Arbitration and the Constitution: Emerging jurisprudence

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Fernados Ombaso Mang’ate

“It will take us (judges) three years and eight months to hear and determine cases pending before the High Court even without new matters being filed. Therefore, the judiciary is encouraging adoption of Alternative Disputes Resolution mechanisms in line with the Constitution because resolution of disputes will be easier and faster through alternative disputes resolution methods like arbitration and reduce case backlog in court”’ – High Court Judge, Lady Justice Jacqueline Kamau, 2015

Arbitration is one among other various alternatives to dispute resolution. It has attracted multiple definitions based on the different dimensions of its application. For example, Muigua describes it as a system whereby formal disputes are determined by a private tribunal of the parties’ choosing. He goes further to state that arbitration arises where a third party neutral is appointed by the parties or an appointing authority to determine the dispute and give a final and binding award. From this definition, the principle of party autonomy is evident in so far as it is the parties that choose the arbitrators. On the other hand, Farooq Khan defined arbitration as, ‘a private consensual process where parties in a dispute agree to present their grievance to a third party for settlement.’ From this definition, the term consensual has been used to connote the willingness of the parties to submit a dispute for settlement. This is essential because as the court stated in Structural Construction Company Limited v International Islamic Relief, an arbitral tribunal cannot give an award that binds a party that was not part of the proceedings. The International Law Commission defined arbitration in respect of sovereign States as, ‘a procedure for the settlement of disputes between States by a binding award on the basis of law and as a result of an undertaking voluntarily accepted.

Further, the court in addressing itself to the question of alternative dispute resolution stated in Alfred Wekesa Sambu & Others v Mohammed Hatimy & Others  that, ‘where members of an organization have chosen by virtue of their membership to the organization to settle their disputes through arbitration, I see absolutely no reason why the courts should interfere in that process. …the court should encourage as far as possible settlement of disputes outside of court process. Arbitration is one of several methods of alternative dispute resolution and is certainly less expensive, expeditious, informal and less intimidating that the formal courts. This court will certainly encourage the use of alternative dispute resolution where it is appropriate to do so.

I adopt for the purposes of this work, this two latter definitions of arbitration to better extrapolate on the constitutional underpinnings of arbitration in Kenya. The statements ‘…a binding award on the basis of law…’ and ‘court’s encouragement of ADR where it is appropriate to do so’ mean that, the proceedings by the arbitral tribunal ought to be founded on the principles of law for the award thereof to be valid and enforceable

When we say that the award ought to be made on the basis of law, the question then becomes, on what law should the award be based?

Kenya is a constitutional law country that is founded on the principles of the rule of law and constitutional supremacy. The Constitution requires that all law should be consistent with the Constitution or else be declared null and void to the extent of the inconsistency. Arbitration in Kenya is governed primarily by the Arbitration Act as amended in 2009. The Act defines Arbitration as ‘any arbitration whether or not it is administered by a permanent arbitral institution.’ This definition widens the scope of arbitration in Kenya thus the need for careful analysis of the constitutional underpinnings of the arbitral proceedings.

Within this work, I evaluate the impacts of some key constitutional provisions as regards arbitration as I analyse some of the upcoming trends in the realm of arbitration informed by the promulgation of the Constitution.

Background

Arbitration is not novel in Kenya. It has existed since antique times as a method of solving disputes albeit with few formal regulations. In 1914, Kenya had the first attempt at formalizing arbitration by the enactment of the Arbitration Ordinance. The Ordinance was a complete replica of the English Arbitration Act of 1889. It had a multiplicity of loopholes and key among them being the frequent interventions of courts in arbitral proceedings. The Ordinance accorded courts in Kenya ultimate control over the Arbitration process and given the reluctance from the courts to inculcate alternative dispute resolution mechanisms especially TDRMs in dispute resolution, there has been a very sluggish growth of ADR in Kenya. In 1968 Kenya acquired her first Arbitration Act which just like its predecessor had several similarities with the United Kingdom Arbitration Act of 1950. In 1985, the United Nations Commission on International Trade Law (UNCITRAL) was adopted with a view to encouraging arbitration globally and nationally. In Kenya, the Model Law led to the repeal of the 1968 Act and subsequent enactment of the current 1995 Act.

