the full-bore evidentiary appeals that render informal arbitration merely a

prelude to a more cumbersome and time-consuming judicial review process.” The

decision in the Hall Street case, therefore, suggests that by entering into an

arbitration agreement, a party necessarily gives up most of his/her rights of

appeal and challenge to the award in exchange for the virtue of finality of the

award.

The limited role of the courts in arbitration was also under consideration in

Eastern Seaboard Concrete Construction Co., Inc., et al v Gray Construction Inc., et

al., District of Maine15 –where the First Circuit Court of Appeals refused to

intervene with a second award issued by an arbitrator to clarify the initial

award based on the finality policy. In this case the court placed great emphasis

on the limited scope of judicial review of an arbitral award and inter alia held

that courts “deferential review of arbitration awards” extended to the

14 552 U. S. – (2008). 15 Eastern Seaboard Concrete Construction Co., Inc., et al v Gray Construction Inc., et al., District of

Maine, Civ. No. 08-37-P-S, United States of America.


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arbitrators reasoning for revisiting and clarifying his award. If an arbitrator

says that he or she intended to make a particular finding or ruling but

inadvertently left it out and stated it incorrectly the courts respect for

arbitration, precludes judicial second – guessing of the arbitrator.”

Once again the Court in Tononoka Steels Limited v. E. A. Trade and Development

Bank (PTA Bank)16 stated that even where the court intervenes in any

arbitration proceedings or any matter that should be referred to arbitration, it

would only be in respect of peripheral matters relating to the subject matter of

the dispute as opposed to dealing with the substantive matters therein. In that

particular case, the Appellant wished to set up a plant in Kenya for

manufacturing steel products and entered into a loan agreement with the PTA

Bank, the Respondent. A dispute arose and the Appellant sued in the High

Court of Kenya, seeking an injunction against the PTA Bank restraining it from

calling for the repayment of the facility or taking possession of the project.

Special damages and general damages were also claimed by the Appellant.

A question arose as to whether the jurisdiction of the High Court of Kenya was

ousted. The arbitration clause and the Legal Notice were heavily relied on.

Kwach JA, in justifying jurisdiction, said that while the jurisdiction to deal

with substantive disputes and differences was given to the International

Chamber of Commerce in London, the Kenyan Courts retained residual

jurisdiction to deal with peripheral matters.17

In essence, section 10 must, further, be construed as allowing the courts the

leeway to intervene in arbitration in the public interest even where it is not

expressly so provided in the Act. The Act cannot reasonably be interpreted as

ousting the inherent power of the courts to do justice especially through

judicial review and constitutional remedies.18 In any case, if that was the intent

of the Parliament, it would have made a clear provision in the constitution

16 Tononoka Steels Limited v. E. A. Trade and Development Bank (PTA Bank), 2 (2000) EA 536. 17 Ibid, Tononoka Case at 549. 18 Sutton, D.J., et al, Russell on Arbitration, op. cit, p. 4.


166

limiting the role of the courts in the arbitration even where public interest is at

stake.

At least, that is a position that most parties and the representatives in

arbitration in Kenya seem to have adopted, if the numerous constitutional

applications challenging arbitration proceedings in court are anything to go

by. For instance, in the case of Epco Builders Limited-v-Adam S. Marjan-Arbitrator

& Another,19 the appellant had taken out an originating summons before the

High Court (Constitutional Court) under, inter alia, sections 70 and 77 of the

old constitution of Kenya; section 3 of the Judicature Act and section 3A of the

Civil Procedure Act.

The appellant’s contention in the constitutional application was that its

constitutional right to a fair arbitration had been violated by a preliminary

ruling of the arbitrator. The main complaint by the applicant was that it was

unlikely to obtain fair adjudication and resolution of the dispute before the

arbitral tribunal, in view of the arbitrator’s “unjustified refusal to issue

summons to the Project Architect and Quantity Surveyor” who are crucial

witnesses for a fair and complete resolution of the matters before the tribunal.20

The counsel for the Chartered Institute of Arbitrators-Kenya Branch, an

interested party, submitted that while she did not refute the application under

section 77 (9) of the repealed Constitution, she was of the considered view that

the procedure laid down under the Arbitration Act should be exhausted first

before such an application.

The majority at the Court of Appeal admitted that the matter was not frivolous

and ordered that the application of the appellant be heard by the High Court

on merit.21 Justice Deverell contributing to the majority decision impressed on

19 Epco Builders Limited-v-Adam S. Marjan-Arbitrator & Another, Civil Appeal No. 248 of 2005

(unreported). 20 Ibid. 21 Ibid.


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the importance of encouraging alternative dispute resolution to reduce the

pressure on the court from the ever increasing number of litigants seeking

redress in court. He noted as follows:

“If it were allowed to become common practice for parties dissatisfied with the

procedure adopted by the arbitrator(s) to make constitutional applications

during the currency of the arbitration hearing, resulting in lengthy delays in

the arbitration process, the use of alternative dispute resolution, whether

arbitration or mediation would dwindle with adverse effects on the pressure

on the courts. This does not mean that recourse to a constitutional court

during arbitration will never be appropriate. Equally it does not mean that a

party wishing to delay an arbitration (and there is usually one side that is not

in a hurry) should be able to achieve this too easily by raising a constitutional

issue as to fairness of the “trial” when the Arbitration Act 1995 itself has a

specific provision in section 19 stipulating that “the parties shall be treated

with equality and each party shall be given full opportunity of presenting his

case,” in order to secure substantial delay. If it were to become common,

commercial parties would be discouraged from using ADR.”22

The EPCO case and the view taken by Deverell J seem to suggest that courts

are reluctant in dismissing the need for constitutional applications in

arbitration. Only the dissenting judge, Justice Githinji, JA who considered the

merits of the application was of the view that arbitration disputes are governed

by private law and not public law and by invoking section 84(1) of the old

constitution, the appellant was seeking a public remedy for a dispute in private

law.23

The current Constitution of Kenya, 2010 provides under Article 259(1) that the

Constitution should be interpreted in a manner that: promotes its purposes,

values and principles; advances the rule of law, and the human rights and

22 Ibid. 23 Ibid.


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fundamental freedoms in the Bill of Rights; permits the development of the

law; and contributes to good governance.

The Constitution of Kenya has gone a step further to provide for the general

principles and national values of governance which must guide the

application of all laws as well as the operation of all state organs and persons.

Article 10(1) thereof provides that the national values and principles of

governance in this Article bind all State organs, State officers, public officers

and all persons whenever any of them: applies or interprets the Constitution;

enacts, applies or interprets any law; or makes or implements public policy

decisions.

The supreme nature of the Constitution was well captured by the Tanzanian

Court of Appeal in Ndyanabo vs Attorney General24 where the Court stated that

firstly, the Constitution is a living instrument, having a soul and consciousness

of its own as reflected in the preamble and fundamental objectives and

directive principles of state policy. Courts must, therefore, endeavour to avoid

crippling it by construing it technically or in a narrow spirit. It must be

construed in (tune) with lofty purposes for which its makers framed it. The

Court asserted that so construed, the instrument becomes a solid foundation

of democracy and the rule of law. Secondly, the provisions touching on

fundamental rights have to be interpreted in a broad and liberal manner,

thereby jealously protecting and developing the dimensions of those rights

and ensuring that the people enjoy their rights, the democracy not only

functions but grows, and the will and dominant aspirations of the people

prevail. The Court stated that restrictions on fundamental rights must be

strictly construed.

Kenya has passed an Arbitration act to define the scope, responsibilities, and

limitations of the arbitral tribunals, to allow parties to determine disputes in a

manner consistent with law. Article 159(2) (c) of the Constitution provides that

24 Ndyanabo vs Attorney General [2001] 2 EA 485, p. 493.


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in the exercise of judicial authority, the Courts and tribunals must be guided

by the principle of inter alia promotion of alternative forms of dispute

resolution (ADR) including reconciliation, mediation, Arbitration and

traditional dispute resolution mechanisms, subject to clause (3). Notable are

the provisions of the Clause (3) which are to the effect that Traditional dispute

resolution mechanisms should not be used in a way that: contravenes the Bill

of Rights; is repugnant to justice and morality or results in outcomes that are

repugnant to justice or morality; or is inconsistent with the Constitution or any

written law.

Arbitration must be carried out in a way that is consistent with Constitutional

principles and values and any derogation thereof would be viewed as

unconstitutional and might be challenged in a Court of law. In the Ugandan

case (which has been upheld by Kenyan courts) of Zachary Olum and Anor vs

Attorney General,25 it was held that in order to determine the constitutionality

of a statute, the Court had to consider the purpose and effect of the impugned

statute or section thereof; if the purpose was not to infringe a right guaranteed

by the Constitution, the Court had to go further and examine the effect of its

implementation. If either the purpose or the effect of its implementation

infringed a right guaranteed by the Constitution, the Statute or section in

question would be declared unconstitutional.

If the government creates a statutory regime to facilitate Arbitrations, then it

has an obligation to ensure that the regime does not violate any of the

constitutional principles and values.26 Arbitration practice in Kenya has

increasingly become more formal and cumbersome due to lawyers’ entry to

the practice of Arbitration. This has had the effect of seeing more matters being

referred to the national Courts due to the disputants’ dissatisfaction. The

referrals have been based on matters touching on substantive as well as

25 Zachary Olum and Anor v Attorney General, (1) [2002] 2 EA 508. 26 Chotalia, S. P., ‘Arbitration Using Sharia Law in Canada: A Constitutional and Human Rights

Perspective,’ p. 67. Available at

http://www.ejournals.library.ualberta.ca/.../constitutional.../8499 [Accessed on 24/11/2013].


170

procedural aspects of the Arbitration. Recourse to Courts may be necessary

due to some unique characteristics of Arbitration which, though positive, may

also adversely affect the certainty of one party to access justice. These include

lack of a harmonized framework for supervision or accountability of

arbitrators,27 a relaxation of evidentiary rules, decreased opportunities for

thorough discovery,28 insufficient or nonexistent explanations of arbitrators’

reasoning in decisions,29 and limited protections for vulnerable parties.

