The Nairobi Centre for International Arbitration Act demonstrates the government's commitment to promoting reconciliation, mediation, arbitration and traditional dispute resolution mechanisms in Kenya. The act's main objective is to establish an independent, non-profit-making international organisation for commercial arbitration based in Nairobi.
Arbitration can be distinguished from litigation due to its flexibility, low cost and lack of complex procedures. However, these attributes are no longer characteristic of arbitration, as the arbitral process is gradually becoming as expensive as litigation – especially if the award is challenged in court. In such case, the same technicalities apply as in civil proceedings.
Arbitration in Kenya is governed by the 1995 Arbitration Act (as amended). There is no substantive law governing other forms of alternative dispute resolution. The absence of a substantive law may be attributed to the fact that these alternative forms are not as widely used as litigation and arbitration. However, the law now recognises these forms of dispute resolution – perhaps in response to their growing popularity.
Before entering into arbitration in order to resolve a dispute, all parties should pay close attention to the type of arbitration they are entering into and the manner in which the proceedings are to take place. The devil lies in the detail; the more astute a party, the greater its chances of achieving a successful outcome from the proceedings.
Of the various alternatives to dispute settlement that are available to parties in Kenya (eg, negotiation, mediation, conciliation and litigation), there appears to be an increasing trend towards resorting to arbitration as the best way to resolve disputes. This update considers the reasons behind the recent popularity of arbitration, taking into consideration its advantages and drawbacks.
An ever-increasing number of parties to disputes have perfected the art of agreeing to arbitration in the first instance, only to resort to the courts if the arbitral award is not in their favour, thus wasting a lot of time and resources and defeating the purpose of having gone to arbitration in the first place. It is hoped that a recent Court of Appeal decision will bring this practice to an end.
Mediation is a method of non-binding dispute resolution which involves a neutral third party attempting to help the disputing parties to reach a mutually agreeable solution. It can be a highly effective medium of dispute resolution in commercial transactions, and is popular with parties which want to avoid having their business relationships strained and that are looking for quick and harmonious settlements to disputes.
The High Court has rejected an application for an interim injunction order to protect the status quo of the subject matter under dispute in a case involving oil processing agreements. Addressing Section 7 of the Arbitration Act, the judge pointed out that the issuance of conservatory orders is not automatic. Rather, the applicant's good faith must be examined before such orders are issued.
The government has extensively amended the Arbitration Act to make it more comprehensive, clear, consistent and responsive to modern technological advances. Similarly, the proposed new Constitution provides in its Article 159(2)(c) for the use of alternative forms of dispute resolution, including arbitration.
The popularity and importance of arbitration as an alternative dispute resolution process has been recognized in Kenya by its inclusion in the harmonized draft Constitution. Kenyans have been clamouring for a new Constitution for over two decades. The inclusion of arbitration in the proposed new Constitution as a dispute resolution method is a considerable achievement.
The attorney general has proposed the Arbitration (Amendment) Bill 2009 to amend the Arbitration Act 1995. The bill aims to facilitate the cost-effective and expeditious conduct of arbitration proceedings by dealing with matters relating to arbitration proceedings which are unclear in the existing legislation.
Where the High Court refuses an application to set aside an arbitral award, a recent ruling held, according to the language of Section 39(3) of the Arbitration Act, that the respondent may appeal against such a decision only with the leave of the High Court or court of appeal and the consent of the parties involved. This language discourages parties from attempting to frustrate the arbitral process.
An 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 disputes. However, the High Court ruled that although parties are free to choose the law to apply in arbitration matters, such a choice cannot oust the jurisdiction of the local courts.
The High Court may refuse to recognize or enforce an award if the subject matter of the dispute is incapable of settlement by arbitration under Kenyan law, or if recognition or enforcement would be contrary to public policy. In addition, the Civil Procedure Rules impose certain requirements for enforcement.
Once a foreign arbitral award against the Kenyan government has been recognized, its enforcement is covered by a process that is quite different from the remedies of execution usually available to an ordinary judgment creditor. This update explains the procedure.