Of the various alternatives to dispute settlement that are available to parties in Kenya (eg, negotiation, mediation, conciliation and litigation), there appears to be an increasing trend towards resorting to arbitration as the best way to resolve disputes. In Kenya, arbitral matters are addressed by the Arbitration Act 1995, as amended by the Arbitration (Amendment) Act 2009. This update considers the reasons behind the recent popularity of arbitration, taking into consideration its advantages and drawbacks.
Parties to disputes are permitted to select a neutral location for the arbitration forum and to agree on the composition of the arbitral tribunal. Decisions which are handed down in arbitration can be enforced against the losing party at either national or international level. Treaties such as the New York Convention 1958 include provisions which allow such a broad scope of enforcement.
Arbitration is a confidential process. Unlike in court proceedings, members of the media and the public are not permitted to attend arbitration hearings. Entities, including governments, often attach considerable significance to issues of confidentiality, as was acknowledged by Stephan Bond in his report on the famous case Esso/BHP v Plowman.(1) However, the concept of confidentiality in the context of arbitration has evolved a great deal since Esso/BHP v Plowman. Under the present regime, confidentiality may not necessarily be as stringently protected as was previously the case; such considerations are dependent on the circumstances of the dispute at hand with regard to public policy and the sensitivity of the dispute itself.
With regard to the flexibility of arbitration, parties to disputes alongside the arbitrators are permitted to arrange arbitral proceedings to fit the circumstances of the dispute in question. From this fact alone, it is evident that arbitration differs from litigation, owing to the fact that legal systems are set mechanisms and do not offer the same degree of flexibility as arbitration. Section 20 of the Arbitration Act of 1995 (as amended) specifically permits the arrangement of procedures that best suit the circumstances of the case at hand.
In addition, more often than not, arbitration is the least wasteful dispute resolution method with regard to time and resources.
Nevertheless, however favourable arbitration appears to be in comparison to other forms of dispute settlement, it is not without its drawbacks. One such drawback is the costs incurred by the parties. Unfortunately, initially at least, litigation often works out cheaper than arbitration. However, once an arbitral award has been issued, it is unlikely that any further costs will arise. In contrast, once a decision has been settled in a court of law, it is highly likely that one of the parties to the case will appeal, thereby increasing costs considerably.
Other potential drawbacks of arbitration include:
- limitations of the arbitral tribunal;
- conflicting awards;
- lack of practicality; and
- a lack of attention to detail in the parties' arbitration documents.
Arbitral practice in Kenya continues to develop rapidly as an increasingly viable way of resolving disputes between parties. The Arbitration Act 1995 (as amended by the Arbitration (Amendment) Act November 2009) further reinforces the rationale behind opting for arbitration over other resolution methods. Arbitration is reliable and swift, and is therefore appealing to parties in dispute.
For further information on this topic please contact Priscilla Goes at Njoroge Regeru & Company by telephone (+254 20 271 8482), fax (+254 20 271 8485) or email ([email protected]).
(1) Esso Australia Resources Ltd v The Honourable Sidney James Plowman (Minister for Energy and Minerals), April 7 1995. 11 Arb Int (1995), p235 and following.