Kampala International University V Housing Finance Company Limited Petition No. 34 (E035) of 2022(Supreme Court of Kenya), Judgment delivered on 12th April 2024
Background to the case
Sometime in October 2017, the Appellant instituted arbitration proceedings against the Respondent, arising from a dispute of over $3,883,368. The Respondent filed a counterclaim to the tune of approximately $ 13,817,270.87. In reaching his decision, the Arbitrator found partially in favour of the Appellant and wholly in favour of the Respondent.
Being dissatisfied with the decision of the Arbitrator, the Appellant filed an application before the High Court to set aside the arbitral award with one of the key grounds of the application premised on bias of the arbitrator arising from an undisclosed personal relationship that the Arbitrator purportedly had with the Respondent which had the resultant effect of denying the Appellant the right to a fair hearing. The other major ground was in respect to lack of jurisdiction by the Arbitrator. The Respondent on the other hand filed an Application for recognition and enforcement of the arbitral award. Both applications were consolidated by the High Court.
The High Court wholly dismissed the Appellant’s application to set aside the Arbitration Award; stating among other reasons, that the grounds of conflict of interest and lack of jurisdiction by the Arbitrator respectively, should have been raised in first instance, before the Arbitral Tribunal and it therefore followed that the Appellant was barred from raising them in the application to set aside the arbitral award. The High Court further stated that in respect to the allegations of fraud and bribery levied against the Arbitrator, there was no sufficient evidence to support the same. In the same ruling, the High Court granted the Respondent’s application for recognition and enforcement of the arbitral award. The Appellant subsequently filed an application in the Court of Appeal for; stay of execution of the High Court’s orders, issuance of conservatory orders and leave to appeal the High Court’s decision on among other grounds that by refusing to hear the merits of its application to set aside and its submission opposing the Respondent’s application for recognition and enforcement, the High Court had declined to grant to the Appellant its Constitutional Right to a Fair Hearing. Yet another ground for seeking leave was that the dismissed application, if heard, would have addressed certain articles of the Constitution and certain sections of the Arbitration Act respectively as well as the proper jurisdiction of the Arbitral Tribunal. The sole issue for determination as framed by the Court of Appeal was whether the Appellant had satisfied the requirements for grant of leave to appeal to the Court of Appeal. The Court of Appeal subsequently
found in favour of the Respondent and declined to depart from the decision of the High Court, stating that the Appellant had not proved any grounds under which an Arbitral Award can be set aside under Section 35 of the Arbitration Act Cap 49. The Court further ruled that because the Appellant had not satisfied any of the grounds for setting aside an Arbitral Award as enshrined in Section 35, it therefore followed that there was no issue of great public importance, to enable the Court grant leave to appeal the decision of the High Court.
The Appellant then filed an Appeal with the Supreme Court of Kenya, pursuant to Article 163(4)(a) of the Constitution, Sections 15(2), 20, 21 and 22 of the Supreme Court Act, 2011 and the enabling provisions of the Supreme Court Rules, 2020. Its Appeal was further premised on ten grounds which the Supreme Court summarized to two which were; whether it had the jurisdiction to hear the appeal and whether the Appellant had met the threshold for grant of leave to appeal to the Supreme Court.
Ruling of the Court
- The Court in concluding that it had no jurisdiction, dismissed the Appeal majorly on the ground that no constitutional issue had been raised in the lower Courts that clothed the Supreme Court with jurisdiction to hear an Appeal arising from an interlocutory application from the Court of Appeal. That the Appeal of the Appellant was premised on the failure by the High Court to set aside the arbitral award on ground of bias and this did not amount to a constitutional issue.
- The Supreme Court further stated that the Appellant did not satisfy the parameters as stated in the case of Nyutu Agrovet Limited V Airtel Networks Kenya Limited & Chartered Institute of Arbitrators-Kenya Branch (As an Interested Party); Supreme Court Petition No. 12 of 2016, that are required before leave can be granted to appeal an arbitral award under Section 35 of the Arbitration Act and hence they had not made out a plausible case for leave to be granted.
The Parameters developed by the Supreme Court of Kenya in the case of Nyutu Agrovet Limited V Airtel Networks Kenya Limited & Chartered Institute of Arbitrators-Kenya Branch
The crux of the appeal in this case was whether; an aggrieved party had a right to appeal the decision of the High Court arising from Section 35 of the Arbitration Act. In resolving this issue, the Supreme Court noted that Section 35 is silent as to whether an Appeal lies from a decision rendered therefrom. The Court concluded that the Section was silent on the remedy available to an aggrieved party but this notwithstanding, it went on to develop parameters that an aggrieved party should satisfy before being given leave to appeal to the Court of Appeal from a decision made under Section 35. The parameters are; that in reaching its decision, the High Court has stepped outside the grounds set out in the said Section and thereby made a decision so grave, so manifestly wrong and which has completely closed the door of justice to either of the parties.