The 1995 Act has indeed promoted and developed arbitration in Kenya through minimizing interventions by the court, introducing the principle of kompetenz which enables the arbitral tribunal to rule on its own jurisdiction, enshrining the principles of party autonomy, neutrality and equality, flexibility, finality of awards and enforceability et al. Even though the Act has liberalized matters arbitration in Kenya, it is essential to conduct an overhaul of the Act with a view of realizing any requirements for aligning its provisions with Constitutional provisions. Prior to the promulgation of the current Constitution, the former constitution did not provide for an elaborate system of alternative dispute resolution. However, the 2010 constitution has been said to provide not only expressly for alternative dispute resolution but also generally for the regime to govern the mechanisms of alternative dispute resolutions.

General constitutional underpinnings of arbitration

As noted herein above, the 2010 constitution has laid down the basis of arbitration in Kenya. Unlike in the former constitution which did not have an express reference to arbitration and other forms of dispute resolution, the current constitution has done an explicit job of enshrining alternative dispute resolution mechanisms. The Constitution begins at Article 1 with the delegation of the sovereign power of the people to the courts and independent tribunals (including arbitral tribunals), which are supposed to exercise the power in accordance with the Constitution. It then proceeds to Article 159 which vests in the courts and tribunals (including arbitral tribunals) the judicial authority that is derived from the people. This authority is supposed to be exercised in a manner that promotes alternative mechanisms to dispute resolution. Even though arbitration is not affected by the consistency clause under Article 159, Article 2 comes in as a check to the processes of arbitration to ensure that they are conducted in accordance with laws that are consistent with the Constitution.

The above provisions, read together with other various provisions of the Constitution lay down what could be termed the basis of arbitration in Kenya. What follows is some of the instances that the Constitution requires the use of arbitration. Article 50 guarantees the right to a fair hearing. In case of a dispute, the disputants have the right to have the dispute heard either through a public hearing in the courts or if appropriate through any other independent and impartial tribunal which includes an arbitral tribunal. This therefore widens the scope of arbitration to extent to any matter, which the court finds appropriate for arbitration, and whose parties agree to submit it to arbitration. Further to this is Article 67 which establishes the National Land Commission. The Commission is mandated under the Constitution to encourage the application of alternative dispute resolution mechanisms including arbitration in land conflicts. So land conflicts are another sphere whereby the Constitution requires the application of ADR. Initially, resolution of land disputes could indeed be through alternative dispute resolution mechanisms, albeit as was provided for under the various legislations. There was no direct nexus between the then constitution and the regime of ADR in land conflicts. Article 162 requires parliament to enact legislation establishing courts with the status of the High Court to hear and determine disputes relating to ‘(a) employment and labour relations; and (b) the environment and the use and occupation of, and title to, land.’

Pursuant to this requirement parliament enacted the Industrial Court Act and the Environment and Land Court Act establishing the Industrial Court and the Environment and Land court respectively. Both of these legislations require the promotion of alternative dispute resolution mechanisms in accordance with the Constitution.

Finally, Article 189 is instructive as regards the inculcation of alternative dispute resolution methods in intergovernmental disputes. This is a transformative provision having in mind that in the previous constitution there did not exist a two-tier system of government and thus there was no need for intergovernmental dispute resolution. With the introduction of devolution, the Constitution was quick to refer any disputes between the two levels of government to alternative mechanisms of dispute resolution given the attributes of the same.

