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26 February 2009
The High Court has held that an arbitration clause may not oust the jurisdiction of the Kenyan courts.
For a dispute to be referred to arbitration there must be an arbitration agreement between the parties. Section 3 of the Arbitration Act 1995 defines an 'arbitration agreement' as an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not.
The arbitration agreement gives the parties the freedom to choose arbitrators in case of a dispute, the manner in which this appointment may be carried out, and the law to be applied in case of such a dispute. An arbitration agreement may provide that disputes it shall be determined in accordance with UK law or such other law as the parties may wish.
In Indigo EPZ Ltd v Eastern and Southern African Trade and Development Bank the parties entered into an agreement in which the applicant loaned the respondent money which was secured by way of a debenture and a charge over a certain property. The agreement provided that all disputes concerning the agreement be referred to arbitration and that the agreement be construed and governed in accordance with UK law.
When the bank demanded repayment of the loan, Indigo EPZ Ltd moved to court seeking, among other things, an order for an injunction restraining the Eastern and Southern African Trade and Development Bank from disposing of the secured property and from appointing receivers under the debenture. The bank then made an application seeking to dismiss the suit on grounds that the court lacked jurisdiction under the agreement.
The court held that the clause relied upon concerned matters of interpretation and not jurisdiction or applicability of Kenyan law to the agreement. It is a well-settled and recognized principle of law that all agreements purporting to oust the jurisdiction of the court are void.
Although parties are free to choose the applicable law in arbitration, such a choice cannot oust the jurisdiction of the local courts.
For further information on this topic please contact Njoroge Regeru at Njoroge Regeru & Company by telephone (+254 20 271 8482) or by fax (+254 20 271 8485) or by email (firstname.lastname@example.org).
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