ADR Lecture

Principles of Natural Justice in Relation to ADR proceedings

It is a fundamental requirement of justice in deciding a dispute between

two or more parties,

Firstly that the arbitrator or the tribunal must be and must be seen to
be disinterested and unbiased.
Secondly, every party must be given a fair opportunity to present his ca
se and to answer the case of his opponent.

The first principle is embodied in section 13 of the Arbitration Act whi

ch provides that when a person is approached for appointment as an arbit
rator he must disclose any circumstances likely to give rise to justifia
ble doubts as to his impartiality or independence. That duty on the part
of the arbitrator is a continuing duty right from the time that he is ap
proached through to the time he accepts appointment, conducts the refere
nce, and renders his award.

So under section 13(2) the arbitrator is obliged through the arbitral pr

oceedings to disclose without delay such circumstances.

The arbitrator must be on his guard with respect to connections with a p

arty or connections in the subject matter of dispute or connections with
the nature of the dispute. And the test that the arbitrator must always
bear in mind is whether a reasonable person not being a party to the dis
pute would think that the connection was close enough to cause the arbit
rator to be biased.

So there are three elements there of connections.-

--party
--subject matter
--nature of the dispute

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The arbitrator has an obligation to conduct the reference impartially in
both actions and words and to decide each issue put before him fairly an
d impartially. And whatever the provocation, each decision must be made
impartially. There is therefore an overriding duty to work fairly and di
spassionately even if one of the parties, for example, provokes the arbi
trator by making the wildest of accusations.

The arbitrator should also take pains not to associate with one party of
his representative more than with the other. He should, for example, nev
er have lunch with one party during a hearing or in the course of the re
ference in the absence of the other party. He should also try to avoid e
ven casual conversation with one side in the absence of the other. For h
is confidence in his own probity may not be shared by a party who does n
ot know him.

Each party must also be given a fair opportunity to present their case a
nd to know the opposing case and to meet the opposing case.

Under section 19 of the Arbitration Act, for example, parties must be tr

eated with equality and each party given full opportunity of presenting
their case.

Section 21 is perhaps also relevant in this regard in that if parties ha

ve not agreed on the place of arbitration, the tribunal must determine t
he place having regard to the circumstances of the case and the convenie
nce of the parties. The arbitrator is doing a balancing act.

Under Section 21 the parties have the right to agree on the venue, faili
ng which section 21 (b) intervenes.

Section 24 provides for exchange of statements of claim and statements o

f defence: To inform parties of the case they are to meet: natural justi
ce.

Section 25 provides that the arbitral tribunal must hold oral hearings u
nless the parties have agreed that no hearing shall be held. For the sa
me reason an arbitrator should not receive oral evidence or arguments fr
om one party in the absence of the other. Neither should the arbitrator
receive any document from one party without ensuring that the other part
y receives a copy. It is important to make it clear to the parties that
all correspondence with the arbitrator must be copied to the other party.
This should be in the agenda of the preliminary meeting.

The arbitrator, if there is to be a hearing, must fix hearing dates so f

ar as practicable convenient to both parties.

Other provisions in the Arbitration Act that you may want to look at:

Section 27, where a tribunal appoints an expert if it has the power to d

o so. The report must be available to the parties and they must have the
opportunity to examine that expert and to present their own expert on th
e subject.

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Section 29: obligation on the part of the tribunal to decide the dispute
in accordance with the rules agreed upon by the parties

What happens when an arbitrator uses his knowledge and experience to det
ermine the matter? Should the parties have right to influence the judg
e’s mind? That is where the arbitrator is empowered by the parties to u
se his own expertise, he should grant the parties an opportunity to comm
ent on his views and so on.

Section 35 deals with the setting aside of an award. If a party was not
afforded an opportunity to be heard, notice not served, appointment of a
rbitrator, etc.

Under section 26 an arbitrator has powers to decide on a hearing date un

less otherwise agreed by the parties. Any party that fails to attend a h
earing, the hearing could go on, etc.

In summary, the principles of natural justice must be observed in the ar

bitral process.

Go through the Arbitration Act in your own time and see what sections
have a bearing on natural justice.
ALTERNATIVE DISPUTE RESOLUTION LECTURE 2 FEBRUARY 2004

When drafting the substantive contract it is important to point out that

in case of any dispute the matter is to go before arbitration. This can
be part of the substantive contract or just a clause.

Invariably almost all insurance companies include arbitration clauses in

all their policies.

THE ARBITRATION AGREEMENT

Arbitration is a process in which a third party neutral or an odd number

ed panel of neutral persons render a decision on the merits of a case.

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The statute that deals with arbitration in Kenya is the Arbitration Act
(1995) Act No. 4 of 1995 Cap 49 Laws of Kenya. This statute commenced o
n the 2nd of January 1996 by virtue of Legal Notice No. 394 of 1995. Th
is date is important because prior to this statute we had an Arbitration
Act that was based on different legal principles for instance under the
repealed or previous Acts, the courts had a wider role in Arbitration th
an they do under the current Act. Parties to Arbitration under the prev
ious statute had recourse to the High Court more than they do under the
current Act. For instance under the old Arbitration Act a party could c
hallenge an award of an arbitrator on the grounds that the arbitrator ha
s misbehaved in the course of arbitration. Misbehaviour on the part of
an arbitrator suggested that it was a ground on which the award could be
challenged which is not the case under the current law. Some cases may
suggest that one might have recourse to the High Court when it is not so.
Under the current Act the situations where one can go to court to comp
lain after arbitration are limited.

The current Arbitration Act is based on a Model of the United Nations Co

mmission on International Trade Law (UNCITAL) which was adopted in 1985
with a view to encouraging arbitration and processes that would have glo
bal recognition. United Nations came up with a model of a statute that h
as been adopted by many countries. The essence of the Act is that it pr
ovides for very broad party autonomy in fashioning the Arbitration proce
ss. This means that parties who enter into an arbitration agreement are
to a large extent at liberty to determine the process of adjudication of
the disputes that will go to arbitration. Autonomy for example in decid
ing who the arbitrator will be, the venue of arbitration, the substantiv
e law that will apply to that agreement or arbitration. Once a dispute h
as arisen, they also have autonomy with regards to how the arbitral proc
ess itself will be conducted. To a large extent, the Arbitration Act pr
ovides the default position in very many respects so that if parties in
an arbitration agreement have not provided the number of arbitrators, th
en the statute will tell you that the default position is the presumptio
n that the parties intended for one arbitrator.

WHAT IS AN ARBITRATION AGREEMENT

According to Section 3 of the Arbitration Act Arbitration Agreement mean

s an agreement by the parties to submit to arbitration all or certain di
sputes which have arisen or which may arise between them in respect of a
defined legal relationship whether contractual or not. A distinction is
made or liberty is given to the parties to choose that only certain type
s of disputes will go to arbitration and not all of the disputes that ar
ise will go to arbitration. An example is where you have a tenancy agre
ement between a tenant and a landlord which provides that there will be
review of rent after every two years of the term under the tenancy and t
he tenancy agreement may proceed to say that at the time of review the m
argin by which rent will be increased will be by agreement of the two pa
rties. It may proceed to state that if there is a dispute as to what the
margin should be, then the matter should be referred to arbitration.

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Effectively what those two parties have done is to select certain type d
isputes that would arise under that agreement and decide that they are t
he only two that would go to arbitration if they arose. Parties are at
liberty to select certain disputes and agree that those should go to arb
itration while others may remain for determination by the courts.

The other important distinction made by the statutory definition is that

parties can anticipate disputes and parties can also decide to go into a
rbitration after disputes have already arisen i.e. an agreement to arbit
rate may be made in respect of existing disputes between the parties or
in respect of disputes that may occur in the future and in each of these
cases that agreement to refer either existing or future disputes to arbi
tration is an arbitration agreement.

Traditionally an agreement to refer future disputes to arbitration was r

eferred to as an Arbitration Agreement whilst an agreement made after di
sputes have arisen was traditionally referred to as a submission or a su
bmission agreement. But in light of the statutory definition that disti
nction between submission and agreement is no longer relevant.

Section 2 - except as otherwise provided in a particular case the provis

ions of the Act shall apply to both domestic and international arbitrati
on.

WHAT ARE THE FORMALITIES/

WHAT ARE THE FORMAL REQUIREMENTS

This is dealt with under Section 4 of the Arbitration Act.

The formal requirements under the Arbitration Act are set out under Sect
ion 4 of the Arbitration Act and the first thing the statute provides fo
r is that an arbitration agreement may be in the form of an arbitration
clause in a contract or it may be in the form of a separate agreement al
l together. So for example in a contract between the government and a b
uilding road contractor, the contract will set out what the works are an
d the instructions from the engineer and one of the clauses in that agre
ement may simply be the clause that says any or all the disputes arising
from this contract shall be referred to Arbitration. That is one option.

The other option is where the contract is silent on whether it should bi

nd the parties to arbitration.

An Arbitration Agreement shall be in writing, it is a requirement that i

t be not oral. Section 4 (3) an arbitration agreement is in writing if
it contains
a written document by the parties;
an exchange of letters; telex, telegram or other means of telecommunicat
ions which provide a record of the agreement;
an exchange of statements of claim and defence in which the existence of
the agreement to arbitrate is alleged by one party and not denied by the
other party.

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Section 4 (4) … the reference in a contract to a document containin
g an arbitration clause shall constitute an arbitration agreement if the
record is in writing and the reference is to make that arbitration claus
e part of the contract. This is talking of incorporation of an arbitrati
on agreement by reference.

CONSTITUENTS OF A PROPERLY WORDED ARBITRATION CLAUSE

In practice not both parties to an agreement are as keen to have the dis
pute resolved. The disputants are usually at different positions. So i
f you have a clause that facilitates a bbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbb
bbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbbprotraction of the proces
s then the Respondent will capitalise on it since he is not interested i
n having the matter resolved. It is thus advisable that a basic arbitra
tion agreement or clause should provide some essential details. For if
an arbitration clause simply provides that disputes to be settled by arb
itration questions would arise as to how the arbitrator is to be appoint
ed, what qualifications the arbitrator should have, where the arbitratio
n should take place, how many arbitrators, what substantive law is to ap
ply to that contract, what procedural law is to apply to that contract e
tc.