Arbitration tribunals are however subject to certain restrictions imposed by

the courts. Further, the court has the power, on application from one or more

of the parties, to remove an arbitrator on grounds of bias, lack of qualifications

or physical or mental capacity, or a refusal or failure to conduct proceedings

properly.30

A court may determine a question of law which it finds “substantially affects

the rights of one or more of the parties” upon application from a party

involved in the Arbitration proceedings and upon the agreement of all parties

or the Arbitration tribunal.31 A court may also issue orders confirming,

varying, or setting aside awards granted by the tribunal, after one party makes

an application to the court.32

Although the foregoing does not provide the exhaustive list of the ways in

which a court can supervise and regulate Arbitration tribunals in the Kenya, it

illustrates that courts can keep Arbitration panels in check, and ensure they do

not act unconstitutionally. In the case of David Onyango Oloo vs The Attorney

general,33 it was held inter alia that rules of natural justice apply to an

27 Supervision is mostly Institution-based. 28 Limited timeframes are usually allocated for this. 29 Parties may agree on whether they will expect an award with reasons thereof or otherwise. 30 Sec. 13, Arbitration Act, 1995. 31 Ibid, sec. 39(3) (b). 32 Ibid, sec. 39(2) (b). 33 David Onyango Oloo v The Attorney general, [1987] K.L.R 711.


171

administrative act in so far as it affects the rights of the appellant and the

appellant’s legitimate expectation to benefit from application of a law.

The scope of application of Arbitration has also been widening day by day.34

It has been said that one of the advantages of Arbitration is that private parties

are entitled to choose the Arbitration law to govern their private relationships.

The Act assumes that the parties have equal bargaining power and therefore

disregards the likelihood of violation of any constitutional rights in the

process. However, it is already settled law that persons cannot contract out of

constitutional and human rights protections.35

There is need to ensure that even as parties enjoy autonomy and other

advantages that are associated with Arbitration, the ‘weaker’ party’s interests

in the process are protected. Anything less would only delay the process, the

very problem that ADR seeks to cure, as the party would resort to

constitutional court to seek justice. It is therefore important to strike this

balance, in order to avoid defeating the purpose of arbitration, through endless

constitutional applications. Arbitrators must be fair, observe the rules of

natural justice and comply with Constitutional provisions that guarantee

parties rights.

10.3 Role of the Court before Reference to Arbitration

The Arbitration Act, 1995 provides two instances when the court may

intervene in a matter that ought to be referred to arbitration before reference

34 For a detailed discussion on this, see Kariuki, F., ‘Redefining “Arbitrability”: Assessment of

Articles 159 & 189(A) of the Constitution of Kenya’ Alternative Dispute Resolution, (2013) 1;

See also generally, Stipanowich, T.J., ‘Arbitration: The “New Litigation,”’ University Of

Illinois Law Review, op cit. 35 Article 19(2) provides that ‘the purpose of recognising and protecting human rights and

fundamental freedoms is to preserve the dignity of individual and communities and to

promote social justice and the realisation of the potential of all human beings.’ Clause (3)

further provides that ‘the rights and fundamental freedoms in the Bill of Rights: belong to

each individual and are not granted by the State;….and are subject only to the limitations

contemplated in this constitution.’


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to arbitration. These are stay of proceedings and interim measures of

protection:

i. Stay of Legal Proceedings

Stay of legal proceedings is provided for under section 6 of the Arbitration Act,

1995. It is one of the instances through which the court may intervene in

arbitration matters before arbitration reference. It has been discussed in detail

in Chapter 3 of this Book.

ii. Interim Measures of Protection

In addition to stay of proceedings, courts may intervene in a potential

arbitration matter in granting interim measures of protection. Section 7 of the

Act gives power to the High Court to grant interim orders for the maintaining

of the status quo of the subject matter of the arbitration pending the

determination of the dispute through arbitration. This avenue is available to

parties before or during arbitration. The powers could include those of

granting interim injunctions, interim custody or sale of goods (perishables),

preserving of any property or thing concerned in the reference, etc. Section 7

reads as follows:

“It is not incompatible with an arbitration agreement for a party to request

from the High Court, before or during arbitral proceedings, an interim

measure of protection and for the High Court to grant that measure.”

Where a party applies to the High Court for an injunction or other interim

order and the arbitral tribunal has already ruled on any matter relevant to the

application, the High Court shall treat the ruling or any finding of fact made

in the course of the ruling as conclusive for the purposes of the application.36

This section basically limits the parties’ freedom to contract any arbitration

agreement that limits and/or bars seeking interim measures of protection in

36 Sec. 7 (2), Arbitration Act 1995.


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court. The jurisdiction to make such orders is the preserve of the High Court

of Kenya.

In Don-wood Co. Ltd v Kenya Pipeline Ltd37 the court found that the jurisdiction

to grant injunctive relief under section 7 of the Act was meant to preserve the

subject matter of the suit pending the determination of the issues between the

parties.

However, it is to be appreciated that where an application is made to a court

for interim measures, a judge would be reluctant to make a decision that

would risk prejudicing the outcome of the arbitration.38 This dilemma was

considered in the Channel Tunnel Group Ltd v. Balfour Beatty Construction Ltd

case thus:

“There is always a tension when the court is asked to order, by way of interim

relief in support of an arbitration, a remedy of the same kind as will ultimately

be sought from the arbitrators: between, on the one hand, the need for the court

to make a tentative assessment of the merits in order to decide whether the

plaintiff’s claim is strong enough to merit protection, and on the other the duty

not to take out of the hands of arbitrators (or other decision-makers) a power

of decision which the parties have entrusted to them alone. In the present

instance I consider that the latter consideration must prevail …. If the court

now itself orders an interlocutory mandatory injunction, there will be very

little for the arbitrators to decide.”39

Courts in Kenya have, therefore, dealt with this issue on a case by case basis,

granting the interim reliefs as the circumstances so demand. The Procedure for

making applications to court before arbitration is that the party seeking stay

of legal proceedings and/or interim measures moves the court in the manner

37 HCCC No. 104 of 2004 (Unreported). 38 Redfern & Hunter, Law and Practice of International Commercial Arbitration (London & Sweet

Maxwell 1999), p. 348 at p. 349. 39 Channel Tunnel Group Ltd v. Balfour Beatty Construction Ltd [1993] A.C. 334, at 367 – 368.


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provided under Rule 2 of the Arbitration Rules 1997. Rule 2 of the Arbitration

Rules 1997 provides that an application under section 6 and 7 of the Act shall

be made by summons in the suit.40 The procedure for court intervention before

arbitration is discussed extensively in Chapter Three of the Book.

10.4 The Role of the Court during Arbitration

The Arbitration Act makes provision for the following interventions by the

High Court of Kenya during arbitral proceedings.

i. Appointment of Arbitrators

The courts assistance in the appointment of an arbitral tribunal may be

required in limited instances especially where a party defaults in making an

appointment. The Act stipulates the extent of the courts’ involvement in

making appointments of arbitral tribunals in Kenya.41 For a detailed discussion

on the appointment of the arbitral tribunal, see Chapter Four of this Book.

ii. Challenging Arbitrator(s)

Parties are free to agree on a procedure for challenging the arbitral tribunal.

However, where the parties fail to agree, a party may within 15 days of

becoming aware of the composition of the arbitral tribunal or after becoming

aware of any circumstances that merit its challenge, write to it stipulating the

reasons for the challenge. If the challenged arbitrator does not withdraw from

office or the other party agree to the challenge, the tribunal shall decide the

matter. If the challenge whether in the manner agreed by the parties or after

decision by the tribunal does not succeed, the challenging party may apply to

the High Court within 30 days of refusal of the challenge. The decision of the

High Court on the challenge is final and not subject to appeal.42 The High

Court may, also, on application by a party decide on a dispute concerning the

40 The Arbitration Rules, 1997 in Legal Notice No. 58/97, The Arbitration Act, 1995. 41 Sec. 12, Arbitration Act 1995. 42 Ibid, Sec. 14.


175

termination of an arbitrator or arbitral tribunal. Such decision shall be final

and not appealable.

iii. Determining the Arbitral Tribunal’s Jurisdiction

The arbitral tribunal has two options open to it when the question of

jurisdiction is raised by a party. The arbitral tribunal may rule on the matter

as a preliminary question or wait to address it in an arbitral award on the

merits.43 The ruling of the arbitral tribunal in the former instance may be

challenged by the aggrieved party by way of an application to the High Court.

Such an application must be made within 30 days of notice of the ruling44 and

the decision of the High Court shall be final.45

But while the application is pending before the superior court, the parties may

commence, continue and conclude arbitral proceedings, but no award in such

proceedings shall take effect until the application is decided, since such an

award would be void if the application succeeds.46

iv. Interim Orders of Protection during Arbitration

The Act gives the High Court power to enforce the peremptory orders of

protection given by the arbitral tribunal. In order to enforce such protective

measure or generally to exercise the power associated with the interim

protective measures the tribunal, or a party with approval of the arbitral

tribunal, may apply for assistance of the High Court.47 The High Court has

equal powers as possessed by the arbitral tribunal with regard to interim

measures of protection under the Act. In particular, the High Court’s power

shall be the equivalent of the one it wields in civil proceedings before it.

