Oraro’s Chacha Odera, Eva Mukami and Radhika Arora look at the use of arbitration as a form of dispute resolution within Kenya.
Introduction
The use of arbitration as a form of dispute resolution within the Kenyan jurisdiction has been on an upward trajectory for a long time, more so with the promulgation of the Constitution of Kenya 2010 (the 2010 Constitution). Article 159 of the said Constitution recognises the need for courts and tribunals to promote alternative forms of dispute resolution which includes arbitration, mediation, reconciliation and traditional dispute resolution mechanisms.
This increasing preference of arbitration as a means of resolving disputes over the traditional court system is a reflection of the robust economic growth within Kenya specifically, and Africa in general. Investment opportunities in Kenya are attracting not only investments in new sectors, but also investors from new jurisdictions, amplifying the need to have an internationally recognised and agreed form of a dispute resolution mechanism.
Towards that end, the Arbitration Act, Cap. 49 Laws of Kenya (the Arbitration Act) has made specific provisions not only in relation to domestic arbitral tribunals, but also for the recognition of foreign arbitral awards and the mechanism for their enforcement.
Finality of arbitrations
The Arbitration Act heavily restricts court intervention in arbitral proceedings and the basis upon which an award can be challenged. In particular, Section 35(2)(a) of the Arbitration Act provides for very limited circumstances upon which a party can seek the High Court’s intervention to set aside an award, namely, if the party making such an application furnishes proof that –
a) A party to the arbitration agreement was under some incapacity; or
b) 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; or
c) 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; or
d) The arbitral award deals with a dispute not contemplated by or not falling within the terms of the 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; or
e) The composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless that agreement was in conflict with a provision of this Act from which the parties cannot derogate; or failing such agreement, was not in accordance with this Act; or
f) The making of the award was induced or affected by fraud, bribery, undue influence or corruption.
Section 35(2)(b) of the Act further provides the two other instances that the High Court will set-aside an arbitral award, namely –
a) The subject matter of the dispute is not capable of settlement by arbitration under the law of Kenya; or
b) The award is in conflict with public policy of Kenya.
The court’s position with respect to intervening with regard to arbitration awards was pronounced in the case of Kenya Bureau of Standards v Geo-Chem Middle East [2017] eKLR wherein it was held –
‘It is not the function nor the mandate of the High Court to re-evaluate such decisions of an arbitral tribunal, when the court was called upon to determine whether or not to set aside an award. If the court were to delve into the task of ascertaining the correctness of the decision of an arbitrator, the court would be sitting on an appeal over the decision in issue. In the light of the Public Policy in Kenya, which loudly pronounces the intention of giving finality to Arbitral Awards, it would actually be against the said public policy to have the court sit on an appeal over the decision of the arbitral tribunal. When the court is called upon to decide whether or not to set aside an arbitral award, issues such as the justice, morality and fairness do not come into play, unless they were so perceived within the confines of Section 35 of the Arbitration Act. The court cannot set aside an arbitral award on the grounds that it was unfair, unreasonable or non-feasible.’ (emphasis ours)
The Supreme Court, in further recognising the parties’ choice of a dispute resolution mechanism and forum, and buttressing the need for finality, has in its decisions limited a party’s right to appeal from a decision of the High Court moved under Section 35 of the Arbitration Act. In the case of Nyutu Agrovet Limited v Airtel Networks Kenya Ltd & Another SC Petition No.12 of 2016 [2019] eKLR, which was followed recently in Geo Chem Middle East v Kenya Bureau of Standards [2020] eKLR, the court stated as follows –
‘In concluding on this issue, we agree with the Interested Party to the extent that the only instance that an appeal may lie from the High Court to the Court of Appeal on a determination made under Section 35 is where the High Court, in setting aside an arbitral award, has stepped outside the grounds set out in the said Section and thereby made a decision so grave, so manifestly wrong and which has completely closed the door of justice to either of the parties. This circumscribed and narrow jurisdiction should also be so sparingly exercised that only in the clearest of cases should the Court of Appeal assume jurisdiction.’
The upshot of the foregoing is that the Kenyan judicial system, in affording respect to the party autonomy inherent in arbitration agreements, will not delve into the merits of award and sit as an appellate court when faced with an application to set-aside the same. In the limited circumstances that it does, it will only intervene on the grounds set out under Section 35 of the Arbitration Act, without allowing a long chain of appeals to derive therefrom. However, the parties, under Section 39 of the Arbitration Act, can by prior agreement reserve the right of an appeal to the High Court on points of law arising from an arbitral award.
Recognition and enforcement
The Arbitration Act, in contemplating awards arising from international arbitrations has provided a recognition and enforcement mechanism. In particular, Section 3 of the Arbitration Act defines an ‘international arbitration’ as one where –
a) the parties to an arbitration agreement have, at the time of the conclusion of that agreement, their places of business in different states;
b) one of the following places is situated outside the state in which the parties have their places of business —
- i. the juridical seat of arbitration is determined by or pursuant to the arbitration agreement; or
- ii. 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
c) the parties have expressly agreed that the subject-matter of the arbitration agreement relates to more than one state.
Section 36 of the Arbitration Act provides that an international award shall be recognised as binding and enforced in accordance with the Convention on Recognition and Enforcement of Arbitral Awards (the New York Convention). This provision has a constitutional underpinning by dint of Articles 2(5) & 2(6) of the 2010 Constitution, pursuant to which Kenya ratified all treaties and conventions to which it is a signatory and incorporated them as part of domestic law.
The party seeking to have a foreign award recognised as binding is required, under Section 36 of the Arbitration Act, to make a formal application to the High Court of Kenya. In so doing, the applicant must attach an original and/or certified copy of both the arbitral award and the arbitration agreement.
Chacha Odera
Managing partner
Eva Mukami
Associate
Radhika Arora
Associate