Is there a distinction between the law governing the contract and the la
w governing the arbitration?

There is a distinction between the law governing the contract and the la
w governing arbitration. For instance if a contract stipulates that in
case of a dispute the substantive law to apply will be Kenyan law, then
any other arbitration law will apply. It is important if one is to avoi
d conflict in basic matters that the arbitration clause should be as cle
ar in these matters as possible.

WHAT ARE THE ESSENTIAL INGREDIENTS

1. PROVISION WITH REGARD TO THE NUMBER OF ARBITRATORS

Section 11 of the Arbitration Act provides that the parties are free to
determine the number of Arbitrators and section 11(2) failing a determin
ation by the parties on the number of arbitrators, the number shall be o
ne. The nature of the dispute should dictate how many arbitrators to go
for.

2. METHOD OF APPOINTMENT

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A lot of time can be spent and wasted between parties on this question o
nce a dispute has arisen. The default position is that if the parties do
not agree on the method of appointing then they can apply to the court t
o appoint Section 12 of the Arbitration Act. There is a drawback in doi
ng that, firstly time is of the essence and you will lose so much time l
ike a few months. Then there is the question of the costs to be paid to
court over the process. So if the procedure for appointment had already
been provided for in the arbitration clause one can avoid the delay and
the cost. Parties will choose an institution if they are not agreeable
on an arbitrator, they can approach another institution i.e. the charter
ed institute of arbitrators to appoint. They can for example decide if
there is a dispute as to method the chairman of LSK becomes the appointi
ng authority.

3. CHOICE OF THE RULES TO APPLY IF ANY

The Arbitrator has power to control the preparations for hearing. He is

obliged to exercise that power and to do so by reference to demanding st
andards. Also an arbitrator is involved in each case during its interlo
cutory stages. If he makes proper use of his powers he can and should s
hape the preparations so as to eliminate unnecessary costs. In particul
ar he can direct the advocates, the experts and even the parties to get
to grips with identifying what the issues really are and how best to pre
sent them. He can decide a preliminary issue quickly; or it may be enou
gh if he merely indicates his provisional views. In this way both the i
ssues themselves and the costs that have to be incurred in preparing for
them, can be greatly reduced.

4. TIME FRAMES

Time frames are matters that should be spelt out in the Arbitration Agre
ement for the following:
the time limit for the giving of the notice of claim
the time limit for giving of notice to appoint an arbitrator;
and the time limit for the commencement of arbitration.

Time frames give certainty in any industry and a time frame within which
the parties should agree is essential.

5. REMUNERATION:

Parties may decide how the arbitration costs are to be shared, whether t
he loser in the dispute bears the cost or both parties provide for the c
osts.

Section 12 of the Arbitration Act provides that parties are free to agre
e on procedure of appointment and failing such agreement where parties h
ave provided for 3 arbitrators the presumption is that each party shall
appoint one arbitrator each and the third one is to be appointed by thos
e two.

There is a common misconception that in situations where you have 3 and

each party appoints one that the arbitrators are the agents of the respe
ctive parties, they are not, arbitrators must always remain impartial.

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In arbitrations where provision is made for one arbitrator then the part
ies should agree on the person to be appointed failing which an applicat
ion is then to be made to the High Court.

Section 12 of the Arbitration Act - to read

No person shall be precluded by reason of that person’s nationality fro

m acting as an arbitrator, unless otherwise agreed by the parties.

(2) The parties

The Chartered Institute of Arbitrators has published rules and it is ope
n to parties to an arbitration agreement to provide in that agreement th
at for instance the Arbitration Rules of the Chartered Institute of Arbi
trators shall apply. For instance these rules will provide for how part
ies to an arbitration agreement can approach the institute to appoint an
arbitrator where the parties are unable to agree. They also provide the
procedure to be adopted by the arbitrator upon appointment. To a large
extent the rules in arbitration are influenced by the rules of pleadings
in a civil process e.g. the Chartered Institute of Arbitrators Rules pro
vide that the claimant should make a statement for a claim within 21 da
ys, 21 days to file defence and 14 days to file a reply..

It also provides for what is to happen if one of the parties does not co
mply.

WHAT HAPPENS WHERE PARTIES HAVE AGREED THAT DISPUTES WILL GO TO ARBITRAT
ION BUT ONE PARTY RENEGES AND FILES A SUIT IN COURT?

The party is in breach of the agreement in so long as they have

ALTERNATIVE DISPUTE RESOLUTIONS Lecture 1 4.9.03

Alternative Dispute Resolution - Alternative to what? Litigation or

Dispute resolution mechanisms that are alternative to litigation

Arbitration
Negotiation - meet and sit down and try and arrive at a conflict resolut
ion without help of a third party
Mediation - facilitated negotiation there is a neutral third party who a
ssists the parties in dispute resolution.

Other Books of reference

Getting to Yes by Roger Fisher and
Getting past NO - Negotiating with
You can negotiate Anything by Herb
Mediation Why People fight and how
ams
William Ury
difficult people by William Ury
Cohen
to help them to stop by Michael Willi

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Alternative Dispute Resolution refers to processes for resolving dispute
s other than litigation. The distinction between the various types of d
ispute resolution processes, they can be arranged from the perspective o
f the level of control the disputants have over the process the more for
mal they get the less control the parties have.

Dispute Prevention
Negotiation
Mediation;
Hybrid between mediation and arbitration (Medarb)
Hybrid between arbitration and mediation (Arbmed)
Arbitration
Litigation or the trial itself.

There are other mechanisms or processes that exist; there are many trial
s and early neutral evaluations. As we examine these processes the foll
owing features emerge
a. The more formal the process, the higher the level of involvement b
y a third party in the process. Parties do not have a say in the process
itself but they are bound by rules of procedure which they have to follo
w so compared to other processes like arbitration the element of party p
articipation in arbitration is higher because the parties are at liberty
to decide which rules of procedure to apply or the venue etc.

b. As you approach the more formal processes like litigation, the pro
cess is increasingly formal from the dress that the parties wear, i.e. w
igs an gowns in litigation or judicial process, manner of address, refer
ences to magistrates and Judges as my lord and your honour, the requirem
ent as to pleadings and the format that they have to meet etc,

c. The more formal the process, the more the danger or likelihood of
potentially damaging the relationship between the disputants. The decis
ion that is reached after the result of a trial is an imposed decision a
nd carries consequences for not complying with it. Secondly the parties
have not voluntarily submitted to that process. For example in a matrimo
nial dispute where a husband is forced to pay alimony to the wife, that
kind of decision cannot endear the parties to each other, the more forma
l it is the likelihood of destroying the relationships.

d. Arguably the more the formal the processes the more expensive it i
s, arguably because arbitration can be expensive as well, getting the di
sputes through the process is very expensive in terms of court fees, law
yers fees etc.

The standard practice in arbitration is that the arbitrator is paid on a

n hourly basis that is not to say that the arbitrator is not at liberty
to value his services with that value of the dispute, he is at liberty t
o adopt a method of charging that best suits him.

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e. The process of litigation tends to take longer. From commencement
to the stage of the dispute resolution the amount of time taken is a lot
longer. Rules of procedure in litigation are rigid and they tend to mak
e a case to last longer than it should. There is also the backlog and
the volume of work that the judiciary have to go through, it’s a lot.

f. Finally the more formal the structure is, the higher the focus on
the disputants’ rights as opposed to their interests. The distinction
between interests and rights is that interests of parties are usually in
having a continuous relationship and when parties litigate their interes
ts are destroyed by virtue of enforcing their legal rights.

Dispute Prevention

One mechanism for preventing disputes is by providing dispute resolution

training. Training that provides people with skills to prevent unnecess
ary disputes. If you take a typical case of a husband and wife, how wou
ld training come in to prevent disputes arising? Training maybe in bett
er communication skills.

Second method of dispute resolution is partnering. This requires disput

ants involved in a project to meet to discuss how to resolve any conflic
t which may arise. If for instance there is a building contract that in
volves, employer, QS engineer building contractor etc. these people can
meet at their own set of this project and decide that should conflict ar
ise we will deal with it in this fashion that is partnering. They can a
gree for instance that the decision of the architect will be the final d
ecision.

The other form of dispute prevention is systems design which involves de

termining in advance what process would be used for handling conflicts w
hich arise.

NEGOTIATION

Negotiation is any form of communication between two or more people for

the purpose of arriving at a mutually agreeable solution. In a negotiat
ion the disputants may represent themselves or they may be represented b
y agents and whatever the case, whether they are represented or not repr
esented, they have control over the negotiation process. When attempts
are made to settle matters out of court involves negotiations

There are two extreme styles of negotiating. there is what is referred t

o as the competitive bargaining style and there is the co-operative barg
aining style or hard bargaining and soft negotiating.

The competitive negotiators are so concerned, with the substantive resul

ts, that they advocate extreme positions. They create false issues, the
y mislead the other negotiator, they even bluff to gain advantage. It i
s rare that they make concessions and if they do, they do so arguably, t
hey may even intimidate the other negotiator.

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Cooperative negotiators are more interested in developing a relationship
based on trust and cooperation they are therefore more prepared to make
concessions on substantive issues in order to preserve that relationship.

Is negotiation a dispute resolution mechanism that can be applied in all

kinds of situations? Are there disputes that will not be necessarily re
solved by negotiations? There are certain disputes that negotiations wo
uld not perhaps assist.

In as far as hard bargaining is concerned, the perceived advantages woul

d be
The hard negotiator is likely to get a better substantive especially in
circumstances where such a negotiator is negotiating with a co-operative
negotiator;
If a negotiator is a professional negotiator i.e. one who is called upon
to negotiate on behalf of parties, he is likely to develop a reputation
which will be useful in future negotiations;
The competitive negotiator is not open to easy manipulation;
A negotiator of that style is also likely to take initiative and to take
a lead role in negotiations;

Disadvantages

The solution that comes out of such hard negotiations is likely to be a

fragile one and therefore not long lasting so the other party is likely
to come out of the negotiations feeling like maybe they gave too much an
d this may create ill feelings;

The competitive or hard negotiator may by reason of his approach fail to

take an opportunity to reach a good deal because of the attitude that he
must have his way and a good deal may be put on the table which he does
not look at as he does not want to compromise.bbb

It may harm the relationship; it may also create misunderstanding by the

fact that the interests of the party maybe compromised.

