Akoth - Stay of Legal Proceedings Pending Arbitration in Kenya - Judicial Interpretation and A Call For Legislative Change

UNIVERSITY OF NAIROBI
SCHOOL OF LAW
STAY OF LEGAL PROCEEDINGS PENDING ARBITRATION IN KENYA: JUDICIAL
INTERPRETATION AND A CALL FOR LEGISLATIVE CHANGE
BY
JAKAILA JULIETTE LEORNARA AKOTH
G62/75615/2014
A THESIS SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS OF
THE AWARD OF THE DEGREE OF MASTER OF LAWS, UNIVERSITY OF NAIROBI
2019
i
DECLARATION
I, JAKAILA JULIETTE LEORNARA AKOTH, do hereby declare that this Thesis is my
original work, which has been done in line with the requirements and regulations of the
University of Nairobi for the degree of Master of Laws (LLM). This Thesis has not been
submitted for a degree in any other university.
Signature: ………………………………………….. Date: …………………………
JAKAILA JULIETTE LEORNARA AKOTH
This Thesis is submitted for examination with my knowledge and approval as University
Supervisor.
Signature:……………………………………… Date: ……………………………
BOSIRE NYAMORI
SCHOOL OF LAW
UNIVERSITY OF NAIROBI
i
ACKNOWLEDGEMENT
I am entirely indebted to the Almighty God for being my strength and making me who I am
today.
I also acknowledge the invaluable guidance and support of my supervisor Mr. Bosire Nyamori,
this journey has indeed been long.
Above all, I am deeply beholden to my endearing family; my parents, my brother, my sisters, my
nephews and niece for their understanding, prayers and support.
ii
DEDICATION
To the memory of my beloved sister Jaki a beautiful soul gone too soon, your unwavering spirit
made this journey possible.
iii
TABLE OF CONTENTS
DECLARATION............................................................................................................................ i
ACKNOWLEDGEMENT ............................................................................................................ ii
DEDICATION.............................................................................................................................. iii
TABLE OF CASES...................................................................................................................... vi
TABLE OF STATUTES ............................................................................................................. ix
INTERNATIONAL INSTRUMENTS ........................................................................................ x
ABSTRACT ................................................................................................................................ xiii
CHAPTER ONE ........................................................................................................................... 1

1.0 Introduction ............................................................................................................................... 1
1.1 Background of the Study .......................................................................................................... 2
1.2 Statement of the Problem .......................................................................................................... 5
1.3 Justification of the Study .......................................................................................................... 6
1.4 Research Objective ................................................................................................................... 6
1.5 Research Questions ................................................................................................................... 7
1.6 Hypothesis................................................................................................................................. 7
1.7 Theoretical Framework ............................................................................................................. 8
1.7.1 The Contractual Theory ................................................................................................... 8
1.7.2 The Theory of Party Autonomy ..................................................................................... 10
1.8 Research Methodology ........................................................................................................... 11
1.9 Limitations .............................................................................................................................. 11
1.10 Literature review ................................................................................................................... 12
1.11 Chapter Breakdown .............................................................................................................. 20
CHAPTER TWO: REVIEW OF THE CONCEPT OF STAY OF PROCEEDINGS

UNDER SECTION 6, ARBITRATION ACT, 1995 .................................................................22
2.0 Introduction ............................................................................................................................. 22
2.1 Rationale of Arbitration and the Concept of Stay of Legal Proceedings ................................ 22
2.2 Judicial Interpretation of Section 6 (1) of the Arbitration Act, 1995...................................... 25
2.2.1 Pre- 1995 ........................................................................................................................ 26
iv
2.2.2 The period between 1995 and 2010 ............................................................................... 27
2.2.3 The Period after 2010 to date ......................................................................................... 31
2.3. Conclusion ............................................................................................................................. 38
CHAPTER THREE OVERVIEW OF STAY OF PROCEEDINGS IN THE UNITED

KINGDOM, AUSTRALIA AND FRANCE: BEST PRACTICES ..................................... 39
3.0 Introduction ............................................................................................................................ 39
3.1.1 United Kingdom ........................................................................................................... 42
3.1.2 Australia ....................................................................................................................... 44
3.1.3 France ........................................................................................................................... 45
3.2 How Court’s Have Interpreted Stay of Proceedings in the Three Selected Jurisdictions ...... 46
3.2.1 United Kingdom............................................................................................................. 47
3.2.2 Australia ......................................................................................................................... 50
3.2.3 France ............................................................................................................................. 52
3.3 Lessons for Kenya................................................................................................................... 53
3.4 Conclusion .............................................................................................................................. 55
CHAPTER FOUR: FINDINGS, CONCLUSION AND RECOMMENDATIONS .............. 57

