A well-drafted arbitration clause is short, clear and workable. A badly drafted one creates a second dispute about where the first dispute should be heard, and that preliminary fight can cost more than the clause was meant to save. Kenyan contracts frequently include arbitration clauses, and the choices in them deserve the same attention as the payment terms. This article sets out the elements of an enforceable clause under Kenyan law and the errors that cause trouble.
Quick answer
A workable clause should record the parties’ agreement to arbitrate, define the disputes covered, identify the seat of the arbitration, choose institutional rules or an ad hoc process, state the number of arbitrators and how they are appointed, and fix the language. It should also be consistent with the governing law, the notice clause and any tiered negotiation or mediation steps. In Kenya the framework is the Arbitration Act, 1995.
The statutory framework
The Arbitration Act, 1995 gives effect to arbitration agreements and governs the conduct of arbitrations in Kenya. Where the parties have agreed in writing to refer disputes to arbitration, the agreement is treated as a binding commitment, and a party that starts court proceedings in breach of it can face an application to stay those proceedings. The Act also provides a limited supervisory role for the courts on matters such as interim measures, the appointment of arbitrators and the setting aside or enforcement of awards. The Nairobi Centre for International Arbitration Act, 2013 establishes the Centre and supports its role in administering arbitrations in Nairobi.
The written form requirement means the clause should sit in a signed contract or in a separate signed agreement, and should be incorporated into later documents by clear words. The firm’s arbitration and ADR practice drafts and reviews these clauses, and the Arbitration in Kenya guide library covers the stages that follow. The article on the commercial arbitration process in Kenya explains how a case proceeds once the clause is used, and the article on arbitration compared with court proceedings sets out the choice between the two routes.
Seat and governing law
The seat of an arbitration is the legal place where the tribunal is based for the purpose of supervision. It decides which courts supervise the process and which procedural law applies. The governing law of the contract is a different question: it decides how the contract is interpreted. A contract can be governed by Kenyan law with a foreign seat, or by foreign law with a Kenyan seat, and the choice has consequences for cost, enforceability and access to interim relief.
The place of hearings is a further practical choice and does not have to match the seat. The clause should say which is which, so that the parties are not left arguing about whether a meeting in Nairobi changed the legal seat.
Institutional rules or ad hoc arbitration
Under institutional arbitration, an institution administers the case, applies its published rules and supervises appointment, fees and administrative matters. The Nairobi Centre for International Arbitration publishes rules and model clauses, and other institutions also provide rules for cross-border transactions. Under ad hoc arbitration, the parties and the tribunal manage the process without an institution, relying on the Act and the arbitration agreement for the default procedure.
The clause should name the rules and the institution precisely, and should avoid referring to rules that do not exist or an institution that will not administer the particular dispute. Where the parties choose ad hoc arbitration, the clause should provide for appointment and for what happens if they cannot agree.
Number of arbitrators and appointment
A sole arbitrator is common in smaller disputes; a tribunal of three is common in larger or more complex matters. The cost and the timetable usually increase with the number of arbitrators. The appointment method should be clear: by the parties, by the institution, or by a named appointing body. A clause that leaves appointment to an institution should reserve the institution’s own default mechanism, so that a failure to agree does not stall the arbitration.
Naming an individual arbitrator is discouraged unless the relationship is genuinely long term, because the named person may become unavailable. If the parties do name a person, the clause should provide a fallback.
Scope of the clause and interim relief
The scope should cover the disputes the parties expect, including disputes about the existence, validity, performance, breach, termination and enforcement of the contract. A broad formula such as disputes arising out of or in connection with the agreement is common. Where the parties want to carve out injunctive or interim relief, the clause should say so, because a party may need to preserve assets, evidence or confidential information before the tribunal is formed.
Where the contract requires negotiation or mediation before arbitration, the clause should define the trigger, the period and the consequence of not following the steps. Tiered clauses are useful but only if each step is capable of being performed.
Language, confidentiality, fees and procedure
The clause should fix the language of the arbitration, which may differ from the language of the contract. It should also state whether the arbitration is confidential, whether the tribunal may consolidate related disputes, whether an expedited procedure applies and how fees and costs are allocated. These choices affect the practical conduct of the case and the behaviour of the parties before the hearing.
Common drafting errors
| Error | Consequence |
|---|---|
| No seat or an unclear seat | Dispute about supervisory courts and procedural law |
| Institution named imprecisely or not available | Uncertainty about rules and appointment |
| Number or appointment method left unclear | Delay and possible court application to appoint |
| Tiered steps with no trigger or period | Argument about whether arbitration can start |
| Dispute clause conflicts with governing law or jurisdiction clause | Parallel proceedings and stay applications |
Checklist for the clause
- State that disputes are referred to arbitration and define the disputes covered.
- Identify the seat and keep the place of hearings separate if they differ.
- Name the institution and the edition of its rules, or set out the ad hoc procedure.
- State the number of arbitrators and the appointment method, with a fallback.
- Fix the language and confidentiality terms.
- Check that the clause works with the governing law, notice and jurisdiction clauses.
- Confirm that the signed contract incorporates the clause and any rules referred to.
Primary sources
- Arbitration Act, 1995, Kenya Law, for the framework of arbitration in Kenya.
- Nairobi Centre for International Arbitration Act, 2013, Kenya Law, for the Centre’s statutory basis.
- Nairobi Centre for International Arbitration: arbitration downloads, for published rules and model clauses.
This article is general information, not legal advice.