Introduction
1. Before this Honourable Court for determination is the Defendants’ Application dated 26th May 2023, seeking, inter alia, a stay of the proceedings initiated by the Plaintiff against the defendants, and a referral of the dispute to arbitration.
2. The motion is based on the grounds of the application and supported by the affidavit of ARIFA-MORBID SHEIKH sworn on 25th May 2023.
3. The genesis of this matter is that vide a plaint dated 12th May 2023, the Plaintiff instituted a suit wherein it sought, among others, an order restraining the Defendants from expelling him from the 1st Defendant's firm. Concurrently, the Plaintiff filed an application for interlocutory orders against the expulsion.
4. In the meantime, in response to the suit and the accompanying interlocutory application, the Defendant filed the application dated 26th May 2023 (the present application) seeking a stay of all proceedings, pending the reference of the dispute to arbitration on account that a binding agreement exists between the parties, for a mandatory resolution of their disputes through arbitration.
5. On 30th May 2023, the Court (Sifuna J) issued interlocutory orders in favour of the Plaintiff and restrained the Defendants from expelling him from the 1st Defendant firm.
6. Aggrieved by the decision of the Learned Judge, the Defendants lodged an appeal, in Civil Appeal No. E779 of 2023 against the decision, arguing, among others, that the present application seeking a stay of all proceedings, pending the reference of the dispute to arbitration, ought to have been heard first.
7. The Court of Appeal delivered its judgment on 27th September 2024 and allowed the Defendants' appeal and stayed all proceedings before this Court pending the hearing and determination of the Defendants' present application.
8. The application is opposed by the Plaintiff through his replying affidavit sworn on 30th May 2023, arguing principally that there is no valid arbitration agreement binding upon him, and that the Defendants have not properly prayed for referral of the dispute to arbitration.
9. The application was canvassed by way of written submissions. The Applicant filed its submissions dated 18th November 2024, whilst the Respondent’s submissions are dated 19th November 2024.
Analysis and Determination
10. Having considered the submissions of both parties, the Court identifies the following two issues for determination: -
i. Whether a valid and binding arbitration agreement exists between the parties.
ii. Whether the Defendants’ application meets the procedural requirements under Section 6 of the Arbitration Act.
iii. Whether the Defendants are entitled to the reliefs sought
Whether there is a valid arbitration agreement
11. In their submissions, the Defendants argued that the Plaintiff, as a partner equivalent of the 1st Defendant, was bound by the terms of the Appointment Documents, being the Country Partnership Agreement (CPA) and the Africa Association Agreement (AAA), both of which contain dispute resolution clauses mandating arbitration between the parties.
12. According to the Defendants, the Plaintiff signed the documents on 1st April 2020 (for the AAA) and 10th April 2020 (for the CPA), and that by signing these documents, the Plaintiff agreed to be bound by their terms, which provides among others, that any dispute between the parties under the agreements would first be resolved through arbitration.
13. It was further the Defendant's argument that in any event, even the Partner Manual, which the Plaintiff conceded to have signed, explicitly states in Clause 2.1 thereof that it is "issued pursuant to the provisions of the Africa Association Agreement and the various Country Partnership Agreements," thereby incorporating the provisions of the AAA and CPA, including their arbitration clauses.
14. The Plaintiff, on the other hand, denied ever signing any agreement between him and the Defendants with an arbitration clause. According to the Plaintiff, his relationship with the Defendants is governed solely by the “Partner Manual”, which he maintains does not contain an arbitration clause. He denies ever signing both the CPA and the AAA.
15. An arbitration agreement is defined under section 2 of the Arbitration Act as:-
“an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not.”
16. I have carefully examined the parties’ respective arguments. I note that the Defendants exhibited the Appointments documents, being both the CPA and AAA as annexures to the affidavits of Arifa Morbi-Sheikh, including Clause 30 of the CPA and Clause 22 of the AAA, both of which require disputes to be resolved first by mediation, then by binding arbitration.