However, the arbitral proceedings should continue regardless of the fact that

43 Ibid, Sec. 17 (5). 44 Ibid, Sec. 17 (6). 45 Ibid, Sec. 17 (7). 46 Ibid, Sec. 17 (8). 47 Ibid, Sec. 18 (2).


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such an application is pending in the High Court except where the parties

agree otherwise.48

v. Court’s Assistance in Taking Evidence for use in Arbitration

The High court has power to take evidence for use at the arbitral hearing. This

happens upon a request by either a party or the arbitral tribunal. The High

Court has discretion to execute the request within its competence and its rules

on taking evidence. The High Court’s assistance in this instance includes

issuing summons to the witness to secure their attendance, if the witness is

within Kenya and is refusing to attend to give evidence. If such a witness

refuses to attend even after such summons, he will be liable to be punished for

contempt of court. The High Court may also order the examination of a

witness on oath before an officer of the court or any other officer. Where the

witness is outside the jurisdiction of the court, the court may order the issuance

of an order for the taking of evidence by a commission or request for

examination of a witness outside the jurisdiction.49

vi. Determination of a Question of Law

The parties to a domestic arbitration may agree for an application to be made

by a party to the High Court for determination of questions of law arising in

arbitration.50 The parties may also agree that the right of appeal be available to

an aggrieved party on questions of law arising out of the award. Such appeal

should be to the High Court. On such application or appeal, the High Court

has two options available to it. It can either determine the question of law

arising, confirm, vary or set aside the arbitral award or remit the matter to the

arbitral tribunal for re-consideration. Where another tribunal has been

appointed, remittance of the matter to this latter arbitral tribunal is permitted.51

The decision of the High Court is subject to appeal to the Court of Appeal if

the parties have agreed to appeal prior to the delivery of the arbitral award or

48 Ibid, Sec. 18 (3). 49 Ibid, Sec. 28. 50 Ibid, Sec. 39. 51 Ibid, sec. 39 (2).


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if the Court of Appeal grants leave to appeal and in its opinion a point of law

of general importance is involved, the determination of which will

substantially affect the rights of one or more of the parties. The court of appeal

has jurisdiction on such appeal to exercise any of the powers exercisable by the

High Court on application for determination of questions of law in

arbitration.52

The Court of Appeal, in Kenya Shell Limited v Kobil Petroleum Limited53, held that

public policy considerations may inure in favour of granting leave to appeal

just as they would to discourage it. In that case, leave to appeal on a question

of law was denied on grounds of public policy. The court stated:

“We think, as a matter of public policy, it is in the public interest that there

should be an end to litigation and the Arbitration Act under which the

proceedings in this matter were conducted underscores that policy….We do

not feel compelled therefore to extend the agony of this litigation on account of

the issues raised by the Applicant.”

vii. Procedure for Court Application during Arbitration

The procedure for applications during arbitration is provided for under Rule

3 of the Arbitration Rules. The same are to be made via an Originating

Summons supported by an affidavit. An originating summons is the method

best suited as it initiates a suit and serve as an application as well. The

summons must be served on all parties before the hearing date indicated on

it.54 Any other application subsequent to the originating summons and

pursuant to the same is to be by way of a chamber summons which must be

served seven days clear of the hearing date indicated on them.55

52 Ibid, Sec. 39 (3). 53 Kenya Shell Limited v Kobil Petroleum Limited, Civil Appeal (Nairobi) No. 57 of 2006. 54 Rule 3 (1) of the Arbitration Rules, 1997. 55 Ibid.


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10.5 Role of the Court after Arbitration

This role involves mainly how the court may intervene after the making of an

award. The role of the court at this stage essentially involves the setting aside,

recognition and/or enforcement of arbitral awards.

i. Setting Aside of an Arbitral Award

The High Court may on an application by a party set aside an arbitral award.

Some of the grounds on which the High Court may rely on to set aside arbitral

award, include, the inability of the dispute to be settled by arbitration under

the laws of Kenya. The court will also set aside an award that is in conflict with

public policy of Kenya.56 A party to the arbitral proceedings whose award is

sought to be set aside may apply for suspension of the setting-aside

proceedings. The High court may exercise the discretion to suspend such

proceedings where it deems the same appropriate.57

ii. Recognition and Enforcement of Arbitral Awards

Generally, an arbitral award is recognised as binding regardless of the State in

which it was made. Thus, on application to the High Court, the award should

be enforced subject to the relevant provisions of the Arbitration Act.58 Any

party may apply for enforcement of an arbitral award.59 However, more often

than not an application for enforcement is made by the party in whose favour

the arbitral award was made and the other party will reply to the application.

This will be discussed in detail in other chapters.

iii. Procedure for Court Intervention after Award

Any application after the arbitral award is preceded by the filling of the award.

If an application had been made during arbitration, the award is to be filed

56 Sec. 35 (2) (b), Arbitration Act, 1995. See the decisions in the Anne Mumbi Hinga case [supra]. 57 Sec. 35 (4), Arbitration Act, 1995. 58 Ibid, Sec. 36 (1). 59 Ibid.


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under the same cause and is therefore not given a new number. In any other

case, the award after filing is given a serial number at the Civil Registry. The

party filing the award must give notice to all the concerned parties of the filing

of the award indicating the date thereof, the cause number and the registry

where the filing has been done. As proof of service of the notice, the party is

required to file an affidavit of service.60

Generally, all applications subsequent to the filing of the award must be served

seven days clear of the hearing date in accordance with section 35 of the Act.

If no application to set aside an arbitral award has been made within three

months after receipt of the award by the parties, the party filing may apply ex

parte by summons for leave to enforce the award as a decree.61

An application to set aside the arbitral award is by way of summons62

supported by an affidavit specifying the grounds relied upon. The application

and the affidavit must be served on the other party and the arbitrator.

An application for recognition and enforcement of the award is by summons

in Chambers.63 The Civil Procedure Rules apply in such an application as far

as appropriate. Generally, the Civil Procedure Rules apply to all proceedings

under the Arbitration Act subject to the provisions of the Arbitration Rules,

1997 as to appropriateness of their application.64

10.6 A Critique on the Role of the Court in Arbitration

The effect of court intervention on arbitral proceedings depends on three

critical factors, namely the provisions of the law on court intervention, the

general policy and attitude of the court towards its role in arbitration and

finally, the approach of lawyers and their clients on court intervention.

60 Rule 5 of the Arbitration Rules, 1997, op. cit. 61 Ibid, Rule 4. 62 Ibid, Rule 4(2). 63 Ibid, Rule 9. 64 Ibid, Rule 11.


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The legal provisions on court intervention are mainly found in the Arbitration

Act, 1995 and the Arbitration Rules thereunder (discussed extensively above),

the Civil Procedure Act65 and the Civil Procedure Rules 201066. There are

chances of conflict of rules and uncertainty in the laws on court intervention

especially because of the fact that there is no one-stop source of law on the

matter. However, all the instances of court intervention provided for in the

legal framework as demonstrated above are justified and necessary. For

instance, stay of proceedings applications are meant to give effect to the

arbitration agreement where one party has filed a suit in court in breach of the

agreement.

The interim measures of protection before arbitration, offer an opportunity for

a party to an arbitration agreement to take measures to maintain the status quo

of the subject matter of the intended arbitration. This is clearly an appreciation

of the reality that reference to arbitration does not happen overnight.

The court intervention measures during arbitration as provided for under the

law are similarly based on demonstrable logic and rationalization. The

provisions on court involvement in the appointment of the arbitral tribunal

offer a default measure where the parties’ efforts to pursue the agreed modes

of appointment have hit a dead end. On its part the opportunity to challenge

arbitrators/the arbitral tribunal, just like the opportunity to challenge the

bench in civil proceedings, is meant to ensure that justice is not only done but

seen to be done.

It also avoids the likelihood of the disgruntled party opting to later challenge

the arbitral award on grounds he could have raised as preliminary matters as

that would imply extra expenses and delay in holding fresh arbitration

proceedings if the challenge succeeds. It is universally accepted that

65 See Sec. 59 of the Civil Procedure Act Chapter 21, which provides that all references to

arbitration by an order in a suit, and all proceedings thereunder, shall be governed in such

manner as may be prescribed by rules. 66 Ibid, see generally Order 46 of the Civil Procedure Rules 2010.


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jurisdiction is everything67 and a party should thus not be compelled to put up

with an award of a tribunal whose jurisdiction he would rather challenge,

whether on the basis of substance or procedure. This is the basis for the

provisions on challenging the jurisdiction of the arbitral tribunal.

The court is also afforded an opportunity to facilitate and aid the arbitration

especially in matters that, as an emanation of a private arrangement, the

arbitral tribunal cannot undertake and or purport to compel. The provisions

for assisting in collecting evidence, assisting in enforcing interim measures of

protection and interpreting questions of law fall under this category. In fact,

even in normal civil proceedings, parties are entitled to appeal on questions of

law and as such, except on express agreement, parties to an arbitration

agreement cannot be said to waive that right merely by agreeing to arbitrate

their disputes.

The opportunities for court intervention after the award are even more

justified and necessary. The need to set aside arbitral awards that visit manifest

injustices on a party cannot be admitted to debate. In the same breath, arbitral

awards, being a result of private contractual arrangements, cannot attain

immediate force of law until they are adopted by the court. The court, being

the custodian of public policy in Kenya, cannot reasonably be expected to

perform a mere rubber-stamping role. The High Court is thus afforded an

opportunity to scrutinise the arbitral award. No doubt this also helps secure

the party, adversely affected by the arbitral award, a right to be heard in the

interest of natural justice.

But while the instances of court intervention are rationally justified, the

provisions relating to them are far from being perfect and unambiguous. For

instance, the provisions on stay of proceedings are beset with unnecessary

conditions that even a well-meaning court is disadvantaged in expediting the

application especially when the Plaintiff is not receptive. For instance, there is

67 Nyarangi, JA in Owners’ of the Motor Vessel “Lillian S”-v-Caltex Oil Kenya Ltd. [1989] KLR 1.


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nothing that a judge can do when an application for stay of proceedings is

inadvertently lodged a day after entry of appearance except to dismiss it. In

such an instance, there is no room for equity when the law is strict in its

stipulations.

The point is that the law on court intervention is in dire need of reforms

especially on matters to do with fine details. The procedure for applying for

court interventions is very strict as to afford lawyers intending to delay

arbitration proceedings room for manoeuvres. There is no reason why the

procedure for such applications cannot be relaxed to ensure that it secures

justice for the opposite party without being tyrannical and prone to abuse. For

example, there is a need for legal provisions that will ensure that applications

under the Arbitration Act shall not be dismissed for want of form and that the

courts shall endeavour to uphold such applications to ensure justice and

fairness to the parties and to avoid delays in arbitration.68 There is a need also

for the law to be amended to provide that arbitration related applications be

heard on priority basis.