4.0 Summary of Findings ............................................................................................................ 57
4.1 Conclusion ............................................................................................................................. 58
4.2 Recommendations .................................................................................................................. 61
4.2.1 Integrated framework and policy ................................................................................. 62
4.2.2 Training and inculcating a culture of Alternative Dispute Resolution. ........................ 62
4.2.3 Robust institutional capacity ........................................................................................ 63
BIBLIOGRAPHY ...................................................................................................................... 64
Books ..................................................................................................................................... 64
JournalArticles....................................................................................................................... 65
Internet Sources ..................................................................................................................... 67
v
TABLE OF CASES
Adrec Limited -vs- Nation Media Group Limited [2017] eKLR.
Africa Spirits Limited v Prevab Enterprises Limited [2014] eKLR.
Ahmad Al-Naimi v Islamic Press Agency [2000] APP.L.R. 0.
Albert Ruturi & Others v A.G & The Central Bank of Kenya High Court at Nairobi,
Miscellaneous Civil Application No. 905 of 2001.
Autoridad Del Canal de Panama v Sacyr, S.A. & Ors [2010] EWHC 1086 (Ch); [2010] Bus LR
1634; [2010] 2 Lloyd’s Rep 29.
Bedouin Enterprises Ltd v Charles Njogu Lofty and Joseph Mungai Gikonyo T/A Garam
Investments (Unreported) Civil Case No. 1756 of 2000.
Bia Tosha Distributors Limited v Kenya Breweries Limited & 3 others, Petition No. 249 of 2016,
[2016] eKLR.
Bilta (UK) Ltd v Nazir [2010] EWHC 1086 (Ch); [2010] Bus LR 1634; [2010] 2 Lloyd’s Rep 29.
Brighton Marine Palace v Wood House [1893] 2 Ch. 486.
Capital Trust Investments Ltd v Radio Design TJ AB [2002] EWCA Civ 135, [2002] 2 All ER
159; [2002] 1 All ER (Comm) 514; [2002] CLC 787.
Charles Njogu Lofty v Bedouin Enterprises Ltd [2005] eKLR.
Comandate Corporation v Pan Australia Shipping (2006)157 FCR.
vi
Corporate Insurance Company Limited v Loise Wanjiru Wachira [1996] eKLR.
Crispus Karanja Njogu v Attorney General (Unreported) High Court Criminal Application No
39 of 2000.
CSR v Gigna Insurance Australia Limited (1997)189 CLR 345 at 392.
Donohue v Armco [2002] Lloyds Rep.
Flint Ink NZ Ltd v Huhtamaki Australia Pty Ltd (2014) 289 FLR.
Ford’s Hotel Company v Bartlett [1896] AC 1 486.
Laiser Communications Limited and 5 others -vs- Safaricom Limited [2016] eKLR.
Lavington Security Guards Ltd v Kenya Electricity Generating Company [2009] eKLR.
Lombard North Central plc & Anor v GATX Corporation [2012] EWHC 1067 (Comm).
M’Kiara v M’Ikiandi (1984) KLR.
Marge Enterprises Ltd v Kenya Alliance Insurance Company Ltd (2006) eKLR.
Nanchang foreign Engineering Company (K) Limited v Easy properties Kenya Limited, [2014]
eKLR.
National Oil Corporation of Kenya Limited v. Prisko Petroleum Network Limited High Court
(Milimani Commercial Courts) Civil Case No. 27 of 2014 [2014] eKLR.
Neelcon Construction Company Limited -vs- Kakamega County Assembly [2018] eKLR.
Niazsons (K) Limited v China Road & Bridge Corporation (K) [2001] KLR.
vii
Omino v Lalji Meghji Patel & Co. Limited [1995-98] 1 EALR 264.
Patel v Patel [2000] QB.
Peter Mweha Kahoro & Another v Benson Maina Githethuki (2006) eKLR.
Petro Oil Kenya Limited v Kenya Pipleline Company Limited [2010] eKLR.
Rashid Moledina v Hoima Ginners [1967] EA 645.
Roussel-Uclaf v Searle [1978] 1 Lloyd’s Rep 225.
Russell Bros. & Co. limited v Lawrence Breen t/a L & E Properties (Pringle J., unreported,
March 14, 1997).
TM-AM Construction Group Africa v Attorney General [2001] eKLR.
Treadsetters Tyres Ltd v Elite Earth Movers Ltd [2007] eKLR.
Trishcon Construction Co. Ltd v. Leo Investments Ltd [2013] eKLR.
Vale Do Rio Dole Navegacao SA v Shanghai Bao Steel Ocaen Shipping Co ltd (2000).
Victoria Furnitures Limited v African Heritage Limited & another Nairobi HCCC No. 904 of
2001.
West Tankers Inc v RAS riunione Adriatica Dissicurte SPA [2007] UKHL 4.
William Lonana Shena v HJE Medical Research International Inc Case No.1096 of 2010
(Unreported).
Zaid Iqubal Dean v Samuel Gakiria Kingori & Another [2014] eKLR.
viii
TABLE OF STATUTES
Arbitration (Amendment) Act, No. 11 of 2009, Laws of Kenya
Arbitration Act, Chapter 49, Laws of Kenya
Arbitration Act, No. 4 of 1995, Laws of Kenya
Arbitration Ordinance, 1914
Australia International Arbitration Act, 1974
Civil Procedure Act, Chapter 21, Laws of Kenya
Code de Procedure Civile
Limitations of Actions Act, Chapter 22, Laws of Kenya
Nairobi Centre for International Arbitration Act, No. 26 of 2013, Laws of Kenya
Nouveau Code de Procedure Civile
UK Arbitration Act, 1889
ix
INTERNATIONAL INSTRUMENTS
Charter of the United Nations, 1945.
The 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New
York Convention).
United Nations Commission on International Trade Law Model Law on International
Commercial Arbitration.
United Nations Resolution 2205 (XXI) on the Establishment of the United Nations Commission
on International Trade Law.
x
ABBREVIATIONS
AC- Appeal Cases
ADR- Alternative Dispute Resolution
All ER (Comm) - All England Reports (Commercial Cases)
All ER- All England Law Reports
Bus LR. - Business Law Report
Ch. - Chancery Law Reports
CiArb- Chartered Institute of Arbitrators
CLC- Company Law Cases
CONTEMP. ASIA ARB. J. -Contemporary Asia Arbitration Journal
DAC- Departmental Advisory Committee on Arbitration Law
EA- East African Law Reports
EACA- Law Reports of the Court of Appeals for Eastern Africa
EKLR- Electronic Kenya Law Reports
EWCA Civ- Court of Appeal of England and Wales Decisions (Civil Division)
EWHC- England and Wales High Court
xi
HCCC- High Court Civil Case
ICC- International Chamber of Commerce
ICCA- International Council for Commercial Arbitration
KLR- Kenya Law Reports
KLRC- Kenya Law Reform Commission
Lloyd’s Rep. - Lloyd's Law Reports
NIAC- Nairobi International Arbitration Centre
P.O- Notice of Preliminary Objection
QB- Queen's Bench Reports
SIAC- Singapore Commercial Arbitration Centre
UK- United Kingdom
UNCITRAL- United Nations Commission on International Trade Law
xii
ABSTRACT
The deviation from the prescribed procedure in Section 10 of the Arbitration Act, 1995 has
caused unnecessary intervention by Courts in matters within the purview of arbitration. Legal
elucidation of Section 6 (1) seems to clash with the principle of party autonomy causing an
upsurge of arbitration disputes in courts.
This study seeks to critique the law as stipulated in Section 6 of the Arbitration Act, 1995. This
provision gives party’s leeway to delay arbitration matters through unnecessary court
intervention which goes against the principle of non-intervention as stipulated under the
Arbitration Act, 1995.
The study seeks to give credence to Arbitration as a mode of Alternative Dispute Resolution
(ADR) in Kenya by ensuring that the judicial process is not initiated as a basis of undermining
arbitral proceedings; by proposing specific amendments to that effect and to bring the Arbitration
Act, 1995 in conformity with the Constitution of Kenya, 2010.
xiii
CHAPTER ONE
1.0 Introduction
Kenya has come a long way, the local communities practiced alternative dispute resolution
(ADR) conducted by community elders who spearheaded the resolution of disputes involving
land, succession and livestock.1The Kenyan law on arbitration has its foundation in the 1914
Arbitration Ordinance, a duplication of English Arbitration Act, 1889. The 1914 Arbitration
ordinance gave the court power to oversee the arbitration process which made minimal impact in
promoting dispute resolution through arbitration.
After independence in 1963 various Arbitration legislations were enacted in Kenya. The
independence Kenyan Government enacted the Arbitration Act, 1968 whose foundation was the
English Arbitration Act of 1950 whose aim was to minimize court interference in Arbitration. It
was later seen to be outdated and was consequently repealed paving way for the Arbitration Act,
1995(the “Act”) which is modeled around the Model Arbitration Law of the United Nations
Commission on Trade Law (“UNCITRAL”).2 A key modification to the Act, was the
incorporation of Section 10 that puts restrictions on judicial powers in arbitral proceedings.3
The Act, evidenced certain short comings particularly on matters stay of proceedings this gave
rise to the Arbitration (Amendment) Act, 2009. 4This research analyses judicial construal of
1
Edward Torgbor, ‘A Comparative Study of law and Practice of Arbitration in Kenya, Nigeria and Zimbabwe,
With particular Reference to current Problems in Kenya’, (PHD Thesis Stellenbosch)
<http://scholar.sun.ac.za/handle/10019.1/80182>, accessed on 10th January, 2016.
2
United Nations Commission on International Trade Law (UNCITRAL),
<https://www.uncitral.org/pdf/english/texts/arbitration/ml-arb/07-86998_Ebook.pdf> accessed on 6th December,
2017.
3
Paul Musili Wambua, ‘The Challenges of implementing ADR as an alternative mode of access to justice in
Kenya”, (2013) 1 (1) Alternative Dispute Resolution Journal, <http://www.ciarbkenya.org/wp-
content/themes/mxp_base_theme/mxp_theme/assets/final-vol-1-issue-1.pdf>, Accessed on 1st March, 2018.
4
The Amending Act introduced changes to the wording in Section 6(1) to introduce the time frame within which an
application for stay of proceedings should be lodged in court.
1
Sections 6 and 10 of the Act. In view of the seeming contradiction in the interpretation of the
applicable statute by the judiciary, the research will seek to address this apparent discrepancy.
This research will attempt to determine what the framing generation understood the principle of
stay of legal proceedings to mean without making any assumptions as to its original meaning and
interpretation; the law as formulated does not seem to be working as was envisioned leading to
unnecessary court interference in matters within the purview of arbitration .This is seen to be in
complete disregard to the consensual agreement by parties to resolve grievances away from the
rigors litigation.
1.1 Background of the Study
Arbitration has undeniably grown into a popular dispute resolution process in the realm of trade
and commerce. It is deemed to be independent of the limitations that govern law suits5 and
parties are free to choose a forum where their grievances can be adjudicated.6
The Arbitration clause takes away from judges their inherent powers to settle disputes
contemplated under it.7Consequently, the courts should not seize jurisdiction over disputes
envisaged in an arbitration agreement unless in instances set out in the law. 8 Nonetheless, the
arbitral process has in recent times been inhibited by long-drawn-out suits in court.9
5
The Right Hon. Sir Michael Kerr in Ronald Bernstein ed., Handbook of Arbitration Practice (Sweet and Maxwell,
1987), at 3.
6
Sara Lembo, ‘The 1996 UK Arbitration Act and the UNICTRAL MODEL LAW –A contemporary Analysis, Rome,
January, 2010.’<https://eprints.luiss.it/694/1/lembo-20100713.pdf>accessed on 15th January, 2016.
7
Enid Marshall and William Gill: The Law of Arbitration (4th edn Sweet & Maxwell 2001), 1; Kariuki Muigua
‘Heralding a New Dawn: Achieving Justice Through Effective Application of Alternative Dispute Resolution
Mechanisms (ADR) in Kenya’ (2013) 1 (1) Alternative Disputes Resolution CiArb-Kenya Journal, 4.
8
See section 10 Arbitration Act.
9
<https://www.livelaw.in/see-court-see-court-burdened-judicial-system-can-adr-system-answer-part-ii/>
accessed on 28th December, 2018.
2
This research seeks to analyze whether declining to halt the hearing of a case before a judicial
officer in favor arbitration, occasioned by a party’s failure to request for stay at the time of
entering appearance frustrates arbitration.
The position taken by Kenya as stipulated in Section 10 appears to be as a result of her endeavor
to operationalize the provisions of UNCITRAL which Kenya adopted in 1995.10 Undeniably,
Section 6 (1) is an exact replica of Article 8 (1) of the UNCITRAL. 11 Prior to 1995, the position
prevailing in the Arbitration Act (Cap 49) (now repealed) was that the applicant would at any
time after appearance, and before delivering any pleadings or taking any other steps in the
proceedings, apply to that court to stay the proceedings.12
The outcry from arbitration stakeholders and the coming into effect of UNCITRAL provided
parliament with an easy fix to enact a new statute. The 1995 Act,13 is the current applicable
Arbitration statute in Kenya. Section 6(1) makes provisions for stay of proceedings having
amended the repealed section in Cap 49 as regards time frame within which the application for
stay should be made. It provides as follows:
“A court before which proceedings are brought in a matter which is the subject of an arbitration
agreement shall, if a party so applies not later than the time when that party enters appearance
or otherwise acknowledges the claim against which the stay of proceedings is sought, stay the
proceedings and refer the parties to arbitration unless it finds— (a) that the arbitration
10
http://www.uncitral.org/uncitral/en/uncitral_texts/arbitration/1985Model_arbitration_status.html accessed on 15th
January 20.
11
Article 8 (1) UNICITRAL: A court before which an action is brought in a matter which is the subject of an
arbitration agreement shall, if a party so requests not later than when submitting his first statement on the substance
of the dispute, refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or
incapable of being performed.
12
See Arbitration Act, Chapter 49 Laws of Kenya, section 6 (1) (a).
13
Act No. 4 of 1995.
3
agreement is null and void, inoperative or incapable of being performed; or (b) that there is not
in fact any dispute between the parties with regard to the matters agreed to be referred to
arbitration.” (Emphasis added)
Originally, the wording of Section 6 (1) before its amendment by the Arbitration (Amendment)
Act, 200914 was that the applicant would make an application before filing a memorandum of
appearance or making an answer to the claim or otherwise participating in the matter before
court.
This study seeks to evaluate if the failure by the courts to halt proceedings before them, due to
the fact that the applicant failed to lodge the stay application at the time of entering appearance
frustrates or undermines arbitration.
It will also be of importance in this research to interrogate the rationale of the judicial approach
in interpretation of the law; its ramifications on a party who is outraged due to a breach of a
contractual agreement and wishes to settle the matter as contemplated in the agreement. This
study will further seek to determine whether the judicial approach supports the intention behind
the 2009 amendments.
14
Arbitration (Amendment) Act No. 11 of 2009, section 5.
4
1.2 Statement of the Problem
The idea of stay of proceedings is key in resolution of disagreements away from litigation. The
conditions where the Judiciary’s intervention in arbitral proceedings is allowed is as stipulated
by law.15
Kenya’s arbitration law and judicial outlook to arbitration is predisposed by the 1985 version of
the UNCITRAL and the New York Convention on the Recognition and Enforcement of Foreign
Arbitral Award (“New York Convention”) which Kenya ratified on 10th February, 1989.The Act
borrows profoundly from both Conventions. By acknowledging the values envisioned under
these conventions, Kenya permeated into the realm of international arbitration principles and
best practices. Needless to say, the muddled drafting of Section 6 (1) of the Act has allowed for
the judicial intervention in instances where they have disallowed applications to bring up
disagreements to arbitration in the pretext of exposing them to constitutional compliance. 16This
has frustrated arbitral proceedings by going against the principle of party autonomy and non-
interference as detailed in Section 10.
The main problem to be addressed in this study is how the law in Section 6(1) together with
judicial interpretation have dealt with the freedom of parties to decide how their contractual
15
In fact, section 6(1)(a) of the Act, stipulates that Court refuse to grant stay of proceedings where the arbitration
agreement is null and void, inoperative or incapable of being performed.
16
Kamau Karori and Ken Melly, ‘Attitude of Kenyan Courts Towards Arbitration’, in Rethinking the Role
of African National Courts in Arbitration, available at
<http://www.ikm.co.ke/export/sites/ikm/news/articles/2018/downloads/Chapter-13_Kamau-Karori-Ken-Melly.pdf>
accessed on 29th November,2018.
5
disputes should be determined outside of litigation and make recommendations for legislative
change in the Act.17
1.3 Justification of the Study
The subject of ADR has gained prominence in recent times.18The possibility of resolving
disputes through ADR goes beyond the Kenyan Arbitration Act, this is because it is anchored in
the Kenyan Constitution besides the United Nations Charter which addresses disputes involving
member states.19
The conclusions of this research will be pertinent to the stakeholders involved in making
recommendations to parliament for the repeal or make amendments to the law to enhance
conformity to the underlying principles of party autonomy, non – interference and binding nature
of arbitral proceedings so at to promote ADR.
This study will seek to advocate for a law to aid parties to be bound to exhaust the remedy of
arbitration before exploring any other legal options for settling disagreements.
1.4 Research Objective
The main objective this study seeks to resolve is how the drafting of the law has frustrated or
undermined the principle of stay of proceedings as well as the freedom of parties to resolve
disputes away from litigation.
17
Paul Ngotho ‘The Bastard Provision in Kenya’s Arbitration Act’ (2013) 1 (1) Alternative Disputes Resolution
CiArb-Kenya Journal, 148-162.
18
Article 159(2) (c) the Constitution of Kenya 2010.
19
Article 2 the Constitution of Kenya, 2010 that declares the Constitution as being the supreme law of the land that
binds all persons. See also Article 33 UN Charter.
6
The specific objectives of the study include;
a) To determine the development of the law of stay of proceedings pending arbitration.
b) To discuss the Kenyan judicial interpretation of the concept of stay of proceedings pending
arbitration.
c) To evaluate the best practices in the interpretation of the concept of stay of proceedings
pending arbitration.
d) To give proposals for legislative change.
1.5 Research Questions
This research seeks to address the following questions.
a) Does Section 6 (1) of the Act, frustrate or undermine arbitral proceedings in so far as it
allows proceedings in the court where the contractual agreement of parties envisages
arbitration?
b) Do the provisions of the Section 6 (1) of the Act, undermine the concept of stay and the
obligatory nature of arbitration agreements?
c) How have the United Kingdom, Australia and France dealt with the concept of stay of
proceedings where contracts are governed by arbitration agreements?
d) What lessons can Kenya embrace to aid in legislative change of Section 6(1) of the Act?
1.6 Hypothesis
The research will test the following hypotheses:
7
a) If Section 6 (1) of the Act, frustrates or undermines arbitral proceedings in so far as it
allows Court proceedings despite the contract envisaging arbitration, thereby
undermining the obligatory nature of arbitration agreements.
b) Whether the United Kingdom, Australia and France have demonstrated best practices
which conform to the Constitution of Kenya.
1.7 Theoretical Framework
This research argues that the law on stay of proceedings is designed to safeguard and promote
arbitration as a mode of settling differences. The law was not only a response to the old legal
aggression to arbitration contracts that occurred in courts, but also sought to create binding and
enforceable arbitration agreements relating to commerce or in the realm of admiralty. In so