The competitive bargainer or negotiator is unlikely to be aligned to the

concerns of the other party because the emphasis is no compromise.

SOFT NEGOTIATING STYLE

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ADVANTAGES

Sustaining relationships or good long term relationships;

A deal or compromise will be reached when there is a deal to be made;
From the perspective of a professional negotiator, it is more likely tha
t people will want to deal with you.
A compromise is likely to be reached sooner and to work quickly either t
o agree or disagree.

DISADVANTAGES

A good deal may be lost or the opportunity for a good deal may be lost b
ecause the negotiator by the end of the process may feel that they give
more than they should have;
There is the possibility of manipulation by the other party.
The negotiator may be taken advantage of by the other party;
The party may want to get out of the deal later so he may feel sorry and
try to get out of the deal.
In the case of a professional negotiator, a cooperative negotiator may n
ot get a very good name e.g. compromises too much which may not be good
for business.

In each of these two styles and based on the mentioned disadvantages, th

e negotiators are more focussed on their respective positions than with
their interests and to try and reap the advantages of both the cooperati
ve and competitive bargaining style, Roger Fisher and William Ury came u
p with a project at Harvard Law School and developed what they referred
to as principled negotiations.

Principled negotiations require negotiators to focus on the interests of

each of the disputants with the goal of creating satisfactory options fo
r resolution which may be assessed by objective criteria.

Principled negotiation seeks to take advantage of both cooperative and c

ompetitive styles and avoid the pitfalls or the disadvantages of the two
styles.

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MEDIATION:

Mediation is a non-binding process in which an impartial third party

facilitates the negotiations process between the disputants and it is
that impartial third party who is called the mediator. The mediator
has no decision making power, he has no decision making power and
the parties maintain the control over the substantive outcome of the
mediation.

However, the mediator with the assistance of the parties will control th
e process and he will with the consent of the parties set and enforce th
e ground rules for the mediation process. If in the dispute the two exa
mples that we have looked at we now bring in a third party as the mediat
or, he will probably get an overview from both parties as to what their
contentions are. He will then agree with the parties that each party wi
ll be given an opportunity to state their case, they could also agree th
at when one party is stating their case, the other party shall not inter
rupt. The role of the mediator is not to impose his own solutions and n
ot to even suggest solutions but that the solutions should be suggested
and agreed upon by the parties themselves.

Story telling - the disputants communicate with the mediator to tell the
ir story. The mediator then assures them that he has heard the story by
re stating what each party has told you and letting them state whether t
hose are the facts as they have stated them. You re narrate the story.
You may then ask them to suggest the way forward and both parties can st
ate how they want to proceed. Lay down the rules.

The mediator should not descend to the arena but should let the disputan
ts decide how to conduct the negotiations.

ARBITRATION AND MEDIATION

Arbitration is a process in which a third party neutral, or an odd numbe

r panel of neutrals render a decision based on the merits of the case.
The Hybrid of mediation or the hybrid between mediation and arbitration
which is a very rare sort of scenario is that the third party neutral co
mmences the process in the role of a mediator and if that does not yield
or result in a resolutions the mediation ceases and the mediator assumes
or becomes an arbitrator who then makes a binding decision. In the arbi
tration mediation hybrid (arbmed) the disputants present their respectiv
e cases to the third party neutral who prepares or makes a decision, he
does not however share that decision or release that decision to the par
ties but he keeps it away and then assumes the role of a mediator. If a
result of the mediation, the parties reach a resolution, he destroys his
decision but if the mediation does not resolve in a resolution then he r
eleases his decision to the parties.

OMBUDSMAN

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An ombudsman is a person who investigates complaints and attempts to ass
ist the disputants to reach a decision. Usually this is an independent
officer of the government or a public or quasi-public body. An ombudsma
n can be classified as an alternative dispute resolution.

ADR Lecture 8 22nd April 2004

POWERS OF THE ARBITRATOR

REMUNERATION OF AN ARBITRATOR

AWARD

GROUNDS UPON WHICH THE AWARD CAN BE SET ASIDE.

POWERS

The principal source of the powers of an arbitral tribunal is the arbitr

ation agreement itself and therefore the mandate of the tribunal stems f
rom the agreement of the parties.

The arbitration agreement may confer powers on the arbitral tribunal exp
ressly for instance if the arbitration agreement itself stipulates expre
ssly that the tribunal or the arbitrator will have power to give an inte
rim or provisional relief. If the arbitration agreement provides that t
he Arbitration Act will apply then the extensive powers given under that
Act again will be available to the Arbitrator.

The powers are stemming from the Agreement of the parties. The parties
are the ones conferring the powers on the arbitrator through the arbitra
tion agreement i.e. powers to determine procedure, powers to determine t
he venue, power to give the award, power to rule on jurisdiction.

If the agreement incorporates the rules of an institution for instance t

he arbitration rules of the chartered institute of arbitrators again the
powers that are conferred under those rules would be available to the tr
ibunal.

Under Clause 16 of Chartered Institute of Arbitrators Rules, the tribuna

l has jurisdiction to determine the extent, validity or existence of an
agreement which is essentially an adoption of Section 17 of the Arbitrat
ion Act. There is power under that clause to allow an amendment of the a
rbitration agreement itself. If for instance the arbitration agreement
has an error, tribunal has power to rectify such error. Under the same
clause there is power to decide on questions of law. there are powers t
o decide on question of dishonesty, fraud or bad faith arising in the di
spute, there is power to order parties to furnish further details of cla
ims, there is power to make an order for conservation of property, power
to order parties to make interim payments towards the cost of arbitratio
n. Power to order payment of interest etc.

To a large extent the rules summarises the powers found in the Arbitrati
on Act but the overriding principle is that the tribunal has those power
s conferred on it by the parties.

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REMUNERATION OF THE ARBITRATOR

THE EXPRESS CONTRACT FOR REMUNERATION

It is highly desirable in an ad hoc arbitration that an arbitrator who r

egards remuneration as important should make an express agreement in wri
ting with the parties as to his remuneration. Ideally, this should be d
one before he accepts the appointment. But in many cases he knows very
little about either the sums in issue or the magnitude of the task invol
ved. So in practice he often accepts the appointment and leaves the sub
ject of fees to be dealt with at or shortly after the preliminary meetin
g. In doing so, he takes a risk. Having accepted the appointment he is
not entitled to insist on specific arrangements and can only ask for the
m. If one of the parties is difficult, then his only option is to go on
without more or to resign forthwith. Of course in that event, he may ha
ve to repay any fees that he has managed to secure.

REMUNERATION OF THE ARBITRATOR

The fees of arbitration should be proportionate to the substance of the

case.

The parties, tribunals or institutions should look for and encourage the
use of fee structures that encourage speed and efficiency.

EXPRESS AGREEMENT

In many cases, the fee or basis of remuneration is expressly agreed befo

re or immediately upon appointment so that the question of what right of
remuneration is implied does not arise. Many arbitrators now include for
interim payments in their terms, which is likely to bring unhappiness on
the part of the parties about the costs of the tribunal to the surface a
t an early bstage.

PAYMENT THROUGH AN INSTITUTION

In arbitrations administered by some institutions, the tribunal’s fees

are channelled through the institution, thus to a considerable degree in
sulating the tribunal from the concerns of the parties about the tribuna
l costs. And the institutions are usually safe from much in the way of
complaint, since they will have established some basis for paying the tr
ibunal in advance.

15
THE LIEN

The practice of requiring payment before issue of the award may reduce t
he enthusiasm of a party for a dispute about fees, which are anyway like
ly to be one of the smaller bills that the arbitration will generate. W
hile there is a mechanism for dealing with this problem, it involves a t
rip to court and thus yet further fees.

The 1996 Act has now addressed Under S. 28, the express contractual posi
tion (which is the most usual arrangement) is preserved. Absent of an a
greement, the parties are jointly and severally liable for “such reason
able fees and expenses (if any) as are appropriate in the circumstances.
The concept of such reasonable fees and expenses as are appropriate in t
he circumstances is picked up when it comes to payment of the costs of t
he arbitration. Section 64 defines the costs(for purposes of payment as
between the parties) as including only such reasonable fees and expenses
of the arbitrators as are appropriate in the circumstances. Thus what t
he arbitrators can recover from the parties, in a situation where there
was no express agreement between the parties and the arbitrators, should
match exactly what is recoverable between the parties when the final wor
d on costs is known.

Where there is an agreement between the arbitrators and the parties, the
inevitability of a match is lost. If the difference proves to be substa
ntial, with the contractual rates at the high end, an arbitrator may fin
d difficulty in obtaining payment, if he has not been paid in advance.

Section 32 (5) there is power on the part of the tribunal to order as to

who becomes responsible for costs.

THE AWARD

Section 29 (3) to Section 34 (3)

Order XX a judgment is required to acquire a particular format which is

not the case with an award. Order XX is to effect that the court needs
to set some facts, the decisions and reasons for decisions

Section 32 of the Arbitration Act which stipulates the formal requiremen

ts of an award provides that the award should be in writing, it must be
signed by the arbitrator or arbitrators and it must be signed by all arb
itrators in the event that there is more than one arbitrator, and if it
is not signed by all of them, reasons must be stated for the omitted sig
natures. There is a requirement under this Section that the reasons for
the award should be stated unless the parties have agreed that a reasone
d award will not be required. Or if an award is as a result of a settlem
ent on agreed terms under Section 31.

To meet the requirements as to reasons for the award, it is sufficient f

or the arbitrator to say that for example on issue Number A I find in fa
vour of the claimant for the reasons that the evidence of Claimant A was
more credible.

16
The other formal requirement is that the award should have a date and th
e place where the award is made. The date is important as there is a t
ime limit within which any party can apply to have a suit set aside Sect
ion 35. The place is also significance where there is an application
for setting aside. An award under this section may be set aside if the
Arbitration Agreement is not valid under the law to which the parties ha
ve subjected it. Section 35 (II) a.

The award must make it clear that due process was observed so there woul
d perhaps be a recital to that award that will recite the agreement to a
rbitrate, it would state or refer to the document under which the tribun
al was constituted, it would allude to the fact whether a hearing was co
nducted, and if no hearing was conducted whether it was by the agreement
of the parties. It would perhaps briefly state what the facts are, the
issues in contention, the tribunal’s findings on those issues with the
reasons and a summary of the award itself.