Close-up of two businessmen shaking hands

The concept of constitutional supremacy vis-à-vis arbitration

The constitution declares itself supreme. It provides that no person may exercise any authority except in accordance with the Constitution. The principle of constitutional supremacy refers to the highest authority in a legal system being conferred to the Constitution. Marianna posits that ‘Constitution Supremacy represents a quality of the constitution being in the top of the juridical system of the society….In this way accomplishment of the objectives of the state of right results especially regarding the citizen’s fundamental freedoms and rights’

Article 2 clause 4 provides in this regard thus;

(4) Any law, including customary law that is inconsistent with this Constitution is void to the extent of the inconsistency, and any act or omission in contravention of this Constitution is invalid.’

This said, it becomes clear that the law governing arbitration in Kenya should be consistent with the provisions of the Constitution. Even though arbitration is regarded as a private law sphere, the current Constitution transcends both public and private law requiring any action or omission to be founded on the Constitution. This therefore means that parties to an arbitration proceeding and the arbitral tribunal ought to inculcate constitutional provisions within their framework of dispute resolution for the award to be valid and enforceable. The High Court, which is the only court allowed to intervene in arbitral proceedings, has supervisory jurisdiction over all the subordinate courts and tribunals. This position was held in the case of Githunguri v Republic where the court held that it has inherent powers to exercise jurisdiction over tribunals and individuals acting on administrative or quasi-judicial capacity.

Article 165 is instructive on the question of hierarchy. Read together with other provisions of the Constitution like Article 1, 2, 3, 10, 19, 22, 159 et al it becomes clear that the arbitral tribunals are subject to checks to align them to constitutional requirements. Article 165 reads in part, that ‘…the High Court shall have jurisdiction to, (b) determine the question whether a right or fundamental freedom in the Bill of Rights has been denied, violated, infringed or threatened.’ In respect to the proceedings of the tribunal, clause 7 provides; ‘For the purposes of clause (6), the High Court may call for the record of any proceedings before any subordinate court or person, body or authority referred to in clause (6), and may make any order or give any direction it considers appropriate to ensure the fair administration of justice.’ For purposes of determining whether a right has been violated by the tribunal, the High Court may call for the proceedings of the tribunal.

Be this as it may, clause 6 of Article 165 gives the High Court supervisory jurisdiction over subordinate courts and over any person, body or authority exercising a judicial or quasi-judicial function. Bearing in mind that the High Court has been made the guardian of the Constitution, it behoves us to conclude that, when exercising its supervisory jurisdiction over arbitral tribunals, some of the aspects that it shall be considering are; whether the law that was chosen by the parties to govern the arbitral proceedings is consistent with the Constitution and whether any decision by the arbitral tribunal that affects any of the parties fundamental rights and freedoms is in line with constitutional requirements.

Party autonomy vis-à-vis constitutional supremacy

The Arbitration Act donates too much autonomy to the parties to a dispute. It acknowledges that arbitration is a consensual process in which parties are the ultimate decision makers. Section 5 requires that in instances where a party to an arbitration knows of any derogation from the Act or any failure to comply with a particular provision and yet proceeds with the arbitration without raising an objection as to the irregularity within a specified period of time (if any) is taken to have waived his right to object. This provision is said to have been included in the Act to guarantee the expeditious nature of arbitration. However, scholars have maintained that a party who has been adversely affected by a particular act or omission, especially one that relates to the fundamental rights and freedoms of the party, may still approach the court and claim a violation of his rights.

Article 20(1) provides that the Bill of Rights applies to all law and binds all state organs and all persons. The arbitral tribunals are bound by the Bill of Rights and should ensure that in conducting the proceedings, they give effect to the various rights and freedoms of the parties. Article 22(1) then proceeds to require that in case any party feels that any of his rights has been violated, then he has a right to approach the court and institute legal proceedings claiming that a right or fundamental freedom in the Bill of Rights has been denied, infringed, threatened or violated. This requirement then puts to rest the argument that in cases where a party fails to raise an objection in time during the arbitral proceedings, is taken to have waived his right.