doing, this provision simply makes the contracting party live up to his obligations under the
agreement. The research will be premised on the contractual and party autonomy theories in
order to generate the background information which will be used to analyse the law of stay of
proceedings.
1.7.1 The Contractual Theory
Proponents of the contractual theory such as Merlin, Martín Domke, Frederic-Edouard Klein and
Voir T. Kitagawa contend that the arbitration clause originates the contractual appeal. Martin
Domke states that arbitration only exists as a result of approval by the contracting parties.20
20
Martin Domke, Commercial Arbitration, Prentice Hall (1965)31.
8
Consequently, an arbitration arrangement states the parties’ intent to select the forum to resolve
their grievances and allow them to determine matters as presented before the tribunal.21
The advocates of the contractual theory trust that settling of disputes is devoid of state
interference and the principle that contractual agreements must be upheld ought to triumph. In
this regard Kitagawa posited that the obligatory power of the arbitration contract originates from
the contract itself.22
Kellor gave an apt summary of the argument advanced by contractual theory believers:
“Arbitration is wholly voluntary in appeal. The contract of which the arbitration clause is part of
is an intentional agreement. No law requires the parties to make such a contract, nor does it give
one party power to force it on another. When such an arbitration agreement is made part of the
principal contract, the parties voluntarily relinquish established rights in favor of what they
deem to be the greater advantages of arbitration”.23
The contractual theory therefore, underscores the concept of party autonomy which allows the
parties to exercise autonomy in the manner in which proceedings are conducted. 24This is in
consensus with UNCITRAL 25 upon which the Act, is modeled.
This theory is relevant and important in this study because under the Act, a matter can only be
resolved by arbitration where parties have a prior agreement.26 The extent in which the Court can
21
Hong-lin Yu, ‘A Theoretical Overview of the Foundations of International Commercial Arbitration,’1(2)
CONTEMP. ASIA ARB. J. 255 [2008], at 266.
22
Voir Kitagawa, Contractual Autonomy, in International Commercial Arbitration: Liber Amicorum for Martin
Domke 133, 138 (Pieter Sanders ed., 1967).
23
See generally Frances Kellor, Arbitration in Action: A Code for Civil, Commercial and Industrial Arbitrations
(1941), quoted by Stone a Paradox in the Theory of Commercial Arbitration, 21 ARB. J. 156, 182 (1966).
24
Sunday A. Fagbemi, The doctrine of party autonomy in international commercial arbitration: myth or reality? Afe
Babola University Journal of sust. Dev. Law and policy
<https://www.ajol.info/index.php/jsdlp/article/viewFile/128033/117583> 224 accessed on 5th October, 2018.
25
Article 7 of the UNCITRAL Model Law 1985.
9
interfere with arbitral proceedings is as provided for in the Act.27This theory will thus be
important in analyzing whether Section 6(1) of the Act, frustrates or undermines arbitral
proceedings by negating the contractual relationship of the parties and allowing court
intervention in instances where they become seized of the dispute.
1.7.2 The Theory of Party Autonomy
An important rule of arbitration is the nature of party’s intent to have their disagreements
determined in this manner devoid of litigation. This self-governing manifestation of intent is
known as party autonomy. As Ercus Stewart posits “arbitration is a method of dispute
resolution. It is not ‘litigation without wigs’, nor is it supposed to be litigation by another
name”.28
The party autonomy theory highlights the entrenchment of arbitration in different legal systems,
as a self-standing device that should not be incorporated under an incorrect legal grouping. In
this logic, the theory projects the independence of parties to the character the courts will play in
the arbitration, while not discounting the state as the precursor of that right.
Party autonomy manifests as a result of insistence made in most arbitration statutes for party
agreements to override the provisions on the role of the court. The key weakness of the theory is
its failure to take notice of the fact that in reality arbitration cannot stand alone in the wake of
public interest in arbitration.
26
Section 3 of the Arbitration Act, 1995.
27
Kariuki Muigua, Making East Africa a hub for international commercial arbitration: a critical examination of the
legal and institutional framework governing arbitration in
Kenya.http://www.kmco.co.ke/attachments/article/114/Making%20East%20Africa%20a%20Hub%20for%20Interna
tional%20Commercial%20Arbitration.pdf> accessed on 28th February, 2018.
28
Ercus Stewart, Arbitration: Commentary and Sources (First law, 2003), at 2.
10
Thus, the Party autonomy theory will be central in this study in analyzing whether Section 6(1)
of the Act, frustrates or undermines arbitral proceedings, the study will interrogate how the
section goes against the agreement of parties to arbitrate and to select a tribunal of choice as well
as the governing regulations.
1.8 Research Methodology
The research procedure embraced in this research is grounded on qualitative data analysis,
specifically the doctrinal approach.
Doctrinal approach involves the appraisal of primary and secondary data, which will comprise of
literature on the research problem drawn from books, journals and articles, legal texts, policy
documents, statutes as well as judicial decisions. An evaluation of the best practice in the United
Kingdom, Australia and France will be done with a view to giving recommendations for
legislative change on the Kenyan Arbitration Act 1995.
The choice of doctrinal approach as research method has been informed by the formulated
humanities subjective, argument-based methodologies that have been tested as data collection
methods. It is a research methodology that will interpret, assess and develop the doctrines, the
concepts, rules and principles on the concept of stay of precedents.
1.9 Limitations
The purpose of this study is to espouse the growth of the concept of stay of proceedings. In this
regard the study seeks to demonstrate that this provision is oppressive to parties who
comprehend too late that they waived their right to arbitrate based on the limitation of time.
11
Due to time constraints, the researcher is unable to conduct field study. Consequently, owing to
the paucity of literature on the intended areas of research within this jurisdiction, the researcher
is relegated to deducting the current status from judicial authorities and drawing presumptions
from the select jurisdictions best practice analysis that will be used as a basis for making
recommendations.
1.10 Literature review
The reviewed literature is drawn from textbooks, article and journals, working papers, treatises,
other scholarly papers and judicial authorities. The literature review is based on the specific
theme under investigation. In examining these resources, the study will ascertain certain gaps
which this study seeks to fill.
It is a norm of practice now well entrenched in the commercial world for contracting companies
to elect an independent arbitrator to conduct the arbitration proceedings.29
Professor Musili Wambua, admits that it is a more preferred mode of (ADR). According to him,
ADR has been accepted by many litigants owing to its flexibility30and the fact that alternative
dispute resolution is grounded on the Constitution.31
Wambua notes that there is need to amend legislation enacted before promulgation of the current
constitutional dispensation to ensure that the laws conform to it. Wambua’s article on the
29
Haniz Zuraiha Zaharullil, (2009) ‘Enforcement and Challenging of Arbitration Award.’ Master Construction
Contract Management <https://studylib.net/doc/14597944/arbitration-practice-and-procedure---interlocutory-and-
90>, accessed on 10th January, 2016.
30
Professor Musili Wambua, ‘The Challenges of implementing ADR as an alternative mode of access to justice in
Kenya’, (2013) 1 (1) Alternative Dispute Resolution Journal, <http://www.ciarbkenya.org/wp-
content/themes/mxp_base_theme/mxp_theme/assets/final-vol-1-issue-1.pdf>, accessed on 1st May, 2018.
31
Article 159(2) (c.
12
difficulties surrounding ADR in access to justice is therefore important to this research because it
highlights the constitutional importance of arbitration as an ADR mechanism.
The importance that the researcher places on arbitration as a preferred mode to litigation is vital.
This research will be analyzing whether or not Section 6 (1) of the Kenyan Act discourages
arbitral proceedings.
Wambua, proposes some changes to the Act, however, he does not look at Section 6(1) and it is
this gap that this research will undertake to address. Similarly, the researcher addresses the
challenges of implementing ADR in a holistic manner; this research will narrow down
specifically to the section under study to establish if it weakens arbitration.32
Githu Muigai and Jacqueline Kamau, 33observe that arbitration is not a simple as it may appear.
The authors acknowledge that there are certain misperceptions in case law on whether the
provision of Section 6(1) requires the Defendant to move the court when filling a memorandum
of appearance, when lodging the response to the claim or addressing other issues in the conduct
of the matter in court.
The aforementioned article by Githu and Kamau has failed to provide a clear way forward in
terms of creating certainty in decision making. Despite the gap, this chapter is important that it
gives the conditions that ought to be satisfied before a party can be allowed to stay proceedings
which is key in so far as giving recommendations whether Section 6 (1) should be maintained in
our legislation.
32
Zaharullil note 29.
Githu Muigai and Jaqueline Kamau‘The Legal Framework of Arbitration in Kenya’, in Arbitration Law and
33
Practice in Kenya Law Africa, Nairobi 2(2011). Chapter 1
13
This research seeks to reconcile the judicial pronouncements with the aim of creating a reform-
based agenda as the foundation for legislative change. This will in turn create certainty in the
doctrine of precedent to aid the judicial officers when confronted with applications touching on
applicability of Section 6(1).
34
Dr. Kariuki Muigua, makes various observations on the role the Court plays in arbitration. He
acknowledges that there is a consensus between practitioners and scholars that the role played by
Courts in arbitration is vital.35 The justification for this, according to him, is the fact that the
Courts not only provide a supportive role but similarly safeguards the rule of law in arbitral
proceedings. According to him, the question to be answered is the extent to which the Court is to
be allowed to intervene in arbitral proceedings.
Muigua, has given a concise analysis of the various cases prior to the 2009 amendment of the
Section where the application of stay of proceedings has come into play, the various
interpretations that the Court’s addressing their mind to this issue have propounded. The case
law that Muigua has taken into consideration was delivered preceding the promulgation of the
new constitutional dispensation. This research aims at showing that the 2009 amendments did
not create certainty with regard to the interpretation of the section and that there exists glaring
rigidity. This study will attempt to give an analysis of the position today based on post
Constitution of Kenya, 2010 while using the analysis done by Muigua as a stepping stone in
tracing the developments.
34
Kariuki Muigua, Settling Disputes Through Arbitration in Kenya, 3rd Edition, Glenwood Publishers Limited
(2017).
35
Ibid
14
Dr.Kariuki Muigua, looks at courts duty in facilitating the conduct of arbitration by giving
proposals for reforms that will encourage non- interference.36According to Muigua, the English
Arbitration Act, 1996 succeeded while the Act failed necessitating amendment to the Act, in
order to bring it at per with the 1996 Act.37Muigua, further notes that the English Arbitration
Act, 1996 has managed to expand party autonomy by limiting court interference to a bare
minimum. The Act, according to Muigua has allowed unlimited interference of the Court in
arbitration proceedings yet ironically at the same time parties have autonomy to arbitrate.38
Muigua, proposes that a total overhaul of the Act, should be undertaken unlike the piece meal
amendments that were undertaken by repeal or insertion of new sections.
Paul Ngotho, has analyzed the Kenyan law, in his article he put emphasis on the provisions of
Section 6 in light of access to justice. Ngotho, opines that the provision of entering appearance is
a barrier to arbitration. In his perspective the Act has an in-built inhibition that makes the law
untenable. 39
The remedy according to Ngotho is to change the Act by removing the offending words, Ngotho
further opines that a regional approach towards arbitration law would be appropriate. This study
however, disagrees with this approach since Tanzania’s and Burundi’s arbitration Acts do not
conform to UNCITRAL while, Rwanda has a fairly new arbitration Act, this will be a limiting
factor to the growth of international arbitration.
36
Kariuki Muigua, ‘Role of the Court under Arbitration Act 1995: Court Intervention Before, Pending and After
Arbitration in Kenya’ available at<http://kmco.co.ke/attachments/080_role_of_Court_in _arbitration_2010.pdf>
(accessed on 2nd November 2014).
37
Ibid.
38
Ibid note 36
39
CiArb-Kenya Journal, 148-162
15
This research seeks to build on the work of Ngotho by evaluating the additional aspects of
freedom of contract. Ngotho, also gives a comparison to the judicial interpretation in the United
Kingdom but, this research will add onto the inconclusiveness that has been generated by Ngotho
through exploring the law as set out in UK, Australia and France. This will influence the
legislative recommendations for law reforms. This research calls for espousal of laws that are
compatible with modern international commercial arbitration by increasing the necessity for a
legislative change in the Act.
Jimmy Mwende, in a paper titled “A Critique of Section 6 of the Arbitration Act,”40 states that
disputes are bound to occur in any legal relationship and ADR is considerably favorable.
According to Mwende, the Arbitration agreement excludes the court from entertaining disputes
41
contemplated under the agreement. However, section 6 (1) of the same Act goes against the
principle of non-interference by courts in arbitration by mandating courts to uphold
technicalities.
Mwende, opines that upholding technicalities has had the effect that disputes meant to be
resolved by arbitration have found themselves in the Courts. The net effect has been delays,
inconveniences and publicity. Mwende in advancing this argument is aided by the following
theories: positivism; natural school of thought; and freedom of contract theory.
This research will seek to build on Mwende’s work by conducting an analysis on the best
practices in stay of proceedings in the United Kingdom, Australia and France. This research will
40
Jimmy Mwende, ‘A critique of section 6 of the Arbitration Act’
http://erepository.uonbi.ac.ke/bitstream/handle/11295/77722/Jimmy%20_A%20critique%20of%20section%206%20
of%20the%20arbitration%20act.pdf?sequence=1accessed on 15th January, 2018.
41
Section 10 of the Kenyan Arbitration Act, 1995.
16
therefore, give a broader perspective of the doctrinal and comparative analysis approach to deal
with the issue under study.
The study on stay of proceedings pending arbitration has gained prominence beyond what has
been analysed by the Kenyan authors as discussed in the preceding section of this research. This
study is enhanced by the works of foreign scholars as discussed below;
42
Indeed, Professor Sornarajah acknowledges that one of the earliest rules to emerge was for
judicial officers to resist the removal of their inherent power to deal with an arbitrable dispute
leading to decline in advancement of commercial arbitration.43 Judicial mandate in advancing
ADR manifests in its refusal to entertain litigation as a means to enforce the agreement to
arbitrate. Lord Selbourne restated this rationale as follows:
“If parties chose to determine for themselves that they will have a domestic forum instead
of resorting to the ordinary courts, then a prima facie duty is cast upon the courts to act
upon such an agreement. The parties here have made that agreement. They probably
knew the reasons in favor of determining these questions by arbitration were, the reasons
against it and they made it part of their mutual contract that these questions should be so
determined. The Plaintiffs cannot therefore be heard to complain if that part of their
contract is carried into effect”.44
45 46
According to Professor Sornarajah, a contracting party is estopped, from bringing up
arbitration where he has by conduct opted to have the matter settled within the confines of the
42
Muthucumaraswamy Sornarajah, ‘Stay of Litigation Pending Arbitration’. Singapore Academy of Law Journal,
Vol. 6, p. 61, 1994 available at SSRN :< https://ssrn.com/abstract=671403>accesed on 15th January, 2016.
43
The Fehmarn [1958] 1 WLR 159. Lord Denning refers to the overriding principle that “no one by his private
stipulation can oust these Courts of their jurisdiction in a matter that properly belongs to them.”
44
In Willesford v. Watson (1873) 8 Ch App 473.
45
(1994) 6 SAcLJ 61 at 73.
17
court system. This research seeks to advocate for the relaxation of such stringent conditions for
grant of stay that have allowed courts to interfere in arbitration disputes.
UNCITRAL was established to deal with the divergence in the various domestic legislations on
arbitration.47 This was upon the discovery that the national laws were not conducive for
international disputes. UNCITRAL considers the global unanimity on the values and finest
practices in international arbitration.
Tomas Kennedy Grant,48 focuses on seeing the facets of the character of Court’s in arbitration
proceedings especially their role in handling challenges to the arbitrator and arbitral jurisdiction,
temporary measures of protection and remedy against and implementation of awards. The debate
on Court’s duty mainly midpoints on UNCITRAL and particularly Article 5 which provides that
the “courts shall not interfere in matters governed by UNCITRAL other than in circumstances
provided for under the law”.
Grant, argues that the article has the effect of limiting the latitude for judicial intrusion to the
circumstances specifically anticipated under the UNCITRAL. The researcher will show that
despite international legal instruments that Kenya has ratified dealing with the matter with
precision Kenya, has since not followed suit and has remained with an obsolete law that is
creating confusion for potential investors.
46
Halvannon Insurance Co. Ltd. v. Companhia de Seguros do Estado de Sao Paulo [1995] LRLR 303 and in Patel v.
Patel [2000] QB 551.
47
UNCITRAL 2012 Digest of Case Law on the Model Law on International Commercial Arbitration
<http://www.uncitral.org/pdf/english/clout/MAL-digest-2012-e.pdf >accessed on 29th November,201
Thomas Kennedy -Grant, ‘The Role of Courts in Arbitration Proceedings’, A paper presented at the UNCITRAL-
48
SIAC Conference “Celebrating Success”, held at the Pan Pacific Hotel, Singapore, on 22-23 September 2005
available at: <http://www.kennedygrant.com/papers.htm> (accessed on 2nd November, 2014).
18
Ashraf El Motei,49 has argued that in the interpretation of Article 8(1) of UNCITRAL,
consideration should be given to the fact that it does not give the judicial officer discretion to
choose, premised on the mandatory inclusion of “shall” in the Law. This scenario however, does
not play out in the Kenyan context as the judicial officers take into consideration other factors
like entering appearance as will be seen in Chapter 2 of this research. Despite legal notoriety of
the provisions of Section 6, the issue that the researcher seeks to canvass in this review is hardly
obsolete.
The works of David St. John Sutton and Judith Gill50 will be of use for purposes of picking out
the best practices from the select jurisdictions under study. It will aid is ascertaining whether the
