News & Analysis

Proposals for Making Kenya a Preferred Seat for International Arbitration

Published

1 year ago

March 28, 2022

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By Dr. Kariuki Muigua, PhD (Leading Environmental Law Scholar, Policy Advisor, Natural Resources Lawyer and Dispute Resolution Expert from Kenya), Winner of Kenya’s ADR Practitioner of the Year 2021, ADR Publisher of the Year 2021 and CIArb (Kenya) Lifetime Achievement Award 2021*

Kenya has a promising future as the preferred seat and venue for international arbitration. All that is required is for the stakeholders to work closely in order to eliminate the challenges identified in this chapter as well as ensuring that the law and institutional practice stays up to date as far as international trends in international arbitration are concerned. Here are some proposals for making Kenya a preferred seat for international arbitration:

Capacity Building on Arbitration

Kenya has qualified and experienced arbitrators who are arbitrating commercial disputes around Africa. Indeed, following the revival of the East African Community and the expansion of regional trade, the possibility of Nairobi becoming a regional centre for arbitration is very high. Therefore, the prospects of international commercial arbitration in Kenya are really promising. However, with the changing trends at the global scene, there is a need for the practitioners and the judges to stay abreast with what is happening. In addition, with the international commercial arbitration taking root in Kenya in recent years and the ever increasing institutional capacity, there is a need to equip students and practitioners with the basic knowledge in their quest for expertise in the area.

Marketing and Arbi-Tourism

The stakeholders in arbitration sector in the country can utilise arbi-tourism to market Kenya as a preferred seat and venue for international arbitration. Arbitourism (arbitration tourism) may be defined as the promotion of arbitration alongside tourism. Kenya is known globally for its tourism sector and thus, the stakeholders in the arbitration and dispute resolution sector should make use of this fame. While marketing Kenya as a tourist destination, there is a need for the ADR stakeholders to consider working with the ministry of tourism and all other relevant ministries to market Kenya as a friendly seat and venue for international arbitration. This could be done by providing incentives in terms of subsidized hotel and park rates for those who are in the country for international arbitration. The relevant government and private stakeholders should also take advantage of international conferences and seminar forums to market the country as a friendly and viable seat and venue for international arbitration.

Enhancing Security

Over the last several years, Kenya has had an unprecedented level of insecurity from both internal and external forces such as the Somali Islamist group, Alshabaab. This has negatively affected the image of Kenya as a safe destination for tourism and business due to this increased insecurity. While the government has done much in improving security over the years, the perception that the larger horn of Africa is insecure still affects Kenya’s rating. If effort towards marketing Kenya as a preferred seat and venue for international arbitration are to bear fruits, then there is a need for the stakeholders in the security department to work closely with other regional leaders to eradicate the insecurity or the perception for the same since security is paramount for both local practitioners and the foreign ones, together with their clients.

Adherence to the Rule of law

The Constitution of Kenya, 2010 provides under Article 259(1) that the Constitution should be interpreted in a manner that: promotes its purposes, values and principles; advances the rule of law, and the human rights and fundamental freedoms in the Bill of Rights; permits the development of the law; and contributes to good governance. While international arbitration has developed over the years to stand as a transnational legal order, its outcomes still heavily rely on national courts and laws in conservatory orders as well as recognition and enforcement of arbitral should also take advantage of international conferences and seminar forums to market the country as a friendly and viable seat and venue for international arbitration.

Supportive Institutional Framework and Informed Judges

International arbitration is an important component of the right of access to justice especially in commercial disputes. There have been efforts over the years to ensure that the legal and institutional framework on access to justice in Kenya achieves that: fulfilment of the right of access to justice. Notably, this right comes with several components as a means to an end. In the case of Dry Associates Limited v Capital Markets Authority & Another; Interested Party Crown Berger (K) Ltd71, the High Court outlined some of the components of access to justice as follows: [110] “Access to justice is a broad concept that defies easy definition. It includes the enshrinement of rights in the law; awareness of and understanding of the law; easy availability of information pertinent to one’s rights; equal right to the protection of those rights by the law enforcement agencies; easy access to the justice system particularly the formal adjudicatory processes; availability of physical legal infrastructure; affordability of legal services; provision of a conducive environment within the judicial system; expeditious disposal of cases and enforcement of judicial decisions without delay.”