The uncertainty of the law has given rise to a myriad of constitutional

applications in arbitration proceedings. The argument in support is largely

that the legal framework on arbitration cannot reasonably be interpreted as

ousting the inherent and constitutional rights of parties to fair hearing and

natural justice. The counter argument is that arbitral proceedings are private

and contractual arrangement where a party by choice opts to contract to sort

out disputes outside the public domain. Thus, by extension, the parties are

taken to have waived access to public remedies afforded under such vehicles

as judicial review and constitutional applications. But this argument is clearly

out of ignorance of the limitation of freedom to contract as one cannot contract

away his/her basic rights.

68 This has been done for matters under the Children Act, No. 8 of 2001, Laws of Kenya

(Government Printer, Nairobi, 2001) , if a demonstration that it is doable is needed!


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The other argument offered in support by antagonists of constitutional and

judicial review applications in arbitration is that there is an adequate

mechanism offered under the law and one should exhaust that first. But rights

are, by nature, matters urgent and emotional and remedies meant to enforce

are permitted to be invoked despite other alternatives. When a party feels

his/her constitutional rights are being infringed, there is no denying that the

first impulse is to doubt the arbitrator’s jurisdiction. To make it compulsory

that a party first submits to the jurisdiction of the arbitral tribunal before

he/she can be entertained in a constitutional court is unconscionable.

If anything, no party would admit to arbitration knowing that the arbitral

process will infringe his/her right to fair trial. If arbitration is to be made the

choice mode of dispute resolution, the law must afford parties flexibility to

make it a fair and just process. In fact, the possibility of a constitutional

application or judicial review, like the sword of Damocles, can help keep the

arbitral tribunal guarded, all for the best of the parties and arbitration in

Kenya.

The best that can be done is to offer optional but efficient and appealing

alternatives to constitutional applications and judicial review and leave it to

the choice of the aggrieved party. Constitutional applications could be

expedited and made to be as simple as possible. At least, there is no reason

why this is not possible given that hardly is viva voce evidence adduced in such

applications. If that was done, the argument against constitutional and judicial

review applications in arbitration, i.e., that they delay the process will be a

thing of the past. The above measures are better than limiting the rights of

parties in arbitral proceedings to have recourse to the constitutional court and

go for judicial review orders. The latter measure is wont to set a bad precedent

that might affect the general attitude to arbitration and even serve as an

impediment to parties genuinely out to secure their rights. In the case of

Kamlesh Mansukhlal Damji Pattni and Goldenberg International Limited v the


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Republic.69 The Court held that the High Court has the primary responsibility

of safeguarding against contravention of the rule of law and the contravention,

particularly with regard to fundamental rights and freedoms.

With regard to the court’s approach to intervention in arbitration, the same has

considerably changed from indifference to a perception of the process as being

facilitative of arbitration. The sentiments of the court of appeal in the Epco case

and Kenya Shell Case (supra) are indicative of this change of heart. The courts

now see arbitration as an opportunity to wrestle the backlog of cases and yield

justice on the parties’ terms. If such a positive attitude could be coupled with

the necessary reforms as proposed herein, much ground would be covered in

making court intervention a friend, rather than a foe, of arbitration.

There is also a need to curb lawyers and parties bent on abusing court

intervention to clog the arbitration process. The problem with the adversarial

system is that it often forces the court to stand aside and watch parties obviate

each other’s cause of action with all imaginable tricks like a lame duck. The

few remedies fashioned to prevent abuse of court process do not offer much

help, especially when lawyers get into the fray with their bagful of tricks. Soon,

what was a simple issue is reduced into complex legal affair.

Arbitration is part of the justice system in Kenya and the fates of each of the

two are inseparably tied together and interdependent. The general duty of

advocates as officers of the court needs to be addressed. So is counsel’s

allegiance and compliance to clients’ whims. The two are matters belonging to

the realm of professional ethics. Undoubtedly, they go to the training and

orientation of the lawyers. Local law schools will do better to impress upon

their students on the role of ADR and arbitration in general and the fact that

the two are not ‘mechanisms designed by non-legal professionals to drive legal

practitioners out of business.’ Also, professional organizations like Law

69 Kamlesh Mansukhlal Damji Pattni and Goldenberg International Limited v the Republic, High Court

Misc. Application No. 322 of 1999 and No. 810 of 1999.


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Society of Kenya and affiliate bodies like the Chartered Institute of Arbitrators-

Kenya branch need to adequately orient their members on ADR and adopt

specific policies for the members to follow when involved in litigation

affecting arbitration.

The foregoing discussion renders it clear that court intervention in Kenya

cannot be dismissed as detrimental to the ideals of arbitration. No doubt, the

role of the court so far exonerates it from being a foe of the arbitral process in

Kenya. But it also leaves a lot to be desired especially due to the constrictions

that are imposed by the provisions of the Arbitration Act. Thus, many reforms

are needed if the role of the court is to become facilitative of arbitration and to

shake off such qualities as we have seen above which unnecessarily render

arbitration inexpedient and cumbersome.

10.7 Conclusion

As a conclusion, it suffices to quote fragments of the joint judgement of their

Lordships the Judges of the Court of Appeal (Omolo, Waki and Onyango-

Otieno, JJA) in Kenya Shell Limited v Kobil Petroleum Limited (supra). This

quotation sums the ideal policy for courts in intervening in Arbitration in

Kenya:

“Arbitration is one of several dispute resolution methods that parties

may choose to adopt outside the courts in this country. The parties may

either opt for it in the course of litigation under Order XLV of the Civil

Procedure Rules or provide for it in contractual obligations in which

event the Arbitration Act, Act no. 4 of 1995 (the “Act”) would apply and

the courts take a back seat. …The [Arbitration] Act, which came into

operation on 2nd January, 1996, and the rules thereunder, repealed and

replaced Chapter 49 Laws of Kenya, and the rules thereunder, which

had governed arbitration matters since 1968. A comparison of the two

pieces of legislation underscores an important message introduced by

the latter Act: the finality of disputes and a severe limitation of access


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to the courts. Sections 6, 10, 12, 15, 17, 18, 28, 35 and 39 of the Act are

particularly relevant in that regard. The message, we think, is a pointer

to the public policy the country takes at this stage in its development.

…We think, as a matter of public policy, it is in the public interest that

there should be an end to litigation and the Arbitration Act under

which the proceedings … underscores that policy.”

Post-Hearing Steps in Arbitration

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Chapter Eleven


11.1 Introduction

This chapter discusses the steps that take place after the arbitration hearing

and the publishing of the arbitration award. The focus is on the applications

that may be made to the court for the purpose of enforcing or setting aside or

appealing against the arbitral award.

The post-hearing steps include applications for setting aside of the award as

well as recognition and enforcement of arbitral awards. A party may also

apply to a court to determine a question of law arising in the cause of the

arbitration and appeal against arbitral award.

11.2 Setting aside the Arbitral Award

Once an arbitral award has been published, except for the limited scenarios

expressly provided for in the Arbitration Act, 1995, the arbitral tribunal

becomes functus officio. Thus, if a party is aggrieved by the award, the only

recourse available to him is to make an application to the High Court to set

aside that award.1 If his grievance meets any of the grounds for setting aside

an award, then the High Court may set aside the arbitral award.2 The High

Court will set-aside an arbitral award if the party making the application

furnishes proof that:

i. A Party to the Arbitration Agreement was under Incapacity

In the first place, it is a ground for setting aside an award if it can be shown

that a party to the arbitration agreement was under incapacity.3 The Act does

1 Sec. 35 (1), Arbitration Act, 1995. 2 Ibid, Sec. 35 (2). 3 Ibid, sec. 35 (2) (a) (i).


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not stipulate when the presence of such incapacity becomes material.

However, it seems that this ground applies where it is shown that the

arbitration agreement is invalid as a party to it lacked capacity to enter into it.

In this regard, the condition will be met where it can be shown that a party

was a minor, or mentally incapacitated, insolvent or even in the case of a

company unincorporated at the time it purportedly entered the arbitration

agreement.

ii. The Arbitration Agreement is not Valid

The second ground is that the arbitration agreement is not valid under the law

to which the parties have subjected it or failing any indication of that law, the

laws of Kenya.4 Parties are free to agree on the law that will govern the

arbitration in default of which the arbitration shall be governed by Kenyan

laws. Thus upon proof that the agreement is invalid under the applicable law,

the High Court may set aside the arbitral award made pursuant to a reference

under the arbitration agreement.

iii. A Party was not given an Opportunity to Present his Case

Further, it is a ground for setting aside an award if it can be shown that the

party making the application was not given proper notice of the appointment

of an arbitrator or of the arbitral proceedings or was otherwise unable to

present his case.5 This ground serves where the other party or the arbitral

tribunal did not adhere to the principles of natural justice in availing the

aggrieved party the opportunity to present his case by giving him proper

notices.

iv. The Dispute not contemplated by or within the terms of the Reference

to Arbitration

The fourth ground for setting aside an arbitral award is that the arbitral award

deals with a dispute not contemplated by or falling within the terms of the

4 Ibid, sec. 35 (2) (a) (ii). 5 Ibid, sec. 35 (2) (a) (iii).


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reference to arbitration or contains decisions on matters beyond the scope of

the reference to arbitration, provided that if the decisions on matters referred

to arbitration can be separated from those not so referred, only that part of the

arbitral award which contains decisions on matters not referred to arbitration

may be set aside.6

v. Disregard of the Arbitration Agreement

The fifth ground is that the composition of the arbitral tribunal or the arbitral

procedure was not in accordance with the agreement of the parties or failing

such agreement, was not in accordance with this Act.7

vi. Making of the Award was induced by Fraud, Bribery, Undue Influence

or Corruption

The arbitral award will also be set aside if it can be shown that the making of

that award was induced or affected by fraud, bribery, undue influence or

corruption.8

vii. The Issue of Public Policy in Kenya

The High Court(on its own motion) will also set aside an arbitral award if it

finds that the subject matter of the dispute is not capable of settlement by

arbitration under the law of Kenya or the award is in conflict with the public

policy in Kenya.9 In a number of cases, the Courts have had occasion to rule

on the question as to when an Arbitral Award can be considered to be in

conflict with the public policy in Kenya.