factors taken into consideration for the grant of stay in UK and Australia are similar to those
instilled under the Kenyan Act. The work of the authors is significant as it provides a broader
perspective of the law of arbitration and how the judicial authorities have interpreted aspects of
stay.
This research will rely on the works to review the various cases and ascertain whether the
guiding principles for the courts in UK, Australia and France are similar to the ones in Kenya.
The work of the authors will aid in giving guidance on the evolution of the arbitration law in the
three jurisdictions. This will assist in filing the gaps and address the challenges occasioned by the
interpretation of the law for the purposes of legislative change.
51
Stephen McCormish, has given a concise analysis of the Australian Act of 1974. The
researcher has given credence to the desire to position Australia as a center for resolving
49
Ashraf El Motei, ‘Local Court Intervention in International Arbitration’ (2009) http://www.motei.com/local-
Courtintervention-in-international-arbitration>accessed 27th February, 2016.
50
David St. John Sutton, Judith Gill, Mathew Gearing; ‘Russell on Arbitration, (23rd Ed, Sweet and Maxwell)
51
Stephen Mc Cormish, ‘New Dawn for International Arbitration’, Lawyers Weekly.2 nd September, 2010.
19
international trade disputes. This has taken effect as a consequence of the changes made to the
law in 2010 which incorporated the key provisions of the amended UNCITRAL 2006. This study
will rely on the literature to understand the law governing Arbitration in Australia and the
applicable principles. This will be a basis for the comparative study to aid legislators in Kenya to
come up with laws that are complaint with international best practices.
This study will seek to interrogate the circumstances under which the Court’s in England,
Australia and France, have dealt with matters governed by the arbitration agreement through a
review of the Court decisions. This will be a guiding factor for the proposed lessons and
legislative reform for Kenya.
1.11 Chapter Breakdown
This study is divided into the following chapters
Chapter One: Introduction
Chapter one presents a background to the concept of stay of legal proceedings as a key tenet to
prompting settlement of disputes through arbitration. The Chapter will also give a framework
for this entire study since it will provide a background of the study, statement of the problem,
justification for the study, research questions, research objectives, hypotheses, theoretical
framework, research methodology, limitations of the study and literature review as a foundation
for analysis of the other chapters in the study.
20
Chapter Two: Review of the Concept of Stay of Proceedings Under Section 6, Arbitration
Act, 1995
This section will critically analyze the concept underlying the principle of stay of proceedings
pending arbitration, background behind enactment of the law and pre- conditions before Court’s
can entertain stay applications. It will further evaluate the judicial interpretation of what amounts
to entering appearance, its impact on party autonomy and how the construction of the section by
judicial officers has influenced stay of proceedings.
Chapter Three: Overview of Stay of Proceedings in the United Kingdom, Australia and
France: Best Practices
Chapter three will review the varying interpretations on the aspect of stay in United Kingdom,
Australia and France. The salient features of the concept of stay of legal proceedings the select
jurisdictions will be distilled with a view to ascertain how it helps to enhance party autonomy
and arbitration. This research shall analyse the legislative framework and judicial interpretations
of English, Australian and French arbitration legislations with a view to adapting best practices
and lessons for Kenya that will aid in legislative reform.
Chapter Four: Findings, Conclusions and Recommendations
This Chapter hosts a summary of the key findings in the study and a conclusion of the entire
research taking into consideration whether or not the objective of the study has been met,
research questions answered and hypothesis proved. The chapter will then give recommendations
on whether Section 6(1) of the Act, undermines the concept of party autonomy and binding
nature of arbitral proceedings. This chapter will also advocate for the legislative reform agenda
on how to address applications to stay proceedings.
21
CHAPTER TWO:
REVIEW OF THE CONCEPT OF STAY OF PROCEEDINGS UNDER SECTION 6,
ARBITRATION ACT, 1995
2.0 Introduction
This Chapter analyzes stay of legal proceedings and party autonomy in arbitration. Particular
focus will be given to the diverse aspects that occasion the stay of proceedings specifically
entering appearance and what amounts to a step as analyzed from the various judicial
interpretations.52
The discussion and analysis in this Chapter is organized around key thematic arguments founded
on an examination of statutes and case law examined. In particular, the rationale of stay of
proceedings and its effect on party autonomy in arbitral proceedings, how courts have interpreted
entering appearance and what amounts to taking a step when faced with applications under
Section 6 of the Act. The analysis will establish whether the Act, is consistent with the new
constitutional dispensation. Consequently, it will ascertain whether the judicial decisions in the
old and current constitutional era encourage or constrain the process of ADR.
2.1 Rationale of Arbitration and the Concept of Stay of Legal Proceedings
Arbitration is a highly favoured mode of ADR because of the benefits it offers in place of
litigation. Wambua, posits that is favored by litigants due to unnecessary delay posed in
litigation.53 Such processes are becoming progressively widespread, unlike litigation, the privacy
Githu Muigai and Jaqueline Kamau‘The Legal Framework of Arbitration in Kenya’, in Arbitration Law and
52
Practice in Kenya Law Africa, Nairobi 2(2011). Chapter 1
53
Musili, (note 2).
22
ensures parties can use better actual co-operation among all parties to circumvent stays and
pointless expenses.54
Arbitration is founded in the Constitution,55 due to its robust nature in comparison to the
traditional methods of resolving disputes. This is envisioned from the upsurge in the number of
arbitrations all over the world.
The central advantage arbitration has is that it supports independence of contracting parties in
dispute resolution, as well as its finality over litigation. It promotes independence of the parties
to decide on how the arbitration will be conducted, the length of the proceedings, form of the
award, choice of arbitrators among other aspects. The contracting parties become the “owners”
of the proceedings and technically form their own code of arbitration proceedings.
It is acknowledged by legal scholar’s world over that court’s jurisdiction is pertinent in
regulating disputes at the commencement, during and after the arbitration process, one of these
instances lies in the stay of legal proceedings pending arbitration. 56 A stay of proceedings is a
court decision stopping litigation in order to give reverence to the parties’ free will to elect an
arbitral forum taking into consideration the contractual agreement. The purpose of the
determination by court is to ensure that parties keep to the obligatory nature of arbitration.
54
Ibid, at 5-6.
55
In Kenya, it is a requirement that inter-governmental disputes are resolved by alternative dispute resolution
mechanisms and arbitration is one of them.
56
Kariuki Muigua, Settling Disputes Through Arbitration in Kenya, 3rd Edition, Glenwood Publishers Limited (2017)
23
In an effort to halt the residual hindrances to global trade as a consequence of the differences in
domestic legislations, UNCITRAL was adapted to harmonize and unify the law governing
trade.57UNCITRAL, is characterized by a number of notable aspects, pertinent to this study is
stay under Article 8. Article 8 (1) refers to timelines for which the application can be made. It
also approves that the applicant is allowed to approach the forum court at any time not later than
when they submit their first account on the elements of the dispute. To this, it is envisaged that
after a party has lodged statements that answer the substantive claim before the court then they
are precluded from resolving their dispute through arbitration.
Section 6 of the Act is akin to UNCITRAL. It seeks to set the time frame within which an
aggrieved party may challenge court’s jurisdiction to entertain matters governed by the contract.
The policy behind the enactment of the section was to curtail unnecessary delay and obstruction
from a Respondent seeking to avoid liability at all cost.58
On 5th January, 1996 three days after the 1995 Act was assented into law, the Court of Appeal
made a landmark ruling with regard to stay applications in Corporate Insurance Company v
Loise Wanjiru Wachira.59 In this matter, during the initial proceedings at the High Court, the
appellant after filing an appearance delivered a defence and made no application for stay
Gicheru, Kwach and Shah JJA in upholding the ruling by the trial court found the applicant to
have surpassed the latitude stipulated in Section 6 (1).
57
United Nations Resolution 2205 (XXI); on the Establishment of the United Nations Commission on International
Trade Law.
58
Muigua, note 56.
59
[1996] eKLR.
24
It is quite surprising that despite the new legal regime, the Court of Appeal did not make any
reference to it nor did it take judicial notice of the amendments to Section 6 (1) albeit in an obiter
decision. The Court of Appeal only commented on the efficacy of Section 6 (1) of the Act, in
that an applicant is allowed to rely on arbitration if the said application is made prior to filing any
pleadings but after entering appearance.
2.2 Judicial Interpretation of Section 6 (1) of the Arbitration Act, 1995
60
Where summons to enter appearance have been issued upon a defendant, he is required to
notify the court within a specified period of his address of service. 61 As has been aptly stated by
Ngotho, entering appearance is therefore nothing more than a procedural step in avoiding an
adverse judgment against a party to whose attention it has been brought that a suit has been
instituted against them.62
Whether the court has requisite jurisdiction to determine a matter should not arise due to entering
appearance. It is a common practice that where one wishes to challenge the authority of court to
entertain a matter, he can do so either by way of a Notice of Preliminary objection or raise an
objection through the pleadings.63
60
The notification by an Advocate to Court that he or she would be representing a certain party in the proceedings.
61
Civil Procedure Rules 2010, Order 6 rule 1.
62
Ngotho, note 39.
63
Civil Procedure Rules 2010, Order 2 rule 9.
25
2.2.1 Pre- 1995
After independence the law on arbitration was found in the repealed 1968, Act. As has been
discussed by Muigua, it provided for Courts intervention in arbitral proceedings.64 The relevant
part of the section states:
… “(a) any party to those proceedings may at any time after appearance, and before
delivering any pleadings or taking any other steps in the proceedings, apply to
that court to stay the proceedings….”
The Arbitration Act, 1968, did not encompass a corresponding Article 5 of the UNCITRAL,
which stipulates court’s involvement in disputes ruled by arbitration. Courts during this time
relied on the case of Rashid Moledina v Hoima Ginners,65 where the Court stated that it will be
extremely cautious before it can interfere with an arbitration award by giving regard to party
autonomy. Court intervention will only be necessitated in the administration of justice where it is
clear that the tribunal had arrived at a wrong decision.
Despite this recognition of arbitration, it was only on paper, in practice, little or no regard was
given to settling disputes through arbitration and the final decision rested with the Courts of
law.66
64
Kariuki Muigua, ‘The Arbitration Acts: A Review of Arbitration Act, 1995 Of Kenya vis-a-vis Arbitration Act,
1996 Of United Kingdom,’ A lecture on Arbitration Act, 1995 and Arbitration Act 1996 of UK delivered at the
Chartered Institute of Arbitrators-Kenya Branch Entry Course held at College of Insurance on 25-26th August 2008
(Revised on 2nd March 2010), at 1-2.
65
[1967] EA 645
66
Lucy Mair, ‘Primitive Government a study of the traditional political systems in East Africa (1977) at 212-215.
26
Indeed, Hancox JA, reiterated this point in M’Kiara v M’Ikiandi,67 when he indicated, “I do not
see how a case before the (High) Court can validly be relegated to an oath administrator, even if
it is not the administration of an oath in the sense previously understood by the people of
Kenya.”68 The Justice further alluded that, “consent of the parties to some unknown procedure
for settlement of a given dispute does not oust the jurisdiction of a court properly seized of a
suit.”69 The prima facie rule and practice of the Court during that era was against staying Court
proceedings in favor of any other form of dispute resolution.
2.2.2 The period between 1995 and 2010
The ratification of the UNCITRAL in 1985 paved way for the Act. The desire by parties in
commercial dealings to resolve their disputes through arbitration gave the legislature impetus to
enact a new statute. The aim of the law was to cater for the requirements of a credible ADR
legislation in Kenya. The key feature of the legislation is that it limits the courts interference in
arbitration.70
The original wording of Section 6 before the amendments introduced by the (Amendment) Act,
2009 was as follows:
“A court before which proceedings are brought in a matter which is the subject of an arbitration
agreement shall, if a party so applies not later than the time when that party enters appearance
or files any pleadings or takes any other step in the proceeding stay the proceedings and refer
the parties to arbitration…”
67
(1984) KLR 170.
68
Mair, note 66 at 177.
69
Ibid, at 179.
70
Section 10 of the act and other ancillary provisions.
27
The law altered the position in the repealed Arbitration Act,1968 and provided that an
application for stay can only be instituted when filling a memorandum of appearance 71or before
submitting an answer to the claim or otherwise participating in the proceedings before Court.72
The Court therefore, has power to stop suits instituted before it pending the hearing and
determination of arbitral proceedings.73
The 2009 amendments brought a construction change which sought to clarify the timeline within
which the application for stay could be made. A thorough analysis of the wording of the
amended Section 6 (1) in 2009 was to the effect that the law sought to limit the time for making
an application for stay to end when a party formally acknowledges the court’s jurisdiction. It
envisages a situation where once the court has jurisdiction a request to stay the suit will be
defeated. The court is only seized of jurisdiction if the Defendant files a defence in the case.74
In Bedouin Enterprises Ltd v Charles Njogu Lofty and Joseph Mungai Gikonyo T/A Garam
75
Investments, Githinji J, rejected the argument that reference to arbitration can be made at 3
stages, when filing a memorandum of appearance, responding to the specifics of the claim by
way of pleadings or when carrying out any other action in the conduct of the suit.
In Treadsetters Tyres Ltd v Elite Earth Movers Ltd,76 the judge cited the case of Charles Njogu
above and ruled that since the Defendant had filed a defence after entering appearance he had
consequently surrendered his right to depend on the arbitration clause, consequently, his grounds
of opposition to the suit did not have merit and were dismissed.
71
TM-AM Construction Group Africa v Attorney General [2001] eKLR.
72
Victoria Furnitures Limited v African Heritage Limited & another Nairobi HCCC NO.904 of 2001.
73
Harnam Singh & others v Mistri [1971] EA 122
74
Niazsons (K) Limited v China Road & Bridge Corporation (K) [2001] KLR.
75
(Unreported) Civil Case No. 1756 of 2000.
76
[2007] eKLR.
28
However, Lesiit J. has offered a different opinion with regards to Section 6(1) in Lavington
Security Guards Ltd v Kenya Electricity Generating Company.77 The judge stated that the
defendant is permitted under Section 6 to apply for reference to arbitration either when entering
appearance, or any time prior to lodging a pleading or taking action in the proceedings. The
learned Judge even went further to state that the three conditions set under the law should be
construed disjunctively and not conjunctively. In this regard, a stay application will only be
allowed if the party files a memorandum of appearance and does not file a defence. In Lavington
Security above the applicant had entered appearance and never took any further action in the case
but filed the application for stay and referral to arbitration 14 days after entering appearance, the
Judge deemed that its application was competent.
It is evident that the courts have considered that the request to stop litigation in favor of
arbitration will only be considered if it is made at the time that the applicant enters appearance or
before responding to the claim or participating in the proceedings. Any delay in making the
application for stay would disenfranchise a Respondent from ADR.
However, we still need to define what amounts to a step. This thesis takes the view that a step in
the proceedings arises only when the Defendant has submitted a statement that substantively
responds to the alleged infractions by the Plaintiff. This reasoning is premised on the definition
of pleadings that includes a statement of defence which contains a chronology of events showing
how the purported breach of duty arose.
77
[2009] eKLR.
29
In certain instances, some judges sought to uphold arbitration by shifting the burden to the
Respondent to prove why the arbitration agreement should not be upheld. For instance, in Omino
v Lalji Meghji Patel & Co. Limited.78The Court held that the disgruntled party must provide
sufficient reasons why the arbitration agreement should not be acknowledged.79
It is evident from legal decisions that a Respondent must seek stay at the time of entering
appearance any lapse of time will be considered a relinquishment of the right to arbitrate.80 It is
worth mentioning that parties often put timelines within which an arbitration dispute may be
heard.81
Therefore, the case of Lavington Security above should be the standard rather than the exception.
It has already been shown that Lesiit J in that ruling held that the applicant therein entered
appearance and took no further action in the case. That despite the application for stay was made
14 days after he had entered appearance, his application was still competent.
However, as Ngotho has stated by dint of the muddled drafting of section 6 this is not
enforceable as it envisions a contemporaneous filing of both the application for stay and the
memorandum of entering appearance. From the foregoing, it is apt to say that current
formulation of the law undermines the principle of stay of proceedings and the obligatory nature
of arbitration as postulated in the Constitution.82
78
[1995-98] 1 EALR 264.
79
Kibaya Laibuta, Principles of Commercial Law: Commercial Arbitration and Alternative Dispute Resolution (Law
Africa 2006), at 426.
80
TM AM Construction Group (Africa) v Attorney General High Court [2001] eKLR.
81
Cap. 22 of Laws of Kenya. It is the case that the arbitral tribunal must uphold the law.
82
Ngotho note 39.
30
2.2.3 The Period after 2010 to date
Before the year 2010, the role of the Courts in ADR seemed settled. The position was that Courts
83
of law in exercising authority recognise their supportive role to arbitration. Therefore, the
Court must present itself to the international circle as supporting arbitration and to respect
parties’ choice as binding.84
The aforementioned position is well grounded in William Lonana Shena v HJE Medical
Research International Inc,85 Court found that its unfettered jurisdiction did not oust the
arbitration process governed by statute. Courts must therefore encourage commercial
transactions and discourage obstruction by re-writing the contractual agreement between the
