In the maiden edition of this newsletter published in August 2015, we featured an article considering whether it was time to rethink arbitration in Kenya – informed by a Ruling handed down by the Court of Appeal in Nyutu Agrovet Limited v Airtel Networks Limited (2015) eKLR (Nyutu I). In the Ruling, the Court of Appeal affirmed the prin- ciple of finality in arbitration and snuffed out further avenue of appeal in case a party was dissatisfied with a decision of the High Court in either setting aside or enforcing an arbitral Award.
The article posited that the decision in Nyutu I could have the effect of dissuading parties from including arbitral clauses in their contracts to avoid situations where parties would have no viable process of error correction since arbitral Awards would be impervious to challenge beyond the High Court. Subsequent to the decision in Nyutu I, there have been further developments in this area of the law, in particular, whether there is a right of Appeal to the Court of Appeal from the decision of the High Court pursuant to section 35 of the Arbitration Act, 1995 (the Act).
It is apposite to compare various provisions of the Act which permit the intervention of the High Court in arbitral proceedings, so as to contextualise the developments alluded to above. The Act, being based on the UNCITRAL Model Law in Arbitration, was designed to limit, or reduce Court interference in the arbitral process and enable Courts to play a more supportive role as espoused under section 10 of the Act. Sections 12, 14, 15 and 16A of the Act also prescribe limited instances of Court intervention in relation to the appointment, challenge, impossibility to act and withdrawal of an arbitrator through an application to the High Court.
However, all the said sections expressly provide that a decision of the High Court in respect thereof shall be final and not subject of an Appeal. It flows from the foregoing provisions that a party dissatisfied with the decision of the High Court arising from an application made under the aforesaid sections would have no further recourse to the Court of Appeal. Section 17 (7) of the Act similarly prohibits an Appeal from the decision of the High Court arising from a challenge on the jurisdiction of an arbitrator.
On the other hand, section 39 (3) of the Act expressly provides for the right of an Appeal to the Court of Appeal from a decision of the High Court arising from either an application or an Appeal on a question of law upon agreement of parties to a domestic arbitration and under the specified circumstances. The said circumstances include an agreement of the parties that an appeal shall lie prior to delivery of the award or where the Court of Appeal is satisfied that a point of law of general importance is involved.
Section 35, being consistent with the principle of finality in arbitration, provides that recourse to the High Court against an arbitral award may be made by an application for setting aside the award only. It then goes on to specify the limited grounds for such challenge to include, incapacitation of a party at the time of entering into an arbitration agreement; invalidity of an arbitration agreement; where an award goes beyond the scope of the arbitral reference; improper composition of the tribunal; where an award is tainted by fraud, bribery or undue influence; or where an award is in conflict with public policy.
Contrastingly, section 35 of the Act is silent on whether a decision of the High Court on an application made thereunder is final or appealable. In the case of DHL Excel Supply Chain Kenya Limited v Tilton Investments Limited (2017) eKLR, the Court of Appeal, in considering whether an appeal to the Court of Appeal lies only under section 39 and not under section 35 of the Act, departed from its earlier position in Nyutu I by holding that the fact that section 35 of the Act is silent on whether such a decision made thereunder is appealable does not by itself bar the right of appeal.
In arriving at that decision, the Court of Appeal was informed by Article 164 (3) of the Constitution which empowers the Court of Appeal to hear appeals from the High Court. It therefore upheld the view that the Constitutional right of appeal can only be denied, limited or restricted by express statutory provisions. This position had been pronounced by the Court in the case of Judicial Service Commission & 3 Others v Justice Kalpana H. Rawal (2016) eKLR, where the Court noted that just as the jurisdiction of the Court of Appeal now flows from the Constitution itself, the right of Appeal equally flows from the Constitution. As per Justice Kiage, who expressed reservation as to whether Nyutu I had been correctly decided:
“I state and hold, unhesitatingly, that both the jurisdiction and the right of appeal from the High Court to this Court are now founded, in the first in- stance, on the Constitution of Kenya 2010. The jurisdiction invested on this Court is not qualified by words such as “where a right of appeal arises”. It provides both the right of approach from the High Court and the power to hear those who have so approached. That constitutional right to appeal can only be denied, limited or restricted by express statutory provision properly justified as required by the Constitution itself. The wording of Article 164(3) of the Constitution admits to no other interpretation. It would be inimi- cal to the general tenor of the Constitution and the centrality of the Bill of Rights were this or any other Court to pronounce itself that in matters to do with the interpretation or application of the Constitution and the en- forcement of fundamental rights and freedoms, this Court has no role to play. There is neither rhyme nor reason; neither doctrine nor policy that can justify such a conclusion.”