In the case of Glencore Grain Ltd v TSS Grain Millers Ltd,10 Onyancha J stated as

follows:

6 Ibid, sec. 35 (2) (a) (iv). 7 Ibid, sec. 35 (2) (a) (v). 8 Ibid, sec. 35 (2) (a) (vi). 9 Ibid, Sec. 35 (2) (b). 10 Glencore Grain Ltd v TSS Grain Millers Ltd, [2002] 1 KLR 606 at p. 626


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“A contract or arbitral award will be against public policy, in my view, if it is

immoral or illegal or that it would violate in clearly unacceptable manner basic

legal and/or moral principles or values in the Kenyan society. It has been held

that the word “illegal” here would hold a wider meaning than just “against

the law”. It would include contracts or acts that are void. “Against public

policy” would also include contracts or contractual acts or awards which

would offend the conceptions of our justice in such a manner that enforcement

thereof would stand to be offensive”

This was the position taken in the case of Kenya Shell Limited v. Kobil Petroleum

Ltd11 which approved the decision of Ringera J (as he then was), in Christ For

All Nations v. Apollo Insurance Co. Ltd 12 discussed earlier in Chapter 6.

Moreover, an application to set aside an Arbitral Award must be filed within

3 months from the date when the party making the application received the

Award.13

The Court of Appeal in Anne Mumbi Hinga vs. Victoria Njoki Gathara14 sitting in

Nairobi on the 13th of November 2009 discussed the requirements a party

seeking to set aside an Arbitral Award must fulfil. In that case the Appellant

sought to set aside the award on the basis that she had not been served with a

notification informing her when the award would be delivered or the notice of

filing the award nor had she been served with a copy of the application seeking

to enforce the award. The High Court dismissed the application to set aside.

On appeal to the Court of Appeal, the Court dismissed the appeal and held

inter alia that the Appellant was deemed to have been properly notified of the

award and service of necessary documents upon her was sufficient and

satisfied the requirements of Section 32 of the Act. Secondly, the application

seeking to set aside the award had relied upon provisions of the Civil

11 [2006] eKLR. 12 [2002]2 EA 366. 13 Sec. 35 (3), Arbitration Act, 1995. 14 [2009] eKLR.


191

Procedure Act and Rules which was improper as the Arbitration Act is a

complete code. It was stated that Rule 11 of the Arbitration Rules does not

override the provisions of Section 10 of the Act and that the High Court did

not have jurisdiction to intervene in any matter not specifically provided for

in the Act. Thirdly, a party cannot seek to set aside an award outside the

grounds specified in section 35 of the Act, therefore non-service of any process

after an award had been made was not a ground for setting aside.

The application was also stated to have failed to meet the grounds for

challenge to recognition and enforcement of an award under section 37 of the

Act. The Court went further and stated that section 35(3) of the Act bars any

challenge, even for valid reason, which is made three months after the award

is delivered, and as such, the application for setting aside was made long after

this period had lapsed and the court could not entertain it.

The Court of Appeal also reiterated that there is no right for any court to

intervene in the arbitration process except in the situations set out in the Act

or as previously agreed in advance by the parties and similarly, there is no

right of appeal to the High Court or to the Court of Appeal against an award

except in the circumstances set out under section 39 of the Act. The application

was also found to have offended the doctrine of public policy as the court was

of the opinion that the underlying principle in the Arbitration Act is the

recognition of an important public policy in enforcement of arbitral awards

and the principle of finality of arbitral awards.

From the foregoing, it can be seen that the Courts in Kenya have taken a strict

interpretation of the Arbitration Act on the matters in which a Court can

intervene after the arbitral award has been rendered. A party to the arbitral

proceedings whose award is sought to be set aside may apply for suspension

of the setting-aside proceedings. The High Court may exercise its discretion to

suspend such proceedings where it deems the same appropriate. A suspension

shall be for such determined time and for the purpose of giving the arbitral


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tribunal an opportunity to resume the arbitral proceedings or take a remedial

action of purging the grounds for setting aside the arbitral award.15

11.3 Recognition and Enforcement of Arbitral Award

The recognition of an arbitral award entails the official acknowledgement of

the award as valid and capable of enforcement. Therefore, a party seeking the

‘recognition’ of an award has to apply to the relevant court to recognize the

award as final and binding on the parties between whom it was made.

Recognition is a defensive process. It can be used to shield against an attempt

to raise, in a fresh proceeding, issues that have already been decided in an

earlier arbitration resulting in the award sought to be recognized. This usually

arises where a court is asked to protect a party with respect to a dispute that

has been the subject matter of an earlier arbitral proceeding.

The party who got a favourable award in arbitration is entitled to object to the

subsequent arbitration with respect to the dispute which was the subject

matter of the earlier arbitration. The subsequent arbitration will be barred by

the rule of res judicata. The court is bound to recognize the earlier award as

valid and binding upon the parties with respect to the issues which it earlier

dealt with. If the earlier award has disposed of all the issues raised in the

subsequent proceedings, it will put an end to the subsequent proceedings

because the matters in issue between the parties have already been decided

and disposed of.

However, if the earlier award did not dispose of all the issues raised, and some

issues had remained undecided, it will need to be recognized, for the purposes

of issues decided, so as to prevent a plea estoppel of the issues it had not dealt

with, from being raised later. Nevertheless, the issues which were not raised

and determined though could have been raised and determined, will too be

barred by the rule of constructive res judicata.

15 Sec. 35 (4), Arbitration Act, 1995.


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Enforcement, on the other hand, is the process of compelling the party against

whom an award is made to perform it by applying all available legal sanctions.

There are a variety of legal sanctions. In a case where a party who fails or

refuses to perform the award is an individual, his property and other assets

may be seized or attached and his bank accounts may be frozen and forfeited.

In extreme cases, even penal proceedings may be invoked against him. In a

case, where the party is a corporate body, apart from seizing and attaching

moveable and immovable property and other assets such as real estate, bank

accounts, trading assets, stock and trade, sanctions may also be directed

against their directors personally or on guarantee as they may be held

personally liable.

The concepts 'recognition and 'enforcement' go hand in hand. One is a

necessary part of the other because a court that is prepared to grant

enforcement of an award will do so because it recognizes the award as valid

and binding upon the parties to it thus suitable for enforcement. The phrase is

however rather confusing as it is apt to give the impression that the terms

'recognition' and 'enforcement' are synonymous. The Kenyan Arbitration Act

also uses the phrase 'recognition and enforcement' of awards.16 In Brace

Transport Corporation of Monrovia, Bermuda v Orient Middle East Lines Ltd17, the

Supreme Court of India said:

“An award may be recognized, without being enforced; but if it is enforced,

then it is necessarily recognized. Recognition alone may be asked for as a shield

against re-agitation of issues with which the award deals. Where a court is

asked to enforce an award, it must recognize not only the legal effect of the

award but must use legal sanctions to ensure that it is carried out.”

There is no question that the two terms, recognition and enforcement of

awards are distinct because an award may be 'recognized' without being

16 Ibid, Sec. 36. 17 Brace Transport Corporation of Monrovia, Bermuda v Orient Middle East Lines Ltd AIR 1994 SC

1715.


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'enforced', though when it is 'enforced' it is necessarily recognized' by the court

that orders its enforcement.

i. Why recognize and/or enforce an Arbitration Award?

The aim of all legal proceedings, whether judicial or arbitral, is to achieve

justice and efficiency. Arbitration is preferred for its advantage with respect to

efficiency. However, if the final award cannot be timeously recognized and

enforced by a competent court, the superiority of arbitration in terms of

efficiency will certainly be weakened or even thoroughly frustrated.

Most arbitral awards are voluntarily complied with and do not require judicial

enforcement. It is only if an arbitral award can be adequately enforced,

however, that a successful claimant can ensure that it will actually recover the

damages awarded it. Recognition of the award is important in that it ensures

that an arbitral award that is recognized as valid can be enforced and therefore

achieve justice for the parties to the arbitration in a timely and efficient

manner.

On the other hand, enforcement is a weapon of attack. It involves aggression

and coercion. It is used to ask the court to not only recognize the legal force

and effect of an arbitral award, which has become final and binding, but also

to enforce it, by using such legal sanctions as are available. As such,

enforcement is a more comprehensive concept.

ii. The Law on Recognition and Enforcement of Awards

The Kenyan law favours arbitration as an established method of settling

disputes. It provides that a domestic award shall be recognized as binding and,

upon application in writing to the High Court, shall be enforced.18 An

international arbitration award shall be recognized as binding and enforced in

accordance with the provisions of the New York Convention or any other

convention to which Kenya is signatory and relating to arbitral awards.19

18 Sec. 36 (1), Arbitration Act, 1995. 19 Ibid, Sec. 36 (2).


195

The law requires the party relying on the award or applying for its

enforcement to furnish it with the original arbitral award or a certified copy of

it and the original arbitration agreement or a duly certified copy of it.20

However, the High Court may order otherwise where a party seeks

indulgence on compliance with these requirements to supply those

documents. The Arbitration award supplied must be in the English language

and if the original is not in English, the law requires a duly certified translation

of it to be availed to court.21

In Kundan Singh Construction Ltd v Kenya Ports Authority22 an application for

recognition and enforcement of an arbitral award was struck out for failure to

comply with section 36(2) of the Act. The Judge found that there was no duly

authenticated original arbitral award or a duly certified copy of it. Rather he

found that what was on the court record were photocopies of the arbitral

award and arbitration agreement contrary to the requirements of section 36(2)

of the Act which could only be waived upon application which had not been

made.

However, in Structural Construction Co. Ltd v International Islamic Relief

Organization23 the lack of an original or certified copy of the arbitration

agreement was held not to be fatal and a copy annexed to the supporting

affidavit was held to be acceptable for the purposes of the application for

enforcement. It was also decided in this case that the non- representation of a

party at the arbitration proceedings due to their neglect to appoint their

advocate of choice did not entitle them to challenge the recognition and

enforcement of an award.