SECTION 35 - SETTING ASIDE AN AWARD - RECOURSE TO COURT AGAINST AN AWARD

When a party states that they were not heard -

Section 26 - if a claimant fails to submit his statement of claim, the t

ribunal should terminate the proceedings. If the Respondent fails to su
bmit his statement of defence the tribunal shall continue with the proce
edings, but there is nothing like a default judgment. And if a party f
ails to appear after hearing or to produce evidence the tribunal may con
tinue with the proceedings and make an award on the evidence that is bef
ore it. It very well could be that a party has been given an opportunit
y to present their case but they have not presented their evidence and a
n award has been given.

What must be established is that the party or all the parties were affor
ded the opportunity to present their case, they have notice of the heari
ng etc.

John Adero v. Ulinzi Sacco H.C.C. 1879 of 1999 Milimani Commercial Court

In this case Justice Onyango Otieno as he then was allowed an applicatio

n under Section 35 of the Arbitration Act on grounds that there was no e
vidence of Notice having been given in a matter which had proceeded befo
re an Arbitrator ex-parte. In taking that view, Justice Otieno said “o
ne thing seems to be clear to me and that is that no evidence exists to
confirm that the Applicant was aware of the Hearing Date. The matter wa
s heard ex parte and a decision made without the Applicant’s input. It
is now settled law that no one can be condemned unheard, the Applicant i
n this case was indeed condemned unheard and this was not proper. He co
ncludes by saying that the award is for that reason set aside and the ma
tter remitted back to the same tribunal for a full hearing.

This ruling raises the question that if the High Court finds under Secti
on 35 that an award should be set aside, what follows? It invalidates t
he agreement of the parties.

If the award deals with a matter which was not in contemplation by not f
alling within the terms of the reference to arbitration.

17
HFCK V. Gitutho Associates & Another Civil App. 76 of 2000

In this case the Plaintiff applied to set aside an award under S. 35 (2)
(a) (ii) on the basis that jurisdiction was exceeded, but on the facts o
f this case the Judge Justice Mbaluto dismissed the Application of the P
laintiff’s action and said
“that having carefully considered the evidence and the law applicable t
o the matter, I cannot see any justification for claiming that the award
dealt with a dispute not contemplated by or not falling within the terms
of the reference to arbitration nor for that matter can I see any basis
for finding that the decisions of the Arbitrator are on matters beyond t
he scope of the reference. He proceeded to dismiss the application.

Express Kenya Limited v. Peter Titus Kanyago Civil App. 963 0f 2002

This was an application under Section 35 seeking to set aside an award i

n which the arbitral tribunal had granted the respondent an award of 5.4
million as a consultancy fee in terms of a consultancy services agreemen
t. The dispute in that respect did not stem or was not covered under th
e Arbitration Clause but the Arbitrator Found that the matters that the
parties had agreed to refer to Arbitration under the Arbitration Agreeme
nt were “inextricably linked” to the matter stemming from the consulta
ncy services agreement and proceeded to make the award of the 5.4 Millio
n. Whilst the arbitration agreement was contained in a share holders’
agreement which then Justice Ringera found to have been outside the scop
e of the arbitration agreement.

Ringera J. as he was then known arrived at the conclusion that the arbit
rator had exceeded or gone outside the scope of the reference and set as
ide part of the award.

The High Court may set aside an award if the High Court finds that the
award is in conflict with public policy of Kenya

Christ for All Nations v. Appollo Insurance Civil Case 499 of 1999

An application under Section 35 to set aside an arbitral award on ground

s that the award was in conflict with public policy.

Justice Ringera after reciting Section 35 (2) (b) went on to say as foll
ows
“As far as I know the above provision has not received judicial interpr
etation in our courts. He then goes to India and is guided by an Indian
decision in the case of Renu Saghar Power Co. v. General Electric where
the Indian Supreme Court identified 3 patterns of the operation of the d
octrine of public policy. In the field of enforcement and recognition o
f foreign arbitral awards. Those 3 patterns he says are
That an award will not be given effect if it is contrary to the fundamen
tal policy of the Indian Law i.e. if the award involves a violation of t
he Indian Laws on non-compliance with a court’s order;
If the enforcement of the award would be contrary to the interests of In
dia and
If the award would be contrary to justice and morality.

18
He adopts these principles and then says
“I am persuaded by the logic of the Supreme Court of India and I take t
he view that although public policy is a most broad concept incapable of
precise definition or that as the common law judges used to say, it is a
n unruly horse. An award could be set aside under Section 35 (2) (b) of
the Arbitration Act as being inconsistent with public policy of Kenya if
it was shown that it was either
Inconsistent with the constitution or other laws of Kenya whether writte
n or unwritten;
Inimical to the national interests of Kenya,
Contrary to Justice or morality.

In the latter category he gives an example of awards induced by corrupti

on or fraud or awards founded on contracts contrary to public morals.

In the second category of national interests he gives examples of nation

al defence and security, economic prosperity of Kenya and good diplomati
c relations with friendly nations. But he is quick to observe that that
list is not inexhaustible.

Incapacity - ie. If the party entered into an agreement when they were i
nsane, minors.

Composition - if the composition of the tribunal or the procedure did no

t accord with the agrs eement. Where for instance parties have agreed
that there will be a hearing and the tribunal departs from that agreemen
t.

Where arbitration agreement provides for 3 arbitrators and the reference

is determined by one.

Time Frame Section 35 (3)

Time frame within which the application must be made - the award may no
t be made 3 months have elapsed from the date on which the party making
that application had received the arbitral award or if a request had bee
n made4 under section 36 from the date on which that request had been di
sposed of by the arbitral award.

19
Justice Onyango Otieno in the case of
APV Hall Equitorial Ltd V. Mistri Jagva Pagbat Civil App 39 1999 Miliman
i

In this matter an application to set aside an award under Section 35 was

made after the expiry of the 3 months and the advocate for the applicant
sought to argue or argued that the provisions of Section 35 (3) conferre
d a discretion on the court to admit an application to set aside. Appar
ently the language used was that an application for setting aside an awa
rd may not and the judge ruled that the mere use of the word may in that
section cannot be taken to mean that a party to arbitration proceedings
can ignore that provision as to time limit with impunity. In his view i
t is still a provision that must be complied with and on compliance wit
h it is clearly at the detriment of the party failing to comply and he t
hen upheld the Respondent’s submissions that the application was incomp
etent having been made after 3 months.

Section 36b

Section 37 - essentially repeats the provisions of section 35 to a very

large extent as it sets out the grounds for refusal to recognise an awar
d being similar to the grounds under Section 35.

ADR Lecture 7 15th April 04

CONSTITUTING THE TRIBUNAL

MISCELLANEOUS MATTERS OF JURISDICTION

If parties to an arbitration have failed to agree, where they apply to t

he court and the court appoints an arbitrator, and one party alleges tha
t the arbitrator is not impartial is this a matter of jurisdiction? If
one is appointed an arbitrator and one party says that part of the matte
rs agreed to be covered by the arbitration agreement is outside the scop
e of arbitration agreement is that a jurisdiction question?

Case law

20
It is important that one is clear in terms of how they want to structure
an arbitration agreement.

Barlany Car Hire Services Ltd v. Corporate Insurance

In this case an application was made under Section 6 of the Arbitration

Act to Stay Proceedings. There was also a point taken on a preliminary
basis that no claim could be made under an arbitration agreement in that
case because a claim had not been raised within the time limit of 12 mon
ths. The relevant arbitration clause or arbitration agreement was to th
e effect that all differences under the policy should be referred to the
decision of an arbitrator to be appointed by the parties. And if they c
annot agree on a single arbitrator then each party was required to appoi
nt an arbitrator within one calendar month of the request to do so and t
he two arbitrators would then appoint an umpire who would sit with the a
rbitrators and preside at their meetings. The clause also provided that
if the company disclaimed liability the claim should then be made or com
menced within 12 months from the date of disclaimer.

In this case the insured vehicle was stolen a claim was made on the insu
rance company which repudiated liability on the 9th August 1994. There
was an attempt to appoint an arbitrator in April of 1995 which did not m
aterialise. An application was then made to the Court under Section 12
of the Arbitration Act for the Court to appoint an Arbitrator. That app
lication was dismissed by the Court as being premature and finally, no a
rbitrator was ever appointed and the insured then decided to go to court
to try and pursue its claim there and that was well after the 12 months
had lapsed.

The court essentially upheld the argument that parties under an arbitrat
ion agreement are at liberty to contract a shorter limitation period tha
n that which is prescribed under the limitation of actions Act. The oth
er important point that the court makes is that the Plaintiff had not co
mplied with the Agreement as set out in the arbitration clause as to how
or as to the manner of appointing an arbitrator. According to the High
Court, the Arbitration Agreement provided 4 steps for the appointment or
for the constitution of the Tribunal.

Once the insurance company repudiated liability the parties were then to
agree or attempt to agree on a single arbitrator;

If a single arbitrator was not agreed upon, either party could give a 30
days notice to the other side for the appointment of own arbitrator and
to require the other party to appoint its own arbitrator;

If the parties appoint “their respective arbitrators” then those two a

rbitrators are required to appoint the umpire.

If either party fails to appoint then an application can then be made un

der Section 12 to the Court to appoint.

The important points that emerge from this decision are that

21
the drafting of the arbitration clause is a very important task
once parties have agreed on a process of appointment including time lim
its the courts will honour that agreement and
a party may easily protract the process of commencing arbitration and ag
ain an advocate can avoid some of these consequences in provided a well
considered properly worded arbitration agreement.

Section 11 of the Arbitration Act stipulates that parties are free to de

termine the number of arbitrators. Usually an arbitration agreement wil
l provide for either a sole arbitrator or two arbitrators with an umpire
as has been demonstrated by the clause in Barlany or three arbitrators.
But theoretically speaking, Section 11 permits parties to have any numbe
r of persons as arbitrators which means one can appoint even numbers.

Important when drafting the arbitration agreement one is alive to most o

f these issues so that one does not provide for two arbitrators and one
can run into serious problems.

An even number is undesirable.

Section 11 (2) provides that where the Arbitration Agreement does not st
ipulate the number of arbitrators, the presumption is that one arbitrato
r is intended and indeed in practice the provision for a single arbitrat
or is the norm.