parties.
Analysis of Kenyan jurisprudence has acknowledged that the latter segment which appears in the
revised version of the Act, is indeed somewhat unclear when one takes into account the process
of litigation before Court. It could mean that the Court must be moved to make an order for stay
of proceedings simultaneously with lodging of the memorandum of appearance but then it is
normal for appearance to be filed first, it is difficult to determine how else the Defendant could
acknowledge the claim against which the objection to courts authority is required other than by
entering appearance.86
A pertinent question that therefore lies in this research is whether the Court’s intervention in
staying proceedings based on the current formulation of Section 6 of the Act, renders its role in
advancing arbitration as a friend or foe?
83
James H Carter, ‘The International Arbitration Review’ (June 2015) 6 <http://www.africalegalnetwork.com/wp-
content/uploads/2016/01/Kenya-Chapter -International-Arbitration-Review.pdf> accessed on 17th June, 2018.
84
Bellevue Development Company Limited v Vinayak Builders Limited and another [2014] eKLR, para 29.
85
Case No.1096 of 2010(Unreported).
86
Trishcon Construction Co. Ltd v. Leo Investments Ltd [2013] eKLR HCCC No. 645 of 2012 (per J.B. Havelock).
31
In the case of Nanchang foreign Engineering Company (K) Limited v Easy properties Kenya
Limited,87 the Defendant in the matter sought for stay before entering appearance. The Plaintiff
opposed the application terming it a misuse of judicial time. The reasons advanced by the
Plaintiff was that the Defendant was employing delay tactics, the claim before the Court was not
arbitrable as alleged by the Defendant. The claim was for recovery of debt that the Defendant
had refused to settle in compliance with the terms of the contract. In declining to grant stay,
Justice Kamau, stated that referral of a matter to ADR is not geared towards causing untoward
delay. She further stated that where a party is rightfully entitled to payment it is unnecessary to
refer the matter to another dispute resolution forum.
Consequently, it is still the position of law that if a Respondent does not raise a challenge to
court’s authority they renounce the obligatory nature of arbitration.88The overriding rationale
here is Section 6 does not render a suit filed where a dispute resolution clause exists frivolous in
light of Order 6 Rule 13 of the Civil Procedure Rules89 but gives an opposing party a right to
have those proceedings stayed if found appropriate by the Court.90
Courts have stated that the Act is a “self-encompassing statute, one does not need to look beyond
its provisions to determine legal questions”.91 In the case of National Oil Corporation of Kenya
Limited v. Prisko Petroleum Network Limited,92 it was stated that “the Civil Procedure Act and
Rules was not applicable in arbitration.93 It is only where the Act is silent on an issue that
87
[2014] eKLR.
88
Zaid Iqubal Dean V Samuel Gakiria Kingori & another 115 [2014] eKLR; HCCC (Nairobi) No. 116 of 2013.
89
Provides for striking out applications.
90
Marge Enterprises Ltd v Kenya Alliance Insurance Company Ltd (2006) eKLR.
91
James H Carter, ‘The International Arbitration Review’ (June 2015) 6 <http://www.africalegalnetwork.com/wp-
content/uploads/2016/01/Kenya-Chapter -International-Arbitration-Review.pdf> accessed on 17th June, 2018.
92
High Court (Milimani Commercial Courts) Civil Case No. 27 of 2014 [2014 eKLR].
93
See also section 11 of the Arbitration Rules.
32
recourse can be had to the Civil Procedure Rules to fill in any gaps, but not so as to conflict with
its aims and objectives”.
94
In Peter Mwema Kahoro & Another v Benson Maina Githethuki, the Defendant
contemporaneously entered appearance; filed Grounds of Opposition to the Plaintiff’s
application which had sought to prevent the Defendant from transferring or otherwise meddling
with the subject matter before conclusion of the case. The Defendant also took out a Chamber
Summons in which he sought orders to strike out the suit as it failed to disclose an action, further
that the proceedings should be stayed. The Court dismissed the applications with costs to the
Plaintiff.
While this research appreciates that the application in both cases above were strictly not stay
applications, both courts seem to be of the view that making Preliminary Objections and filing
grounds of opposition to a suit was a step in the proceeding precluding the application for a stay.
This seems at odds with the very notion of a Preliminary Objection or grounds of opposition to
the effect that they seek to oust court’s jurisdiction.95 The question that arises is how it can be
deemed that by filing a Preliminary Objection or moving the court to consider grounds of
opposition the applicant has acquiesced to the court’s authority.
However, there seems to be logic in the fact that the applicant may file his application
contemporaneously on the same day he enters appearance but also files a defence together with a
counter-claim. Thus, in Africa Spirits Limited v Prevab Enterprises Limited96the Defendant
entered appearance and contemporaneously filed an objection to the proceedings, a statement of
94
[2006] eKLR, Nairobi HCCC No.208 of 2014.
95
Preliminary Objection and grounds of opposition are objections that should be raised at the earliest opportunity
not when a matter has been substantially dealt with. See for a dicta on this, Mukisa Biscuit Company v Westend
Distributors Limited (1969) EA 696.
96
[2014] eKLR.
33
defence and a counter claim. In allowing the application the ruled that Section 6 requires stay
applications to be filed at the earliest. The Court acknowledged that the challenge to its
jurisdiction was raised at the instant of entering appearance and opted to safeguard the
sovereignty of contract by referring the dispute to arbitration.
Following this logic then and with the nature of a memorandum to enter appearance, an
application to stay proceeding pending arbitration should be allowed if it is made before filing of
a defence or contemporaneously with summons to stay the proceedings. This argument has been
advanced in Adrec Limited -vs- Nation Media Group Limited97where the Court held that;
“Once a defendant, in a suit founded on a contract containing an arbitral clause, enters
appearance or causes a notice of appointment of advocates to be filed on his behalf and prior
thereto or contemporaneous with filing of such notice of appointment or entering appearance
files an application for stay of proceedings, the court is statutorily obligated to stay the
proceedings and to refer the parties to arbitration …..It should be emphasized that the right to
seek and obtain stay proceedings under section 6(1) of the Arbitration Act is lost the moment a
defence is filed in the proceedings.”
It is concise from the decisions that an application for stay is to be addressed immediately as it is
a challenge to the court’s authority. This is in line with the strategy behind the enactment of
Section 6(1) that sought to prevent the unnecessary delay in resolution of dispute.
However, in recent times the Constitution has come into play to assist parties by allowing court
to extend time, as in Neelcon Construction Company Limited -vs- Kakamega County Assembly98
97
[2017] eKLR
98
[2018] eKLR
34
where the Court relied on Article 159(2) (c) to extend time to a defendant who entered
appearance but failed to file a defence or apply for a stay and reference to arbitration.
Muigua has posited that the acknowledgment of arbitration is anchored on
Constitutionalism.99The Constitution upholds the freedoms of parties to contract and non-
conformity can be challenged as a violation of the fundamental rights of the citizenry.100
For instance, in Albert Ruturi & Others v A.G & The Central Bank of Kenya, 101Court was of the
view that the Constitution is the grand norm and any law that contradicts it is repugnant. The
bottom line is that the Constitution of Kenya, 2010 must be construed in a manner that advances
good governance.102 The legislature as well as the judiciary is bound to comply with these
principles.
In the case of Kamlesh Mansukhlal Damji Pattni and Goldenberg International limited v the
Republic.103 The Court stated that the High Court has the primary responsibility of safeguarding
against contravention of the rule of law and the contravention, particularly with regard to
fundamental rights and freedoms. This was also affirmed in the current Constitution of Kenya,
2010 which provides that the High Court has authority, to hear and determine applications for
redress of a denial, violation or infringement of, or threat to, a right or fundamental freedom in
the Bill of Rights.104
99
Muigua Kariuki, ‘Constitutional Supremacy over Arbitration in Kenya.’ Alternative Dispute Resolution (CiArb
Kenya), 2016; 4(1):100-131, at 106.
100
Liliana Mariana, ‘The Constitution Supremacy’<http://www.sustz.com/.../Jurj_Liliana_Mariana_2.pdf> accessed
on 13th August 2016.
101
High Court at Nairobi, Miscellaneous Civil Application No. 905 of 2001.
102
Constitution of Kenya 2010, Article 259(1).
103
High Court Misc. Application No. 322 of 1999 and No. 810 of 1999.
104
Constitution of Kenya 2010, Article 23(1), however, it is noteworthy that Clause (2) thereof provides that
Parliament shall enact legislation to give original jurisdiction in appropriate cases to subordinate courts to hear and
determine applications for redress of a denial, violation or infringement of, or threat to, a right or fundamental
35
In Crispus Karanja Njogu v Attorney General105the constitutional Court ruled that because of its
sovereignty compared to other laws, during the interpretation of legislation in the Constitutional
context the Judicial officer has a duty to establish if the Act is compliant with the tenets
illustrated in the Constitution.
While Courts in most cases have acknowledged arbitration agreements on the basis of
independence of the contracting parties’, current cases obliterate the position in the pretext of
constitutional conformity.106 This is seen in Bia Tosha Distributors Limited v Kenya Breweries
Limited & 3 others,107 the Court in this case did not deem it necessary to refer the matter to
another forum. The key consideration here was how the dispute was framed, the Court made a
finding that only constitutional issues had been raised from the commercial agreement. It was the
Courts view that the constitutional parameters of dispute resolution would override the freedom
of contract between the parties.
The Bia Tosha decision pre-supposes that even where parties have agreed on a forum to resolve
their disagreement, a party can try to evade the contractual obligations on account of the drafting
of the suit. This trend is detrimental as it goes against the principle of non-interference and party
autonomy.
freedom in the Bill of Rights. This has since been achieved through the enactment of the Magistrates' Courts Act,
2015, No. 26 of 2015, which was passed to give effect to Articles 23(2) and 169(1) (a) and (2) of the Constitution; to
confer jurisdiction, functions and powers on the magistrates' courts; to provide for the procedure of the magistrates'
courts, and for connected purposes. S. 8(1) provides that subject to Article 165 (3) (b) of the Constitution and the
pecuniary limitations set out in section 7(1), a magistrate's court shall have jurisdiction to hear and determine
applications for redress of a denial, violation or infringement of, or threat to, a right or fundamental freedom in the
Bill of Rights.
105
(Unreported) High Court Criminal Application No 39 of 2000. (Per Oguk, Etyang and Rawal, J.J.J).
106
Kamau and Melly note 16.
107
Petition No. 249 of 2016, [2016] eKLR.
36
An arbitration clause that seems to handicap a party to it will not automatically be upheld by the
courts. This was evident in Laiser Communications Limited and 5 others -vs- Safaricom Limited,
108
where the contract had a clause limiting liability of the respondent to Kshs.100, 000. The
appellants claim was for more than the amounts capped under the contract. The Respondent
successfully managed to stay the suit at the High Court. Nevertheless, on appeal the Court ruled
that the limitation of accountability values was an impediment to the appellant’s right to access
justice.
The Laiser decision above seems to interfere with party autonomy and arbitrator’s jurisdiction.
Devoid of proof of coercion to enter into a contract, it is believed to have been executed at will
and as such parties should be held to their respective bargains under the agreement. The
limitation of liability clause in any event should be severed from the arbitration clause which is
an independent contract and must not be seen to be used to invalidate an arbitration. This should
be taken into consideration on view of the fact that Tribunals render their decisions based on
Constitutional considerations that safeguard access to justice.
The decisions in Bia Tosha and Laiser Communications above seem to contradict Kenya’s blue
print of becoming a centre for commercial arbitration. There is therefore an obligation to adapt a
more progressive interpretation of the arbitration law.109
Even though enacted 15 years before the endorsement of the Constitution of Kenya 2010, the Act
should be streamlined to espouse the values and principles of constitutionalism this includes
paramount provisions to promote arbitration where appropriate. In this regard then, the study
108
[2016] eKLR.
109
The Nairobi Centre for International Arbitration Act.
37
adopts the view that if an Act of Parliament and the judiciary are seen to curtail the right to
arbitration the same should be construed as nothing but unconstitutional.
2.3. Conclusion
This chapter has revealed that the discretion of Courts to entertain oppositions to its authority in
favor of arbitration is curtailed by the current formulation of the provisions of Section 6 and the
stringent judicial interpretation. Courts have given prominence to the requirement to stay
proceedings when entering appearance or otherwise loose this right. Ideally the rationale is that
once a court has been seized of a matter, then recourse to arbitration is not plausible. It has
however, been demonstrated that the nature of a memorandum of entering appearance does not
seize a court with a matter and cannot be construed as a step in the proceeding.
This chapter took a critical look at the concept of stay of proceedings and the parties’ free will to
choose how to determine how to resolve their disputes and whether the same is undermined by
the law as currently formulated.
The discussion in 2.2 and 2.3 has shown that the drafting of Section 6 is couched with ambiguity
allowing Courts to arrive at decisions that undermine the principle of stay of proceedings and
consequently frustrates party autonomy in arbitration. There is a need to review the practice in
other jurisdictions on the principle of stay of proceedings with the aim ascertaining the best
practices. This will aid in legislative reform as will be established in the next chapter.
38
CHAPTER THREE
OVERVIEW OF STAY OF PROCEEDINGS IN THE UNITED KINGDOM,
AUSTRALIA AND FRANCE: BEST PRACTICES
3.0 Introduction
The preceding section of this study evaluated the concept of stay as stipulated in the Kenyan Act.
The Chapter explained how the current formulation of Section 6, undermines the rationale for
stay of proceedings which is founded on the basis that arbitration is obligatory.
Chapter three reviews the best practices on stay of court proceedings pending arbitration
proceedings in UK, Australia and France. The salient features of the concept of stay of
proceedings in the three jurisdictions are analysed with a particular interest on how the select
jurisdictions have promoted the effectiveness of arbitration by ensuing a balance of stay of
proceedings pending arbitration while giving due regard to party autonomy.
The chapter aims at showing that the Court’s in the three selected jurisdictions have adapted an
interpretation that upholds party autonomy therefore promoting arbitration. This chapter will take
into consideration the judicial interpretation of Section 9 of the United Kingdom Arbitration Act,
1996, Section 7(2) Australian International Arbitration Act, 1974, (IAA), Article 1448 French
Code de Procedure Civile (CPC) and the lessons Kenya can draw from the best practices in UK,
Australia and France.
It has been noted worldwide that most jurisdictions have a goal of becoming more competitive in
their respective markets hence the desire to adapt rules and administrative processes that promote
39
international Arbitration.110The research has opted to do an analysis of the United Kingdom and
Australia’s legal regime because both countries are common law jurisdictions that rely on
judicial precedents which have a binding force. On the converse France is a civil law jurisdiction
and is considered in this discourse as a way of finding the best practices across jurisdictions.
United Kingdom is the foundation of common law principles.111 The Arbitration Act, 1996 has
taken into consideration certain principles as laid out in the UNCITRAL. Central to this study
being party autonomy and minimum Court interference so as to make arbitration more effective
and a much sought-after dispute resolution mechanism.
Australia is among the leading jurisdictions to accept the 2006 revisions to the UNCITRAL. In
Australia, the adoption of the UNCITRAL at the national and state levels ensures that courts
have legislative authority to facilitate the work of arbitrators. Equally important, the adoption of
the UNCITRAL sends a clear signal to courts that it is desirable that they should exercise that
authority consistently with the objectives to be found, expressly or impliedly, in the domestic
enactments of the UNCITRAL. 112
The French law upholds arbitration, compared to other states in the world113 this is seen in the
fact that it has but in place a transnational character in international arbitration.
The first law in France was passed by the 1981 Decree which was a modern law of arbitration.
The Decree No. 2011-48 of 13th January, 2011 further transforms legislative framework and
110
Mc Cormish note 51
111
<https://www.britannica.com/topic/common-law/The-modernization-of-common-law-in-Great-Britain> accessed
on 6th December, 2018.
112
Mc Cormish note 51
113
International Arbitration 2018, France <https://www.globallegalinsights.com/practice-areas/international-
arbitration-laws-and-regulations/france> accessed on 27th December, 2019.
40
integrates the jurisprudence advanced by French Courts. It is of key significance that the French
arbitration law offers a more accepted arbitration management despite the fact that its arbitration
law is not modeled in line with the UNCITRAL.114
It would consequently be perfect to look at how the law in France has dealt with the issue of stay
of legal proceedings and provide this study with a basis for making suitable recommendations.
Courts in France have immensely advanced the development of international arbitration by
establishing a practice of encouraging arbitration through minimum interference. Where there is
evidence of a valid arbitration clause, French courts will automatically decline to hear the matter.
France is equally considered as a favourable forum for conducting arbitration due to its
progressive statutes. 115
The research therefore, seeks to reconcile why Kenya has decided to abandon a position that
seems popular with the three selected jurisdictions. The said jurisdictions have emerged as
centers for international commercial arbitration on account of the progressive laws on stay of
proceedings.
3.1 Laws Governing Stay of Proceedings in the Three Selected Jurisdictions
The contemporary arbitration crusade stems from the aftermath of World War1. 116The
establishment in 1919 of the League of Nations led legislators to view arbitration as a means
114
<https://www.globallegalinsights.com/practice-areas/international-arbitration-laws-and-regulations/france>
accessed on 27th December, 2018.
115
Jean de la Hosseraye, Stephanie de Giovanni and Juliette Huard-Bourgois, Cms ‘Arbitration in France’
<https://eguides.cmslegal.com/pdf/arbitration_volume_I/CMS%20GtA_Vol%20I_FRANCE.pdf> accessed on
27thDecember, 2018.
116
<https://www.khanacademy.org/humanities/us-history/rise-to-world-power/us-in-wwi/a/the-league-of-
