Arbitration is a party driven process whereby a neutral third party resolves a dispute by investigating a matter (s) of difference between contending parties and makes a determination thereto. The dispute could either be commercial or non-commercial and the parties could include individuals, corporations and states.
In Kenya, the main legislation with respect to matters of Arbitration is the Arbitration Act, 1995. It is anchored on Article 159 (2) (c) of the Constitution of Kenya, 2010 which states,
“In exercising judicial authority, the courts and tribunals are guided by alternative forms of dispute resolution mechanisms including reconciliation, mediation, arbitration and traditional dispute resolution mechanisms shall be promoted by sub-clause 3”
In as much as Arbitration is a voluntary process that is backed by arbitration clause in an agreement, there are instances where an aggrieved party may seek the intervention from the Court to ensure the procedure is not flawed. Below I shall endeavor to discuss the Role of the Court before reference to Arbitration proceedings, during the arbitration proceeding and after the delivery of the arbitration award.
1. The Role of the Court before reference to Arbitration proceedings
The Court can intervene in two ways before a matter is referred to Arbitration namely:
- by staying legal proceedings; or
- granting interim measures of protection.
2. Stay of legal proceedings
An application for stay of legal proceedings is made under Section 6 of the Arbitration Act. This application must be made at the earliest i.e. immediately a party acknowledges the claim against which the stay of legal proceedings is sought or at the point of entering appearance.
- Conditions precedent before granting an order for stay of legal proceedings
The Court in making a determination whether to stay legal proceedings must take into consideration the following:
3. Whether there is an arbitration agreement?
The Court must ascertain that there is an arbitration agreement that is valid and enforceable and go further to see if there are any legal impediments to the validity, operation or performance of the agreement.
Where the arbitration agreement is null and void the Court cannot order that parties refer the matter to Arbitration. The rationale here is that to stay proceedings where there is no valid Arbitration Agreement would otherwise amount to driving the claimant away from the seat of justice as he cannot get redress by enforcing the arbitration agreement.
4. Whether the applicant seeking stay is a party to the arbitration agreement or at least a person claiming through a party?
See the case of Chevron Kenya Limited versus Tamoil Kenya Limited (2007) eKlR.
- Whether the party making the application for stay has taken any steps in the proceedings to answer the claim?
As earlier indicated this application must be made at the earliest. 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 choosing to have the Court deal with the matter rather than insisting on the right to arbitration.
5. Whether the parties have agreed to refer the dispute under the Arbitration clause?
The Court is obligated to scrutinize the arbitration agreement and determine whether the dispute that exists between the parties is among the matters agreed on by parties to be referred to Arbitration.
Where the following questions are answered in the positive, the Court has no option but to stay legal proceedings and direct that parties refer the matter to Arbitration
6. Grant of interim measures of protection
An aggrieved party may approach the High Court of Kenya for the grant of interim measures of protection under Section 7 of the Arbitration Act. The essence of such an order is to protect the rights of a party before arbitration by regulating the terms of an existing relationship or by maintaining status quo to avoid frustration of the final award. The effect being to either restrain the performance of an act or causing continuance of it.
The Court of Appeal in Safaricom Limited v Ocean View Beach Hotel Limited & 2 others [2010] eKLR set out the following factors to be taken into account before issuing the interim measure of protection:
- Existence of an arbitration agreement.
- Whether the subject matter of Arbitration is under threat.
- In special circumstances, which is the appropriate measure of protection after an assessment of the merits of the Application
- For what period must the measure be given especially if requested for before the commencement of the Arbitration so as to avoid encroaching on the tribunal’s decision- making power as intended by the parties
The Court in making its determination must avoid venturing into the merits of the dispute for the obvious reason that this is not its remit. It is the remit of the Arbitral tribunal. The Court must thus be careful not to pre-empt the ultimate award even as it considers an application for interim measure of protection. However, it has loose discretion to ensure that the aim and purpose of an interim measure of protection is achieved.
It should be noted that a party seeking stay of legal proceedings and/or interim measures shall move the Court in the manner provided for under Rule 2 of the Arbitration Rules 1997. Rule 2 provides that an application under section 6 and 7 of the Act shall be made by summons in the suit. The chamber summons is accompanied by a supporting affidavit usually annexing the arbitration agreement if the application is for a stay of the proceedings.
