Centre to speed up court cases

Commercial disputes in Kenya have been known to drag on for decades in courtrooms while concerned parties pay millions of shillings in legal fees.

Avoiding these drawn out cases sometimes means taking a detour across the oceans for resolution. Popular destinations include the United Kingdom, Mauritius and Switzerland. Here, companies spend millions of shillings in arbitration fees as well as accommodation.

After nearly two decades of flirting with the idea of an international arbitration office in Nairobi, it seems that the centre is about to come to reality making the reality of years and millions of shillings sacrificed to litigation a thing of the past.

On January 14, President Kibaki ascended into law the Nairobi Centre for Arbitration Act, 2012. The piece of legislation proposes creation of an alternative dispute resolution centre in Nairobi which would rival those in Mauritius and South Africa.

“The Constitution gives prominence to the role of alternative dispute resolution thus the establishment of the centre becoming a legal imperative,” reads part of the Act.

It is tasked with administering domestic and international arbitration and gives members of the legal fraternity opportunities when it is finally in place.

Arbitration in Kenya is governed by the Arbitration Act of 1995, which was amended in 2009. Further, the Institute of Chartered Arbitrators, an international body, has a robust local chapter that provides services in helping resolve both corporate and personal disputes.

Nevertheless, it has been argued that the lack of a government body mandated with carrying out arbitrations has not always engendered confidence in Kenya as an attractive investment destination.

“There is no stand-alone legal framework to guide the arbitration process in Kenya. The framework will make it easier even for international companies to have confidence that they will be treated fairly should arbitration occur in Kenya,” said Law Society of Kenya chairperson, Mr Eric Mutua.

Indirectly, the creation of an international arbitration centre in Kenya should make the country more attractive to investors and cement its position as a regional financial hub. In the East African Community (EAC), Rwanda is the only country that has such an institution having put in place the Kigali Arbitration Centre last year.

“One of the biggest challenges we have in Kenya is the length of time it takes to get justice. This will complement reforms that are already ongoing in the judiciary,” said Kenya Private Sector Alliance (KEPSA) chairman, Mr Patrick Obath.

In the 2013 Ease of Doing Business report, the World Bank litmus test for the business climate internationally, Kenya slipped 19 positions in ranking of a country’s ability to enforce contracts.

The survey, which places the country in position 149 on the legal category, noted that it takes up to 465 days for courts to resolve commercial disputes while costs may take up to 47.2 per cent of a plaintiff’s claims.

“I have come across many commercial agreements stipulating that in case of disputes, arbitration will be carried out in London. It is not a cheap process but it is better than taking years in local courts,” said Bidco Oil Refineries chief executive, Mr Vimal Shah.

He is quite familiar with challenges companies face in solving disputes locally. Personally, Mr Shah has an interest in the real estate development project, Tatu City. The Sh240 billion project is expected to accommodate 22,000 residents on a 1,000 hectare piece of land in Kiambu.

Seek arbitration in London

However, its construction has stalled for the last two years. Two weeks ago, the courts declined a wind up petition brought by two shareholders against the company. Upon the court’s advice, the minority shareholders have now said that they will either appeal or seek arbitration over the matter in London.

The proposed Nairobi’s centre for international arbitration will be tasked with taking on such cases as the one that has dogged Tatu City. In addition, the centre will advise the government on matters of international commercial agreements as well as working with the state to develop alternative dispute resolution mechanisms.

Apart from attracting investments, it is hoped that the centre will also provide alternative employment opportunities for legal practitioners in Kenya.