Further, in Kenya Bus Service Ltd & another v Minister for Transport & 2 others [2012] eKLR, the Court affirmed that “the right of access to justice protected by the Constitution involves the right of ordinary citizens being able to access remedies and relief from the Courts. The Supreme Court also elaborated on the confines of access to justice in the case of Francis Karioko Muruatetu & another v Republic72, in the following words: [57] Thus, with regard to access to justice and fair hearing, the State through the courts, ensures that all persons are able to ventilate their disputes. Access to justice includes the right to a fair trial. If a trial is unfair, one cannot be said to have accessed justice. In this respect, when a murder convict’s sentence cannot be reviewed by a higher court, he is denied access to justice which cannot be justified in light of Article 48 of the Constitution.

International Cooperation

As already pointed out, international arbitration developed over the years to achieve the status of a transnational legal order. As such, its development and continued acceptance heavily relies on cooperation amongst various states in both developing and developed world to recognise and enforce the outcome of international arbitration in their jurisdictions. There is therefore a need for Kenya work closely with other likeminded states in Africa and beyond in order to build its capacity and have a ready market for its institutions.

Easy Access and Travel to Kenya

One of the factors that make any country to lag behind in attracting international arbitration practitioners and parties’ preference for a country as their preferred seat for their arbitration is difficulty in accessing the same physically, should they require traveling there. The Free Trade Agreement (FTA) is set to ease the entry of established US companies into the local market. If concluded, the reciprocal trade deal would grant the US government unfettered entry for its companies into nearly all segments of Kenya’s economy, including the heavily guarded ones. While this may come with intended and unintended repercussions for the job market for Kenyans and local companies, the same is also likely to bring some work for the local arbitrators and institutions, if they are ready to grab the opportunity and well prepared for the same. As for foreign parties that may not have their businesses running local subsidiaries, they can benefit from government to government agreements on either complete waiver of visas or convenient arrangements that might allow business persons entering the country to get their visas on arrival.

Kenya is among the very few states in the world that offer visa exemption to quite a number of particular nationalities. Currently, the citizens of 43 states can travel to Kenya without a visa, only a passport is necessary to enter the country, and there’s no need to get a Kenyan visa. The only exceptions to this rule involve the citizens of Rwanda and Uganda, part of the East African Agreement, who can travel to Kenya only with their Identity Cards. As a way of promoting Kenya as a preferred seat for international arbitration, Kenyan stakeholders in arbitration may consider approaching the Government for either visa free entry or specialized processes for visa processing for parties who choose to carry out their arbitration in the country or choose Kenya as their preferred seat and decide to visit the country for business.

Effective Supporting Institutions

As already mentioned elsewhere, Kenyan courts have shown a positive attitude towards ADR and arbitration and are willing to minimize court intervention as envisaged under the relevant laws. There is a need for ensuring that this continues and also ensuring that lawyers and judicial officers are not used by parties to frustrate the arbitration process. Only then will the practice of international arbitration in the country grow and attract international clientele.

Enhanced Access to Internet and Cybersecurity

With the world becoming global village due to the advancement in technology, it is possible for parties to carry out their international arbitration proceedings from different parts of the world. Technology has also become a valued part of arbitration proceedings and has been embraced by all the major arbitral institutions across the world. The corona virus pandemic has forced many professions to resort to the use of virtual forums to conduct meetings. While Kenya has made considerable steps in enhancing access and the use of internet in the country, the same cannot be said to be satisfactory. The country has also made some progress in putting in place cybersecurity law, a step towards enhancing trust for dispute resolvers and their clients. There is however a need for the local arbitration practitioners and institutions to borrow a leaf from their international counterparts and invest in the appropriate software and hardware necessary for virtual arbitration. Technology can save parties valuable time and resources and still achieve justice.