To buttress this requirement of constitutional protection through an application to the court, section 7 provides for instances of interim interventions by the court. During the pendency of arbitration proceedings or before the proceedings, the court held in Don-wood Company Limited v Kenya Pipeline Limited that a party is at liberty to approach the court for interim measures of protection of the individual or any property that is subject to the arbitral proceedings. It is in this spirit that the court further held in Sadrudin Kurji & Another v Shalimar Limited & 2 others, that; ‘…Arbitration process as provided for by the Arbitration Act is intended to facilitate a quicker method of settling disputes without undue regard to technicalities. This however, does not mean that the court will stand and watch helplessly where cardinal rules of natural justice are being breached by the process. Hence in exceptional cases in which the rules are not adhered to, the courts will be perfectly entitled to set in and correct obvious errors.

Parties enjoy so much autonomy before, during and after the arbitration process. They play vital roles in choosing the law applicable to their dispute, the procedure to be followed by the arbitral tribunal in the conduct of the proceedings, the manner in which the dispute will be heard, the appointment of the arbitral tribunal, the seat of the arbitration, the language of the arbitral process, the form of the award et al.

All of these freedoms ought to be exercised by the parties in regard to constitutional requirements. The parties cannot for example portend to choose an applicable law which contains provisions that are contrary to the Constitution. Article 159 requires that when choosing to use alternatives to dispute resolution, they should not be inconsistent with the Constitution or any other written law.

Natural justice

Natural justice is a terminology used to connote the rule against bias and the right to a fair hearing. It entails a general requirement to act fairly. Mr. Kaluma states that the rules of natural justice are elastic and generally connotes procedural fairness in decision making. In any case or decision in which the rights of individuals stand to be affected, the court held that it is vital that the rules of natural justice be observed. This has indeed gained acceptance globally even in States that have not codified a provision on natural justice rules. In Kenya, the Constitution has taken a step ahead from the old constitution by enshrining rules of natural justice within its sphere. Article 47 provides thus;

Every person has the right to administrative action that is expeditious, efficient, lawful, reasonable and procedurally fair.

This provision touches on one limb of natural justice which is the rule against bias (Nemo judex in re causa sua). This rule demands complete impartiality on the part of the decision making bodies like arbitral tribunals.

it is a matter of prime importance that judges, tribunals and all decision making bodies should be free from bias while discharging their duties. This, however, does not presuppose a complete absence of bias, passion or personal affection towards particular things or issues. Bias should be avoided only as far as it relates to the judicial role of a judge.

The wording of the constitutional provision as herein above (Article 47(1)) is to the effect that no person, on whatever ground, should be discriminated against by the arbitral tribunal when it is discharging its judicial functions. To this end, we find relevance when the Act provides that even in instances where a party fails to take part in the selection of the arbitral tribunal, the arbitrator if appointed solely by one party makes an award that is binding on both the parties.

Article 50 on the other hand enshrines the rights of parties to a fair hearing. This is reflective of the other limb of natural justice which is the right to be heard (Audi alteram partem). This right emphasizes the need for fair hearing and entails ideals such as the need for prior notice before adverse proceedings are taken against a person, the need to grant the affected party fair opportunity to defend himself, the right to legal representation where applicable et al. The article reads;

‘Every person has the right to have any dispute that can be resolved by the application of law decided in a fair and public hearing before a court or, if appropriate, another independent and impartial tribunal or body.

The provision goes further to use the terms ‘independent’ and ‘impartial.’ The arbitral tribunal in this instance has its threshold set by the Constitution by inculcating rules of natural justice into the dealings of the tribunal. It is not enough to conduct the proceedings in a manner that would deviate from these cardinal rules of natural justice just because the parties have chosen to deviate from them. These rules ensure procedural and substantive fairness in the arbitral proceedings. Even though one of the attributes of arbitration is flexibility to the extent that, it is not necessarily magistrates or lawyers who oversee the process, all the other professions that get involved in the process, whether or not they understand the principle of natural justice, should play by the rules or audi alteram partem and nemo judex in re causa sua for the subsequent validity of the award.