17. Further, I note that as correctly argued by the Defendants, the Partner Manual, which the Plaintiff has conceded to be bound, in Clauses 2.1 and 2.3 thereof, recognizes the primacy of both the CPA and AAA. Essentially, it is apparent that the Partner Manual derives its life from the two documents. This constitutes incorporation by reference, as contemplated under Section 4(4) of the Arbitration Act, Cap. 49 which provides that:
"A reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement in writing if the reference is such as to make that arbitration clause part of the contract."
18. In Mt. Kenya University v Step Up Holding (K ) Ltd [2018] eKLR, the Court of Appeal stated as follows: -
“17. it is clear from this provision that the enquiry that the court undertakes and is required to undertake under section 6(1) (b) of the Arbitration Act is to ascertain whether there is a dispute between the parties and if so, whether such dispute is with regard to matters agreed to be referred to arbitration. In other words, if as a result of that enquiry, the court comes to the conclusion that there is indeed a dispute and that such dispute is one that is within the scope of the arbitration agreement, and then the court refers the dispute to arbitration as the agreed forum for resolution of that dispute. If on the other hand the court comes to the conclusion that the dispute is not within the scope of the arbitration agreement, then the correct forum for resolution of the dispute is the court.”
19. Regarding the scope of the arbitration agreement, Clause 30.2 of the CPA broadly covers "any dispute of whatever nature... from or in connection with this Agreement." The Plaintiff's expulsion from the partnership is obviously a dispute arising from or in connection with his partnership relationship, which is governed by these agreements.
20. Based on the foregoing, the Court finds that a valid and binding arbitration agreement exists between the parties.
On the Procedural Requirements under Section 6 of the Arbitration Act
21. The Plaintiff contends that the Defendants' application, which prays for a "stay of the proceedings... pending the reference to arbitration of any dispute," does not constitute a direct and explicit prayer for the referral of the matter to arbitration. He argues that a court can only grant reliefs that are specifically pleaded, citing Karin Anne Challis vs The Hon. Attorney-General and 6 Others [2002] eKLR and Caltex Oil (Kenya) Limited v Rono Limited [2016] eKLR.
22. The Defendants, on the other hand, argue that their application was timely, filed contemporaneously with their Notice of Appointment, thereby meeting the threshold under Section 6(1) of the Arbitration Act. They also assert that their response to the Plaintiff's interlocutory application does not amount to "taking a step in the proceedings" that would waive their right to arbitration, a position supported by Russell on Arbitration and Standard Group PLC v Wesley Kiptoo Yegon & another [2019] eKLR.
23. Section 6 of the Arbitration Act, Cap 49 of the Laws of Kenya provides that;
“Stay of legal proceedings
(1) A court before which proceedings are brought in a matter which is the subject of an arbitration agreement shall, if a party so applies not later than the time when that party enters appearance or otherwise acknowledges the claim against which the stay of proceedings is sought, stay the proceedings and refer the parties to arbitration unless it finds—
(a) that the arbitration agreement is null and void, inoperative, or incapable of being performed; or
(b) that there is not in fact any dispute between the parties with regard to the matters agreed to be referred to arbitration.
(2) Proceedings before the court shall not be continued after an application under subsection (1) has been made and the matter remains undetermined.
(3) If the court declines to stay legal proceedings, any provision of the arbitration agreement to the effect that an award is a condition precedent to the bringing of legal proceedings in respect of any matter is of no effect in relation to those proceedings.
24. From the above, it is clear that a court is under a mandatory obligation to "stay the proceedings and refer the parties to arbitration" once it is established that there exists an arbitration agreement, and an application in that regard has been made timeously.
25. While the Defendants' prayer uses the phrase "pending the reference to arbitration," the clear intent and context of an application brought under Section 6(1) is to achieve both a stay of proceedings and a referral of the matter for arbitration. This Court is of the view that the words "pending the reference to arbitration" in the context of the Defendant’s application are not exhaustive and final, but an integral part of the principal relief sought, being the ultimate referral of the matter for arbitration.
26. In this case, it is not disputed that the Defendants filed their application simultaneously with their notice of appointment, and therefore complied with the timing requirement under Section 6(1). They acted promptly and did not take steps in the proceedings that would waive their right to arbitration. It is settled law that a party who wishes to take advantage of the arbitration clause in a contract should either, at the time of entering appearance or before the entry of appearance, make application for reference to arbitration.
