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ARBITRATION.

1. INTRODUCTION.

It is usual for a business agreement, such as fire or domestic package policy, to contain a clause,
which provides for reference of any dispute between the parties to arbitration. For example, a fire
or domestic package policy may have an arbitration clause which provides that if any differences
arise as to amount of any loss or damage, such difference shall, independently or all other
questions, 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 then it shall be referred to the decision
of two disinterested persons as arbitrators and, in case of disagreement between the arbitrators,
the difference shall be referred to the decision of an umpire.

Other business agreements that usually contain arbitration clauses are building contracts between
architects building contractors and their mutual client. Many private companies also have
arbitration clauses in their articles of association.

Arbitration agreements in Kenya are governed by Arbitration Act Cap. 49 of (1995)

Section 2 of the Act defines arbitration agreement as ‘a written agreement to refer present or
future differences to an arbitrator, whether an arbitrator is named or not’.

An arbitrator/arbiter is a person appointed by the parties as a judge for the purpose of settling any
disputes that may arise between them.

Arbitration may therefore be regarded, generally speaking, as a method of settling disputes


between two or more parties by a hearing and determination in quasi-judicial manner instead of
having recourse to an action at the court of law. The Act permits submission of disputes to
arbitration only by written agreement.

2. EFFECT OF ARBITRATION AGREEMENT.

No party can bring an action in a court of law relation to those matters referred to for arbitration. If
any of the party disregards the arbitration agreement and commences legal proceedings, the other
party can apply for stay of proceedings.

Under Section 6, the court will stay the proceedings if the following conditions are fulfilled:

1. The proceedings relate to the same matter as covered by the arbitration agreement.

2. There is no sufficient reason why the matter should not proceed in accordance with the
arbitration agreement.

3. The party asking for a stay hasn’t delivered his pleadings or taken any steps in the court
proceedings.

4. The applicant for stay was and is still ready and willing to proceed with the arbitration and
everything necessary for the purpose.

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3. REFERENCE TO ARBITRATION.

A dispute may be referred to arbitration in any of the following three ways:


i) By order of the court: A court may refer a specific issue or the whole case before it
which requires specialized technical, scientific or other treatment however the parties
must consent to the reference.

ii) By certain statute: Certain Acts of Parliament provide that parties should refer
disputes arising under those statutes to arbitration.

iii) By consent of the parties: Parties may by their consent submit to arbitration any
matter to which they are disputing.

4. POWERS OF THE ARBITER

a. To determine whether he has jurisdiction to entertain the dispute.

b. To provide interim relief or remedy.

c. To require a party to provide security.

d. To administer oath.

e. To examine persons on oath.

POWER OF THE COURT TO APPOINT AN ARBITRATOR OR UMPIRE.

Section 12 gives the High Court powers to appoint an arbitrator or umpire in the following cases:-

i) Where an arbitration agreement provides for appointment of a single arbitrator and the
parties have failed to appoint one.

ii) If the appointed arbitrator refuses to act or is incapable of acting or dies and the
vacancy is not filled.

iii) Where a reference is to two arbitrators and one is not appointed.

iv) Where the parties or the two arbitrators are to appoint an umpire or third arbitrator and
they fail to appoint one.

v) Where the appointed umpire or third arbitrator refuses to act or is incapable of acting or
dies and the parties or arbitrators do not appoint one.

6. AWARDS.

The decision of an arbitrator is called “an award”. It must be written and signed by all arbitrators
if more than one and copies must be sent to the parties to the dispute.

An award is enforceable as a court order. However it may be set aside by the High Court or
reviewed under Section 34 of the Act if;

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a. The applicant was not afforded an opportunity to appoint an arbiter.

b. The arbitration agreement was not valid in law.

c. The applicant had no capacity to enter into the arbitration agreement.

d. The award relates to a dispute not contemplated by the parties.

e. The dispute is not capable of resolution by arbitration.

Once an arbitral award is set aside, the parties are free to file the case in a court of law. Unless
otherwise provided, every award made by arbitrator or umpire shall be final and binding on the
parties.

The High Court may remit any matter back to the arbitrator / umpire for reconsideration on the
following grounds.

i. Any defect in award, sufficient to justify the court to set it aside.

ii. Any serious omission through inadvertence.

iii. Formal defect or mistake by the arbitrator.

iv. Where new and material facts have been discovered.

Where an award is referred back for reconsideration the arbitrators shall be required to make their
award within 3 months after the date of order.

7. IMPLIED TERMS OF ARBITRATION AGREEMENT

Every arbitration agreement is presumed to include the following provisions, unless expressly
provided otherwise by the parties:-

1) Unless contrary intentions are expressed by it, the reference is to a single arbitrator.

2) If the reference is to an even number of arbitrators, they must appoint an umpire


immediately after they themselves are appointed.

3) The arbitrator’s award is final and binding and an interim award may be made pending
final decision.

4) The arbitrator / umpire have the same powers as the High court to order specific
performance of a contract other than a contract relating to immovable property.

5) Parties to the arbitration must submit to examination on oath if the umpire or


arbitrators require so.

6) The cost of reference and award shall be at the discretion of the arbitrator/umpire.

7) The arbitrator or umpire has the power to correct an error arising from an accidental

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slip or omission, or a clerical mistake in an award.

8. ADVANTAGES OF ARBITRATION.

a. Confidentiality: The proceeding can be conducted in private therefore controlling


unnecessary publicity.

b. Expert’s assistance: The parties have the benefit to make use of experts in the field of
dispute, as the arbitrators.

c. Convenience: The parties can fix a convenient place and time for hearing proceedings.

d. Informality: Arbitrations are informal and faster way of settling disputes through a
more simple process than court process.

e. Cheap: It is less costly.

f. Finality: The award of the arbitrator once approved is final and no appeal lies for it.

g. User friendly: The gruesome process of litigation usually makes enemies between the
parties whereas arbitration in its very nature enables them to determine their rights in a
friendly manner.

h. Flexibility: Arbitral tribunals are not bound by previous decisions.

i. Eases congestion: It relieves overburdened courts.

9. DISADVANTAGES.

a. Miscarriage of Justice: It is believed that where arbitration is related purely to a


question of law, the arbitrators do not have sound legal knowledge.

b. Lack of uniformity: Besides, arbitrators do not create uniform and well settled
rule of law and so their decisions are not uniform in similar situations. Natural
justice does not only require that administration of justice should be consistent but
also predictable.

c. Bias: There are not stringent mechanisms to control possible bias.

d. Un-procedural: Lack of proper procedure may weaken confidence in the parties to


the award.

e. Enforcement machineries: There are no proper enforcement machineries.

10. TERMINATION OF ARBITRAL PROCEEDINGS.

Proceedings may be terminated by;

1. The final award of the arbitrator.

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2. Mutual consent of the parties.

3. Withdrawal of the complaint or the matter by the plaintiff.

4. Arbitrators order to that effect.

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