There being no consensus by the Court of Appeal on how section 35 of the Act should be interpreted, the Supreme Court, the apex Court of the land, was called upon to bring an end to the debate thus ensure certainty of law on the issue in Nyutu Agrovet Limited v Airtel Networks Kenya Limited & Another (2019) eKLR (Nyutu II). The Supreme Court appreciated that section 35 of the Act does not expressly indicate whether the decision of the High Court made thereunder is final. After considering the interpretations made by Courts in other jurisdictions in relation to their respective arbitration statutes similarly drawn from the Model Law, the Supreme Court found that the Arbitration Act and the UNCITRAL Model Law do not expressly bar further appeals to the Court of Appeal.
The Supreme Court then proceeded to hold that whereas there was a need to shield arbitral proceedings from unnecessary Court intervention, there may also be legitimate reasons seeking to appeal High Court decisions. For instance, a manifestly unfair determination by the High Court should not be immune from appellate review. As a result, the Court of Appeal ought to have residual jurisdiction to enquire into such unfairness. The Supreme Court thus opined and held that there is a right of Appeal from the High Court to the Court of Appeal under section 35 of the Act. However, the Supreme Court was quick to circumscribe the circumstances under which the right of appeal could be exercised, i.e. where it is shown that in setting aside an arbitral award, the High Court went outside the grounds set out in section 35 of the Act. For example, where an award is set aside on Constitutional grounds. The Supreme Court also pointed out that this circumscribed and narrow jurisdiction should also be so sparingly exercised that only in the clearest of cases should the Court of Appeal assume jurisdiction.
In Synergy Industrial Credit Limited v Cape Holdings Limited (2019) eKLR (Synergy), the Supreme Court reiterated that purpose of section 35 of the Act is to ensure that Courts are able to correct specific errors of law which, if left unchallenged, would lead to a miscarriage of justice. Therefore, in the interest of safeguarding the integrity of the administration of justice and particularly in the absence of an express bar, the Court of Appeal should have residual jurisdiction but only in exceptional and limited circumstances.
The two decisions of the Supreme Court have effectively afforded par- ties to arbitration some recourse especially where the High Court, has in determining an application under section 35 of the Act, clearly misdirected itself resulting in a miscarriage of justice.
The reasoning by the Supreme Court in both Nyutu II and Synergy draws heavily from comparative jurisprudence from Canada, the Unit- ed Kingdom and Singapore. However, the respective arbitration statutes in these jurisdictions specifically provide instances when leave to appeal a decision confirming or setting aside an award may be granted.
Taking cognisance of this fact, the Supreme Court in the Synergy case above stated in passing that it is expected that a leave mechanism would be introduced into our laws by Parliament to sieve frivolous appeals. It is therefore arguable that the Supreme Court jumped the gun and has, by exercise of judicial craft, proceeded to amend the Act thus stepping into the exclusive domain of the Legislature. Yet, the Supreme Court would be justified for being ill-at-ease in precluding avenues of judicial redress in the face of miscarriages of justice all for the sake of upholding the principles of “finality” and “minimal or limited Court intervention” in arbitration.
Whereas we expressed an underlying concern for the future of arbitration in Kenya post Nyutu I, the two Supreme Court decisions in Nyutu II and Synergy would, in our view, work to bolster confidence in the arbitral process by allowing for further (albeit limited) appellate redress from decisions of the High Court where circumstances allow – despite seemingly watering down the allure of finality. For the time being, we return the verdict that it is not yet time to rethink arbitration in Kenya.