KENYA: An Introduction to Dispute Resolution: Arbitrators

Public Policy Consideration in Enforcement of Arbitral Awards in Kenya

Arbitration, praised for its flexibility, efficiency and cost-effectiveness, has become the most preferred alternative dispute resolution mechanism in Kenya. However, the enforcement of arbitral awards is not always uncomplicated, particularly when public policy considerations come to the fore. Public policy serves both as a safeguard and a potential snag in ensuring arbitral awards do not offend the prevailing laws of Kenya.

Enforcement of domestic arbitral awards in Kenya is governed by the Arbitration Act, 1995, which is modelled after the United Nations Commission on International Trade Law (UNCITRAL) Model law on International Commercial Arbitration. Kenya has also ratified the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention). In line with Article V(2)(b), Kenyan courts can decline to recognise and enforce a foreign arbitral award if the award is contrary to Kenya’s public policy.

Public policy stands as a corner stone in enforcement of arbitral awards, particularly in situations where the arbitral award conflicts with Kenya’s Constitution and domestic laws. Much like the UNCITRAL Model Law, Section 37(1)(b)(ii) of the Arbitration Act provides for public policy as a ground for refusal of enforcement of an arbitral award. The Act, however, neither defines nor provides a scope of what constitutes public policy. Absent a transnational definition, the interpretation of what constitutes public policy in the enforcement of an arbitral award has been left to judicial discretion.

Kenyan courts have been instrumental in defining the scope of public policy in enforcement of arbitral awards. In Christ for All Nation v Apollo Insurance Co. Ltd [2002] eKLR, the court characterised public policy as an “unruly horse” and proceeded to opine that an arbitral award is contrary to public policy if it is “inconsistent with the Constitution or other laws of Kenya, or if it was inimical to the national interest of Kenya, or if it was injurious to the public good”. Without attempting to give an all-inclusive definition of what would be considered to be contrary to public policy, the court included awards induced by corruption or fraud and protection of national security to be grounds upon which a court could decline to enforce an arbitral award.

Despite the parameters defined in Christ for All Nation, there is no comprehensive list of what constitutes public policy. It depends on the circumstances of the case; the facts being pleaded and the supporting evidence. As such, the wide discretion enjoyed by the Kenyan courts in interpreting what amounts to public policy is a double-edged sword: it allows nuanced decisions based on individual case facts, but it also introduces subjectivity, leading to inconsistent outcomes.

In declining to enforce a foreign arbitral award for being contrary to public policy, the court in Glencore Grains Limited v TSS Grain Millers Limited [2002] eKLR reasoned that Kenya’s public policy requires it to enforce foreign arbitral awards as part of its commitment under the New York Convention. However, fulfilling this obligation must be balanced with the obligation to protect its citizens’ rights and ensure that its constitutional principles are safeguarded. The court interpreted and applied public policy in a manner that aligns with Kenya’s overarching interest and its obligation under the New York Convention. Furthermore, the court also clarified that an arbitral award or contract is contrary to public policy if it is immoral or if it violates moral principles or values in Kenyan society. Through this finding, the court underscored the importance of ensuring that arbitral awards align with the broader societal commitment to preserve shared moral values.

Often, arbitral awards are challenged for being unfair or having unjust towards one of the parties. However, the mere perception of unfairness or injustice cannot be the sole basis upon which an award is found to be contrary to public policy. Public policy, as the word denotes, aims to serve the common good rather than individual interest. This was the court’s view in the Mall Developers Limited v Postal Corporation of Kenya [2014] eKLR, when it clarified that public policy must have a connotation of national interest. The court was of the view that for an award to be deemed contrary to public policy, the award must jeopardise fundamental national interest or conflict with the Constitution or laws of Kenya. Therefore, the mere dissatisfaction or perceived unfairness with an arbitral award is insufficient to warrant refusal of enforcement.

The concept of public policy is rooted in Kenya’s legal framework and is inherently subjective. This creates uncertainty for parties seeking to enforce or challenge arbitral awards. The prevailing voice in the judicial precedents is that public policy should be narrowly construed to avoid undermining the efficacy of arbitration. However, this often conflicts with the necessity to tackle the flagrant violation of constitutional rights, corruption and fraud. The lack of a standardised transnational definition and the ambiguity surrounding the concept of public policy in enforcement of arbitral awards not only compromises the reliability of arbitration as an alternative dispute resolution mechanism but diminishes the predictability of arbitration outcomes.

With Kenya being a signatory to the New York Convention, its courts have the arduous task of balancing its international commitments with the need to safeguard its national interest and constitutional principles. While arbitration prospers on the principles of party autonomy, finality and efficiency, public policy acts as guardian of constitutional freedom and societal values. The enforcement of arbitral awards stands at the crossroads between party autonomy and public interest. Therefore, striking a delicate balance between preserving party autonomy in arbitration and safeguarding public interest remains a persistent challenge in Kenya’s arbitration arena.

In navigating this delicate landscape, the need for clarity, consistency and adaptability remains of utmost importance for the courts and arbitration practitioners. The reliability of arbitration as a dependable alternative dispute resolution mechanism is pegged on its ability to balance private interest with the broader public good. The lack of a transnational definition of public policy in enforcement of arbitral awards results in inconsistent judicial decisions. This inconsistency undermines the reliability and predictability of arbitration as a dispute resolution mechanism.

To address this challenge, courts could adopt a restrictive approach in defining the scope of public policy. Rather than the current open approach, the court may circumscribe the scope of public policy objections to breach of fundamental laws and blatant disregard for principles of morality and justice. In addition to the court’s efforts, organisations and arbitral institutes such as UNCITRAL, IBA and CIArb may work together to develop a framework or guidelines with a view to creating uniformity across multiple jurisdictions. This course of action is geared toward enhancing the enforceability and credibility of arbitral awards, while maintaining the integrity of arbitration as a dispute resolution mechanism.