20 Arbitration Act, 1995, Sec. 36 (3). 21 Ibid, Sec. 36 (4). 22 Kundan Singh Construction Ltd v Kenya Ports Authority, H.C.C.C No. 794 of 2003 (Milimani,

unreported). 23 Structural Construction Co. Ltd v International Islamic Relief Organization [2006] eKLR.


196

Section 37 provides the grounds upon which the High Court may refuse to

recognize an arbitral award. The grounds for refusal to recognize awards are

the same as those of setting aside the same under the Kenyan law.

At the request of the party against whom the award is sought to be invoked

the court may refuse only if the party proves any of the following: that the

party to the agreement was under some incapacity; that the arbitration

agreement is not valid under the applicable law; that proper notice of the

appointment of an arbitrator or of the arbitral proceedings was not given to

the party or that the party was otherwise unable to present his case; that the

award does not fall within or is incurably beyond the scope of the reference to

the arbitration; that the composition of the arbitral tribunal or the arbitral

procedure was not in accordance with the parties agreement or failing such

agreement, was contrary to the applicable law; that the arbitral award has not

yet become binding on the parties or has been set aside or suspended by a

court of the state in which, or under the law of which, that arbitral award was

made; that the making of the award was induced or affected by fraud, bribery,

corruption or undue influence.24

The High Court may also on its own motion or upon request by a party refuse

to enforce an award if it finds that: the subject matter of the dispute is not

capable of settlement by arbitration under the law of Kenya; or the recognition

of the award would be contrary to the public policy of Kenya.25 These grounds

are in recognition of the court’s role as custodian of the laws and public interest

in Kenya and the resultant duty on the courts to uphold the same.

iii. Enforcement of Foreign Arbitral Awards under New York Convention

The New York Convention26 on the Recognition and Enforcement of Foreign

Arbitral Awards of 1958 (hereinafter referred to as ‘New York Convention’)

24 Sec. 37 (1) (a), Arbitration Act, 1995. 25 Ibid, Sec. 37 (1) (b). 26 Convention on the Recognition and Enforcement of Foreign Arbitral Awards 330 UNTS 38;

21 UST 2517; 7 ILM 1046 (1968) (New York Convention).


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provides for the enforcement of foreign arbitral awards. Kenya is a party to the

New York Convention. The New York Convention is to the effect that an

award issued by a contracting state can generally be freely enforced in any

other contracting state.27 In this regard, virtually every significant commercial

country in the world is a party to the Convention. As a result, in many

countries, a foreign arbitration award is much easier to enforce than a domestic

arbitration award. This is due to the fact that relatively few countries have a

comprehensive network for cross-border enforcement of judgments of the

court.

The other characteristic of cross-border enforcement of arbitration awards that

makes them appealing to commercial parties is that they are not limited to

awards of damages. Whereas in most countries only monetary judgments are

enforceable in the cross-border context, no such restrictions are imposed on

arbitration awards and so it is theoretically possible to obtain an injunction or

an order for specific performance in an arbitration proceeding which could

then be enforced in another New York Convention contracting state.

As a matter of fact, the New York Convention is not actually the only treaty

dealing with cross-border enforcement of arbitration awards. The earlier

Geneva Convention on the Execution of Foreign Arbitral Awards 1927 remains

in force although the New York Convention is more popular and has achieved

a wide acceptance/application over time. A person who intends to enforce a

foreign arbitral award should apply to the court and produce the following

documents:

a) Original award or copy thereof, duly authenticated in the manner

required by the law of the country in which it was made.

b) Original agreement for arbitration or a duly authenticated copy.

c) Such evidence as may be necessary to prove that the award is a

foreign award.

27 New York Convention, Article III.


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d) Translations, if necessary shall also be furnished.28

Under the New York Convention, a foreign award is to be recognized and

enforced in any signatory state unless the defendant proves the existence of

the specific grounds set forth in Article V of the Convention, that is:-

a) The parties to the arbitration agreement did not have the capacity to

contract, or the agreement to arbitrate is otherwise invalid;

b) The party against whom the award is made did not have proper notice

of the arbitration or could not present its case;

c) The award exceeds the scope of the arbitration agreement;

d) The composition of the arbitral panel or procedure was contrary to the

agreement of the parties or the law of the forum country;

e) The award was set aside under the law of the forum country;

f) The subject matter is not arbitrable; or

g) The enforcement of the award is contrary to public policy.29

There are a few key issues to note with respect to enforcement of the foreign

arbitral award. In the first place, the New York Convention does not permit

any review on the merits of an award to which the Convention applies. This

principle which is referred to as prohibition of the revision au fond will not

allow the national enforcing judges to retry the whole case. Secondly, the

grounds for refusal of recognition and enforcement set out in the New York

Convention are exhaustive. They are the only grounds on which recognition

and enforcement may be refused30. Thirdly, the New York Convention sets out

five separate grounds on which recognition and enforcement of a Convention

award may be refused at the request of the party against whom it is invoked.31

28 New York Convention, Article IV.. 29 Ibid, Article V. 30 Ibid, Article V (2). 31 Ibid, Article V (1).


199

It is significant that under the Convention the burden of proof is not upon the

party seeking recognition and enforcement. The remaining two grounds on

which recognition and enforcement may be refused relate to the public policy

of the place of enforcement and are grounds which may be invoked by the

domestic court sua sponte.

Fourthly, even if the grounds for refusal of the recognition and enforcement of

an award are proved to exist, the enforcing court is not obliged to refuse

enforcement. The opening lines of paragraphs (1) and (2) of Article V states

that enforcement “may” be refused. They do not say that it “must” be refused.

Fifthly, the intention of the New York Convention is that the grounds for

refusing recognition and enforcement of arbitral awards should be applied

restrictively.

11.4 Determination of Questions of Law and Appeals

Parties to a domestic arbitration may agree that an application by any party

may be made to a court to determine a question of law arising in the cause of

the arbitration.32 The parties may also agree that an appeal may be available to

an aggrieved party on questions of law arising out of the award. Such appeal

shall lie to the High Court.33 On such an application or appeal, the High Court

has two options available to it. It can either determine the questions of law

arising or confirm, vary or set aside the arbitral award for re-consideration.34

An appeal under this section shall lie to the Court of Appeal, if the parties have

so agreed35, or, if the Court of Appeal is of the opinion that a point of law of

general importance is involved, the determination of which will substantially

affect the rights of one or more of the parties and as such grants leave to appeal.

In such an appeal the Court of Appeal has jurisdiction to exercise any of the

32 Sec. 39, Arbitration Act, 1995. 33 Ibid. 34 Ibid, Sec. 39 (2) (a) and (b). 35 Ibid, Sec. 39 (3).


200

powers exercisable by the High Court on an application for determination of

questions of law in arbitration.36

The Court of Appeal in Kenya Shell Limited v Kobil Petroleum Limited37 held that

public policy considerations may apply in favour of granting leave to appeal

just as they would discourage it. In that case, leave to appeal on a question of

law was denied on the ground of public policy. The court stated:

“We think, as a matter of public policy, it is in the public interest that there

should be an end to litigation and the Arbitration Act under which the

proceedings in this matter were conducted underscores that policy…we do not

feel compelled therefore to extend the agony of this litigation on account of the

issues raised by the Applicant.”

36 Arbitration Act, 1995, Sec. 39 (3) (b). 37 [2006] eKLR.

Arbitration Practice in Kenya

201

Chapter Twelve


12.1 Introduction

This chapter explores the practice of arbitration in Kenya. In this regard, it

discusses the contemporary issues surrounding professional arbitration

practice in the country, what it takes for one to qualify as an arbitrator in

Kenya, the nature of arbitration as a profession and the future of arbitration in

Kenya and around the world. The aim of this chapter is to provide a primer

for anyone seeking a career as an arbitration practitioner in Kenya and East

Africa in general.

12.2 The Nature of Arbitration as a Profession

These days, many people are turning to arbitration to settle their disputes, as

an alternative to the court system. Arbitrators, sometimes called umpires,

referees or third-party neutrals, facilitate and decide private disputes between

parties. Arbitration is a private and confidential practice designed to ensure

fast, practical and economical settlements out of court.

Arbitration is less formal than litigation. Since the arbitrator acts as a third

party, listening, assessing and making sound decisions on each specific case

without forming judgments, he must remain neutral in order to make just

decisions on a case. Arbitrators hold proceedings in private, unlike the public

forum of a court where personal information about your business and personal

affairs becomes public knowledge. Unless both parties agree to make

information public, it will remain confidential between the disputants and the

arbitrator.

Arbitrators are like judges because they are in charge of settling cases.

Sometimes, they often specialize in a specific area of arbitration such as family


202

disputes, land ownership or property disputes. Arbitrators usually charge

much less than lawyers and, therefore, many individuals who cannot afford

court proceedings turn to an arbitrator. As professionals, arbitrators are highly

trained in personal skills and they offer a higher chance of maintaining

goodwill between the parties and finding a solution that will make both parties

satisfied.

Acting on principles of Alternative Dispute Resolution (ADR), arbitrators are

constantly looking to create win-win situations and finding compromises for

both parties. Arbitrators make their decisions based on facts, evidence and the

law. Their decision are legally binding, therefore, both sides of the dispute

must act upon what the arbitrator decides.

The best personal traits for arbitrators include the capacity to remain neutral,

patient and unprejudiced.

Arbitrators must also possess excellent communication skills, including

listening and writing skills. Writing is important since they draw up awards

based on clear, concise and logical decisions. Arbitrators must also possess the

ability to establish relationships with all different kinds of people, inspire trust

in parties and be culturally sensitive to their backgrounds.

Arbitrators often work part time as arbitrators and part time in different

professions and contract their services when needed. All in all, arbitrators are

intellectuals who engage in analysing problems and facts and identifying the

important issues involved in each case. From this, they come up with awards

and develop innovative approaches to conflict resolution. They must be

organized, quick-thinking and retain a sense of humour in order to relieve the

occasional stressful pressures of emotionally charged clients and hostile

situations.