27. In Eunice Soko Mlagui versus Suresh Parmar& 4 others [2017] eKLR, the Court stated as follows on the issue:
28. “Section 6 of the Arbitration Act is a specific provision of a statute that provides for stay of proceedings and referral of a dispute to arbitrating where parties to the dispute have entered into an arbitration agreement. The conditions under which the court can stay proceedings and refer a dispute to arbitration are prescribed by section 6 and in our view, the purpose of that provision is to regulate and facilitate the realization of the constitutional objective of promoting alternative dispute resolution. We do not therefore find anything in the provision that can be described as derogating or subverting the constitutional edict as regards alternative dispute resolution. The provision, for example, of section 6 which require parties to make an application for referral of a dispute to arbitration at the earliest opportunity and before taking any other action, ……”
29. In the present case, while the Defendants had filed a response to the plaintiff's application for interlocutory reliefs before making the instant application, that response by the Defendants cannot be considered as taking a step in the proceedings. It is indeed true, as submitted by the Defendants, that a response filed in respect of an interlocutory application does not amount to “taking any other step in the proceedings” as understood under section 6(1) of the Act. see the case of Standard Group PLC v Wesley Kiptoo Yegon & another [2019] eKLR, the court stated as follows on the issue: -
"However, it suffices to note that, generally, an action to resist interim injunction is not a step in proceedings. Applications for interim injunction order are interlocutory proceedings (See the Court of Appeal of England decision in Patel-v-Patel (19981 3 WLR 322). Therefore, the filing of the Replying Affidavit to the Application for injunction order will not be deemed to be an acknowledgment of the Court's jurisdiction. "
30. In the circumstances, it is therefore the finding of this Court that the Defendants have made a timely and procedurally sufficient application for a stay of proceedings and referral to arbitration.
Whether the Defendants are entitled to the reliefs sought
31. The Defendant’s entitlement to the reliefs sought hinges on the findings for the first two issues. As determined in Issue (i), a valid and operative arbitration agreement exists between the parties, binding the Plaintiff to arbitration. As determined in Issue (ii), the Defendants' application, despite its phrasing, effectively seeks both a stay of proceedings and a referral to arbitration in compliance with Section 6(1) of the Arbitration Act.
32. Section 6(1) of the Arbitration Act creates a strong presumption in favour of arbitration. Once the Court is satisfied that there is a valid arbitration agreement and a timely application for stay, the Court shall stay the proceedings and refer the parties to arbitration, unless the exceptions outlined in the subsection are met. The Plaintiff has not demonstrated that the arbitration agreement is null and void, inoperative, or incapable of being performed, nor has he shown that there is no dispute between the parties with regard to matters agreed to be referred to arbitration.
33. The Plaintiff's suit seeks to restrain expulsion from the partnership, a matter that the parties agreed to resolve through arbitration. To permit the matter to proceed in court would defeat the purpose of the arbitration clause and contravene the principle of party autonomy. The principle of party autonomy and the freedom to contract, including the choice of dispute resolution mechanisms, is a cornerstone of contractual law, as highlighted in Musimba Investments Limited v Nokia Corporation [2019] eKLR. This Court must give effect to the parties' agreement.
34. Consequently, the Court finds that all the conditions precedent for the grant of a stay of proceedings and referral to arbitration under Section 6(1) of the Arbitration Act have been satisfied by the Defendants.
35. Accordingly, the Court issues the following orders: -
i. The Defendants’ application dated 26th May 2023 is hereby allowed.
ii. The proceedings herein are stayed in their entirety pending reference of the dispute to arbitration.
iii. The dispute between the Plaintiff and the Defendants is hereby referred to arbitration in accordance with Clause 30 of the Country Partnership Agreement and Clause 22 of the Africa Association Agreement.
iv. Costs of the application to abide by the outcome of the Arbitration.
v. This file is closed
36. It is so ordered.
SIGNED, DATED, and DELIVERED IN VIRTUAL COURT THIS
24TH DAY OF JULY 2025
ADO MOSES
JUDGE
In the Presence of
Moses C/A
Ms. Kirimi …………for 1st – 9th Defendants
Eredi…. ………..…..for the Plaintiff
1. Before this Honourable Court for determination is the Defendants’ Application dated 26th May 2023, seeking, inter alia, a stay of the proceedings initiated by the Plaintiff against the defendants, and a referral of the dispute to arbitration.
