Legal Briefing

The landscape of international arbitration in Kenya

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Global Outlook: Disputes | 02 October 2018

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The main focus of this article is on international arbitration in Kenya. However, we shall take a short glimpse at alternative dispute resolution methods in Kenya in this section.

The use of alternative dispute resolution methods is established in the Constitution of Kenya of 2010. As a guiding principle in exercising judicial authority, Article 159(2)(c) states that the court is to promote all forms of alternative dispute resolution which include arbitration, reconciliation, mediation and traditional dispute resolution mechanisms. As the foundational piece of legislative authority, this firmly establishes Kenya as a pro-arbitration country.

Furthermore, the Arbitration Act 1995 (which was further amended in 2010), reflects the necessary elements of a functioning national arbitration law as provided by the 2010 United Nations Commission on International Trade Law (UNCITRAL) Arbitration Rules. Notably, s36(5) of the Arbitration Act takes cognizance of the New York Convention on the enforcement of foreign arbitral awards, as Kenya has been a signatory to the said Convention since 10 February 1989 with a reciprocity reservation. Consequently, for a foreign award to be recognised and enforced, the applicant must provide the court with the following as seen at s36(3):

  1. The original award or a duly certified copy; and
  2. The original arbitration agreement or a duly certified copy.

The Act recognises only two instances when a Kenyan court may refuse to recognise or enforce a foreign award, and these are: (1) when the subject matter is not arbitrable under the laws of the jurisdiction in which the award is to be enforced; and (2) where the subject matter is against public policy.

An interesting development in the dispute resolution landscape of Kenya is the introduction of the court annexed mediation project in the Nairobi High Court (family division) which was introduced on 4 April 2016. This initiative sought to cut down the typical 24-month process that litigation took to a much more reasonable duration of 66 days. The programme has since referred over 600 cases to mediation and has a settlement rate of 55.24% as reported by the judiciary. Due to this success, the Kenyan judiciary has embarked on a guide to replicate the mediation process across the country.

The attitude of Kenyan courts towards international arbitration

The first Arbitration Act of Kenya was enacted in 1968. This Act provided too many intrusive powers for the courts to interfere with arbitral proceedings and the awards. This was contrary to the spirit of arbitration which needed to be unfettered from the courts’ intricate legal procedures. Court influence in arbitration had to be reduced. This led to the adoption of the UNCITRAL model arbitration law, and the Arbitration Act 1995 of Kenya is based on this model law.

Consequently, the current Arbitration Act provides for minimal interference in any arbitration process, and this is clearly spelt out under s10 of the Act. Mainly, these circumstances are:

  1. issuance of stay of legal proceedings where the contract governing the parties provides for an international arbitration clause;
  2. issuance of interim orders where necessary;
  3. instances where an aggrieved party makes an application to set aside an arbitral award; and
  4. instances where a party makes an application to the Kenyan courts for recognition and enforcement of an award.

There is growing jurisprudence in the Kenyan courts that is indicative of the abidance to the provisions of the Arbitration Act as far as they relate to Section 10. Interestingly, a bulk of this jurisprudence relates to applications to set aside arbitral awards under s35 of the Arbitration Act. A read through these cases demonstrates that the High Court of Kenya is not willing to go beyond the scope set out under s35 as grounds for setting aside of an award, and any decision made by the court with regards to s35 cannot be appealed in the higher courts.

National arbitral institutions

There is currently one arbitration centre conducting domestic and international arbitration in Kenya. This is the Nairobi Centre for International Arbitration (NCIA) which is established under the Nairobi Centre for International Arbitration Act of 2013. The Centre was officially launched in December of 2016. The NCIA issued its Arbitration Rules and Mediation Rules in December 2015.

The NCIA rules are very similar to the London Court of International Arbitration (LCIA) and its rules. Recently, in the context of Africa, the LCIA has withdrawn from the LCIA-MIAC in Mauritius, which was viewed as one of the more advanced arbitration centres in Africa. We are yet to witness the impact of this withdrawal on the MIAC centre, which remains.

The climate for investment arbitration in Kenya

Kenya offers a good climate for investment, given the internationally recognised mechanisms for dispute resolution enforced by the country. Kenya has so far signed 19 bilateral investment treaties (BITs)with various countries, of which 11 are in force. These BITs provide for international arbitration as the mode for the resolution of any disputes that may arise between an investor and the government of Kenya, with most providing for international arbitration through the International Centre for Settlement of Investment Disputes (ICSID) forum.

Kenya signed the ICISD convention on 24 May 1966, and became a contracting state on 2 February 1967. Since then, there have been three ICSID arbitration claims commenced against the Government of Kenya. These are the World Duty Free case, which has already been determined; and the WalAm case and the Cortec Mining case which are still ongoing. On a comparative scale, this number is not very high compared to other African countries. 31 claims under ICSID have so far been commenced against the government of Egypt. However, this is not to say that there are only three investment arbitration claims that have been brought against the government of Kenya. These three are in the public domain, given the transparency of cases commenced under the ICSID convention. We are aware that there have been other investment arbitration cases that have been commenced against the government of Kenya under the auspices of the LCIA, the International Chamber of Commerce (ICC) and the ad hoc UNCITRAL rules.

As a general comment, Kenya is doing well compared to other countries on the African continent. South Africa is not a member of ICSID, and is currently in the process of terminating its BITs. Also, coming closer home to Kenya, Tanzania has, in 2017, enacted new laws in relation to natural resources in the country, which require that any dispute arising from a contract relating to natural resources in Tanzania be resolved by the courts in Tanzania. These developments in South Africa and Tanzania are recent, and we are yet to see how they will impact on the investment climate of these countries.

Conclusion

In conclusion, Kenya has come a long way in formulating its position in the international arbitration scene. Internationally acceptable standards have been absorbed into the law to ensure that Kenya identifies itself as a hub for investment. A constructive criticism for Kenya is the slow processes of its court system, which in certain instances hinders access to justice. n

About JMiles & Co

JMiles & Co is a legal services entity that provides specialised services in the fields of international arbitration, mediation, forensic investigation and legal consulting out of Africa. We are strategically based in Nairobi, Kenya. JMiles & Co is one of the only legal entities in Africa that specialises purely in international arbitration and fraud/asset chasing investigations out of Africa.

We have represented clients, both governments and the private sector based around the continent, in international arbitration matters before Tribunals of the ICC in London and Paris, LMAA, LCIA, DIFC-LCIA, GAFTA, FOSFA and ad hoc tribunals in Stockholm, Zurich and Geneva. John Miles has also been appointed as an Arbitrator under the auspices of the LCIA, UNCITRAL, and most recently, was appointed to the board of directors of the Lagos Chamber of Commerce International Arbitration Centre (LACIAC). We are also involved in mediation, and we have two CEDR-qualified mediators in our team.

The JMiles & Co team has conducted a number of forensic audits on behalf of listed companies and regulators. The team also advises corporations and governments in local and international asset recovery.

Lastly, JMiles & Co is heavily engaged in international legal consultancy work which ranges from sector reviews and reports, training government ministries on alternative dispute resolution, providing legal advice, drafting publications and involvement in legislative reviews for governments. Most recently, JMiles & Co has been involved in training of business registration services and various stakeholders in Kenya on the beneficial ownership concept.

For more about JMiles & Co, please visit our website on www.jmilesarbitration.com