Perception of Corruption

Kenya’s justice sector and its key players have consistently been rated poorly as far as corruption index is concerned. Section 35 confers the High court powers to set aside an arbitral award under the circumstances provided under that provision. Notably, Section 35(2) of the Arbitration Act sets out the grounds upon which the High Court will set aside an arbitral award upon the applicant furnishing proof. These grounds include, inter alia: where fraud, undue influence or corruption affected the making of the award. The High Court may also decline recognition and/enforcement of an award if its making was affected by fraud, corruption or undue influence. There is a need to fight corruption in order to create conducive environment for international arbitration and eliminate any notion or perception that the government is likely to interfere with private commercial arbitration matters.

*This article is an extract from the Book: Settling Disputes Through Arbitration in Kenya, 4^th Edition (Chapter Thirteen), Glenwood Publishers, Nairobi, 2022 by Dr. Kariuki Muigua, PhD, Kenya’s ADR Practitioner of the Year 2021 (Nairobi Legal Awards), ADR Publisher of the Year 2021 and ADR Lifetime Achievement Award 2021 (CIArb Kenya). Dr. Kariuki Muigua is a foremost Environmental Law and Natural Resources Lawyer and Scholar, Sustainable Development Advocate and Conflict Management Expert in Kenya. Dr. Kariuki Muigua is a Senior Lecturer of Environmental Law and Dispute resolution at the University of Nairobi School of Law and The Center for Advanced Studies in Environmental Law and Policy (CASELAP). He has published numerous books and articles on Environmental Law, Environmental Justice Conflict Management, Alternative Dispute Resolution and Sustainable Development. Dr. Muigua is also a Chartered Arbitrator, an Accredited Mediator, the Africa Trustee of the Chartered Institute of Arbitrators and the Managing Partner of Kariuki Muigua & Co. Advocates. Dr. Muigua is recognized among the top 5 leading lawyers and dispute resolution experts in Kenya by the Chambers Global Guide 2022.

References

Muigua, K., Settling Disputes Through Arbitration in Kenya, 4^th Edition, Glenwood Publishers, Nairobi, 2022, p. 261 to 264.

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News & Analysis

The Roles of the Three Parts of the Permanent Court of Arbitration

Published

2 days ago

May 30, 2023

Admin

H.E. Amb. Marcin Czepelak, the Fourteenth Secretary-General of the Permanent Court of Arbitration (PCA)

(more…)

News & Analysis

Brief History of the Permanent Court of Arbitration (PCA)

Published

7 days ago

May 26, 2023

Admin

By Dr. Kariuki Muigua, PhD, C.Arb, Current Member of Permanent Court of Arbitration (PCA) Representing the Republic of Kenya.

The Permanent Court of Arbitration (PCA) is a 124 Years Old Intergovernmental Organization currently with 122 contracting states. It was established at the turn of 20^th Century during the first Hague Peace Conference held between 18^th May and 29^th July 1899. The conference was an initiative of then Russian Czar Nicholas II to discuss peace and disarmament and specifically with the object of “seeking the most effective means of ensuring to all peoples the benefits of a real and lasting peace, and, above all, of limiting the progressive development of existing armaments.” The culmination of the conference was the adoption of a Convention on the Pacific Settlement of International Disputes, which dealt not only with arbitration but also with other methods of pacific settlement, such as good offices and mediation.

The aim of the conference was to “strengthen systems of international dispute resolution” especially international arbitration which in the last century had proven effective for the purpose with number of successful international arbitrations being concluded among Nations. The Alabama arbitration of 1871-1872 between the United Kingdom (UK) and the United States (US) under the Treaty of Washington of 1871 culminating in the arbitral tribunal’s award that the UK pay the US compensation for breach of neutrality during American Civil War which it did had demonstrated the effectiveness of arbitration in settling of international disputes and piqued interest of many practitioners in it as a mode of dispute resolution during the latter years of the nineteenth century.