By the time the parties are seeking arbitration, there are already diffe
rences and therefore it is difficult for them to sit down and agree on o
ne arbitrator where the clause provides for one arbitrator. It would be
helpful to provide that the parties go to the Chartered Institute of Arb
itrators in case of dispute.
One of the problems that is involved or arises in constituting the tribu
nal in a sole arbitrator scenario is
(i) After the dispute has arisen, the task of agreeing on an arbitrato
r becomes difficult because in the atmosphere of difference the parties
are hardly in a position to agree on many things; this is a difficulty.

(ii) Section 12 then says that if the parties fail to agree they make
an application to court and when this happens the court will disregard t
he proposed arbitrators and even if the proposed arbitrators were expert
s in that certain field, the court will decide and name other arbitrator
s.

(iii) Where a dispute has arisen and your client asks you to propose nam
es for the persons to put forward as likely arbitrators, how is one to d
o this? It is safer to approach the chartered institute for them to as
sume that responsibility lest you name an arbitrator and the client lose
s and continues to blame you for your choice of arbitrator. Firstly the
parties may not have the reservoir of information with regard to who sho
uld be nominated as suitable arbitrators. An institution may be better
placed to do that and secondly the parties’ advisers are usually reluct
ant to suggest names. What procedure would one employ to come up with
one name? you could agree to pick lots, elimination method with a crit
eria i.e. must be an architect, Q.S etc. Section 12 (3) permits you to
agree on a procedure.

22
All these disputes can be avoided by substantially suggesting a name in
advance as by nominating the arbitrator in advance e.g. should disputes
arise they should referred to arbitration by Mr. Onyango.

Problems with two or more arbitrators

1. The cost, where an arbitration agreement stipulates two or more ar

bitrators, it is a costly arrangement. The difficulties in doing this w
ould be, the two arbitrators may not agree on a third, when this happe
ns Section12 (3) kicks in. The advantage is that the party who one part
y nominates does not require consultation. Another problem would be tha
t constituting a 3 panel tribunal is a time consuming exercise. When it
comes to charging, there are problems, how do you justify paying more to
one arbitrator for a certain job to the parties who are paying. There a
re however advantages, if you have a dispute that cuts across industries
i.e. you have an engineer, lawyer, architect, then you are well equipped
with the expertise from all the fields. When it comes to the final deci
sion if all arbitrators cannot agree, then there is a problem. But Sect
ion 30 provides for a majority decision. When it comes to writing the a
ward, there are still problems in terms of logistics, if the arbitrators
live in different cities or town, how do you get 3 people together to ex
peditiously deliver the award. All these go back to the initial step of
when one is drawing the original agreement and all these matters have to
be considered.

There is a distinction between a tribunal of 2 arbitrators and an umpire

and a tribunal of 3 arbitrators. The umpire usually comes in to break t
ies between the two arbitrators and in the case of 3 arbitrators they ar
e all substantive in the sense that they all have an input.

Assuming that grounds have arisen to challenge an arbitrator and one of

the parties wants to challenge or to ask for the removal of that arbitra
tor. How is this effected? The current arbitration Act in an effort to
limit bbbthe numbers of avenues that one can use to challenge an arbitra
tor.

Section 13 imposes the arbitrator once approached to declare interest.

S 13(3) an arbitrator may be challenged only if …. Or does not possess
qualification agreed to

Section 4 a party may challenge an arbitrator appointed by him … only

for reasons that he becomes aware after the appointment.

Case law on bias

The “Elissar” Case (1984) 2 Lloyds LR 84

What test do you apply when dealing with a question of whether an arbitr
ator is biased or not biased. That is suggested by Justice Ackner in
“Elissar” case that in answering that question the test should be

23
“Do there exist grounds from which a reasonable person would feel that
there was a real likelihood that the arbitrator could not or would not f
airly determine the issue on the basis of the evidence and arguments to
be adduced before him. It seems to me that that is the satisfactory way
of expressing the objective test. To suggest that the mere lack of conf
idence which no reasonable person would in the relevant circumstances ex
perience should be a basis for removal of an arbitrator seems to be quit
e unacceptable.”

The test here is one of a reasonable person and the existence of a real
likelihood of bias. Mere lack of confidence is not sufficient.

The Bremer v. Ets Soules [1985] 1 Lloyds LR 84

This case was based on a provision where an arbitrator could be removed

on grounds of misconduct. Mustill J. discussed what he considered to be
3 material situations

Actual Bias;
Implied Bias;
Conduct that would have justified removal of an arbitrator.
Section 13 and 14 of the Arbitration Act are relevant provisions in this
regard. Section 14 specifically deals with the challenge procedure wher
e the impartiality of independence of an arbitrator arises. Section 14
(1) says that parties are free to agree on procedure and 14(2) says that
if they don’t agree on procedure a party intending to challenge an arbi
trator send a written statement of reasons for the challenge within 15 d
ays after becoming aware of the composition of the Tribunal and if the
arbitrator who has been challenged does not withdraw, then the Tribunal
is required to make a decision on that challenge.

In practical terms there is a situation where a dispute has arisen and t

he parties do not agree on choice or arbitrator and the clause says that
the institution will appoint and goes ahead and appoints and then you re
alise that the arbitrator has interest in the matter which he does not d
eclare. This is what Section 14 is talking about.

You write to the arbitrator requesting him to withdraw to the office for
the following reasons.

Section 14 (3) provides for the procedure if the challenge is not succes
sful. The competent authority has been gazetted under Legal Notice No.
64 of 2001. in other words if you ask the tribunal to make a decision o
n the challenge and they say they don’t consider that there are grounds
for them to remove themselves, then one can go to court.

Mustill says there are 3 material situations in which the High Court has
power to remove an arbitrator under Section 23 of the Arbitration Act 19
50. (It is important to note that this decision was based on that Secti
on)

Mustill says that

24
Where it is proved that the Arbitrator suffers from what may be called a
ctual bias, then he may be removed; and what the complaining party nee
ds to satisfy the court is that the arbitrator is predisposed to favour
one party or conversely to act unfavourably towards him for reasons pecu
liar to that party. He then says that prove of actual bias entails prov
e that the arbitrator is in fact incapable of approaching the issues wit
h the impartiality required.

Where the High Court may remove an arbitrator is where the relationship
between the arbitrator and the parties or between the arbitrator and the
subject matter of the dispute is such as to create an evident risk that
the arbitrator has been or will in future be incapable of acting imparti
ally. In this case prove of actual bias is not necessary. The concern
here is the manifest risk of partiality. This is what is referred to as
imputed bias.

Conduct which it is doubtful that cabbbbbbbbbbbbbbbbbbbbbbbbbbbbbbn be r

aised under our section 13 is where the conduct of the arbitrator is thr
ough lack of talent, experience, diligence or incapability of conducting
the reference in a manner in which the parties are entitled to expect.

Section 15 of the Act shall terminate if the parties agree to terminate

his mandate. These are not grounds you can challenge under Section 13.

DEGREE OF CARE TO BE EXERCISED IN DRAWIN THE ARBITRATION AGREEMENT

How do you move the court under Section 14 (3)? Look it up.

Is it open for a party to submit to an arbitrator and say that you are n
ot constituted? These grounds can be raised and an objection brought un
der Section 17.

Doctrine of Kompetenz Kompetenz and the doctrine of Separability.

These are both covered under Section 17 (1)

Where the law says that we can separate the agreement from the main cont
ract that sets out the rights and obligations. Even though one may argu
e that substantive contract is void the tribunal is competent to arbitra
te in that decision

17. (1) The arbitral tribunal may rule on its own jurisdiction, incl
uding ruling on any objections with respect to the existence or validity
of the arbitration agreement, and for that purpose-

An arbitration clause which forms part of a contract shall be treated as

an independent agreement of the other terms of the contract; and

25
A decision by the arbitral tribunal that the contract is null and void s
hall not itself invalidate the arbitration clause.

Where one of the parties says that the agreement is void for whatever re
ason and argues that the agreemebbbbbbbbbbbbbbbbbnt is void, if the agre
ement is taken up and the arbitration agreement is a clause within that
agreement, is the arbitration itself void?

The arbitrator has power to rule on this particular point, so what happe
ns if the arbitrator rules that the agreement is void.

s. 17 is a reaction to the logic of common law.

Christopher Brown Limited v. Genossenschaft

ADR Lecture 5
March 11, 2004

SECTION 6 -STAY OF LEGAL PROCEEDINGS

The concern of Section 6 is that if you have two parties who have entere
d into an agreement that contains an arbitration agreement clause and on
e party ignores the arbitration clause and files in court, what is open
to the other party if the party would like the dispute to be referred to
arbitration. This is what Section 6 is dealing with.

It is a provision that enables the courts to force parties to go to Arbi

tration where that mode of dispute resolution is the mode of choice.

Section 6. (1) A court which before proceedings are brought in

a matter which is the subject of an arbitration agreement shall, if a pa
rty so applies not later than the time when that party enters appearance
or files any pleadings or takes any other step in the proceedings, stay
the proceedings and refer the parties to arbitration unless it finds---

26
That the existence of an Arbitration Clause or Arbitration Agreement in
a contract is not an impediment to resolving disputes in court if neithe
r party objects which means that parties can still ignore the arbitratio
n clause and file the proceedings in court. However, if one of the part
ies to the Arbitration Agreement goes to court but the other party wishe
s to enforce the Arbitration Agreement, then it is for that latter party
to seek an order from court under Section 6 of the Arbitration Act 1995
staying the court proceedings and if the order is granted it leaves the
initiator of the court proceedings with no option but to follow the prov
isions of the Arbitration Agreement if he wishes the dispute to be resol
ved. Under Section 6 a party wishing to enforce the Arbitration Agreeme
nt in a situation where the other party has initiated court proceedings
must apply to court not later than the time when that party enters appea
rance or files any pleadings or takes any other step in the proceedings.
That is to say that the application for stay under S. 6 must be made at
the correct time. The correct time

Section 6 (1) it appears that once summons to appear are served on the d
efendant, if the defendant wishes to enforce the agreement, he must not
later than the time he enters appearance file for stay. Section 6 appea
rs to suggest that this option is open but we shall look at case law tha
t says if you file a defence you have lost your right. Another judge sa
ys that even after you file your defence you can still go to arbitration.
We shall find which view is correct.