2. The motion is based on the grounds of the application and supported by the affidavit of ARIFA-MORBID SHEIKH sworn on 25th May 2023.
3. The genesis of this matter is that vide a plaint dated 12th May 2023, the Plaintiff instituted a suit wherein it sought, among others, an order restraining the Defendants from expelling him from the 1st Defendant's firm. Concurrently, the Plaintiff filed an application for interlocutory orders against the expulsion.
4. In the meantime, in response to the suit and the accompanying interlocutory application, the Defendant filed the application dated 26th May 2023 (the present application) seeking a stay of all proceedings, pending the reference of the dispute to arbitration on account that a binding agreement exists between the parties, for a mandatory resolution of their disputes through arbitration.
5. On 30th May 2023, the Court (Sifuna J) issued interlocutory orders in favour of the Plaintiff and restrained the Defendants from expelling him from the 1st Defendant firm.
6. Aggrieved by the decision of the Learned Judge, the Defendants lodged an appeal, in Civil Appeal No. E779 of 2023 against the decision, arguing, among others, that the present application seeking a stay of all proceedings, pending the reference of the dispute to arbitration, ought to have been heard first.
7. The Court of Appeal delivered its judgment on 27th September 2024 and allowed the Defendants' appeal and stayed all proceedings before this Court pending the hearing and determination of the Defendants' present application.
8. The application is opposed by the Plaintiff through his replying affidavit sworn on 30th May 2023, arguing principally that there is no valid arbitration agreement binding upon him, and that the Defendants have not properly prayed for referral of the dispute to arbitration.
9. The application was canvassed by way of written submissions. The Applicant filed its submissions dated 18th November 2024, whilst the Respondent’s submissions are dated 19th November 2024.
Analysis and Determination
10. Having considered the submissions of both parties, the Court identifies the following two issues for determination: -
i. Whether a valid and binding arbitration agreement exists between the parties.
ii. Whether the Defendants’ application meets the procedural requirements under Section 6 of the Arbitration Act.
iii. Whether the Defendants are entitled to the reliefs sought
Whether there is a valid arbitration agreement
11. In their submissions, the Defendants argued that the Plaintiff, as a partner equivalent of the 1st Defendant, was bound by the terms of the Appointment Documents, being the Country Partnership Agreement (CPA) and the Africa Association Agreement (AAA), both of which contain dispute resolution clauses mandating arbitration between the parties.
12. According to the Defendants, the Plaintiff signed the documents on 1st April 2020 (for the AAA) and 10th April 2020 (for the CPA), and that by signing these documents, the Plaintiff agreed to be bound by their terms, which provides among others, that any dispute between the parties under the agreements would first be resolved through arbitration.
13. It was further the Defendant's argument that in any event, even the Partner Manual, which the Plaintiff conceded to have signed, explicitly states in Clause 2.1 thereof that it is "issued pursuant to the provisions of the Africa Association Agreement and the various Country Partnership Agreements," thereby incorporating the provisions of the AAA and CPA, including their arbitration clauses.
14. The Plaintiff, on the other hand, denied ever signing any agreement between him and the Defendants with an arbitration clause. According to the Plaintiff, his relationship with the Defendants is governed solely by the “Partner Manual”, which he maintains does not contain an arbitration clause. He denies ever signing both the CPA and the AAA.
15. An arbitration agreement is defined under section 2 of the Arbitration Act as:-
“an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not.”
16. I have carefully examined the parties’ respective arguments. I note that the Defendants exhibited the Appointments documents, being both the CPA and AAA as annexures to the affidavits of Arifa Morbi-Sheikh, including Clause 30 of the CPA and Clause 22 of the AAA, both of which require disputes to be resolved first by mediation, then by binding arbitration.
