New arbitration body in Kenya looks to woo hesitant foreign investors

kenya auctiontradersKenya’s newly established Nairobi Centre for International Arbitration (NCIA) aims to win back the confidence of foreign investors who for years have been hesitant to do business in the country due to drawn out and costly court litigation on commercial matters.

NCIA is set up as an alternative business dispute resolution mechanism to court systems that will handle all commercial-related disputes involving Kenyan businesses, as well as regional and international business collaborations.

The centre’s board of directors, sworn into office November 4th, are finalising the selection of its administrative offices, hiring support staff and admitting arbitrators from the Chartered Institute of Arbitrators Kenya (CIAK), an association comprising professionals from diverse fields trained in arbitration, with which NCIA is partnering.

“We have slated the second week of January 2014 as the time the centre will start actual trade arbitration cases,” said NCIA board member Arthur Igeria, who also serves as the chairman of CIAK.

The centre will be headed by a president and deputy president, registrar, and 15 members who will act as judges. It was established by an act of parliament in 2012, which gives it exclusive original and appeal jurisdiction to hear and determine all commercial dispute cases filed by traders.

Unlike the regular court system which has a limited number of judges and magistrates to handle commercial cases, the NCIA will have over 500 arbitrators from the CIAK at its disposal, Igeria said.

“Traders with disputes will be spoilt of choice when picking an arbitrator of choice from various professions,” he said.

“The purpose of this centre is to [take] commercial cases out of court,” he told Sabahi. “Why take a case to drag in commercial court when we have an efficient arbitration centre offering timely, impartial and legally-binding resolutions?”

How arbitration works

The centre, which will also offer interpretations of contested trade contracts, is the latest initiative by the government to market Kenya as an attractive destination for foreign investors.

Earlier efforts by the government to position Kenya as an ideal business hub were dented by slow and costly court processes, often cited by investors as a major drawback to doing business in Kenya.

“We should not have waited this long to establish such a crucial centre. It should have come many years ago,” Igeria said. “If you look at the profile of international business entities operating in Nairobi and other foreign blue chip companies seeking permits to start business in Kenya, this centre has been a necessity.”

“The selection and appointment of an [arbitral tribunal] to hear and determine a dispute is made in accordance with a process stipulated in the arbitration agreement entered into by the parties,” Igeria said.

“Often this process includes an agreement to have an independent nominating body make the appointment, particularly for the case where the parties in dispute have hit a dead rock in agreeing on selection and appointment,” he said.

The decision of an arbitral tribunal is known as an award, it is legally binding and enforceable by law and provides the stakeholders a limited right to seek judicial review.

Unlike in litigation where no one is allowed to choose a judge, in arbitration, the parties agree on an arbitrator or arbitrators. “An arbitrator has the knowledge about the [sector] you have the dispute in, unlike a judge who may have limited knowledge,” Igeria said.

When to opt for arbitration

Businesspeople who spoke to Sabahi say arbitration offers the best alternative to litigation because it takes less time to resolve disputes, is private, less formal and cost-effective.

“Going to court does not necessarily translate to getting justice,” said Eric Kinoti, managing director for Shade Systems E.A Limited.

Unlike in court where presentation skills and arguments of the lawyer may persuade a judge, in arbitration, the quality of the arguments and the lawyer’s charm do not matter, he said. Arbitrators interpret business documents without necessarily requiring oral evidence or presentations.

“I welcome this alternative to dispute resolution solution,” said Kinoti, who has had to file disputes against foreign business partners for not meeting contractual obligations. Kinoti’s most recent experience with Kenya’s courts is from a case he filed against a former business partner that has been dragging in court since last April.

“I filed a commercial court case for breach of contract against a Ugandan transportation company I had sub-contracted to deliver campsite tents to Rwanda,” he said. “But it delivered them 11 days too late.”

“The company which had given me the work in Rwanda ended up cancelling my contract. In return, I sued the Ugandan transporter to recover my losses. The judgment is on February 4, 2014,” he said, adding the process has been time consuming and costly.

As Kenyans get used to the arbitration process, they will appreciate its place in Kenya’s justice system, supporters of the NCIA said, because it will help free up the judiciary so courts can dedicate more time and resources to non-commercial cases.

Kimemia Mugo, manager at Primecom Events Management Limited, said he was excited by the establishment of the centre, adding that he would prefer arbitration over court should he run into a protracted dispute with his clients.

“I hope [the government] will embark on a sensitisation campaign so that more Kenyans know about its existence and advantages,” said Mugo, whose company organises exhibitions, trade fairs and conferences for corporations, government institutions and private citizens.

“If the centre is professionally run, it will definitely attract trade disputes emanating from elsewhere to be determined here,” he told Sabahi, adding that it would help elevate Kenya’s image on the world stage.





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