Arbitration in Kenya: How Businesses Resolve Commercial Disputes Outside Court

Arbitration in Kenya is the usual route for resolving high-value commercial disputes privately and with a binding result. Because it rests on the parties’ agreement rather than on a court’s jurisdiction, the quality of the arbitration clause, the way proceedings are run and the limited grounds for challenging an award all matter. This guide explains how arbitration in Kenya works for businesses, from the arbitration agreement to enforcement of the award.

The legal framework for arbitration in Kenya

Domestic and international arbitration seated in Kenya is governed by the Arbitration Act, No. 4 of 1995, as amended by Act No. 11 of 2009. The Nairobi Centre for International Arbitration Act, No. 26 of 2013 establishes the Nairobi Centre for International Arbitration (NCIA), which promotes and administers arbitration and other dispute resolution mechanisms. Section 10 of the Arbitration Act sets the guiding principle that, except as the Act provides, no court shall intervene in matters it governs.

The arbitration agreement

Arbitration begins with agreement. The parties may include an arbitration clause in their contract or sign a submission agreement after a dispute arises. Under section 6 of the Arbitration Act, a court hearing proceedings on a matter that is the subject of an arbitration agreement must stay the proceedings if a party applies not later than the time it enters appearance or otherwise acknowledges the claim. A party that litigates first and objects late risks losing the right to insist on arbitration.

A sound clause names the seat of arbitration, the institution or rules (for example the NCIA rules or another institution’s rules, or ad hoc), the number of arbitrators, the language and the governing law. The seat matters because it determines which courts supervise the arbitration. Ambiguous or inconsistent clauses, often called pathological clauses, generate satellite litigation about jurisdiction before the real dispute is heard.

How arbitral proceedings run

An arbitration starts when a party serves a notice or request for arbitration in accordance with the agreed rules. Proceedings usually follow pleadings (statement of claim and defence), document disclosure, witness statements and a hearing at which witnesses are examined and submissions made. The tribunal controls the procedure within the limits the parties agree and the Act allows, which is why arbitrations can be faster and more flexible than court cases. Arbitration is typically private, but confidentiality is best secured by an express clause or institutional rules rather than assumed.

Interim measures

Under section 18 of the Arbitration Act, unless the parties agree otherwise, a tribunal may on a party’s application order interim measures of protection that it considers necessary in respect of the subject matter of the dispute. Section 7 confirms that it is not incompatible with an arbitration agreement to ask the High Court, before or during the arbitration, for an interim measure of protection. Court support is useful where a party needs coercive orders, such as against third parties, that a tribunal cannot make.

The award and its effect

An award must be in writing and signed. Under section 32A, unless the parties agree otherwise, an award is final and binding on them and no recourse is available against it except as the Act provides. Under section 36, a domestic award is recognised as binding and, on written application to the High Court, enforced subject to that section and section 37, which lists the limited grounds for refusing enforcement. The applicant must produce the original award or a certified copy and the original arbitration agreement or a certified copy of it.

Challenging an award

Section 35 provides that recourse to the High Court against an award may be made only by an application to set it aside, and only on the grounds the section lists. They include a party’s incapacity, invalidity of the arbitration agreement, lack of proper notice or inability to present one’s case, an award that goes beyond the scope of the reference, defects in the composition of the tribunal or procedure, and conflict with the public policy of Kenya. The grounds are narrow by design: the High Court does not re-hear the merits.

The question whether the High Court’s decision on a section 35 application can itself be appealed was settled by the Supreme Court in Nyutu Agrovet Limited v Airtel Networks Kenya Limited; Chartered Institute of Arbitrators-Kenya Branch (Interested Party), Petition 12 of 2016, [2019] KESC 11 (KLR), decided on 6 December 2019 (with a dissent by Maraga CJ). The Court held that an appeal to the Court of Appeal lies only where the High Court, in setting aside an award, has stepped outside the grounds in section 35 and made a decision so grave and manifestly wrong that it must be corrected. It is not a general right of appeal on the merits.

International awards

Section 36(2) provides that an international arbitration award is to be recognised as binding and enforced in accordance with the New York Convention or any other convention to which Kenya is signatory. For cross-border contracts involving Kenyan parties this treaty-based route to enforcement is a major reason to choose arbitration over court proceedings, though enforcement abroad always depends on the law of the enforcing country.

Arbitration compared with litigation and mediation

Arbitration offers privacy, a final result, expert decision-makers and treaty-based enforceability. It can cost more than litigation because the parties pay the arbitrators and any institution, and it is less suited to urgent relief that needs immediate court coercion. For smaller claims, court proceedings may be more economical. Where the parties want to preserve a relationship, a negotiated outcome is often cheaper still; see our guide to mediation in Kenya, including how a stepped clause can require mediation before arbitration starts.

Drafting tips for commercial contracts

Check that arbitration clauses in shareholders’ agreements, joint ventures and share purchase agreements are consistent with any mediation or escalation steps in the same transaction documents, so the parties do not argue about which process applies before the dispute starts. Name an appointing authority for the case where the parties cannot agree on an arbitrator, and state whether any escalation step is a condition precedent to arbitration.

Frequently asked questions

This article is general information on Kenyan law as at its publication date, not legal advice. Reading it does not create an advocate and client relationship.