17. Further, I note that as correctly argued by the Defendants, the Partner Manual, which the Plaintiff has conceded to be bound, in Clauses 2.1 and 2.3 thereof, recognizes the primacy of both the CPA and AAA. Essentially, it is apparent that the Partner Manual derives its life from the two documents. This constitutes incorporation by reference, as contemplated under Section 4(4) of the Arbitration Act, Cap. 49 which provides that:
"A reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement in writing if the reference is such as to make that arbitration clause part of the contract."
18. In Mt. Kenya University v Step Up Holding (K ) Ltd [2018] eKLR, the Court of Appeal stated as follows: -
“17. it is clear from this provision that the enquiry that the court undertakes and is required to undertake under section 6(1) (b) of the Arbitration Act is to ascertain whether there is a dispute between the parties and if so, whether such dispute is with regard to matters agreed to be referred to arbitration. In other words, if as a result of that enquiry, the court comes to the conclusion that there is indeed a dispute and that such dispute is one that is within the scope of the arbitration agreement, and then the court refers the dispute to arbitration as the agreed forum for resolution of that dispute. If on the other hand the court comes to the conclusion that the dispute is not within the scope of the arbitration agreement, then the correct forum for resolution of the dispute is the court.”
19. Regarding the scope of the arbitration agreement, Clause 30.2 of the CPA broadly covers "any dispute of whatever nature... from or in connection with this Agreement." The Plaintiff's expulsion from the partnership is obviously a dispute arising from or in connection with his partnership relationship, which is governed by these agreements.
20. Based on the foregoing, the Court finds that a valid and binding arbitration agreement exists between the parties.
On the Procedural Requirements under Section 6 of the Arbitration Act
21. The Plaintiff contends that the Defendants' application, which prays for a "stay of the proceedings... pending the reference to arbitration of any dispute," does not constitute a direct and explicit prayer for the referral of the matter to arbitration. He argues that a court can only grant reliefs that are specifically pleaded, citing Karin Anne Challis vs The Hon. Attorney-General and 6 Others [2002] eKLR and Caltex Oil (Kenya) Limited v Rono Limited [2016] eKLR.
22. The Defendants, on the other hand, argue that their application was timely, filed contemporaneously with their Notice of Appointment, thereby meeting the threshold under Section 6(1) of the Arbitration Act. They also assert that their response to the Plaintiff's interlocutory application does not amount to "taking a step in the proceedings" that would waive their right to arbitration, a position supported by Russell on Arbitration and Standard Group PLC v Wesley Kiptoo Yegon & another [2019] eKLR.
23. Section 6 of the Arbitration Act, Cap 49 of the Laws of Kenya provides that;
“Stay of legal proceedings
(1) A court before which proceedings are brought in a matter which is the subject of an arbitration agreement shall, if a party so applies not later than the time when that party enters appearance or otherwise acknowledges the claim against which the stay of proceedings is sought, stay the proceedings and refer the parties to arbitration unless it finds—
(a) that the arbitration agreement is null and void, inoperative, or incapable of being performed; or
(b) that there is not in fact any dispute between the parties with regard to the matters agreed to be referred to arbitration.
(2) Proceedings before the court shall not be continued after an application under subsection (1) has been made and the matter remains undetermined.
(3) If the court declines to stay legal proceedings, any provision of the arbitration agreement to the effect that an award is a condition precedent to the bringing of legal proceedings in respect of any matter is of no effect in relation to those proceedings.
24. From the above, it is clear that a court is under a mandatory obligation to "stay the proceedings and refer the parties to arbitration" once it is established that there exists an arbitration agreement, and an application in that regard has been made timeously.
25. While the Defendants' prayer uses the phrase "pending the reference to arbitration," the clear intent and context of an application brought under Section 6(1) is to achieve both a stay of proceedings and a referral of the matter for arbitration. This Court is of the view that the words "pending the reference to arbitration" in the context of the Defendant’s application are not exhaustive and final, but an integral part of the principal relief sought, being the ultimate referral of the matter for arbitration.
26. In this case, it is not disputed that the Defendants filed their application simultaneously with their notice of appointment, and therefore complied with the timing requirement under Section 6(1). They acted promptly and did not take steps in the proceedings that would waive their right to arbitration. It is settled law that a party who wishes to take advantage of the arbitration clause in a contract should either, at the time of entering appearance or before the entry of appearance, make application for reference to arbitration.
