Arbitration

ARBITRATION
An arbitration agreement is a contract by which the parties undertake to

submit a present or future dispute to the decision of one or more
arbitrators, to the exclusion of the courts. The person who decides the
disputes under arbitration is known as an arbitrator. The decision that
he makes is known as an award. The proceedings before him are known
as arbitration proceedings.
An arbitration agreement shall be evidenced in writing; it is deemed to

be evidenced in writing if it is contained in an exchange of
communications which attest to its existence or in an exchange of
proceedings in which its existence is alleged by one party and is not
contested by the other party.
Most contracts include an agreement of both parties to the arbitration

process. Arbitration is used in labor disputes, business and consumer
disputes and family law matters. In arbitration, the two sides are not
usually represented by an attorney in arbitration. An arbitrator is
selected, and both parties have an opportunity to present their side of
the situation. The rules of evidence do not apply. No appeal to the
arbitrator's decision is possible, the decision of the arbitrator is final.
Requirements of a valid Arbitration Agreement
An arbitration agreement that provides for international commercial

arbitration must take into account the international requirements of a
valid agreement as set out in the Conventions or Treaties on arbitration.
The arbitration agreement and any award made thereunder would not
qualify for international recognition and enforcement If it fails to do so.
(i) An arbitration agreement must comply with the requirements of a valid

contract;
(ii) An arbitration agreement must be in respect of a dispute that is
arbitrable;
(iii) The agreement must be in writing;
(iv) It deals with existing or future disputes;
Arbitration agreement must be in writing; It is not necessary that the
agreement be in a formal document, nor is it necessary that the
agreement should be signed by both parties, although there is a
requirement that the arbitration agreement be in writing. It is sufficient
that the agreement has been orally accepted by the parties or that one
has signed and the other has accepted.64
Existing or future dispute; It is not an agreement to arbitrate, if the

agreement between the parties is in effect an agreement to prevent
disputes from arising and not an agreement as to how they are to be
settled.
Subject matter capable of settlement under Arbitration; An arbitration
agreement in respect of disputes relating to:- (i) Insolvency proceedings;
(ii) Probate matters; (iii) Matrimonial causes; (iv) Criminal matters (v)
Industrial disputes; and (vi) Proceedings for appointment of a guardian
would not be capable of settlement by arbitration as the law has given
jurisdiction to determine such matters to specified institutions such as
the court exclusive jurisdiction to hear and determine such matters.
Content of arbitration agreements; In considering whether or not an

arbitration agreement is valid as regards substance, the first question in this
regard is whether the parties intended to refer the dispute between them to
arbitration. An arbitral tribunal or the court should strive to give effect to
their agreement if they did. The case is one of an arbitration, if it appears from
the terms of the agreement by which a matter is submitted to a person’s
decision that the intention of the parties was that he should hold an inquiry
in the nature of a judicial inquiry and hear the respective cases of the parties
and decide upon the evidence laid before him.
Capacity; Every reference to arbitration arises from the agreement of the
parties to have their differences settled by arbitration as a general rule.
Therefore, anyone who is capable of making a binding contract or
agreement is also capable of entering into an arbitration agreement. Need
not necessarily be the persons whose interests are involved in the
dispute, and it need not necessarily be the parties in the reference, to
refer the disputes, it may be merely the agents of the parties whose
interests are involved in the dispute.
Stay of court proceedings pending a reference to arbitration

As a matter of course, the courts in Kenya will stay any proceedings filed
before them that are subject to an arbitration clause, unless the
agreement is void or incapable of performance or if there is no dispute
between the parties that is capable of being referred to arbitration. There
is in fact an automatic statutory stay of proceedings under the
Arbitration Act, as the Act is explicit that proceedings before a court shall
not be continued after an application for stay has been made and the
matter remains undetermined. An application to stay proceedings must
be made before or at the point of entering appearance, before
acknowledging the claim. If the applicant fails to satisfy the court that
there is in fact a dispute between the parties with regard to the matters
agreed to be referred to arbitration the court may, however, decline to
grant an application for stay.
Implied terms in Arbitration Agreements
1. Reference shall be to a single arbitrator unless expressly provided.
2. Where reference is to un-even number of arbitrators, the arbitrators

shall appoint an umpire within one month of entering reference.
3. The arbitrators shall make an award within four months of entering