Once the application for stay under Section 6 is made at the correct tim
e, whatever the correct time might be, the court’s obligation under Sec
tion 6 is clear. It must stay the court proceedings and refer the parti
es to Arbitration. There are however 2 provisos

The court shall not stay the proceedings if the Arbitration Agreement is
null and void; if for instance it is inconsistent with the law i.e. if i
t is illegal.
The Arbitration Agreement is inoperative or incapable of being performed;

The second part of Section 6 is to the effect that the court shall not s
tay proceedings if there is not in fact a dispute between the parties wi
th regard to the matters that are agreed to be referred to arbitration.

Where an Arbitration Agreement says that an award of an arbitrator shall

be a condition precedent to the right of any party to that agreement to
seek court relief, meaning parties are not at liberty to go to court wha
tsoever unless they firstly go to arbitration

It would read as follows or have a provision in these terms

“Where by this clause any dispute or difference is to be referred to ar

bitration the making of an award shall be a condition precedent to any r
ight of action by either party against the other.

27
This provision is generally referred to as the Scott v. Avery clause fol
lowing a very old English case which recognised and gave effect to such
a provision in an arbitration agreement. In other words the English cou
rts have for a long time recognised that where parties contract to refer
disputes to arbitration effect will be given by the courts to such a con
tractual provision.

The effect of Section 6 is really to say that whether or not an arbitrat

ion clause contains such a stipulation, the court will give it effect.

How do you move the court for a stay of proceedings as per Section 6 of
the Arbitration Act.

Rule 2 of the Arbitration Rules 1997 being the rules made by the Chief J
ustice under Section 40 of the Arbitration Act provides that an Applicat
ion under Section 6 shall be made by summons in the Suit. In some insta
nces judges have said that if you move the court using a wrong procedure,
you may lose your right to relief so that where the rules say you shoul
d move the court by summons and you do it by notice of motion, you may b
e thrown out of court. But one might add that there are conflicting dec
isions on that point.

REPUBLIC OF KENYA
IN THE HIGH COURT OF KENYA AT NAIROBI
CIVIL CASE NO. 210 OF 2004

X …………………………………………………………………………………….
PLAINTIFF

Y …………………………………………………………………………………….
DEFENDANT

SUMMONS

28
(Under Section 6 of the Arbitration Act and Rule 2
of the Arbitration Rules 1997)

LET ALL PARTIES concerned attend before the Honourable Judge(court) on

…… of ……………………… 2004 at 9.00 o’clock in the forenoon or soon
thereafter as the Advocates may be heard on the Hearing of an Applicatio
n by counsel for the Defendant for orders that:-
that the proceedings in this suit be stayed
That the dispute between the parties be referred to arbitration;
That the costs of this Application be borne by the Plaintiff.

Which Application is based on the grounds:-

(a) That the parties under an Arbitration Agreement to refer the matte
rs in controversy in this suit to Arbitration;
(b) That the dispute has not been referred to Arbitration;

The Application is supported by the Affidavit of Y sworn herein.

Dated at Nairobi this day of

2004.

29
Kairu & McCourt Advocates
ADVOCATES FOR THE DEFENDANT

Drawn & Filed by:

If any party served does not appear at the time and place

Order L imposes that the summons should have a notice at the bottom

Prepare an Affidavit to accompany summons

CASE LAW ON SECTION 6

TM AM Construction Group Africa v. The Attorney General Civil Case 236 o

f 2001 at the High Court Milimani Commercial Courts
Decision by Honourable Justice Mbaluto

In this case, the Plaintiff instituted suit against the Attorney General
on the 21st February of 2001. The Attorney General entered appearance o
n the 15th March 2001. On the 25th April 2001 the Attorney General then
made an Application under Section 6 of the Arbitration Act and Rules 2 o
f the Arbitration Rules 1997 seeking orders that the suit be stayed and
that the Dispute be referred to Arbitration. The Application for stay u
nder Section 6 of the Arbitration Act having therefore been filed on the
25th April 2001 was 41 days after the Memorandum of Appearance.

The Plaintiff opposed the Application for stay on grounds that

it was out of time under Section 6;

30
That there was in fact no dispute within the meaning of Section 6 (1)
(b) to refer the matter to Arbitration.

Justice Mbaluto upheld the two grounds.

On the question of time Justice Mbaluto cited a passage from the Court o
f Appeal decision of Corporate Insurance Company v. Loise Wanjiru Wachir
a Civil Appeal NO. 151 of 1995. the decision was based on an arbitratio
n clause before the enactment of the current Act

“In the present case, the Appellant did more than just enter an
appearance. It delivered a defence which is of course a pleading. T
he Appellant made no Application for Stay of Proceedings. The Appellan
t was a party to an Arbitration Agreement within the meaning of Section
6 of the Act. Arbitration Clause in this case are known as Scott v. Av
ery Arbitration Clauses named after a leading case decided by the House
of Lords in 1856 in which their efficacy was considered and have long b
een accepted as valid. These clauses do more than provide that dispute
s shall refer to Arbitration. They also stipulate that the award of an
Arbitration is to be a condition precedent to the enforcement of any ri
ghts under the Contract so that a party has no cause of action in respe
ct of a claim falling within the Arbitration Clause unless and until a
favourable award has been obtained. In the present case, if the Appell
ant wished to take the benefit of the clause it was obliged to apply fo
r a Stay after entering appearance and before delivering any pleading.
By filing a defence the Appellant lost its right to rely on the claus
e.”

Justice Mbaluto applied that passage to the case in TM and held that the
attorney General had lost the right to rely on the Arbitration Clause be
cause if the AG was to rely on it, he was obliged to make the applicatio
n under Section 6 not later than when he entered appearance. In other w
ords if you file a Memorandum of Appearance today and you do not file fo
r an application for stay, tomorrow is too late.

On the question of whether there was a dispute or not, it had been argue
d for the Plaintiff that the Attorney General was in fact making an appl
ication under Section 6 of the Arbitration Act as a delaying tactic beca
use it was submitted that there was not in fact a dispute about the clai
m.

Justice Mbaluto cited another passage from the case of London and Northw
estern Joint Railway v. JH Bilington Limited (1899) A.C. 79

Lord Halsbury is cited as having said the following

“A condition precedent to the invocation of the Arbitrator on wh

atever grounds is that a difference between the parties should have ari
sen and I think that must mean a difference of opinion before the actio
n is launched either by Plaint or writ. Any contention that the partie
s could when they are sued for the price of the services raise for the
first time the question whether or not the charges were reasonable, and
that therefore they have a right to go to an arbitrator seems to me to
be absolutely untenable.”

If there is no dispute, the court will not stay the proceedings.

31
HYPOTHETICAL CASE

Definition of arbitration agreement entitles parties to select disputes

that will go to arbitration and others that will not. Refer to Section
3 of the Arbitration Act

A and B are business partners. In the year 2000 A and B entered into an
agreement where A would lease a fleet of vehicles to B. A had the oblig
ation to maintain and repair those vehicles at B’s cost. During the le
ase arrangement, A would introduce customers to B for which a commission
was payable. In the year 2002 the parties entered into a formal agreeme
nt under which B agreed to purchase outright from A the fleet of vehicle
s. That agreement provided for payment of the purchase price by instalm
ents. It also provided that should B default in the repayment of those
instalments, A could repossess the vehicles. A claims that B defaulted
in those instalments and as a result exercised his right to repossess th
e vehicles and indeed repossessed them. B on his part claims that the p
urchase price has been paid, there has been no default and A has no busi
ness repossessing the vehicles. The purchase agreement of 2002 provides
for Arbitration and so B has invoked the Arbitration Clause, has referre
d the matter to Arbitration seeking two orders
1. A declaration that repossession by A is wrongful;
2. An order directing A to give possession of those vehicles to B.

before the Arbitrator, A has counter-claimed against B for maintenance c

osts incurred by him under the lease arrangement that pre-dated 2002. w
hen the matter comes up for hearing before the Arbitrator, B takes an ob
jection to jurisdiction with respect to A’s counterclaim and argues tha
t A’s claim on maintenance charges does not arise from, neither is it r
elated to the purchase agreement of 2002.

The Arbitration Clause in the 2002 purchase agreement provides any dispu
tes or differences arising from or relating to this agreement shall be r
eferred to Arbitration.

The question is does the Arbitrator have power, jurisdiction with respec
t to the counterclaim?

The Arbitrator has said he has no power to rule on the matters of a coun
ter claim.

Tropical Food Products International v. The PTA Bank H.C.C. NO. 1534 OF
2001 MILIMANI H C NAIROBI \MWELA J.

The judge interprets Section 6 with regard to timing in a very liberal f

ashion.

In his view Section 6 does not impose the time limit.

32
 “the court would wish to comment on Section 6 of the Arbitration
Act. He then reproduces Section 6 and sums his position as follows
“accordingly, this court is not of the view that a party is limit
ed as to when it can apply to go to arbitration in a matter subject of a
n arbitration agreement. He hinges that view on Section 6 (2) Notwithst
anding that an application has been brought under (1) and the matter is
pending before the court arbitral proceedings may be commenced or contin
ued and an arbitral award may be made.

“That this provision says that 6 (2) that it does not matter that
an Application has been brought under Section 6 (1) and a suit is pendin
g before the court. Arbitral proceedings can still be brought and an aw
ard made.”

Under Rule 2 you make application by summons but Mbaluto J. where an obj
ection was taken as to form, in another case where similar objection was
said that application did not conform with rule 2 he ruled that it could
be overruled.

Arbitration Lecture 4 4th March 2004

Arbitration Clauses (Samples)

“Any dispute arising between the parties and all claims or matters in s
uch disputes not otherwise mutually settled between the parties shall be
referred to arbitration by single arbitrator to be appointed by agreemen
t between the parties or in default of such agreement within 14 days of
the notification of such dispute by either party to the other upon appli
cation by either party to the chairman for the time being of the Kenya B
ranch of the Chartered Institute of Arbitrators. Every award made under
this clause shall be subject to and in accordance with the provisions of
the arbitration Act 1995 or other Act or Acts for the time being in forc
e in Kenya in relation to arbitration. To the extent permissible by law
the determination of the arbitrator shall be final and binding upon the
parties.

