Arbitration Clauses in Cross-Border Supply Contracts with Kenyan Counterparties: Drafting for Enforceability

When a foreign company signs a supply, distribution or services contract with a Kenyan counterparty, the arbitration clause is often drafted in a hurry after the commercial terms are settled. That is a mistake. The clause is a separate agreement within the contract, and if it is loose, a company can win an arbitration years later and still struggle to enforce the award. This article covers the drafting choices that decide whether the clause produces an enforceable result.

Seat versus venue

The most consequential drafting decision is the legal seat of the arbitration, which is routinely confused with the physical venue. The seat fixes which country’s courts supervise the arbitration, for example on a jurisdictional challenge or an application to set aside the award, and it fixes the nationality of the award for enforcement purposes. The venue is simply where the tribunal meets, and it can change from hearing to hearing without changing the seat.

Kenya’s Arbitration Act, 1995 draws the same line. Section 21(1) says the parties are free to agree on the juridicial seat of arbitration and the location of any hearing or meeting. Under section 21(2), if they do not agree, the tribunal determines the place of arbitration having regard to the circumstances and the convenience of the parties, which is not a position a foreign party wants to be in once a dispute has arisen. Name a specific city and country as the seat, not a region or an institution’s headquarters.

Choosing the institution and rules

The contract should name an arbitral institution and its rules, or specify ad hoc arbitration under a defined rule set such as the UNCITRAL Arbitration Rules.

The Nairobi Centre for International Arbitration (NCIA) is a genuine option where the contract has a real Kenyan connection. Section 4 of the Nairobi Centre for International Arbitration Act, No. 26 of 2013 establishes it as a body corporate. Its functions under section 5 include promoting international commercial arbitration and administering domestic and international arbitrations as well as other alternative dispute resolution techniques.

The major international institutions apply their own defaults. Under the 2021 ICC Rules, if the parties have not agreed the number of arbitrators, the ICC Court appoints a sole arbitrator unless the dispute warrants three (Article 12(2)). The ICC Court fixes the place of arbitration unless the parties agree it (Article 18(1)), and the tribunal determines the language absent agreement (Article 20). None of those defaults may suit a Kenya-facing contract. The clause must still fix the seat, the number of arbitrators and the language.

The governing law trap

A recurring error is assuming one governing law clause covers everything. The law governing the substance of the contract and the law governing the arbitration agreement are distinct questions, and they can point to different countries.

This follows from separability. Section 17(1) of the Arbitration Act, which confirms the tribunal’s power to rule on its own jurisdiction, provides that an arbitration clause forming part of a contract is treated as an agreement independent of the other terms of the contract. A decision by the tribunal that the contract is null and void does not itself invalidate the arbitration clause. Because the arbitration agreement stands apart, it can be governed by a different law from the contract around it.

Section 29 of the Act addresses the law applicable to the substance of the dispute. The tribunal decides in accordance with the rules of law the parties choose (section 29(1)). Unless they agree otherwise, a choice of the law of a state refers to its substantive law and not to its conflict of laws rules (section 29(2)). Failing a choice, the tribunal applies the rules of law it considers appropriate in all the circumstances (section 29(3)). Because section 29 deals with the substance of the dispute, state the law of the arbitration agreement separately, ordinarily the law of the seat.

Arbitrators, language and scope

Three further points deserve deliberate drafting rather than recycled boilerplate.

• Number and appointment. Section 11 of the Act lets the parties decide the number of arbitrators and, failing that, fixes it at one. Section 12(2) lets the parties agree an appointment procedure and, failing agreement, has each party appoint one arbitrator in a three-member tribunal, with those two choosing the third. A clause should add a fallback appointing authority in case a party refuses to nominate.
• Language. Fix the language in the clause. Leaving it to the tribunal, as the ICC Rules do absent agreement, invites delay if the parties work in different languages.
• Scope. Use broad wording such as “any dispute arising out of or in connection with this Agreement, including any question regarding its existence, validity or termination”. A narrow list of claim types lets related disputes escape to the courts.

Court support and stays

Under section 6 of the Act, a court hearing a matter that is the subject of an arbitration agreement must, if a party applies no later than when it enters appearance or otherwise acknowledges the claim, stay the proceedings and refer the parties to arbitration. The court need not stay the case if the agreement is null and void, inoperative or incapable of being performed, or if there is no dispute. Section 7 confirms that asking the High Court for an interim measure of protection, before or during the arbitration, is not incompatible with the arbitration agreement.

Enforcement and the New York Convention

Section 36(2) of the Act provides that an international arbitration award is recognised as binding and enforced in accordance with the New York Convention or any other convention to which Kenya is signatory. Section 36(3) requires the party relying on an award to furnish the award and the arbitration agreement, original or certified copies.

Kenya acceded to the New York Convention on 10 February 1989, and it entered into force for Kenya on 11 May 1989. UNCITRAL’s status page records that Kenya applies the Convention only to the recognition and enforcement of awards made in the territory of another contracting state. The seat should therefore be in a Convention state, Kenya included if NCIA arbitration is chosen, so that the award qualifies for Convention enforcement wherever the counterparty holds assets. For the enforcement process itself, see our guide to enforcing foreign arbitral awards in Kenya.