The Institut de Droit International adopted a code of procedure for arbitration in 1875 to answer the need for a general law of arbitration governing for countries and parties wishing to have recourse to international arbitration. The growth of arbitration as a mode of international dispute resolution formed the background of the 1899 conference and informed its most enduring achievement, namely, the establishment of the PCA as the first global mechanism for the settlement of disputes between states. Article 16 of the 1899 Convention recognized that “in questions of a legal nature, and especially in the interpretation or application of International Conventions” arbitration is the “most effective, and at the same time the most equitable, means of settling disputes which diplomacy has failed to settle.”

In turn, the 1899 Convention provided for the creation of permanent machinery to enable the setting up of arbitral tribunals as necessary and to facilitate their work under the auspices of the institution it named as the Permanent Court of Arbitration (PCA). In particular, Article 20 of the 1899 Convention stated that “[w]ith the object of facilitating an immediate recourse to arbitration for international differences which it has not been possible to settle by diplomacy, the signatory Powers undertake to organize a Permanent Court of Arbitration, accessible at all times and operating, unless otherwise stipulated by the parties, in accordance with the rules of procedure inserted in the present Convention.” In effect, the Convention set up a permanent system of international arbitration and institutionalized the law and practice of arbitration in a definite and acceptable way.

As a result, the Permanent Court of Arbitration (PCA) was established in 1900 and began operating in 1902. The PCA as established consisted of a panel of jurists designated by each country acceding to the Convention with each country being entitled to designate up to four from among whom the members of each arbitral tribunal might be chosen. In addition, the Convention created a permanent Bureau, located in The Hague, with functions similar to those of a court registry or secretariat. The 1899 Convention also laid down a set of rules of procedure to govern the conduct of arbitrations under the PCA framework.

The second Hague Peace Conference in 1907 saw a revision of the 1899 Convention and improvement of the rules governing arbitral proceedings. Today, the PCA has developed into a modern, multi-faceted arbitral institution perfectly situated to meet the evolving dispute resolution needs of the international community. The Permanent Court of Arbitration has also diversified its service offering alongside those contemplated by the Conventions. For instance, today the International Bureau of the Permanent Court of Arbitration serves as a registry in important international arbitrations. In 1993, the Permanent Court of Arbitration adopted new “Optional Rules for Arbitrating Disputes between Two Parties of Which Only One Is a State” and, in 2001, “Optional Rules for Arbitration of Disputes Relating to Natural Resources and/or the Environment”.

Reference

PCA Website: https://pca-cpa.org/en/about/introduction/history/ (accessed on 25^th May 2023).

News & Analysis

Former KCB Company Secretary Sues Over Unlawful Dismissal

Published

4 months ago

January 19, 2023

Admin

Former KCB Group Company Secretary Joseph Kamau Kania who has sued the Bank for Unlawful Dismissal

Former KCB Group Company Secretary Joseph Kamau Kania has sued the lender seeking reinstatement or be compensated for illegal sacking almost three years ago. Lawyer Kania was the KCB Group company secretary until restructuring of the lender in 2021 that saw some senior executives dropped.

Through the firm of Senior Counsel Wilfred Nderitu, Kamau wants the court to order KCB Group to unconditionally reinstate him to employment without altering any of the contractual terms until his retirement in December 2025.

In his court documents filed before Employment and Labour Relations Court, the career law banker seeks the court to declare the reorganization of the company structure a nullity and amounted to a violation of his fundamental right to fair labour practices as guaranteed in Article 41(1) of the Constitution. He further wants the court to declare that the position of Group Company Secretary did not at any time cease to exist within the KCB Group structure.