Effect of the Court’s ruling in the Kampala International University Case
The Court firmly emphasized the finality of arbitration; strongly reiterating their prior position in the Nyutu case that only where a gross miscarriage of justice has been occasioned to either party would an Appeal lie to the Court of Appeal from a decision made by the High Court and arising from Section 35.
The position in Uganda, Tanzania and Rwanda in respect to Appealing a decision arising from an application to set aside an Arbitral Award
In Uganda, Section 38 of the Arbitration and Conciliation Act Cap 4 provides that leave to appeal on a question of law can only be made if the parties have agreed that an appeal can be preferred and that leave is obtained from the High Court or where the High Court fails to grant the Appeal, then special leave can be obtained from the Court of Appeal. It is important to note that both these requirements must be satisfied before the Court of Appeal can be clothed with jurisdiction (Mohammed Mohammed Hamid V Roko Construction Ltd SCCA No. 014 of 2015 & Babcon Uganda Limited V Mbale Resort Hotel Limited SCCA No. 06 of 2016).
In Tanzania, the Arbitration Act Cap 15(As revised in 2020) provides for only two grounds under which an arbitral award can be set aside and these grounds are; lack of substantive jurisdiction by the arbitral tribunal (Section 74) and serious irregularity (Section 75). A party aggrieved by a dismissal of an application either under Section 74 or under Section 75 is required to seek leave before lodging an appeal. It is important to note that leave to appeal on grounds of lack of substantive jurisdiction can only be sought where the aggrieved party has fully exhausted any available arbitral process of appeal and any recourse relating to correction of an award or rendering of an arbitral award by the arbitral tribunal (Section 77).
In Rwanda, the law on arbitration and conciliation in commercial matters, provides only for the setting aside of an arbitral award. There is no more recourse for an aggrieved party after this.
The Finality of an Arbitral Award
From all the different jurisdictions in East Africa, an arbitral award is intended to be final and binding hence the strict restriction to Court interference to only matters expressly provided for in the different Arbitration legislation or for the case of Kenya; upon satisfaction of parameters clearly defined by the Court. This notwithstanding, many an aggrieved person has attempted to circumvent the finality of an arbitral award not only through the filing of the appeals as discussed herein but also through filing of applications for review of High Court decisions dismissing applications to set aside arbitral awards. A case in point is the Kenyan decision of Coretec Systems and Solutions Ltd V Digital Divide Data Kenya Ltd Miscellaneous Civil Application No. E052 of 2018 wherein when faced with an application for review of its decision declining to set aside an arbitral award, which application was brought under Section 80, 63(e) and 3A of the Civil Procedure Act and Order 45 Rule 1 of the Civil Procedure Rules, the High Court relied on Section 10 of the Arbitration Act of Kenya which limits Court interference to only matters expressly provided for in the Act and dismissed the application since the power to review its ruling in respect to an application to set aside an award, was not one of the powers that was granted to it under the Arbitration Act. Similarly, in Uganda, in the case of China Communications Construction Co. Ltd V Justus Kyabahwa High Court Miscellaneous Application No. 692 of 2019, the Judge dismissed the application for stay of execution of the arbitral award pending the determination of the main application for review. The sole ground for dismissal was that the main application for review did not have a reasonable likelihood of success because the remedy of review is not provided for under the Arbitration & Conciliation Act Cap 4 and it therefore followed that the Applicant had failed to satisfy one of the requirements for stay of execution that is; the main application having a likelihood of success.
Concluding observations
The Kampala University decision is a firm and loud gong once again sounded by the Kenyan Courts in respect to the finality of an award arising out of arbitration proceedings, where the parties have agreed to arbitration as a mechanism of alternative dispute resolution.; and this resonates with the position in the entire East African Region.
It is to this end that parties are urged to fully understand the effect of incorporating an arbitration clause in their contracts; especially what the entire arbitral process entails; with a great emphasis on the general rule relating to finality of an arbitral award and to the increasing reluctance by Courts in East Africa to set it aside.
Disclaimer: No information contained in this alert should be construed as legal advice from Namara Musinguzi & Co. Advocates or the individual authors, nor is it intended to be a substitute for legal counsel on any subject matter.
Prepared By:
Ann Namara Musinguzi; MCIArb
Managing Partner, Namara Musinguzi & Co. Advocates
ann@namaramusinguziadvocates.com
