What is the difference between mediation, arbitration, and litigation?

Out of Court Mediation is an out of court process that is less formal whereby parties  led by a neutral third party mediator, discuss and negotiate on a business dispute until they either come to an agreement that substantially resolves the dispute in question; or in the case where negotiations do not yield a mutual agreement, the dispute remains unresolved and parties may decide to escalate the dispute to more formal dispute resolution mechanisms to bind the parties to a decision that resolves the dispute.

On the other hand, Arbitration is a binding and formal dispute resolution mechanism whereby a dispute is brought before a neutral third party called an arbitrator with skill in resolving disputes of that nature. The decision of the arbitrator is based on evidence of the parties and his decision is binding. Appeals on arbitral awards lie to the High Court of Kenya.

Litigation on the other hand is a formal and binding dispute resolution where a dispute is resolved by a judicial officer in court. Usually the parties are called: plaintiff (the party suing) or defendant (the party being sued).

The more amicable dispute resolution process that is also cheaper is usually mediation. On the other hand, litigation is advantageous for finally determining a dispute as courts have the final say on the outcome of the dispute. Often, court can also be a cost effective formal dispute resolution process in the long run.

What laws govern arbitration in Kenya?

The relevant law is the Arbitration Act of Kenya and the Arbitration Rules of Kenya.  The Rules of the Arbitral body chosen by parties in their contract are also relevant. The Civil Procedure Act and Rules also make reference to arbitration in the context of civil suits.

Can I force my contract counterparty to resolve a business dispute through arbitration?

Yes, if there is a binding arbitration clause. However, what is binding may be subject to interpretation by the court; for instance, where an arbitration clause is poorly or ambiguously worded. Often, if a party challenges the validity and binding nature of clause, they go to court on the commercial dispute and leave it to the opposing party to bring an objection to the initiated court process. Subsequently, it is the court that determines the validity of the arbitration clause and if found valid, the matter is referred to binding arbitration.

What happens if one party refuses to comply with an arbitration agreement?

A well drafted arbitration clause should provide for eventualities where a party refuses to adhere to arbitration. For instance, the clause can refer the appointment of an arbitrator to an independent body where parties are unable to agree on an arbitrator; the arbitration clause can also set out how the arbitration is to be initiated e.g. through serving a notice to initiate arbitration, etc.

Are arbitration clauses enforceable in commercial contracts?

Yes, they are enforceable if there is a binding arbitration clause. A binding arbitration clause is one that duly provides for arbitration and is well crafted to remove doubt that arbitration is the dispute resolution process that parties agreed to pursue via their contract. Sometimes commercial contracts are so poorly worded such that a party can construe that it leaves room to pursue litigation in court and once the matter is taken to court by the party relying on the ambiguity in the poorly drafted arbitration clause.

Can a court intervene in a commercial arbitration process?

Yes, the court has power under the Arbitration Act of Kenya to intervene in the arbitration process. For instance:

1. To provide interim relief if this is needed e.g. injunctions where needed
2. In applications for reference to arbitrations e.g. where a party initiates litigation and there is a binding arbitration clause, the party who wishes to proceed with arbitration can ask the court to stay the court [proceedings so a matter proceeds to arbitration meaning the court proceedings are stopped as the matter ought to rightfully be heard in arbitration and not litigation
3. To determine if there is manifest injustice on the part of an arbitrator occasioning breach of a party’s right to a fair hearing e.g. if the arbitrator was clearly biased to a party
4. To hear appeals on arbitration awards

How is arbitration initiated?

Usually one party initiating the arbitration serves a notice of intention to arbitrate and proposes the process of appointing the arbitrator to begin as per the arbitration clause. The opposing party can either respond or ignore this notice although ignoring can be prejudicial as proceedings can continue exparte or you can be estopped from relying on the arbitration agreement later if you failed to cooperate in the process.

The timeline of arbitration can be indeterminate (could be short, could be lengthy) unless the arbitrator sets tight timelines for conclusion of processes and provision of documents during the arbitration process.