He further urged the Employment Court to declare that the recruitment and appointment of Bonnie Okumu, his former assistant, as the Group Company Secretary, in relation to the contemporaneous termination of his employment, was unprocedural, insufficient and inappropriate to infer a lawful termination of his employment.

“A declaration that the factual and legal circumstances of the Petitioner’s termination of employment were insufficient and inappropriate to infer a redundancy against him, and that any redundancy declared by the KCB Group in relation to him was therefore null, void and of no legal effect and amounted to a violation of his fundamental right to fair labour practices as guaranteed in Article 41(1) of the Constitution,” seeks lawyer Kamau.

Kamau says he was subjected to discriminatory practices by the KCB Bank Group in violation of his fundamental right to equality and freedom from discrimination as guaranteed in Article 27 of the Constitution and the termination of his employment was unfair, unjustified, illegal, null and void.

Lawyer Kamau further seeks the court to declare that the Non-Compete Clause in the 2016 Contract is unenforceable by the KCB Group as against him and is voidable by him as against the Bank ab initio, byreason of the termination of the Petitioner’s employment having been a violation of Articles 41(1) and 47(1) and (2) of the Constitution, and of the Employment Act.

He also wants the Employment Court to find that finding that KCB’s group legal representation by Messrs of Mohammed Muigai LLP Advocates law firm in respect of his claim for unlawful termination of employment resulted in a clear conflict of interest by reason of the fact that a Founding and Senior Partner at the said firm lawyer Mohammed Nyaoga is also the Chairman of the CBK’s Board of Directors.

“A Declaration that the circumstances of KCB’s legal representation by Messrs. Mohammed Muigai LLP Advocates resulted in a violation of the Petitioner’s fundamental right to have the employment dispute decided independently and impartially, as guaranteed in Article 50(1) of the Constitution,” seeks lawyer Kamau.

Kamau is seeking damages against both KCB Group and Central Bank of Kenya jointly and severally for the violation of his constitutional and fundamental right to fair labour practices.

He wants further wants court to declare that CBK is liable to petitioner on account of its breach of statutory duty to effectively regulate KCB Group to ensure that KCB complied with the Central Bank of Kenya Prudential Guidelines and all other Laws, Rules, Codes and Standards, and that, as an issuer of securities, it complied with capital markets legislation.

Kamau through his lawyer Nderitu told the court that he was involved in Shareholder engagement in introducing the Group aide-mémoire that significantly improved the management of the Annual General Meetings, including obtaining approval without voting through the Memorandum and Articles of Association of Kenya Commercial Bank Limited among others.

He said that during his employment at KCB Bank Kenya and with the KCB Group, he initially worked well with former KCB CEO Joseph Oigara until 2016 when the CEO allegedly started sidelining him by removing the legal function from his reporting line.

He further claims he was transferred from the Group’s offices at Kencom House to its offices Upper Hill under the guise that the Petitioner was merely to support the KCB Group Board.

He adds that at that point his roles were given to Okumu for reasons that were not related to work demands. He stated that Oigara at one time proposed that he should leave his role in the KCB Group and go and serve as the Company Secretary of the National Bank of Kenya Limited, a subsidiary of the Group, a suggestion which he disagreed with to Oigara’s utter annoyance.

Kamau stated that his work was thenceforth unfairly discredited, leading to his being taken through a disciplinary process whose intended outcome failed miserably, and the Petitioner was vindicated.

“More specifically, the Petitioner contends that the purported creation of a new organizational structure towards the end of 2020 was in fact Oigara’s orchestration targeted to remove certain individuals by requiring them to undergo interviews in the pretext that new roles were created, and amounted to a further violation of the Petitioner’s fundamental right to fair labour practices under Article 41(1) of the Constitution,” said in his court documents.

He further adds that this sham reorganization demonstrates how the role of the KCB Group Company Secretary purportedly ceased to be and was then very briefly replaced with a new role of the KCB Group General Counsel. The role of KCB Group Company Secretary then ‘resurfaced’ immediately thereafter, in total violation of legal and regulatory requirements.