Introduction

The 2010 amendments to the Arbitration Act introduced Section 19A, according to which "the parties to arbitration shall do all things necessary for the proper and expeditious conduct of the arbitral proceedings". Arguably, this includes keeping arbitration costs down by doing everything necessary at the appropriate time and in accordance with the tribunal's directions.

It may no longer be common knowledge that the 2010 amendments were championed by the Chartered Institute of Arbitrators Kenya Branch, which, having reviewed the 1995 version of the act (a wholesale adoption of the United Nations Commission on International Trade Law (UNCITRAL) Model Law), felt that there was a need to include a few safeguards and precautionary measures to ensure that tribunals had a well-anchored position within the arbitration space.

Accordingly, Section 19A was introduced to add statutory clout to party obligations (eg, to act without prompting). Further, the section reflects Section 40 of the English Arbitration Act 1996 and is thus not an original UNCITRAL Model Law provision.

Escalating costs

One of the hallmarks of arbitration that has increased its popularity in the commercial sphere is expedition – a factor which, among other things, ought to reduce costs because time is used more effectively than if the same dispute had been resolved through litigation. Further, the outcome is generally positive because party relationships are not weakened (in fact, many continue to thrive) as the acrimony that is common in litigation has been neutralised.

However, arbitration costs are likely to increase unnecessarily where:

  • egos are involved (ie, a party has something to prove);
  • a party would rather settle through litigation rather than arbitration due to a weak defence;
  • the claimant, whose duty it is to drive the proceedings in terms of funding, is poorly prepared;
  • the claimant has a poor case and keeps changing legal representatives or disappears, thereby prolonging matters indefinitely; or
  • a newly appointed legal representative is uncooperative and fights the tribunal at every stage of the proceedings.

Despite the robustness and experience of tribunals, there is little that can be done in the abovementioned scenarios other than increase party costs.

As arbitration costs are tribunals' principal (sometimes the only) means of bringing parties into line, hitting them where it hurts can take some creativity. For example, where a party ignores a tribunal's procedural orders and refuses to pay security deposits up front, it could face a weekly levy and be denied rights of audience until the debts are paid.

Arguably, rising arbitration costs are due to party conduct, rather than as a result of sluggish tribunals. This raises the question of whether parties should disclose at the outset whether they can pay the security deposit and provide bank statements as evidence, which would also contribute to their Section 19A requirements.

Comment

Despite Section 19A's mandate that parties fully cooperate in order to expedite the arbitral process, party misconduct remains an issue. To remedy this, Section 26 of the Arbitration Act sets out penalties for recalcitrant or truant parties.

However, party misconduct may also be a result of economic challenges. Therefore, Article 159(2)(d) of the Constitution encourages the courts (and thereby the tribunals) to administer justice without undue regard for procedural technicalities – a robust arbitrator must have flexibility in such circumstances and not rely on the strict letter of the law.

Arbitrators must therefore determine the best course of action by considering many factors, including whether:

  • the case has merit;
  • prolonged proceedings would damage their reputation; and
  • the respondent's actions (eg, security for costs) would result in the claimant's impecunity.

Arbitrators must also go the extra mile to protect themselves by ensuring that all of the minutes and orders for direction, as well as any arbitral awards, reflect the fact that parties can and will be held responsible for any delays in the proceedings.

For further information on this topic please contact Njeri Kariuki at The Offices of Njeri Kariuki by telephone (+254 20 221 7936) or email (njeri_kariuki@nka-law.co.ke). The Offices of Njeri Kariuki website can be accessed at www.nka-law.co.ke.

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