Although there are no specified minimum requirements for arbitrators, many

of the practicing and qualified arbitrators in Kenya have some sort of

professional background. Most of the arbitrators in practice in Kenya have a


203

university degree or are professionals in such disciplines as law, insurance,

psychology, human resources, quantity surveying, engineering, social work or

other related fields. In the minimum, arbitrators must possess an appreciation

of the principles of natural justice, a working knowledge of contracts and

evidence legislation and knowledge of the principles of alternative dispute

resolution.

In most cases in Kenya, arbitrators are private practitioners who get contracted

to arbitrate cases. Usually, arbitrators work in other occupations and work

contractually on assignments. Thus, it is possible to work within their homes

or at mutually acceptable locations. In terms of career engagements, arbitrators

are either independent practitioners or attached to a specific dispute resolution

institution. They may also become private trainers sometimes called contract

trainers or facilitators.

As private trainers they conduct workshops, seminars, retreats, conference

sessions and/or individual instruction sessions for adults in areas such as

conflict management. They may also develop and design training programs,

curriculums and other resource materials. An arbitrator usually performs the

following roles:

i. Conducts initial meeting with disputing parties to outline the

arbitration process, which includes settling matters such as location,

fees, witnesses and time.

ii. Controls the hearing process so as to accord each side an opportunity

to present its arguments and evidence, question witnesses and cross-

examine other witnesses.

iii. Considers both sides of the argument, assessing their validity and the

evidence presented.

iv. Comes up with an award in favour of one of the two parties and states

the reasons behind the decision.

v. Reduces the hostility between the parties.

vi. Identifies what is important and what is expendable in each case.


204

A typical day will revolve around the case an arbitrator is working on.

Therefore, case proceedings will take up the majority of the arbitrator's time

along with going over the evidence in order to make an arbitral award.

Arbitrators may conduct hearings in a neutral location such as a boardroom,

hotel conference room or anywhere else where all the parties may agree on.

Since arbitrators are independent contractors, many work in other professions,

such as education or law because there is no guarantee for back to back cases.

Arbitrators travel often, sometimes to other cities in order to proceed with their

arbitration. Also, they sometimes work for long hours as disputes can run late

into the night and may need to do extensive research before writing the award.

12.3 How to Become an Arbitrator in Kenya

Arbitration is one of the alternative dispute resolution mechanisms in Kenya

that involves resolving conflicts outside the court environment. As such

arbitrators are not necessarily legal professionals although they help parties

resolve their disputes. For instance, in Kenya we have human resource

professionals, engineers, insurance professionals, quantity surveyors, land

economists and managers who are excelling as arbitrators.

In order to qualify as an arbitrator, you do not necessarily need to have a

bachelor’s degree. However, many employers and prospective arbitration

clients require arbitrators to have a degree or at least be experienced

professionals in their specialist area as well as arbitration. The training and

orientation of arbitrators in Kenya is spearheaded by the Chartered Institute

of Arbitrators-Kenya Branch, which is the leading arbitration training

institution in Kenya. The Chartered Institute of Arbitrators Kenya Branch

(CIArb-K) was established in 1984.

It is a branch of the Chartered Institute of Arbitrators (UK) which was formed

in 1915, with headquarters in London. The objectives of the institute as a whole

is the promotion and facilitation of determination of disputes by Arbitration


205

and other forms of Alternative Dispute Resolution (ADR), which includes

mediation and Adjudication. The Institute has over 12,000 members spread

out in 90 countries in the world with branches in England, Wales, Scotland,

Hong Kong, Europe, Nigeria, Kenya, India and North America, among others.

It also has affiliations with The London Court of International Arbitration, The

International Chamber of Commerce in Paris, other arbitration bodies and

institutions in other countries across the world.1

The number of registered members of the Kenya Branch (CIArb-K) has grown

over the years. The Institute maintains a register of knowledgeable and

experienced Arbitrators in order to facilitate their appointment. It also runs a

secretariat with physical facilities for arbitration and for other forms of ADR.

In order to attain membership of the Chartered Institute of Arbitrators, one is

required to be a member of a recognized profession, discipline or calling. The

profession, discipline or calling must have recourse to Arbitration and other

forms of ADR as an accepted method of resolving disputes. Currently, the

institute has members from such diverse fields as Architecture, Engineering,

Quantity Surveying, Law, Insurance, Accounting and Property Valuation,

among others.

Once a person is accepted to seek qualification as a member of the institute,

she or he is required to sit the entry course to arbitration examination. The

passing of the entry course examination leads to acceptance, upon application,

to associate membership of the Institute. At this level, one is called an

Associate Arbitrator. Further training is provided and private study

encouraged for upgrading membership to Member, Fellow and Chartered

Arbitrator grades.2

1 Source: Chartered Institute of Arbitrators (K) Branch website. http://www.ciarb.org 2 Ibid.


206

In addition to the theoretical training, one is required to complete internships

while pursuing their education to gain practical experience in the field. Many

arbitrators also complete specialized training to become certified. The training

at the Institute typically only last a few days. Once qualified as an arbitrator,

arbitrators in Kenya must also engage in and complete regular continuing

education throughout their careers to keep up their skills up to date and stay

abreast on the current advancements in the field. The Kenya Branch maintains

a strict Continuous Professional Development (CPD) programme. In this

respect it conducts lunch talks, surgeries, workshops and seminars on relevant

topics in the field of dispute resolution.

12.4 The Future of Arbitration in Kenya

One thing is beyond question; there is a bright future for arbitration and

alternative dispute resolution in Kenya and around the world. This is due to

the renewed quest for legal systems the world over to finding new and more

effective ways of providing these services to meet the needs of people in an

even greater array of human transactions. In Kenya, for example, the judiciary

is required to promote the use of alternative forms of dispute resolution

including reconciliation, mediation, arbitration and traditional dispute

resolution mechanisms.3

The constitution also provides that national laws should provide for the

procedures to be followed in settling intergovernmental disputes by

alternative dispute resolution mechanisms, including negotiation, mediation

and arbitration.4 It seems that the future of Alternative Dispute Resolution in

Kenya is bright and really promising in bringing about a society where

disputes are disposed of more expeditiously and at lower costs.

3 Article 159 (2) (c) of the Constitution of Kenya 2010, Government Printer, Nairobi. 4 Ibid, Article 189 (4).


207

One of the increased approaches to arbitration entails court-ordered

arbitration. This form of arbitration which is taking root around the world

requires parties to present their dispute to an arbitrator or a panel of arbitrators

for resolution. When parties are ordered to arbitrate, however, they face the

possibility of losing their day in court unless they first opt for arbitration.

Presently, international arbitration in Kenya has picked up. The Nairobi Centre

for International Arbitration Act5 establishes the Nairobi Centre for International

Arbitration (NCIA) whose functions include, inter alia, to promote, facilitate

and encourage the conduct of international commercial arbitration in

accordance with the Act; to administer domestic and international arbitrations

as well as alternative dispute resolution techniques under its auspices; to

ensure that arbitration is reserved as the dispute resolution process of choice;

and, to develop rules encompassing conciliation and mediation processes.6

NCIA is administered by a Board of Directors as provided for under the Act.7

There is also an Arbitral Court established under the Act, which court has

exclusive original and appellate jurisdiction to hear matters that are referred

to it under the Act.8

Its capacity to handle domestic and international arbitration requires to be

constantly improved, and it can only be hoped that this potential will be

exploited to its maximum in the years to come so as to prominently place

Kenya on the global map of international arbitration.

Kenya also has qualified and experienced arbitrators who are arbitrating

commercial disputes around Africa. Indeed, following the revival of the East

African Community and the expansion of regional trade, the possibility of

Nairobi becoming a regional centre for arbitration is very high. Therefore, the

5 Nairobi Centre for International Arbitration Act, No. 26 of 2013, Laws of Kenya (Government

Printer, Nairobi, 2013). 6 Ibid, Sec. 5 (a)-(d). 7 Ibid, Sec.6. 8 Ibid, Sec.21.


208

prospects of international commercial arbitration in Kenya are really

promising.

The use of arbitration is therefore critical in Kenya in settlement of disputes,

not only in the commercial set up but also in settling intergovernmental

disputes between the County government and the national government, as

envisaged in Article 189 of the Constitution. Since it is a consensual, flexible,

cost-effective, private and expeditious process, the role of arbitration in an

emerging economy like Kenya cannot be gainsaid. The use of arbitration in

commercial and all other disputes where it is amenable is thus the way of the

future.

With the enactment of the Constitution of Kenya in 2010, there is no doubt that

a bright future lies ahead for arbitration and other alternative dispute

resolution mechanisms in Kenya. This is so because the Constitution now

obligates the judiciary, in its pursuit of expeditious resolution of disputes and

enhanced access to justice, to promote the use of alternative forms of dispute

resolution including reconciliation, mediation, arbitration and traditional

dispute resolution mechanisms. Recognising arbitration as one of the main

conflict resolution mechanisms in Kenya is, thus, encouraging. Its status has

been elevated. Its applicability also to a wide array of disputes will thus be

seen in the near future.

The scope for the application of arbitration has also been extensively widened

with the Constitution now providing that various national laws should

provide for the procedures to be followed in settling disputes by alternative

dispute resolution mechanisms, including negotiation, mediation and

arbitration.

I have practised arbitration for a number of years both as a representative of

parties and as the presiding arbitrator. I can attest to the fact that arbitration

has the capacity to be flexible, fast and expeditious if the parties are willing to

make it so. It is widely used in settling commercial disputes. International


209

commercial arbitration has also taken root in Kenya in recent years. In the past,

there has been a capital flight by investors who have relocated from Kenya due

to the protracted court battles that are the hallmark of any commercial dispute

in Kenya. Apart from running a profitable enterprise, an investor’s only other

concern is business certainty and confidentiality and litigation has not

promoted any of these. The express endorsement of international commercial

arbitration therefore has the capacity to make Kenya an attractive centre for

international arbitration and business.

However, the practice of arbitration in Kenya continues to be weighed down

by litigious parties who, even after the arbitrator makes an award, they still

would want to challenge it in court on public policy grounds, among others.