Arbitration proceedings shall take place in Nairobi Kenya. The law whic
h is to apply to the contract and under which the contract is construed
is Kenyan law. The law governing the procedure and administration of an
y arbitration instituted pursuant to this clause is Kenyan law.

Section 12 of the Arbitration Act moves in to prescribe what happens if

this clause is not adhered to

Section 12. (1) No person shall be precluded by reason of that perso

n’s nationality from acting as an arbitrator, unless otherwise agreed b
y the parties.

33
The parties are free to agree on a procedure of appointing the arbitrato
r or arbitrators and failing such agreement-
(a) in an arbitration with three arbitrators, each party shall appoint
one arbitrator and the two arbitrators so appointed shall appoint the th
ird arbitrator;
(b) in an arbitration with one arbitrator, the parties shall agree on
the person to be appointed.
If-
(c) in the case of three arbitrators, a party fails to appoint the arb
itrator within 30 days of receipt of a request to do so from the other p
arty or if the two arbitrators fail to agree on the third arbitrator wit
hin 30 days of their appointment; or
(d) In case of one arbitrator, the parties fail to agree on the arbitr
ator;

The appointment shall be made, upon application of a party, by the High

Court.

This clause does not say who will appoint the umpire if there is disagre
ement.

Chief Justice published rules under Legal Notice 58 to the effect that t
he application will be by way of Originating Summons and will be served
upon the parties within 14 days.

The above clause makes a distinction between the law of contract and the
law of governing procedure and arbitration. The substantive rights unde
r the contract will be adjudicated based on substantive law of Switzerla
nd while the procedural law is that of Kenya. In this situation of an e
mployee in Kenya with employer in Switzerland, it means that one may uti
lise the Arbitration Act in matters of appointing the Arbitrator but in
terms of the substantive law the Swiss law shall apply.

Following arbitration sample is plucked out of an Insurance Policy “all

differences arising out of this policy shall be referred to the decision
of an arbitrator to be appointed in writing by the parties in difference
or if they cannot agree upon a single arbitrator to the decision of two
arbitrators one to be appointed in writing by each of the parties within
one calendar month after having been required in writing so to do by eit
her of the parties or in the case the arbitrators do not agree of an ump
ire appointed in writing by the arbitrators before entering upon the ref
erence. The umpire shall sit with the arbitrators and preside at their
meetings and the making of an award shall be a condition precedent to an
y right of action against the company. If the company shall disclaim l
iability to the insured, for any claim hereunder and such claim shall no
t within 12 calendar months from the date of such disclaimer have been r
eferred to arbitration under the Provisions herein then the claim shall
for all purposes be deemed to have been abandoned and shall not thereaft
er be recoverable.”

34
The following clause is extracted from an oil operator’s licence compan
y between an oil company and a petrol station owner. “if any dispute o
r difference shall arise between the parties hereto touching on their re
spective rights, duties or liabilities under this agreement, the same sh
all be referred for determination to and shall be determined by an advoc
ate of the High Court of Kenya, to be agreed upon by the parties within
30 days of sending of a written notice to the other by the party seeking
the determination of the matter in dispute. In default of agreement suc
h advocate shall be nominated by the chairman for the time being of the
Law Society of Kenya. If either party is not satisfied with the decisio
n of such advocate, an objection must be filed within 10 days of the dat
e of the decision and copies thereof forwarded to both the Advocate and
the other party and within a further 30 days from the date of the object
ion the objecting party shall file proceedings in the High Court of Keny
a. Provided that if the objection is not made or proceedings are not fi
led as aforesaid within the stipulated period the decision of the Advoca
te shall be final and binding on both parties.

One of the problems with this clause is with the language because firstl
y is the advocate who is appointed under this clause to determine the cl
aim as an arbitrator? The other question is, if that advocate is to det
ermine the dispute as an arbitrator under the arbitration act, what type
of objections can either of the party take as against the advocate’s de
termination? That question is to be considered in the context of Sectio
n 35, 36, 37 and 39 of the Arbitration Act. Under the Arbitration Act th
ere are limited grounds under which you can challenge an arbitration agr
eement this is an illustration of how not to draft an arbitration clause
because it will raise many problems. The language is important i.e. the
first line of the clause, is it possible that there will be other types
of disputes that could arise under the agreement that are not resolvable
by arbitration. You want finality in the dispute resolution process and
you do not want the loser to go on challenging the decision.

An example of a clause that combines arbitration with other alternative

dispute resolution processes such as negotiation as a means of settling
failing which it provides for mediation and failing which it provides fo
r arbitration. “If any dispute or difference shall arise between the p
arties to this agreement from or in connection with this agreement or it
s performance construction, or interpretation the parties shall endeavou
r to resolve it by agreement through negotiations conducted in good fait
h. If they are unable to agree the issues shall in the first instance b
e dealt with by mediation with a mediator to be chosen jointly by them.
Both parties reserve all their rights in the event that no agreed resolu
tion shall be reached in mediation. If the dispute has not been resolve
d by mediation within dash days of initiation thereof or such extended p
eriod as the parties may agree the dispute shall be referred to Arbitrat
ion by a single arbitrator in accordance with the provisions of the Arbi
tration Act 1995 or any amendments thereto whose decision in relation to
such dispute or difference shall be final and binding on the parties.

35
The use of language or phrases is important from the perspective of cove
ring the types of disputes that you want referred. Expression or words
like ‘arising out of’ or words like ‘claims’ or ‘differences’ or
‘disputes’ or words used in connection with or in relation to or in re
spect of or ‘with regard to’ may pose problems of interpretation with
regard to the qbuestion of the scope of the matters that parties have ag
reed to refer. It is a danger that a person drafting an arbitration agr
eement should be alive to or should guard against. For instance under S
ection 35 of the Arbitration Act an arbitral award may be set aside if i
t deals with a dispute not contemplated by the parties or not falling wi
thin the terms of the reference. It is also important to note that an a
rbitrator or an arbitral tribunal has so much power as the parties confe
r. In other words the jurisdiction of an Arbitrator or of an arbitral t
ribunal is defined in the context of what the arbitration agreement or t
he arbitration clause mandates.

When a question arises as to whether an arbitrator or an arbitral tribun

al acted within his jurisdiction, that question will in turn hinge on th
e wording or particular forms of wording that are employed in the arbitr
ation agreement. In construing arbitration agreements courts have adopt
ed 3 broad principles

The courts will make the prima facie assumption that the parties intende
d all disputes relating to a particular transaction to be resolved by th
e same tribunal.
It will be assumed that unless the words of an arbitration clause are cl
early intended to limit the arbitrator’s powers then it will be taken t
hat the parties intended that the arbitrator should have all the powers
which will be exercisable by a court.
Words of a broad import used in an arbitration clause for example words
such as in connection with this agreement should be given their natural
meaning in the context in which they are found.

So if e.g in one case a court has interpreted “all disputes arising in

relation to” in a limiting way, that is not to say that that same inter
pretation should be given wherever those words appear in other cases.

Section 6. (1) A court before which proceedings are brought

ADR Lecture 3 26th February 04

Rules of the Chartered Institutes of Arbitrators

Clause 1

Rule 16 - deals with jurisdiction and powers of a tribunal. It stipulat

es that by submitting to Arbitration under these rules the parties submi
t themselves to these rules.

Is the Agreement that contains the Arbitration Agreement valid? The Arb
itral tribunal has powers to determine any question

Section 17. Competence of arbitral tribunal

36
17. (1) The arbitral tribunal may rule on its own jurisdiction, incl
uding ruling on any objections with respect to the existence or validity
of the arbitration agreement, and for that purpose-

An arbitration clause which forms part of a contract shall be treated as

an independent agreement of the other terms of the contract; and
A decision by the arbitral tribunal that the contract is null and void s
hall not itself invalidate the arbitration clause.

Where one of the parties says that the agreement is void for whatever re
ason and argues that the agreement is void, if the agreement is taken up
and the arbitration agreement is a clause within that agreement, is the
arbitration itself void?

The arbitrator has power to rule on this particular point, so what happe
ns if the arbitrator rules that the agreement is void.

There are 3 related principles

Doctrine of Kompetenz Kompetenz - tribunal has power to rule on its own

jurisdiction
Separability - when the arbitration agreement is part of the contract ag
reement you can sever _ Heyman v. Darwins Limited - this case seemed to
suggest that what Section 17 is trying to say is not achievable.

Section 7 of the 1996 Act,

“Unless otherwise agreed by the parties, an arbitration agreement which

forms or was intended to form part of another agreement (whether or not
in writing) shall not be regarded as invalid, non-existent or ineffectiv
e because that other agreement is invalid, or did not come into existenc
e or has become ineffective, and it shall for that purpose be treated as
a distinct agreement.”

The arbitration provision is to be treated as wholly distinct from the h

ost contract. Consequently it is unaffected by the fact, if such it be,
that the host contract is or was invalid, or non-existent or has, at the
time the issue arises, become ineffective. These flaws in the host agre
ement do not percolate down or otherwise infect the arbitration agreemen
t. The issue is simply whether it can be established that there was an
arbitration clause that was in fact part of a host “agreement” (howeve
r flawed) or whether it can be established that such a clause was intend
ed to become part of the host “agreement”.

If the tests are met, there is a prima facie an arbitration agreement be

tween the parties. One consequence of this is that, insofar as proceedin
gs in court were started in apparent breach of this agreement, they woul
d be expected to be subject to the mandatory stay provided for in Sectio
n 9 and discussed above.

Kompetenz Kompetenz

37
The related doctrine of Kompetenz Kompetenz, namely the ability of the t
ribunal to decide upon its own jurisdiction has the effect of statutoril
y conferring on the putative tribunal a limited jurisdiction - namely th
e jurisdiction to determine whether it, the tribunal, has a jurisdiction
under the arrangements that the parties have made. The resultant procee
dings are no less an arbitration than they would have been had they aris
en under an express agreement, whether or not the resultant decision is
in favour of a party determined jurisdiction or against it. The award i
n which the position is declared binds the parties; it may also make an
order for costs, which can be enforced in the usual way. Accordingly, t
he tribunal, the arbitration and the award will be subject to the provis
ions of the Act in the usual way.