reference. Where they fail to do so, the umpire shall make an award
within two months of entering reference.
4. Once an award has been made, it is final and binding.
5. The parties to arbitration shall submit to be examined on oath.
6. The cost of the award shall be at the discretion of the arbitrators and
umpires.
Appointment of arbitrators
There is a default procedure to follow where the parties fail to agree on the
appointment of an arbitrator (section 12, Arbitration Act). Section 12(2) states
that where the parties fail to agree on a procedure for an appointing arbitrator,
they can do the following:
 In an arbitration with three arbitrators, each party will appoint one
arbitrator and the two appointed arbitrators will appoint the third
arbitrator known as an umpire
 In an arbitration with two arbitrators, each party will appoint one
arbitrator.
 In an arbitration with one arbitrator, both parties must agree on the
appointed arbitrator.
Unless the parties agree otherwise, where each of the two parties to an
arbitration agreement are supposed to appoint an arbitrator, and one party
either indicates that it is unwilling to do so, or fails to do so within the relevant
time period, the other party (having duly appointed an arbitrator) can give notice
in writing to the party in default proposing that their appointed arbitrator act as
the sole arbitrator. If the defaulting part does not, within 14 days after receiving
notice under section 12(3) of the Arbitration Act, either make the required
appointment or notify the other party that it has been done, the other party is
free to appoint its arbitrator as the sole arbitrator. The resulting award is binding
on both parties as if it had been appointed by agreement of both parties (section
12(4)(a)-(b), Arbitration Act). Where a sole arbitrator is appointed using this
procedure, the defaulting party can serve notice on the other party and apply to
the High Court within 14 days to have the appointment set aside (section 12(5),
Arbitration Act). The court will grant the application when it is satisfied that there
was good cause for the failure or refusal of the party in default to appoint an
arbitrator in time. If the court grants an application under section 12(5), the
applicant can go ahead and appoint a sole arbitrator. The court's decision will
be final and binding and not be subject to appeal
The High Court will have due regard to the qualifications the parties set out in
the agreement, and any other considerations to secure the appointment of an
independent and impartial tribunal.
Removal of arbitrators
Grounds for challenging an arbitrator arise from circumstances giving rise to
justifiable doubts as to his or her impartiality and independence, such as:
 Not possessing the qualifications agreed on by the parties.
 Being physically or mentally incapable of conducting the proceedings.
 Doubts concerning capacity to conduct the proceedings.
These grounds can only be relied on when the party challenging the appointment
of the arbitrator becomes aware of them after the appointment. If he or she was
aware of them before the appointment, it is presumed that he or she waived the
grounds and agreed to the appointment (section 13, Arbitration Act).
Generally, the parties can agree on the procedure for challenging the arbitrator.
If the parties have not agreed, a party that intends to challenge sends a written
statement of the reasons for the challenge to the tribunal within 15 days of
becoming aware of the composition of the tribunal or of the grounds for
challenge. The tribunal then decides on the challenge. If the challenge is
unsuccessful, the challenging party can apply to the High Court to determine
the matter within 30 days of receiving the decision to reject the challenge. The
decision of the High Court is final and not subject to appeal. While the court
application is pending, parties can commence, continue and conclude arbitral
proceedings, but no award in those proceedings takes effect until the application
is decided. The award is void if the application is successful (section 14,
Arbitration Act).
Advantages of Arbitration
There are many advantages to arbitration:
 Timeliness: A legal resolution through arbitration is much quicker than

waiting for a trial date. Arbitration is less formal and more flexible in terms
of scheduling. The discovery process is a simple phone call, cutting down
on much of the traditional trial process.
 Cost: Arbitration does not include expert witnesses or require as much
legal preparation. Both parties often split the cost of the arbitrator,
meaning the process is much cheaper.
 Confidentiality: The arbitration legal process is more private than a trial.
 Finality: There is a level of finality to the arbitration process. Because it
cannot be appealed, both parties can move on following the outcome.
 Simplified Procedures: Legal outcomes are more adaptable to the two
parties present in the dispute. Each party does not have to hire an attorney
for representation.
Disadvantages of Arbitration
There are also some disadvantages of arbitration to consider:
 No Appeals: The arbitration decision is final. There is no formal appeals

process available. Even if one party feels that the outcome was unfair,
unjust, or biased, they cannot appeal it.
 Rules of Evidence: A judge in a traditional court setting has specific
regulations to follow when it comes to accepting evidence. Arbitrators,
however, can utilize any information that is brought to them.
 Lack of Cross-Examination: The arbitration process generally includes
documents and not witnesses, voiding the ability to cross-examine.
 Lack of Consistency: There are no set standards for arbitration, making
it difficult to find consistency. It is possible that an arbitrator can be
biased, which is sometimes the case in mandatory arbitration contracts.
 Lack of Evidence: Because arbitration is not evidence-based, you entrust
the experience of the arbitrator to make the right legal decision.
 The arbitrators may be incompetent both in trade and profession.
 Only civil cases are decided under arbitration not criminal.

Arbitration

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ARBITRATION

An arbitration agreement is a contract by which the parties undertake to

An arbitration agreement shall be evidenced in writing; it is deemed to

Most contracts include an agreement of both parties to the arbitration

Requirements of a valid Arbitration Agreement

An arbitration agreement that provides for international commercial

(i) An arbitration agreement must comply with the requirements of a valid

Existing or future dispute; It is not an agreement to arbitrate, if the

Content of arbitration agreements; In considering whether or not an

Stay of court proceedings pending a reference to arbitration

Implied terms in Arbitration Agreements

1. Reference shall be to a single arbitrator unless expressly provided.

2. Where reference is to un-even number of arbitrators, the arbitrators

3. The arbitrators shall make an award within four months of entering

4. Once an award has been made, it is final and binding.

5. The parties to arbitration shall submit to be examined on oath.

 Timeliness: A legal resolution through arbitration is much quicker than

 No Appeals: The arbitration decision is final. There is no formal appeals

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