nations>accesed on 22nd December,2018
41
of promoting peace and international trade. 117Enthusiasm for private dispute resolution was
founded around UNCITRAL and the New York Convention. 118
3.1.1 United Kingdom
The 1950 English Arbitration Act was a consolidation of the 1889 and 1934 Arbitration Acts. It
incorporated the power of Courts to stay actions where there was an applicable arbitration
agreement. However, it contained a rider on Section 4(1) that the authority would be
implemented where there was no impediment as stipulated in the law.119 During the period
when the 1950 English act was in force, there was a perforation of varied interpretations with
regard to what constituted a step when considering an application for stay. For example, in
Brighton Marine Palace v Wood House,120 Court stated that seeking extra time to respond to the
claim does not amount to a step. While on the other hand, in Ford’s Hotel Company v
Bartlett121court stated that applying for extension of time to deliver pleadings was viewed as
amounting to taking a step. In this regard thus, what amounted to taking a step was not clear and
it depended on the interpretation of each judge with no apparent consistency evident.122
After the ratification of the Convention, England enacted a new Arbitration Act in 1975 to
operationalize the Convention. This Act did not fundamentally alter the position that persisted in
117
<https://www.theatlantic.com/past/docs/issues/20oct/fosdick.htm>accessed on 22nd December, 2018.
118
<http://kmco.co.ke/wp-content/uploads/2018/08/Paper-on-Recognition-and-Enforcement-of-Foreign-Arbitral-
Awards.pdf>accessed on 28th December, 2018.
119
Section 4 1950 English Arbitration Act.
120
[1893] 2 Ch. 486.
121
[1896] A.C 1. 486.
122
R Breen & G James ‘Arbitration: To Stay or Not to Stay? A Step, Estoppel and a Step Too Far- An Overview of
Recent Judicial Decisions in Ireland,’ available at <http://www.lexology.com/library/detail.aspx?g=72eccbc4-964a-
4236-9f31-9b601d7799da> accessed on 24th August, 2016
122
[1896] A.C 1. 486 quoted in R Breen & G James Ibid.
42
the 1950 Arbitration Act. In the situation of local arbitration agreements, the Court maintained
the choice to allow the application for stay with regards to foreign arbitrations the UK Courts
were mandated to refer a valid arbitral dispute.
The 1996 Arbitration Act is drafted to complement the mandatory provisions.123The 1996 Act
limits court interference in the arbitral procedure except in situations contemplated by the
Law.124 Through the mandatory stay of court proceedings the English Act reduces the desire by
parties to defer proceedings through unmerited applications.125
This study however, only focusses on the law that deals with mandatory stay of proceedings. The
operative Section 9 states that:
“A party to an arbitration agreement against whom legal proceedings are brought (whether
by way of claim or counterclaim) in respect of a matter which under the agreement is to be
referred to an arbitration may (upon notice to the other parties to the proceedings) apply to
the court in which the proceedings have been brought to stay the proceedings so far as they
concern that matter.”
As is evident this section has retained the traditional timeline when a Respondent intending to
benefit from the dispute resolution clause may move the court, that is, after entering appearance
(the procedural step) and before taking any action to respond to the issues raised in the suit. It is
also evident that this provision enjoins English Courts to mandatorily promote arbitration and
enforce the arbitration agreements unless they are content that the agreement is unenforceable.
123
Guy Pendell & David Bridge, ‘Arbitration in England and Wales,’ (n 116), at 302.
124
UK Arbitration Act, 1996, section 1 (c).
125
Ibid, section 9.
43
3.1.2 Australia
Australia is a federal state with six (6) states and two (2) territories.126 Consequently, all
jurisdictions in Australia contain legal systems that govern commercial disputes. The statutes
contain numerous identical and similar provisions. Key being, ousting Court’s jurisdiction in
arbitral matters where parties have approved to have the disagreement referred to arbitration, stay
of arbitration proceedings and non-interference of the Court where the law expressly provides for
arbitration. 127
The federal legal regime for arbitration is the IAA this was enacted to fulfil Australia’s
responsibility under the New York Convention. The 1974 IAA was modified in 2010 to meet the
changes in the arena of international trade principally, the amendments made to the UNCITRAL
in the year 2006.
Section 7 (2) of the 1AA which deals with stay provides as follows;
“Proceedings instituted by a party to an arbitration agreement to which this
section applies against another party to the agreement are pending in a court;
and the proceedings involve the determination of a matter that, in pursuance of
the agreement, is capable of settlement by arbitration; on the application of a
party to the agreement, the court shall, by order, upon such conditions (if any)
as it thinks fit, stay the proceedings or so much of the proceedings as involves
126
<https://www.australia.gov.au/about-government/how-government-works/local-government> accessed on 18th
August, 2018.
127
Section 7 (2) of the IAA. This is likely to apply to most arbitration agreements with international aspects: see s
7(1), and Garnett R 'the current status of international arbitration agreements in Australia' (1999) 15 Journal of
Contract Law 29, 31.
44
the determination of that matter, as the case may be, and refer the partiesto
arbitration in respect of that matter.”
In line with the Uniform Commercial Code, Australian Courts have the authority to look into the
decisions of arbitral tribunals.
3.1.3 France
France implemented a modern arbitration statute in 2011, the intent of the new legislation was to
restructure the conduct of its national and global arbitration. The legislation enacted in 2011 was
a codification of the legal principles advanced in case law and largely sought to uphold the
confidence the French arbitration system has on international users.128
In 1980 and 1981, two revolutionary decrees were passed, introducing progressive arbitration
provisions into the Nouveau Code de Procedure Civile, which was subsequently renamed Code
de Procedure Civile (CPC). Decree No. 80-354 of 14 May 1980 related to domestic arbitration
and Decree No 81-500 of 12 May 1981 related to international arbitration (1980-81 Decrees).129
The operative provision of the code is Article 1448 of the CPC (paragraphs 1 and 2) which states
as follows;
“When a dispute subject to an arbitration agreement is brought before a court, such court shall
decline jurisdiction, except if an arbitral tribunal has not yet been seized of the dispute and if the
arbitration agreement is manifestly void or manifestly not applicable. A court may not decline
jurisdiction on its own motion.”
128
<https://uk.practicallaw.thomsonreuters.com/7-501-
9500?transitionType=Default&contextData=(sc.Default)&firstPage=true&comp=pluk&bhcp=1>
accessed on 20th April, 2019.
129
Jean de la Hosseraye, Stéphanie de Giovanni and Juliette Huard-Bourgois, ‘Arbitration in
France’<https://eguides-
test.cmslegal.com/pdf/arbitration_volume_I/CMS%20GtA_Vol%20I_FRANCE.pdf>accessed on 29th April, 2019.
45
In order for the courts in France to exercise its powers not to entertain a dispute before it, the
court must be moved by the party that seeks to enforce the arbitration agreement. This should be
raised prior to responding to the substantive claim, or else one is deemed to have relinquished the
right to arbitrate.130
The CPC provisions on arbitration were enacted before the UNCITRAL was passed and France
has not modified its laws to resemble it in anyway.131
3.2 How Court’s Have Interpreted Stay of Proceedings in the Three Selected Jurisdictions
As already demonstrated herein, it is evident from the discussion above of the United Kingdom,
Australia and France arbitration statutes, arbitration agreements are given effect by the
mechanism of stay of judicial proceedings.132 A Defendant in a claim or a claimant in a counter
claim may institute an application to ouster courts authority to entertain the dispute placed before
the Court where the agreement contains a valid arbitration clause.133
United Kingdom, Australia and France have adapted the New York Convention and largely
promoted resolution of disputes through arbitration. It has been stated that individuals as well as
entities that take part in commerce opt for arbitration so as to be outside the scope of the courts.
This is based on their desire to avoid lengthy court proceedings while maintaining privacy and
business relationships.134
130
Michael Buhler and Pierre Heitzmann, Jones Day,’PLC Arbitration Book, France’ Arbitration 2009/10,
<https://www.jonesday.com/files/Publication/ee6ac2d0-adef-4f9e-8a82-
fc3dbfadaf7b/Presentation/PublicationAttachment/0c4deb70-26ef-4d77-
b5de0171692d4971/PLC%20Arbitration%20Handbook%20-%20%20Articel%20MB%20(France.pdf).PDF>
accessed on 20th April, 2019.
131
Ibid.
132
Mustill & Boyd, Commercial Arbitration: Companion Volume (London 2001), at 267.
133
Section 9(1), Arbitration Act 1996; as noted by Lord Woolf in Patel v Patel [2000] QB 551, at 556 CA.
134
West Tankers Inc v RAS Riunione Adriatica Dissicurte SPA [2007] UKHL4 per Lord Hoffman at [17].
46
In general, most common law systems specifically stay proceedings in favour of lawful
agreements. The mandatory construction of the provisions of the UK and Australian statutes
precludes the courts from interference in arbitrable disputes, unless in circumstances specifically
provided for under the particular statutes.135
Despite France being a civil law jurisdiction, it has in place a law that seeks to promote.
Arbitration the French arbitration law offers a more satisfactory arbitration management than the
one provided by the UNCITRAL.136
Further, Courts will decline to grant a stay where it has jurisdiction over the matter and consider
that the applicant has by their actions and omissions waived their rights to arbitrate the
grievance. Judicial approach to stay of proceedings is discussed in the study hereunder.
3.2.1 United Kingdom
The position of law in the UK is that an applicant having taken a step in recognizing the claim,137
ought not to have answered to the substantive issues raised in the suit.138 The determining factor
is if the Defendant by rebutting issues raised in a claim has opted out of arbitration.
In Patel v Patel139the Court was of the view that party’s right to arbitrate had not been
abandoned when he sought to have the default judgment that had been entered set aside
unconditionally and he be allowed to defend the claim. The Court here interpreted the
Defendant’s actions to mean that he had not relinquished his right to arbitrate the dispute.
135
Neil Andrews, “Arbitration and Contract Law: Common Law Perspectives, Springer Publishing Switzerland
(2016), at 69.
136
<https://www.globallegalinsights.com/practice-areas/international-arbitration-laws-and-
regulations/france>accessed on 20thApril, 2019.
137
Section 9 (3) English Arbitration Act, 1996.
138
Mustill & Boyd, Commercial Arbitration (n 1), at 270-271; see also Roussel-Uclaf v Searle [1978] 1 Lloyd’s Rep
225, at 231-232, Graham J.: defendant resisting application for interim injunction; this did not involve ‘some
positive act by way of offence on the part of the defendant,’ who was instead parrying a blow’).
139
[2000] QB 551, CA.
47
The decision in Capital Trust Investments Ltd v Radio Design TJ AB,140 addressed the issue
further where it was determined that the Rubicon had not been crossed by the Defendant whose
sought for stay and in the alternative summary judgment to be issued in his favour. The
applicant’s view was that the second limb of his request would only be necessary where the court
became seized of the matter.
The learned Judge in the case of Bilta (UK) Ltd v Nazir141when faced with the same challenge
opined that a request to have additional time prepare the necessary objections to a claim was not
a forbidden step as construed under the English Act. It was an indication that his desire was to
have sufficient time to ascertain whether the dispute was arbitrable.
In case the parties have taken a ‘step’ impugned by section 9 (3), the Courts have been helpful by
encouraging the parties who intend to make an application for stay to indicate that early enough.
For instance, at the time when a defendant is filing a defence they may indicate that ‘…at the
opportune time the defendant shall seek to refer the matter to ADR.
Since the judicial decision made in the Patel case in 1978 judges have been reluctant to impugn a
‘step’ taken by the applicants. In effect the detailing of a response to the suit in the defence was
considered taking a step as held in Russell Bros. & Co. Limited v Lawrence Breen t/a L & E
Properties.142
The decision in Lombard North Central plc & another v GATX Corporation 143gives a bird view
on how the Courts in England will address the issue of deciding on matters touching on Section
9(1) of the 1996, Act. In order to comply with the New York Convention, England adopted a
140
[2002] EWCA Civ 135; [2002] 2 All ER 159; [2002] 1 All ER (Comm) 514; [2002] CLC 787, at 60-64.
141
[2010] EWHC 1086 (Ch); [2010] Bus LR 1634; [2010] 2 Lloyd’s Rep 29.
142
(Pringle J., unreported, March 14, 1997).
143
[2012] EWHC 1067 (Comm).
48
provision of law that prohibit suits that are brought in express contravention of the desire by
parties as laid down in their contractual agreement to arbitrate a dispute.
Most recently in Autoridad del Canal de Panama v Sacyr, S.A. & Ors,144 where the court
considered a failed stay application relating to the International Chamber of Commerce
arbitration. In a subsequent judgment, the English Court deliberated further on the practical
repercussions of the analogous proceedings. The Court rejected the Consortium’s argument and
refused to entertain the challenge to the decision to decline to halt the proceedings.
In so doing, the Court interpreted the law to mean that an answer to the claim by the Consortium
would not constitute a step to deprive the Appellate Court of its jurisdiction to grant a stay on
appeal. Consequently, it allowed the proceedings awaiting the outcome of the Consortium’s
request to appeal.
The Courts in England have largely taken a pro – enforcement approach to arbitration
agreements. This is mirrored in the courts extensive and liberal attitude to the construction of
arbitration clauses. English Courts will rarely hold that the clause is void for uncertainty and will
endeavour to uphold the agreement. In the event the provisions of Section 9 have not been
adhered to the court is able to down its tools in line with its inherent jurisdiction.
144
[2017] EWHC 2337 (Comm).
49
3.2.2 Australia
Article 8, of UNCITRAL oversees the attitude of domestic courts in Australia where a party
initiates a suit in completer disregard to the arbitration agreement.145
The Courts in Australia are in certain instances faced with a multiplicity of suits instituted by the
same claimant. In such instances the judicial officers have adopted the approach of elimination
and entertaining suits where it has jurisdiction.146The remaining suits are therefore referred to
arbitration in compliance with party autonomy and freedom of contract.147
This is not to say that Courts are precluded from intervention however, the intervention must be
necessary where a clear thought out process must have been laid out.148 In spite of this the
appellate Court in Ahmad Al-Naimi v Islamic Press Agency149asserted itself and opined that it has
the inherent jurisdiction to stay proceedings and as such its role must not be taken for granted.
The said position has been firmly laid down in the Australian decision in CSR v Gigna Insurance
Australia Limited150 where the Court ordered a stay which had the effect of restraining deviation
from the terms of the contract.
The stay of court proceedings is aimed at preventing vexatious and unfair behavior by a party
who appears to abuse an arbitration agreement. Upon production of sufficient evidence of the
145
Peter Wood, Phillip Greenham and Roman Rozenberg, Minter Ellison, ‘Arbitration in
Australia’<https://eguides.cmslegal.com/pdf/arbitration_volume_I/CMS%20GtA_Vol%20I_AUSTRALIA.pdf>
accessed on 29thApril, 2019.
146
<Https: //uk.practicallaw.thomsonreuters.com’> Accessed on 25th August, 2018.
147
(Hi- Fert Pty Limited and Cargill Fertilizer Inc v Kiukiang Maritime Carriers Inc and Western Bulk Carriers
(Australia) Limited (1998) 159 ALR 142).
148
Vale Do Rio Dole Navegacao SA v Shanghai Bao Steel Ocean Shipping Co ltd (2000).
149
[2000] APP.L.R. 0.
150
(1997)189 CLR 345 at 392.
50
existence of a valid agreement the Defendant must give reasons why he should not be ordered to
adhere to his contractual promise.151
In order to constitute a waiver, the laid down requirements are high. In Comandate Corporation
v Pan Australia Shipping, it was ascertained that the privileges accorded to parties by arbitration
and litigation are consistent. Consequently, when a party takes part in the court process it does
not imply that they have abandoned the obligations under the dispute resolution clause.152The
Court went on to affirm the need to give credence and efficacy to the needs of international trade.
To achieve this party autonomy and freedom of contract must be given consideration when
trying to purposively refer disputes to arbitration.153
The law under Section 7 of the Act is mandatory in nature preventing the evasion of a
contractual obligation by instigating a third party to commence litigation. The Courts will
ordinarily decline to entertain such a claim so as to guard the clarity of the tribunal.
When persons who have no privity of contract are allowed to participate in arbitration
proceedings it weakens the desire of parties to settle on the forum for addressing their
grievances.154This violates the freedom of contract as well as party autonomy that is supreme in
the scope of ADR. It would equally expose the proceedings to public scrutiny as the choice of
forum will be based on those applicable to litigation. The Courts in Australia in Flint Ink NZ Ltd
v Huhtamaki Australia Pty Ltd,155 upheld this assertion by declining to entertain a suit instituted
151
Donohue-vs-Armco [2002] Lloyds Rep 425 at 432
152
(2006)157 FCR 45[62].
153
See Richard Garnett, ‘Australia’s International and Domestic Arbitration Framework’ in GA Moens and P Evans,
Arbitration and Dispute Resolution in the Resources Sector (New York, Springer, 2015) 9, available online:
<www.springer.com/cda/content/document/cda_downloaddocument/9783319174518-c2.pdf?SGWID=0-0-45-
1507878-p177329726 >. accessed on 20th August,2018.
154
Margaret L. Moses, ‘The Principles and Practice of International Commercial Arbitration,’ (Cambridge
University Press 2008) 17-18.
155
(2014) 289 FLR 30.
51
by a third party. The purpose was that the Court made efforts to respect contractual obligations
that is the mainstay of commerce in Australia.
The Australian companies are increasingly becoming aware of arbitration, this has led the Courts
to place considerable importance in the arbitration process. The widespread adaption of the New
York Convention in Australia is geared towards the desire by the Court to ensure that a pro
arbitration approach will propel Australia to being a favourable forum for the settlement of
international disputes.
3.2.3 France
In France where proceedings are commenced in contravention of the contract to arbitrate, courts
will not be seized of jurisdiction, unless in instances where the arbitration agreement cannot be
implemented.156Parties must raise their opposition before filing any substantive response to the
claim, or else they are considered to have consented to court’s jurisdiction.
Whereas common law jurisdiction courts will halt the process the courts in France will not
accept jurisdiction at the very outset. However, the courts cannot exercise this discretion on its
own, it must be moved by a party seeking to have the matter determined by arbitration. The
court’s pronouncement on the matter may be challenged within 15 days under a distinctive
process intended to circumvent expenses and stay157
Article 1448 CPC.