7. The Role of the Court during Arbitration
The Arbitration Act has provisions that allow for instances in which the Court can intervene during the pendency of arbitration proceedings. These include:
- Appointment and Challenging Arbitrators
- Where a party wishes to contest the appointment of an Arbitrator the Court must give outmost consideration to the qualification required of an arbitrator by the parties’ agreement.
- As a matter of practice, where a party wishes to challenge the composition of the Arbitral Tribunal he must first make an application before the Tribunal within fifteen (15) days unless the Arbitrator being challenged withdraws from office or the other party agrees to the challenge.
- An unsuccessful challenge before the Tribunal gives the challenging party recourse to the High Court within thirty (30) days for determination of the matter.
- Such decision is final and not subject to appeal.
- Determining the Arbitral Tribunal’s Jurisdiction
- Where a party is of the opinion that the Tribunal lacks jurisdiction to handle and determine a dispute, it may raise it as a preliminary objection. The Arbitrator may rule on the same instantaneously or at the time of making the award. (As per the doctrine of “kompetenz kompetenz ”)
- If the ruling or award is not in their favor they may challenge the same by making an application before the High Court. Such an application must be made within thirty (30) days from the date of the ruling/or award and be served upon the other party and the Arbitral tribunal.
- It is worth noting that before such a ruling is made the parties may proceed with the arbitral proceedings however any award made is not final until such application is decided by the High Court.
- Such decision by the High Court is nevertheless final!
- Interim measures of protection during arbitration
- Unlike interim measures of protection given by the court before reference to arbitration, those given by court during arbitration need the approval of the arbitral tribunal.
- The Court must not issue orders that would prejudice the outcome of the Arbitration.
- Determination of a question of law.
- Applications to the High Court or a determination on a point of law may be made on agreement of the parties, or as an appeal from the decision of the arbitral tribunal.
- Where the point of law arises from an award, the court can either confirm, vary or set aside an arbitral award. The Court can additionally choose to remit the matter back to the tribunal for reconsideration.
- The decision of the High Court in this regard, is subject to appeal having met two conditions i.e. the parties must have agreed to appeal and the High Court grants leave to appeal.
8. The Role of the Court after Arbitration
The role of the Court at this stage, essentially and principally revolves around the arbitral award. The court’s jurisdiction is therefore invoked in the following scenarios:-
- Setting aside of an arbitral award; and
- Recognition and enforcement of arbitral awards
1. Setting aside an arbitral award
Where a party is aggrieved by an award made by the Arbitrator he may apply to Court to have the award set aside. Such an application falls under Section 35 of the Arbitration Act which goes on further to highlight instances where the Court would set aside an award which include –
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- that a party to the arbitration agreement was under some incapacity; or
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- 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
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- 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
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- 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
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- 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
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- the making of the award was induced or affected by fraud, bribery, undue influence or corruption”
However, it should be noted that such an application must be made within three (3) months from the date the arbitral award was received.
2. Recognition and enforcement of arbitral awards
Section 37 of the Arbitration Act provides for recognition and enforcement of arbitral award. Where the other party effectively ignores the award but takes no active steps to resist it; the successful party may apply to the High Court to have the award enforced.
Before a court can enforce an award, the award needs to be recognized which entails the court accepting that the decision of the tribunal is valid and that it is binding on the parties. Thereafter, the Court then enforces the award, which is the process of compelling the other party to comply with the terms of the award.
All applications after the award has been made shall be by way of chamber summons supported by an affidavit specifying the grounds relied on. Both applications must be served upon the other party and the Arbitrator.
Nonetheless, the Civil Procedure Rules shall apply as far as appropriate subject to the provisions of the Arbitration Act 1995 and the Arbitration Rules 1997.
CONCLUSION
Arbitration in Kenya is a progressive aspect of the law that continues to be fine-tuned with time having due regard to emerging issues. Arbitration having now received constitutional backing is considered one of the most effective dispute resolution mechanisms. Matters referred to arbitration are completed in a timely manner, with minimal exposure of parties and are at the same time affordable.
We are of the opinion that parties in contractual agreements ought to include the Arbitration clause for possibly faster resolution of disputes. Further, as highlighted above parties should not be concerned that their rights are at risk of being infringed and/or prejudiced at any interval of the arbitration process.
The Arbitration Act has given the High Court jurisdiction to intervene before, during and after arbitration where a party is aggrieved and seeks redress.