Whereas it is their right to do so, it is my view that this could hamper the

enforceability of arbitral awards and also erode the gains made in fronting

arbitration as an expeditious dispute settlement mechanism in Kenya.

Arbitration is still fairly misunderstood in Kenya, and sometimes it has been

made as structurally complex as litigation by those opting for it, thus making

it unattractive to others who would want to utilise it. However, dissemination

of information to the public on the use of arbitration as a dispute settlement

mechanism is on the rise and this will go a long way in popularising and

demystifying it. One of the increased approaches to arbitration in Kenya has

entailed court-ordered arbitrations with the aim of dealing with the backlog of

cases and yield justice on the parties’ terms.

It is the way of the future, for access to justice and economic growth to be

realised in Kenya.

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221

Appendix A

Agenda for Preliminary Meeting

DATED: TIME: PLACE:

Represented by:

Also present:

1 To see the original

agreement

2 To identify the issues in

dispute

3 Arbitrators schedule of

charges

Accepted

Security

Interim payments

4 To find out if the parties are

briefing counsel

Claimant

Respondent

5 Programme for pleadings Points of

claim……..

Points of defence

& counter-claim.

Points of reply to

defence and

defence to

222

counter-

claim……….

Points of reply to

defence to

counterclaim….

6 F & BP

Further & better particulars

7 Discovery Procedure

After close of

pleadings,

exchange of lists

within ….days

Inspection

Bundle to be

limited

To be provided to

arbitrator ….days

before the

hearing.

Written

representation

8 Conduct of the reference Hearing

223

9 Hearing venue

Estimated

duration

Procedure

10 Expert witness Number on each

side

Meeting of

experts of the

same discipline

on a without

prejudice basis

Exchange of

reports

simultaneously

Date for exchange

Sanction for

failure to

exchange reports

Access for expert

11 Witness of fact

Proofs of evidence

Exchange

Date of exchange

12 Communications with

Arbitrator

Copies to be sent

to other party

224

13 Figures, plans,

photographs and

correspondence

To be agreed

where possible

14 Transcript of hearing

15 Oath

16 Pre-hearing review

17 Opening addresses

reduced to writing

Date of service

18 Final speeches reduced to

writing

Programme

19 Taxation of costs

By taxing master

By arbitrator

20 Any other business Claimant

Respondent

225

Appendix B

Order For Directions No 1

REPUBLIC OF KENYA

IN THE MATTER OF THE ARBITRATION ACT (1995) AS AMENDED IN

2009 AND THE RULES THERETO

AND

IN THE MATTER OF AN ARBITRATION

BETWEEN

WAJENZI CONTRACTORS………….…………………………...CLAIMANT

AND

HOUSING BANK LTD………..……………………………….RESPONDENT

ORDER FOR DIRECTIONS NO 1

ISSUED pursuant to a preliminary meeting held on 10th April 2011 at the

Arbitrator’s offices in the presence of Mr. Mustapha Jamio counsel for the

Claimant and Mr. John Runengo counsel for the Respondent.

WHEREAS the parties herein have agreed on the issues particularized

hereunder and WHEREAS they have also agreed and requested the Arbitrator

to proceed with the hearing of this matter;

NOW IT IS HEREBY ORDERED and directed as follows:

1.1 THAT the matter is properly before the Arbitrator Mr. Wabukala

Samuel who is duly appointed and has jurisdiction to hear this matter by

virtue of the Arbitration agreement contained in Clause 20 (g) of the

contract dated 9th January 2010 and the Chartered Institute of Arbitrators

Rules and the Arbitration Act 1995 as amended in 2009.

226

1.2 THAT the parties have agreed and shall pay the Arbitrator’s charges as

at the rate of Kshs. 15,000.00 per hour. Parties to put in a deposit of Kshs.

200,000/=; Kshs 100,000/= from each party is to be forwarded to the

Arbitrator forthwith and in any event within the next seven (7) days.

1.3 THAT the parties shall then proceed by way of Statement of Case. The

Claimants statement of case shall be filed with the Arbitrator and served

on the other party on or before 13th April 2017. It should contain the

Statement of Claim, brief arguments, issues for determination, witness

statements and all primary documents the Claimant wishes to rely on.

1.4 THAT the Respondent shall file and serve it’s reply and or counterclaim

on or before 20th April 2017. The reply should include brief arguments,

issues for determination, witness statements and all primary documents

the Respondent wishes to rely on.

1.5 THAT the Claimant shall be at liberty to file and serve a response on or

before 27th April 2017.

1.6 THAT discovery shall be done within 7 days after 27th April 2017.

1.7 THAT the matter is fixed for hearing on 7th & 8th May 2017 in the

Arbitrator’s offices.

1.8 THAT submissions shall be in written form.

1.9 THAT communication to the Arbitrator shall be by letter or Email copied

to the other side.

1.10 THAT all documents that need to be filed shall be filed at the Arbitrator’s

office and stamped to signify receipt of the same.

1.11 THAT parties are not entitled to the arbitrator’s notes. They shall make

their own arrangements to record the proceedings.

227

1.12 THAT the Arbitrator’s communications to the parties shall be verbal at

meetings, by letter or Email to the parties or through orders for

directions.

1.13 THAT parties be at liberty to apply.

DATED at Nairobi this day of 2017.

WABUKALA SAMUEL

ARBITRATOR

TO:

1. MUSTAPHA JAMIO & CO. ADVOCATES

ARBANA HSE, 9TH FLOOR,

HIGHRISE AVENUE,

P.O. BOX 897-00100

NAIROBI

2. RUNENGO & ASSOCIATES

FURAHI HSE 7TH FLOOR

NEEMA AVENUE

P.O. BOX 28982-00100

NAIROBI

228

Index

2009 amendment, 71, 157

access to justice, vii, viii, 5, 6, 16, 18,

33, 208, 209

Ad hoc arbitration, 9

additional award, 147

Adjournment of hearing, 106, 144

adjudication, 32

adversarial, 17, 19

Adversarial Procedure, 140

Alternative Dispute Resolution

ADR mechanisms, 28, 71, 214

amendment of pleadings, 103, 122,

126, 129

applicable law, 9, 74, 136, 188, 196

Appointment of Arbitrators, 76,

118, 119, 174

arbitral award, 6, 71, 82, 91, 105,

111, 114, 121, 123, 131, 146, 147, 148,

149, 150, 151, 154, 157, 158, 163, 164,

175, 176, 178, 179, 180, 181, 187, 188,

189, 190, 191, 192, 194, 195, 196, 197,

198, 199, 204

arbitral dispute, 107

Arbitration, 8, 9, 11, 12, 24, 27, 28,

207, 212, 213, 216, 217, 218, 219

Arbitration Act, 12, 28, 207

Arbitration Act, 1995, 1, 6, 7, 12, 15,

28, 43, 44, 62, 74, 76, 77, 81, 82, 86,

87, 90, 91, 95, 98, 99, 100, 103, 105,

107, 108, 110, 111, 112, 113, 118, 119,

121, 122, 125, 127, 134, 137, 146, 150,

151, 154, 157, 159, 162, 170, 171, 172,

174, 178, 180, 187, 190, 192, 194, 196,

199, 200

arbitration as a profession, 201

arbitration clause, 10, 35, 36, 37, 38,

39, 41, 42, 46, 47, 48, 49, 50, 51, 52,

54, 55, 56, 58, 61, 63, 73, 75, 84, 95,

96, 110, 112, 114, 165

arbitration hearing., 69, 136, 138

arbitration institutions, 81

arbitration process, 7, 8, 10, 15, 37,

51, 67, 68, 109, 111, 112, 117, 126,

131, 154, 163, 167, 184, 191, 203

Arbitration Rules, 13, 69, 70, 74, 76,

78, 84, 91, 121, 135, 174, 177, 179,

180, 191, 210

arbitrator’s award, 6, 152

arbitrator’s notes, 143, 226

arbitrator's decision, 38, 39, 144, 146

Arb-Med, 29

Attributes of Arbitration, 3

Authority of an arbitrator, 90

autonomy, 24

Challenge of the Arbitral tribunal,

86

Choosing an Arbitrator, 80

Civil Procedure Act

Civil Procedure Rules, 19

Civil Procedure Rules, 11, 13, 15,

60, 69, 70, 127, 179, 180, 185

Claimant, 75, 137, 138, 143, 221, 224,

225, 226

Conflict, 17, 20, 21, 32, 210, 212, 213,

219

conflict management, 29, 32, 71

Conflict of Interest, 84

Constitution of Kenya, 11, 17, 18,

33, 71, 116

Costs, 4, 134, 146, 154, 158, 213

Costs in Arbitration, 154

Critique, 179

customary, 32, 33

Defence, 12, 68

Defining Jurisdiction, 91

Discovery, 130, 222

Dispute, 17, 18, 26, 27, 28, 29, 32, 71,

214, 215, 218, 219

dispute settlement, 17, 24

elders, 32

fairness, 25, 28

Finality,, 52

impartial, 19, 31

interests, 25, 26, 27

litigation, 11, 17, 18, 23, 32, 117

Litigation, 7, 17, 24, 171, 211, 216

Med-Arb, 24, 26, 28, 218, 219, 220

Med-Arb,, 24

Mediation, 17, 19, 20, 21, 22, 24, 27,

28, 211, 213, 219

Mutual Consent, 43

Nationality, 83

needs, 116

Neutral Evaluation, 22

New York Convention,, 198

Proofs of evidence, 223

reconciliation, 32, 72, 116

Security, 134, 221

Separability, 46

Setting aside, 187

settlement, 17, 18, 22, 24, 30, 31, 32,

116

Sources of Jurisdiction, 97

Stay against a counterclaim, 65

Submissions, 103

Termination of Proceedings, 103

Termination of the Office, 88

third party, 22, 24, 25, 27

traditional dispute resolution, 72,

116

Traditional Justice Systems, 32

Types of awards, 152

Types of Jurisdiction, 94

UNCITRAL Model Law, 44, 160

United Nations Charter, 1

violence, 26

Withdrawal of instructions, 144,

229

Settling Disputes Through Arbitration Kenya

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