Arbitration may be carried out under applicable law (ie, so-called 'ad hoc arbitration') or under institutional rules. Parties to a dispute which choose to arbitrate under institutional rules must follow the rules of the particular institution from the time that arbitration is commenced until the final award or order. Of these alternatives, parties to commercial disputes in Kenya usually opt for institutional arbitration. There are many reasons for this. One is that institutional arbitration is a far less arduous process than ad hoc arbitration, since it does not require the parties to undertake certain processes concerning the arbitration procedure. Ad hoc arbitration consists of an inflexible set of rules, whereas the rules and regulations of institutional arbitration may be altered to suit the nature of the dispute at hand. Therefore, for example, parties which are engaged in ad hoc arbitration must schedule arbitration proceedings according to the provisions of the law, while those engaged in institutional arbitration can have their proceedings scheduled to best suit their needs.
According to Section 22 of the Arbitration Act, (Chapter 49 of the Laws of Kenya), arbitration proceedings are considered to have commenced once one party has served a notice upon the other requiring it to appoint an arbitrator or to agree to the appointment of an arbitrator. At this point, the parties must be mindful of matters such as the subject matter of the notice served or existing time limitations – these features are present in both ad hoc and institutional arbitration.
Under institutional rules such as those of the International Chamber of Commerce (ICC), the commencement of arbitration proceedings is acknowledged when the secretariat receives the request of a party to arbitrate.(1) Accordingly, the Chartered Institute of Arbitrators Arbitration Rules also recognise the commencement of arbitration once a party has issued a written request to the secretariat requesting the appointment of an arbitrator. However, the ICC and the Chartered Institute of Arbitrators are not the only arbitral institutions available to parties wishing to utilise an institutional system of arbitration. Other arbitration institutions include the London Court of International Arbitration and the American Arbitration Association.
Upon commencement of arbitration proceedings, an arbitral tribunal may also be appointed simultaneously. Arbitral tribunals are usually made up of between one and three arbitrators, although in rare cases more than three arbitrators take part in a tribunal.(2)
Furthermore, the method in which an arbitral tribunal is appointed also varies depending on the whether the proceedings are institutional or ad hoc.(3) Three options are available: appointment by agreement, appointment by the courts or appointment by an official (of a body such as the Chartered Institute of Arbitrators or the Law Society of Kenya). The latter method is the most common.
Where the parties to a dispute fail to include crucial details concerning the way in which they would prefer the arbitration to proceed, under ad hoc or institutional rules, the court will assume responsibility. Thus, for example, where the parties fail to select an arbitrator, the courts step in and make the selection.(4) The Kenyan courts are often called upon to act on behalf of parties to arbitration in one way or another.
Once the appointment of the arbitral tribunal has been completed, the tribunal requests a preliminary meeting, during which schedules and other matters pertinent to the arbitration and its proceedings are discussed and finalised.
At this point, the parties may agree that they have understood the initial stages of the arbitration proceedings. The tribunal then establishes that it has jurisdiction to resolve the dispute and outlines the law applicable to the agreement.
Once these tasks have been completed, the arbitral tribunal may then proceed to apply the applicable rules to the dispute and to decide in favour of one of the parties.
Before entering into arbitration in order to resolve a dispute, all parties should pay close attention to the type of arbitration they are entering into and the manner in which the proceedings are to take place. The devil lies in the detail; the more astute a party, the greater its chances of achieving a successful outcome from the proceedings.
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) ICC Rules of 1998, Article 4(2).
(2) Sir Michael J Mustill Etal, Commercial Arbitration, Second edition, Butterworths, 1999, p174.
(3) Ibid, p 171 to 173.
(4) See ICC Rules of 1998: Article 9(6), Arbitration Act of 1996 Sections 15 to 18.