- July 20, 2022
By Maureen Bwari - Lawyer
LEGAL FRAMEWORK
Arbitration in Kenya is governed by the following:
- The Constitution Of Kenya, 2010
- The Arbitration Act, 1995
- Nairobi Centre For International Arbitration Act,2013 and NCIA (Arbitration) Rules, 2015
- United Nations Convention On The Recognition And Enforcement Of Foreign Arbitral Awards 1958( New York Convention)
ARBITRATION INSTITUTIONS
- Nairobi Centre for International Arbitration established under the NCIA Act, 2013.
- Chartered Institute of Arbitrators CIArb established in 1984 and registered under the Societies Act Cap 108.
- Strathmore Dispute Resolution Centre.
- International Centre For Settlement Of Investment Disputes (ICSID).
The Act applies in disputes, especially commercial disputes, where there is a written arbitration agreement (mostly in form of an arbitration clause or separate agreement) signed by the parties in the dispute.
Under Section 4 of the Arbitration Act, an arbitration agreement can either be in the form of a clause in a contract or a separate agreement. Further, it must be in writing through a document signed by both parties, or an exchange of communication where both parties acknowledge the existence of the agreement.
Notwithstanding the above, any party still has the right to move the court for interim reliefs pending referral of a dispute to arbitration. E.g injunctions to protect subject matter of a dispute, mandamus, certiorari etc This is provided for under Section 7 of the Act
Once there is an arbitration agreement, any dispute will have to be resolved through arbitration. Should one party to the dispute decide to override the agreement and move to court for the substantive determination of the dispute, the other party can move to the court to halt proceedings and have the matter referred to arbitration.
Appointment of an Arbitrator
Good arbitration clauses will always provide for a method of appointment of an arbitrator and number of arbitrators. The procedure set out would have to be followed to the letter.
Under Section 11 of the Arbitration Act, the parties to a dispute are free to agree on the number of arbitrators who will constitute the arbitral panel. If do not have such an agreement, it is then assumed that the arbitrator shall be one.
Under the Act, if the parties are to agree on an arbitrator and one party fails to propose an arbitrator within 14 days, the other party will write to the defaulting party informing the defaulting party that the arbitrator the other party has selected will be appointed as an arbitrator in another 14 days if the other party does not communicate
Procedural rules
- The act does not require arbitrators to follow a specific set of procedural rules. The parties and the arbitrator can agree the rules to use, and the arbitration clause or agreement may impose a set of procedural rules.
- However, where the parties cannot agree on the rules, under Section 20 of the act the arbitrator becomes the master of procedure. The following sections of the Arbitration Act set out the procedure that must be followed in the absence of agreement to the contrary by the parties:
- Section 24 – submission of the statement of claim and defence;
- Section 25 – hearings and written representation;
- Section 26 – default of a party, failure to comply and peremptory orders; and
- Section 27 – tribunal-appointed experts.
- Parties are also free to adopt the rules of any institution as they see fit, or even to create their own.
- What is the applicable law (and prevailing practice) where a respondent fails to participate in an arbitration? Can the courts compel parties to arbitrate? Can they issue subpoenas to third parties?
- Under Section 28 of the act, the courts may issue a summons to require a third party to attend the tribunal. However, the act does not give the courts the power to compel parties to arbitrate – this would be contrary to the consensual nature of arbitration. In the event that a respondent fails to participate in an arbitration after it has submitted to its jurisdiction, the tribunal can issue peremptory orders and its powers of persuasion to get the respondent to participate. If this fails, the tribunal can proceed with the hearing and render an award
Default language and seat
Unless agreed by the parties, what is the default language and location for arbitrations?
The act imposes neither a default language nor venue for arbitrations. In the absence of an agreement between the parties, the tribunal can rule on the language and venue to be used.
Gathering evidence
How is evidence obtained by the tribunal?
- The tribunal can gather evidence through submission of pertinent documentation by the parties through either:
- the statements of case procedure, whereby documents are annexed to pleadings; or
- full discovery and disclosure procedures.
- The production of documents can be compelled either by the tribunal directly or through court assistance. The tribunal can also make site visits to gather further evidence
What kinds of evidence are acceptable?
- There are no limits to the kinds of evidence that are acceptable, bearing in mind that where parties are unable to agree on the limits, if any, it is for the tribunal to decide.
- Section 23(3) states that a tribunal 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" where the parties have failed to agree. The Evidence Act does not apply to arbitrations, although parties may agree to its application.
Can local courts intervene in proceedings?
According to Section 10, national courts may intervene in arbitral proceedings only as prescribed by the Arbitration Act. The scope of intervention by courts is severely limited by the act
The award
The law does not require that an award be reviewed by any other body. An award must contain reasons (unless otherwise agreed by the parties or if the award is a consent award under Section 31 of the Arbitration Act 1995). Further, to be valid the award must be in writing, signed by all members of the tribunal and dated, and the juridical seat must be stated.
Timeframe for delivery
Other than the limits that may be imposed by the parties in the arbitration agreement, which may be extended with the consent of the parties, there are no time limits on delivery of the award imposed by statute.
The award is final and binding except in circumstances permissible appeals may be made to the highcourt and the judgement therein shall be final and not subject to any appeal
Costs
The arbitral tribunal charges on an hourly basis and maintains a strict schedule through the use of timesheets. Counsel representing the parties are free to agree with clients on the mode of charging costs.
Security for costs
Section 32 of the act -arbitral tribunals are empowered to order security for costs
Interest
Interest may be awarded under Section 32C of the act unless otherwise agreed by the parties.
At what rate?
The interest rate is specified in the award, but must be within the bounds of the law applicable to the substance of the dispute (Section 32C of the act), unless otherwise agreed by the parties
Appeal
What is the procedure for challenging awards?
An application must be lodged with the High Court within three months of the date of receipt of the award by the challenging party.
On what grounds can parties appeal an award?
The grounds for setting aside or challenging an award are limited and are set out in Section 35 of the Arbitration Act. These include:
- a finding by the High Court that the award is against Kenyan public policy;
- a finding that the subject matter of the dispute is incapable of settlement by arbitration under national law; or
- the appellant providing proof that the award was procured or induced by corrupt means, bribery, undue influence or fraud
- A finding that one party to the proceedings was incapacitated.
Enforcement
What steps can be taken to enforce the award if there is a failure to comply?
The award may be filed with the High Court under a miscellaneous application within 30 days of delivery; which is served on the respondent, who then has the opportunity to defend the enforcement proceedings.
Can awards be enforced in local courts?
Yes, awards can be enforced in the national courts – Sections 36 and 37 of the Arbitration Act give equal treatment to domestic and foreign awards in their recognition and enforcement.
How enforceable is the award internationally?
Kenya is a signatory to the New York Convention, and therefore any award delivered or published within Kenyan jurisdiction is enforceable internationally, provided that it does not fall foul of the law in the jurisdiction where enforcement is sought
Limitation periods
Are there any limitation periods for the commencement of arbitration?
The Kenyan Statute of Limitations contains no provision limiting the bringing of arbitration claims within a specified period. However, it is arguable that as a commercial contract an arbitration clause will fall into the ambit of general civil matters and therefore be limited to a period of six years.
The specific arbitration agreement may also contain a limitation period within which the arbitration must be commenced, which is typically 30 days. On the other hand, the right to arbitrate may be forfeited by virtue of the fact that no party has taken any step within a given period, usually to be found within the arbitration agreement.
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