27. In Eunice Soko Mlagui versus Suresh Parmar& 4 others [2017] eKLR, the Court stated as follows on the issue:
28. “Section 6 of the Arbitration Act is a specific provision of a statute that provides for stay of proceedings and referral of a dispute to arbitrating where parties to the dispute have entered into an arbitration agreement. The conditions under which the court can stay proceedings and refer a dispute to arbitration are prescribed by section 6 and in our view, the purpose of that provision is to regulate and facilitate the realization of the constitutional objective of promoting alternative dispute resolution. We do not therefore find anything in the provision that can be described as derogating or subverting the constitutional edict as regards alternative dispute resolution. The provision, for example, of section 6 which require parties to make an application for referral of a dispute to arbitration at the earliest opportunity and before taking any other action, ……”
29. In the present case, while the Defendants had filed a response to the plaintiff's application for interlocutory reliefs before making the instant application, that response by the Defendants cannot be considered as taking a step in the proceedings. It is indeed true, as submitted by the Defendants, that a response filed in respect of an interlocutory application does not amount to “taking any other step in the proceedings” as understood under section 6(1) of the Act. see the case of Standard Group PLC v Wesley Kiptoo Yegon & another [2019] eKLR, the court stated as follows on the issue: -
"However, it suffices to note that, generally, an action to resist interim injunction is not a step in proceedings. Applications for interim injunction order are interlocutory proceedings (See the Court of Appeal of England decision in Patel-v-Patel (19981 3 WLR 322). Therefore, the filing of the Replying Affidavit to the Application for injunction order will not be deemed to be an acknowledgment of the Court's jurisdiction. "
30. In the circumstances, it is therefore the finding of this Court that the Defendants have made a timely and procedurally sufficient application for a stay of proceedings and referral to arbitration.
Whether the Defendants are entitled to the reliefs sought
31. The Defendant’s entitlement to the reliefs sought hinges on the findings for the first two issues. As determined in Issue (i), a valid and operative arbitration agreement exists between the parties, binding the Plaintiff to arbitration. As determined in Issue (ii), the Defendants' application, despite its phrasing, effectively seeks both a stay of proceedings and a referral to arbitration in compliance with Section 6(1) of the Arbitration Act.
32. Section 6(1) of the Arbitration Act creates a strong presumption in favour of arbitration. Once the Court is satisfied that there is a valid arbitration agreement and a timely application for stay, the Court shall stay the proceedings and refer the parties to arbitration, unless the exceptions outlined in the subsection are met. The Plaintiff has not demonstrated that the arbitration agreement is null and void, inoperative, or incapable of being performed, nor has he shown that there is no dispute between the parties with regard to matters agreed to be referred to arbitration.
33. The Plaintiff's suit seeks to restrain expulsion from the partnership, a matter that the parties agreed to resolve through arbitration. To permit the matter to proceed in court would defeat the purpose of the arbitration clause and contravene the principle of party autonomy. The principle of party autonomy and the freedom to contract, including the choice of dispute resolution mechanisms, is a cornerstone of contractual law, as highlighted in Musimba Investments Limited v Nokia Corporation [2019] eKLR. This Court must give effect to the parties' agreement.
34. Consequently, the Court finds that all the conditions precedent for the grant of a stay of proceedings and referral to arbitration under Section 6(1) of the Arbitration Act have been satisfied by the Defendants.
35. Accordingly, the Court issues the following orders: -
i. The Defendants’ application dated 26th May 2023 is hereby allowed.
ii. The proceedings herein are stayed in their entirety pending reference of the dispute to arbitration.
iii. The dispute between the Plaintiff and the Defendants is hereby referred to arbitration in accordance with Clause 30 of the Country Partnership Agreement and Clause 22 of the Africa Association Agreement.
iv. Costs of the application to abide by the outcome of the Arbitration.
v. This file is closed
36. It is so ordered.
SIGNED, DATED, and DELIVERED IN VIRTUAL COURT THIS
24TH DAY OF JULY 2025
ADO MOSES
JUDGE
In the Presence of
Moses C/A
Ms. Kirimi …………for 1st – 9th Defendants
Eredi…. ………..…..for the Plaintiff