Arbitrability of Disputes in Kenya

Arbitrability is the determination of disputes that can be solved through the arbitration process and those subject to the national courts. The Arbitration Act 1995 (amended in 2009) does not have a broad scope of arbitrability as with the case of the Kenya Constitution 2010.

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Introduction

Arbitrability is the determination of disputes that can be solved through the arbitration process and those subject to the national courts. The Arbitration Act 1995 (amended in 2009) does not have a broad scope of arbitrability as with the case of the Kenya Constitution 2010. A well-defined scope of arbitrability in Kenya would help resolve sensitive matters that are public interest by placing them primarily under the preview of national courts rather than through Arbitration. Increasing the scope of arbitrability to a wide range of issues may enhance justice in Kenya. However, though in tandem with international trade, it may raise juridical questions, for instance, where the subject matter touches on sensitive matters of national importance.1 The development of international trade implies that Kenya needs to properly define the scope of arbitrability to promote access to justice through Arbitration and ensure that sensitive matters of public interest are solved through national courts. The measure of an arbitrable matter is based on public policy. A question then arises as to what factors qualify a matter for Arbitration if public policy is not an issue.2 This paper examines arbitrability under the Kenyan law in the Constitution and Arbitration Act 1995 and its impact on the scope of arbitrability in Kenya.

Demystifying Arbitrability in Kenya

Arbitrability answers whether there are specific disputes that are barred from Arbitration based on the disputed matter. It involves determining what disputes can be solved through Arbitration and those that only the courts of law can resolve. Since Arbitration is a private and consensual process with public consequences, certain types of disputes are reserved for courts of law where proceedings are generally in the public domain.3 Even though parties are free to refer a disputable matter to Arbitration, the national laws will always define the kinds of arbitrable matters. As with the case of criminal offences and bankruptcy, the national courts can only be heard and determined. Contrary to the Kenyan context, where jurisdiction is not a scope of arbitrability, the United States scope is broad and extends to the questions of who should decide on the validity of the arbitral agreement.

In principle, the courts or Arbitration can hear and resolve any issue, but when the matter of public policy is fronted, the issue of whether a matter is arbitrable pops up. The Constitution of Kenya, under Art. 159, 43 accords constitutional credence to the importance of Arbitration for the first time in Kenya’s history.4 The Act, which reflects the Model law that was unable to reach a consensus at its drafting on arbitrability issues, is silent on arbitrability. The 1995 Act also does not clearly define the issue of arbitrability. The Civil Procedure Act, order 465 Provides that whether any party raises the issue on whether or not a dispute has arisen or whether the dispute ought to proceed to Arbitration, the issue then becomes an issue of interpretation of the contract. In this respect, the court has inherent jurisdiction to determine the matter.6 Suppose the parties agree to solve a dispute through Arbitration before a litigation hearing. In that case, the courts are not null and void but have the jurisdiction to determine the matter according to article 165 of the Constitution.

Non-arbitrable Disputes.

Some matters are generally considered not to be arbitrable: crime patents trademarks Anti- Trust, human rights, securities and bribery and corruption, among others.8 Matters involving third parties are also excluded from Arbitration.

  1. Crime: Penally, it is committed against a citizen, but prosecution is by the state. Only judges and magistrates have the authority to punish criminals, especially in the issues of criminal responsibility.
  2. Patents, Trademarks and Copyrights: These are given to an individual to protect their innovation within the state’s jurisdiction. The granting or not granting of copyright or whether a patent should be trademarked is a matter of public authority and the state. Only the state has the right to grant such matters. However, an exception may be when the owner of a patent has a dispute with a corporation or individual that they have licensed to exploit the trademark or patent. Any such dispute between the licensor and the licensee may be referred to Arbitration.
  3. Anti-Trust and Competition Law: Anti-Trust issues usually aimed at capitalistic business people who swindle the public at large for their interests. Although Arbitration can e used to solve issues of competition and anti-trust that arise from breaches in securities legislation, the states have the right to punish offenders. The tribunal can determine whether or not there was a breach, but the courts reserve the right of punishment.
  4. Bribery and Corruption: These are usually matters of public concern. It usually involves issues to do with tendering, procurement etc., that the public is concerned with. Arbitration is not the best place for dispute, and therefore, the courts have the jurisdiction to determine such cases. The courts are custodians trusted by the public to look after their best interests in economic crimes.
  5. Fraud: Closely related to aforementioned In issues of procurement and contract performance. Fraud raises a myriad of issues related to public welfare, morality and public policy, which the court best handles.

Though the Constitution under Article 159 2(c) recognizes Arbitration as a means of solving disputes, it fails to limit its application.11 It is only in Article 159, Sec 3 that the Constitution expressly limits the traditional dispute resolution mechanism. The Arbitration Act Section 3(1) does not give a conclusive meaning of Arbitration. Regarding arbitrability, the Act does expressly lay out its requirements, but there are matters universally agreed to be beyond the scope of Arbitration.

The Act (Cap 49) does not clearly define what is arbitrable. However, in an attempt to address Arbitrability, Section 37(1)(b) of the Arbitration Act provides for the refusal of recognition or enforcement of the arbitral award if the High Court finds that: (i) the subject matter of the dispute is not capable of settlement by arbitration under the law of Kenya; or (ii) the recognition or enforcement of the arbitral award would be contrary to the public policy of Kenya.12 In light of the Act (Cap 49), though giving guidance on the determination of arbitrability of disputes fails to address arbitrability directly. It can be argued that in the determination of arbitrability of labour issues using Arbitration Act, one should consider:

  • Is the matter in question under the Kenyan law capable of settlement by Arbitration?
  • Is Arbitration of the issue contravening the public policy of Kenya?

A case to Widen the Scope of Arbitration in Kenya

One can argue that it would be easier to enforce awards under the New York Convention if the national law has a wide range of matters that can be resolved through Arbitration. If this is effected, it will positively impact international trade and investment. This is because the Model Law and the New York Convention do not require Arbitration on disputes that are not capable of Arbitration. In addition, the Convention dismisses an award if the subject matter of the difference is not capable of settlement by arbitration under the law of the country where recognition is sought.13 This implies that if national laws would subordinate domestic notions of arbitrability and widen the scope of what is arbitrate, then international commerce and Arbitration would blossom.

Widening the scope would promote access to justice. The impediments of legislation such as delays, a backlog of cases, high cost and complex rules of procedure would be avoided.

Conclusion

It is increasingly vital to expressly define issues that are arbitrable and ones that are not. A balance must be reached in reserving matters of sensitive nature and national interest and promoting international trade and commerce. The provisions of Arbitration in the Arbitration Act need to be harmonized with the Constitution. However, care must be taken in need to promote international trade and commerce, not to annihilate sensitive matters of national importance to courts law. There is also a need to define what matters are arbitrable in Kenya in view that what is arbitrable at the international level has greatly expanded, with so many disputes that were considered non-arbitrable being brought under the purview of Arbitration.15 The Arbitration Act and the Constitution need to be aligned as such, the requirement for arbitrability need to be spelt out clearly in the spirit of international practice of Arbitration. Finally, parties in dispute in Kenya need to consult to ensure that the disputable matter intended for Arbitration is arbitrable.

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