Noteworthy is the fact that, the requirement for adherence to natural justice rules does not invite the courts to be at the neck of arbitral tribunals to monitor the process. As Mr. Kaluma notes, ‘natural justice does not demand that proceedings before quasi-judicial tribunals be as formal as court process. It is simple ordinary justice as opposed to complex or technical justice. Indeed, the justification for having quasi-judicial tribunals outside the regular court system would disappear if it were to be demanded that, as a matter of natural justice, all hearings be fashioned in the manner hearings are conducted before courts of law.’ The only requirement is that the proceedings ought to be impartial and that everybody appearing before them must have a fair opportunity to present his case.

Therefore, the Constitution has elevated the level of the rules of natural justice. It has made it mandatory that all courts and tribunals (including arbitral tribunals), and any decision maker for that case whose decision may have an effect to the rights of any individual, should apply these rules. The courts play a vital role in this instance since, it is upon them to determine whether the rules of natural justice have been contravened or not. Therefore a party who is aggrieved by a decision of the tribunal, and feels that the tribunal did not observe and apply the rules of natural justice, can approach the court after which, it will analyse any contravention thereof.

Fairness

The word ‘fairness’ comes from the noun, ‘fair.’ It alludes to impartiality and being just and equitable. The principle of fairness has been enshrined in the Constitution as a bed rock of judicial and quasi-judicial. In regards to this work, I focus on the constitutional provision concerning fair hearing. To begin with, judicial authority in Kenya, which belongs to the people of Kenya as whole, has been vested upon and exercised by the courts and tribunals established by or under the constitution. Arbitral tribunals are bodies established pursuant to the Constitution and whose mandate ought to dispensed with in accordance with the provisions of the constitution. Therefore, article 50 binds the arbitral tribunals much as it binds the courts.

The article entails what is viewed as to constitute a fair hearing which every accused person is entitled to. Again as noted herein above, this provision is the other among the few examples under the Constitution that is all-inclusive. It does not narrow down to Kenyan citizens but it is clear that, ‘every accused person…’ imploring all the readers of the provision to appreciate that in some instances (like in the case of international arbitration, where the seat of arbitration may be in Kenya but with a mixture of parties) non-Kenyan citizens may be accused persons within the meaning of the this provision of the Constitution.

Fairness of the arbitral proceedings demands inter alia that the defaulting party be presumed innocent by the tribunal until he is proved otherwise, it demands that adequate notice and time be given to a party do defend his claim before the tribunal. Even though the parties have been allowed the autonomy to choose on the procedures to govern the proceedings, this requirement ought to be taken into consideration. Fairness also demands that the proceedings by the tribunal are expedited and concluded within reasonable time. Further, fairness requires arbitral tribunals to conduct the proceedings in the presence of both parties unless the presence of a party is highly impossible to dispense with and where applicable, the parties should be allowed representation.

These provisions of the Constitution on fairness are not subject to derogation by the arbitral tribunal. They are justiciable and thus require ultimate adherence for the award to be valid and binding on the parties. The tribunal ought to be keen on the procedures settled upon by the parties because where they choose a procedure that defeats fairness, the victim party may approach the court after the award is made and successfully set the award aside.

Conclusion

The 2010 constitution lays down a framework upon which arbitral proceedings are practiced. Unlike the former constitution, the current constitution expressly establishes alternative dispute resolution mechanisms and bestows upon the quasi-judicial tribunals including the arbitral tribunals the judicial authority as derived from the people at large. The Constitution establishes general grounds upon which any such proceedings should be conducted in order for the award to receive ultimate acceptance in law. The Bill of Rights under chapter four of the Constitution binds all state organs and all persons who applies or enacts any law. Arbitral tribunals fall under this category of persons applying a law and thus are bound by chapter four. Article 50 which provides on fair trial read together with other provisions on the rights of accused persons require that during the arbitral proceedings, the tribunal should make sure that these provisions are adhered to. Arbitration as governed by the Arbitration Act has its principles anchored on the constitution, given the repugnancy clause under Article 2, arbitral proceedings ought to be entirely premised on constitutional requirements. ^

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