As a general proposition, this entitlement of the applicant to a stay wo

uld be valid even if the jurisdiction of the arbitrator was challenged.
This is the result of the introduction into English statutory law of a f
orm of the doctrine of Kompetenz Kompetenz. Section 30 of the 1996 Act
provides for arbitrators to determine their own jurisdiction, while S. 3
1 makes consequential provisions. They are as follows:

“Competence of tribunal to rule on its own jurisdiction

(1) Unless otherwise agreed by the parties, the arbitral tribunal may r
ule on its own substantive jurisdiction, that is, as to-
(a) whether there is a valid arbitration agreement;
(b) whether the tribunal is properly constituted, and
(c) what matters have been submitted to arbitration in accordance with
the arbitration agreement.

(2) Any such ruling may be challenged by any available arbitral proces
s of appeal or review or in accordance with the provisions of this Part.
l

The doctrine is a legal fiction essential to the efficient working of th

e arbitration process. It was developed in England in a long line of ca
ses starting with the landmark decision of the House of Lords in Heyman
v. Darwins and it culminated in the decision of the Court of Appeal in H
arbour Assurance v. Kansa which for the first time established the princ
iple as now enshrined in Section17.

Heyman v. Darwins Ltd [1942] AC 356

This case decided that an accepted repudiation or frustration, while it

might bring the contract to an end in the sense of discharging the parti
es from further performance of their primary obligations, did not affect
the enforceability of an arbitration clause. The House of Lords arrived
at this decision by looking at the purpose of the rule that accepted rep
udiation or frustration discharges the parties from further obligations
and asking whether the arbitration clause should for this purpose be reg
arded as imposing an obligation. In one sense it obviously did. In the
context of the repudiation or frustration rules, however, there was no r
eason to treat the obligation to submit to arbitration as discharged, an
d such a conclusion would have severely reduced the value of the clause.

Harbour Assurance v. Kansa

The quotation from the Judgment of Hoffman L.J

38
 “Mr. Longmore’s argument is
question raised on the pleadings is
as void ab initio. The arbitration
on agreement. There the issue must
ion clause itself.
extremely simple. He says that the
whether the retrocession agreement w
clause formed part of the retrocessi
involve the validity of the arbitrat

Mr. Longmore calls this logic. I call it over-simplification. Th

e flaw in the logic, as it seems to me, lies in the ambiguity of the pro
position that the arbitration clause ‘formed part’ of the retrocession
agreement. In one sense of course it did. It was clause 12 of a longer
document which also dealt with the substantive rights and duties of the
parties. But parties can express words that two separate agreements are
intended. Or the question of whether the document amounts to one agreeme
nt or two may have to be answered by reference to the kind of provisions
it contains. In any case, it is always essential to have regard to the
reason why the question is being asked. There is no single concept of
‘forming part’ which will provide answer in every case. For some purp
oses a clause may form part of an agreement and for other purposes it ma
y constitute a separate agreement. One must in each case consider the t
erms and purpose of the rule which makes it necessary to ask the questio
n.

In explaining why he refused to categorise an arbitration clause as a co

ntractual obligation for the purposes of the repudiation or frustration
rules Lord Macmillan said at pp 373-374

“I venture to think that not enough attention has been directed t

o the true nature and function of an arbitration clause in a contract.
It is quite distinct from the other clauses. The other clauses set out
the obligations which the parties must undertake towards each other hinc
inde, but the arbitration clause does not impose on one of the parties a
n obligation in favour of the other. It embodies the agreement of both
parties that, if any dispute arises with regard to the obligations which
the one party has undertaken to the other, such dispute shall be settled
by a tribunal of their own constitution.”

Likewise Lord Wright said at pp 377

“an arbitration agreement … is collateral to the substantial sti

pulations of the contract. It is merely procedural and ancillary, it is
a mode of settling disputes, though the agreement to do so is itself sub
ject to the discretion of the court. All this may be said of every agre
ement to arbitrate, even though not a separate bargain, but one incorpor
ated in the general contract.’

The proposition that at least for some purposes the arbitration clause m
ay be treated as severable or separable or autonomous has become orthodo
x doctrine. In the case of Bremer Vulkan Schiffbau und Maschinenfabrik
v. South India Shipping Corporation Ltd [1981] AC 909, 980 Lord Diplock
said without further explanation:

“The arbitration clause constitutes a self-contained contract collatera

l or ancillary to the shipbuilding agreement itself.

39
Lord Scarman also said that “an arbitration clause in a contract was
“in strict analysis, a separate contract, ancillary to the main contrac
t.

The other power conferred on the Tribunal is the power to amend or to al

low amendments. The arbitrator may also use his own knowledge to resolv
e a conflict.

The rules of the arbitral institution will set out the provisions in det
ail and outline the powers of the arbitrator.

If one opts to adopt the rules of the chartered institute into an agreem
ent then the arbitration clause should provide the following:

“That any dispute arising out of or in connection with this contract sh

all be referred to and finally resolved by arbitration under the rules o
f the Chartered Institute of Arbitrators Kenya Branch which rules are de
emed to be incorporated by reference into this clause.

The advantage of that clause is that one avoids setting out in the arbit
ration clause or the essentials that need to be incorporated. Instead o
f a lengthy arbitration clause the mere reference to the Chartered Insti
tute addresses all the essentials that need to be included in the Agreem
ent.

Other arbitral institutions that have their rules.

The Chartered Institute of Arbitrators is a representative body for arbi

trators in the UK founded as early as 1915. It has branches throughout
the UK and also in countries such as Kenya, India, Cyprus, Malaysia etc.
the principal object of the Chartered Institute of Arbitrators is to pro
mote and facilitate the determination of disputes by arbitration. Recen
tly, it has expanded that object to include Mediation. It also performs
other functions namely it appoints suitably qualified persons to act as
arbitrator on request. It also maintains and provides upon requests nam
es and CV’s of suitably qualified persons to act as arbitrators or as m
ediators. It also sometimes provides facilities for Arbitration Referen
ces. The Kenya Branch is just a branch of that body.

Other arbitral institutions

London Court of International Arbitration - previously called the London

Court of Arbitration. It is one of the oldest Arbitral Institutions in
the World and was inaugurated in 1892. It aims to provide a comprehensi
ve service of arbitration, conciliation and mediation for settlement of
international commercial disputes of any nature and parties are at liber
ty to appoint or nominate the London Court of International Arbitration
as the appointing authority in the even of the parties not agreeing on a
n arbitrator and they also have arbitration rules which again parties ar
e at liberty to incorporate for purposes of their references.

40
International Court of Arbitration of the International Chamber of Comme
rce (ICC) International Court of Arbitration - this was established in 1
923 and deals with disputes relating to International Trade and it has r
ules of arbitration that one can adopt. It is important that one is cau
tious about the fees structure one is committing to before adopting this.
For instance if a reference is to be adjudicated on the basis of these
rules there will be the arbitrators fees which are pegged to the value o
f the subject matter and other fees.
The International Centre for Settlement of Investment Disputes (ICSID) T
his was established by the convention on the settlement of disputes betw
een the States and Nationals of other States and was signed in Washingto
n in 1965. It provides facilities for conciliation and Arbitration of i
nvestment disputes between contracting parties and Nationals of other St
ates.
The Permanent Court of Arbitration established by the Hague conventions.
American Arbitration Association (AAA) - this is the principal arbitral
institution in the USA.
Hong Kong International Arbitration International Centre
All these institutions basically discharge the following functions
They are involved in the promotion of arbitration in general. They do t
his by holding seminars, publish newsletters and basically spread the go
spel of arbitration.
They administer arbitrations: like they can appoint arbitrators at the
request of the parties, they ensure strict observance of the rules of ar
bitration, they make arbitration.
Publication of Arbitration Rules
Training of Arbitrators - Award writing calls for skills and these insti
tutions should give guidelines on award writing that is both independent
and objective, principles of natural justice.
They provide a forum for research and information and publication of per
iodicals and so on.
Order for Directions is something to the effect that you document the pr
oceedings of the day and put them in writing and state the following for
example
Claimant will submit to the arbitrator and to the other party a statemen
t of claim or points of claim or a summary of the claim by a certain dat
e.
The second direction will be the Respondent to submit its points of defe
nce to the arbitrator and to serve on the claimant by a certain date.
Each party to prepare and submit to the other a bundle of documents for
use at the hearing on or before 15th April.
Arbitrators fees are agreed at KShs. 10,000 an hour, each party to pay a
n initial deposit to the Arbitrator of Kenya Shillings 20,000/- before
…
At the onset you need a direction stating that the arbitrator will not r
elease the award unless and until all arbitrator’s fees are paid.
At the meeting you should address how costs will be handled i.e the cost
of arbitration including the arbitrators fees and expenses shall be born
e by the unsuccessful party. Costs shall follow the events.
To safeguard against one party writing to you while the other party does
not know, you direct that all communication with the arbitrator must be
disclosed and copied to the other party.
The hearing of the reference will take place on the 1 st June commencing
at 10.00 a.m until 5 pm at the Professional Centre or whatever venue is
agreed upon. You are then supposed to date the Order the Date you met o
r the date when all this was agreed and send it to both parties.
41
There is a statutory obligation when you are approached to be an arbitra
tor to make full disclosure of any circumstances that may give rise to j
ustifiable doubts as to your impartiality or independence.
Section 13 - when a person is approached in connection with his possible
appointment as an arbitrator, he shall disclose any circumstances likely
to give rise to justifiable doubts as to his impartiality or independenc
e.
(2) from the time of his appointment and throughout the proceedings the
arbitrator shall without delay disclose any such circumstances to the pa
rties unless the parties have already been informed of them by him.
Some advantages of choosing the rules of an arbitral institution:
one of the advantages of incorporating institutional rules is that the r
eference to an arbitral institution as the appointing authority will ens
ure that an arbitrator is appointed without the need to refer the matter
of appointment to court under Section 12 of the Arbitration Act for exam
ple.
The adoption of the rules of that institution will ensure that the proce
edings are conducted in a relatively predictable fashion.
The powers and jurisdiction of the Arbitrator are defined and this avoid
s a situation where the arbitrator has to seek the express agreement of
the parties on sticky points at a later stage.
If an institution provides for administration of the reference then the
parties are able to utilise those resources.
Separability and Jurisdiction:

42