156
Michael
157
O’ Reilly, ‘Appeals from Arbitral Awards: the section 69 Debate’
<https://www.justice.gov.uk/courts/procedure-rules/civil/pdf/practice_directions/pd_part62.pdf> accessed on 19th
July, 2018.
52
3.3 Lessons for Kenya
The preceding discussion has shown the evolution of stay of proceedings in UK, Australia and
France which arose from the desire to make international arbitration friendly. In a bid to enhance
these legislative changes the three select jurisdictions seem to have made major inroads where
the Kenyan Act has failed in reducing unnecessary court intervention in matters under the realm
of arbitration.
Article 8 (1) refers to timelines for which the application can be made. It also approves that the
applicant is allowed to approach the forum court before lodging a rebuttal to the claim that has
been put out in court. To this end all that the UNICITRAL is envisaging is, after a party has
filled statements that answer the substantive claim before the court then they are precluded from
enforcing the arbitration.
Unlike Kenya, the UK and Australia have not given any consideration and thought process to the
issue of entering appearance. This is probably because the drafters of the law never envisioned
this as a restricting factor to a grant of stay of proceedings. Similarly, under UNICITRAL
entering appearance is inconsequential.158 The silence on the aspect of entering appearance is
therefore, a big step in promoting international commercial arbitration.
UNICITRAL presupposes that an intent to resolve the disagreement through arbitration can only
be made if a party has not filed a substantive response to the issues raised in the suit. The Courts
have often considered that the request must be made in due time.159
158
CiArb-Kenya Journal, 148-162, 148.
159
UNCITRAL Digest of Case Law on the Model Law on International Commercial Arbitration, United Nations
Publication, Sales NO. E12, Volume 9(2012), at 33.
53
With regards to what amounts to a step in the judicial proceedings, English Courts have moved
to define the same ensuring there is no lacuna in interpretation. From the study, it emerged that
the prevailing policy for Court intervention in Australia is minimal court intervention while in
France the court will decline jurisdiction. The key approaches in Court intervention in arbitration
around the world seems to follow two key patterns; minimal intervention of the Court except in
public interest and supporting arbitration in order to realize its obligatory role.
It must be underscored that Article 8(1) is couched in mandatory terms to the extent that its terms
are binding and the courts are not given leeway to exercise discretion. 160The law further allows
the commencement of arbitration hearings before an arbitral tribunal during which an application
challenging the Courts Jurisdiction can be raised. The rationale for this is to be viewed in light of
Article 16 of the UNICITRAL which donates to the tribunal the capability to decide on whether
or not it has power to entertain the dispute.161
A country is not obligated to follow the provisions of UNICITRAL in totality, alterations and
adaptations that are relevant to the countries commercial needs are to be taken into consideration.
162
However, this does not mean enacting laws that are mismatched in comparison to the
contemporary global practices in arbitration.
The 1996 Act and the 1974 IAA have clarified the law making it less susceptible to court
challenges. The Act, took into cognizance UNICITRAL in tune with the clamor for legislative
change. However, as a result of muddled drafting the provision of the law is ambiguous.
160
UNICITRAL Digest of Case Law on the Model Law on International Commercial Arbitration, United Nations
Publication, Sales (N 18) at 37.
161
Alan Uzelac, “Jurisdiction of the Arbitral Tribunal: Current Jurisprudence and problem areas under the
UNICITRAL Model Law,’’ INT.A.A.L.R. Issue 5, Sweet and Maxwell and Contributors (2005).
162
54
The Act, has given impetus to party autonomy which has however, been abused by parties who
seek to deviate from their contractual obligations by instituting Court proceedings to delay the
process.
The Arbitration Act, 1996 and Australian Act, 1974 on the other hand, have been amended over
time and due consideration given to the stakeholders affected by the law. In that regard the laws
that have been enacted are progressive and adequately cater for the interests of commerce and
trade in UK and Australia.
The Kenyan law is as a result of poor drafting. It is not without doubt that to blunder is human
however we must correct the situation by making the law enforceable without undue regard to
technicalities.
On the other hand, the Kenyan Act can be made progressive by taking into consideration the sole
intent of the legislators of the Act as well as the Constitution and synchronize the law governing
stay to cater for the ever growing need to settle international commercial disputes through
arbitration. This is where we can borrow from the judicial interpretation in France.
The desire to annul the Act, through the Arbitration Bill 2009 was a welcome move that was
viewed as a way to give Kenya a modern law. However, it ended up as a mere patching up of the
statute and a complete repeal of the Act was not taken into consideration.
3.4 Conclusion
This chapter has discussed the concept of stay of proceedings in the UK, Australia and France. It
has emerged that the two Common law countries and the Courts in the UK and Australia have
managed to strike a balance between interfering in matters arbitration and its obligatory nature.
55
France despite being a civil law jurisdiction has managed to strike a balance by declining
jurisdiction in matter governed by the arbitration clause.
It has been established that in the UK and Australia there is synergetic association between the
Courts of law and ADR in determining disputes. The Courts enforce their authority by giving
respect to parties’ freedom to determine the forum for resolution of their disputes.163
With respect to this research, the observation made is that the drafting of the Kenyan Act is
substantially different from similar provisions in the UK, Australia and French Acts and
international conventions that Kenya has acceded to, should offer a moment of reflection on the
Kenyan regime.
The chapter has answered the third and fourth research questions by setting out the lessons for
Kenya based on how the UK, Australia and France have dealt with applications for stay and has
laid down the basis for legislative change as deliberated in the subsequent section.
163
Rares, Justice Steven --- "The role of Courts in arbitration" (FCA) [2012] FedJSchol 12
< http://www.austlii.edu.au/au/journals/FedJSchol/2012/12.html> accessed on 29 th August, 2018.
56
CHAPTER FOUR
FINDINGS, CONCLUSION AND RECOMMENDATIONS
4.0 Summary of Findings
This section of the research recaps the salient features of the study based on the findings from the
preceding chapters. It will also lay down the proposals for legislative change arising from the
observation that the interpretation of stay pending arbitration is inhibited by the muddled drafting
of Section 6 of the Act. This coupled with the varied judicial interpretations emanating from our
Courts have been a hindrance to Kenya being a centre of arbitration.
This research is founded on party autonomy theory as well as freedom of contract theory. These
theories have aided the research in proposing the repeal of Section 6. Further, the freedom of
contract theory has been the basis for proposing progressive interpretation of Section 6. This
research has analysed and critiqued Section 6 of the Act in the context of the constitutional
dispensation, the spirit of the Kenyan Act, UNICITRAL and legal rules in the UK, Australia and
France which were the jurisdictions analysed in this research.
This study sought to make a case for parties to be bound to uphold the terms of their contractual
agreements before exploring other options for resolution of their grievances. The study seeks to
examine how Section 6 of the Act, has frustrated or undermined the principle of stay of
proceedings pending arbitration and parties’ autonomy to resolve their contractual disputes away
from litigation.
57
The research has elucidated that based on the fact that acknowledging a claim is commenced by
entering appearance, the failure to file an application after entering appearance but before
making any substantive rebuttals to the claim should not be interpreted that a party has opted out
of ADR. This is evaluated based on comparative jurisdictional elucidation of the concept of
entering appearance with respect to stay of proceedings pending arbitration.
4.1 Conclusion
The researcher herein has been able to discern that the inadvertence to file a memorandum of
appearance concurrently with the application for stay of proceedings should not be used to curtail
intent to resolve disagreements as has been alluded to in Chapter 2 of the thesis.
The researcher reviewed various materials where an arbitration contract exists in Kenya, the
United Kingdom, Australia and France. In addition to literature reviewed on stay of proceedings
pending arbitration, the researcher analysed fairly a huge number of cases to determine the
position of stay of proceedings in Kenya. The law in United Kingdom, Australia and France is
discussed in Chapter 3. In the analysis, written texts and case law as well as codes of law were
taken into consideration.
The need to uphold party contractual agreement and desire of parties to decide a mode of dispute
resolution is posited on examination of the statues governing arbitration, in addition to the law
and practice in the United Kingdom, Australia and France.
58
To answer the first and second research questions being, whether Section 6 (1) of the Act,
frustrate or undermine arbitral proceedings in so far as it allows proceedings in the court where
the contract envisages arbitration and whether the provisions of the Section 6 (1) of the Act,
undermine the concept of stay of which is founded on the obligatory nature of arbitration
agreements.
The questions have been answered in the positive and the research proposes that the Courts
should ensure limited interference in matters governed by agreement of parties. Failure by
judicial bodies to decline jurisdiction is deemed to be a violation of rule of law and due process.
This trend gives room for desecration of the contractual obligations leading to an innocent party
being dragged through the process of rigorous litigation.
The questions have been answered by analysing the odd nature of construction of the Kenyan
Act by the Courts that by entering appearance a party has taken a step acknowledging the claim
thus estopped from arbitration. Therefore, unlike United Kingdom and Australia which do not
make reference to entering appearance as a delimiting factor to stay, their laws have promoted
and advanced the obligation of contracting parties. France on the other hand seems to be more
progressive, the courts do not stay proceedings but they decline jurisdiction over arbitrable
disputes.
In response to the third and fourth research questions on how the United Kingdom, Australia and
France have dealt with the concept of stay of proceedings where contracts are governed by
arbitration agreements and what lessons can Kenya embrace to aid in legislative change of
Section 6(1) of the Act.
59
This research has considered at the historical expansion of the law of stay of proceedings. The
best practices have adapted broad interpretation of the concept of stay of proceedings and upheld
resolution of disputes based on internationally recognised methods outside of Courts jurisdiction.
The UK and Australia both common law jurisdictions have adapted provisions that are of a
mandatory nature of arbitration which have ensured that party autonomy is upheld at all times
save for constraints imposed by law. France on the other hand despite being a civil law
jurisdiction has offered a more pro- active enforcement of the arbitration law than the one
provided under the modern law.
The research begun on the hypotheses, whether Section 6 (1) of the Act, frustrates or undermines
arbitral proceedings in so far as it allows proceedings in the court where the contract envisages
arbitration, thereby undermining the obligatory nature of arbitration agreements. The second
hypothesis was whether the United Kingdom, Australia and France have demonstrated best
practices which conform to Kenyan Constitution which advocates for arbitration as ADR
mechanism.
This research has shown that disregard to party autonomy contradicts the best practices in
commercial arbitration world over as seen in the elucidation in chapters two and three of the
research herein.
From the lessons for Kenya, the research has further evaluated how the United Kingdom and
Australia have demonstrated best practices by upholding party autonomy and eliminating
unnecessary court interference in arbitration. Conversely, France is home for the International
Chamber of Commerce and despite being a civil law jurisdiction it has upheld the arbitration
60
agreement thereby upholding ADR. This is in conformity to Article 159 of the Constitution that
endorses ADR.
The findings from the best practices have influenced the recommendation for the repeal of
Section 6 of the Act to pave way for legislative change that is geared towards making Kenya a
centre for international commercial arbitration.
4.2 Recommendations
The foregoing research has ascertained that stay of proceedings is one of the key attributes of
arbitration. It has been shown that party autonomy is paramount to determination of disputes in
arbitration. The research, has revealed conditions in which the Court can interfere in matters
arbitration. Nevertheless, Section 6 of the Act undermines party autonomy and non-interference
as provided by Section 10 of the Act by declining to stay proceedings on account of a party not
lodging the application for stay at the time of entering appearance.
Many reforms are therefore needed if the principle of stay of proceedings is to uphold arbitration
and eliminate unnecessary court intervention that makes arbitration burdensome. Court
interference process is riddled with stringent parameters that give legal practitioners planning on
postponement of arbitration proceedings an opportunity to create schemes.
61
4.2.1 Integrated framework and policy
There is need for an overhaul of the Arbitration (Amendment) Act, 2009 to fill the gaps and
address challenges faced in conducting arbitration in Kenya. This is necessary to align the Kenya
arbitration law with current trends in international arbitration.
A fully-fledged alternative dispute statute must be operationalized to actualize the gains of
Article 159 of the Constitution. The Arbitration (Amendment) Act, 2009 should succinctly
provide sound dispute referral mechanism and make it imperative for the parties to exhaust all
the ADR mechanisms before resorting to courts and impose sanctions to parties who circumvent
these provisions.
4.2.2 Training and inculcating a culture of Alternative Dispute Resolution.
The consensus appeared to be that the root cause of the problem is limited exposure to alternative
ways of settling grievances. To limit the nature and approach to court intervention in arbitration
in Kenya.
The business community, legal fraternity, our judge’s new generation of lawyers and business
people need to be sensitized and trained, there is need for a judiciary-led ADR initiative
comprising awareness training for the judiciary, legal professions, academic and private sectors.
The government through the Ministry of Planning and Devolution ought to guarantee a
budgetary allocation for ADR structures. Judicial officers through the Judiciary Training Institute
should be trained on the importance of ADR and how it can be used to reduce the backlog and
clogging in the courts. Advocates should in turn be sensitized on ADR through their continuing
62
professional development organized by the Law Society of Kenya and the Chartered Institute of
Arbitration. ADR programs should also be entrenched in law schools and legal clinics.
There is an eminent urgency for a practice direction to give priority to arbitration applications in
court to ensure speedy disposal of arbitral matters. It is prudent to strengthen the Commercial
Courts as well as enactment of time bound rules of procedure to ensure that arbitration
applications in court are fast tracked and dispensed with within a specific period after filling.
4.2.3 Robust institutional capacity
Attention needs to be paid towards capacity building of institutions. National and County
Governments need to collaborate with institutions like the Chartered institute of Arbitrators and
the Dispute Resolution Centre to build capacity across the country by putting in place adequate
infrastructure to train and equip ADR practitioners.
The researcher, therefore, calls on the Courts to support and not to choke arbitration by
upholding technicalities. The mainstream court practice in Kenya paints a different picture. The
Court came across as being inconsistent in the interpretation of its role in arbitration. Indeed, in
most cases it seemed the Court considers its role as being parallel to the arbitrators.
63
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UNIVERSITY OF NAIROBI

STAY OF LEGAL PROCEEDINGS PENDING ARBITRATION IN KENYA: JUDICIAL

INTERPRETATION AND A CALL FOR LEGISLATIVE CHANGE

JAKAILA JULIETTE LEORNARA AKOTH

A THESIS SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS OF

THE AWARD OF THE DEGREE OF MASTER OF LAWS, UNIVERSITY OF NAIROBI

I, JAKAILA JULIETTE LEORNARA AKOTH, do hereby declare that this Thesis is my

submitted for a degree in any other university.

Signature: ………………………………………….. Date: …………………………

JAKAILA JULIETTE LEORNARA AKOTH

Signature:……………………………………… Date: ……………………………

this journey has indeed been long.

Above all, I am deeply beholden to my endearing family; my parents, my brother, my sisters, my

nephews and niece for their understanding, prayers and support.

made this journey possible.

CHAPTER ONE ........................................................................................................................... 1

CHAPTER TWO: REVIEW OF THE CONCEPT OF STAY OF PROCEEDINGS

CHAPTER THREE OVERVIEW OF STAY OF PROCEEDINGS IN THE UNITED

CHAPTER FOUR: FINDINGS, CONCLUSION AND RECOMMENDATIONS .............. 57

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CSR v Gigna Insurance Australia Limited (1997)189 CLR 345 at 392.

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Ford’s Hotel Company v Bartlett [1896] AC 1 486.

M’Kiara v M’Ikiandi (1984) KLR.

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Arbitration (Amendment) Act, No. 11 of 2009, Laws of Kenya

Arbitration Act, Chapter 49, Laws of Kenya

Arbitration Act, No. 4 of 1995, Laws of Kenya

Arbitration Ordinance, 1914

Australia International Arbitration Act, 1974

Civil Procedure Act, Chapter 21, Laws of Kenya

Code de Procedure Civile

Limitations of Actions Act, Chapter 22, Laws of Kenya

Nouveau Code de Procedure Civile

UK Arbitration Act, 1889

UK Arbitration Act, 1950

UK Arbitration Act, 1975

UK Arbitration Act, 1979

UK Arbitration Act, 1996

Charter of the United Nations, 1945.

United Nations Commission on International Trade Law Model Law on International

on International Trade Law.