Background and introduction
1. This ruling determines the application dated 13th June 2024, brought by way of an Originating Summons under Section 12(8) & (9) (a) of the Arbitration Act I995, Rule 5 of the Arbitration Rules 2020, Article 159(2) (c) of the Constitution, Sections 1A, IB & 3A of the Civil Procedure Act and Order 46 Rule of the Civil Procedure Rules.
2. The application seeks the appointment of a sole Arbitrator, Hon. Robert N. Murigi, MCIArb, to hear and determine the dispute between the applicants and the respondent in respect of tender NEMA/RFQ/OO699/2021-2022, dated 15th November 2021 for supply of branded staff uniforms, (‘the tender’). In the alternative, the applicants pray for orders directing the Chairman of the Chartered Institute of Arbitrators (Kenya Chapter) to appoint an Arbitrator.
3. The application is premised on the grounds on the face of it as well as the supporting affidavit of STEPHEN OTIENO OGUTU sworn on even date. The applicants contend that the respondent issued the 2nd applicant with a Local Purchase Order (‘LPO’) dated 17th November 2021, pursuant to the tender, for a total of Kshs. 1,900,000/=. The applicants, through the 1st applicant, delivered the branded uniforms to the respondent on 18th October 2022.
4. The respondent has failed to settle the LPOs and instead asked the 1st applicant to collect its goods, culminating to the notice to commence arbitration, issued by the applicants. The applicants further contend that the respondent has frustrated the efforts towards arbitration by refusing to participate in the appointment of an arbitrator and in the proceedings.
5. The application is opposed through the replying affidavit of MAMO B. MAMO, sworn on 3rd October 2024. The respondent acknowledges the award of the contract to the 2nd applicant and the issuance of the LPO dated 17th November 2021. The respondent however confirms that the said LPO was valid for 30 days and that the applicants did not deliver the branded uniforms until after the 30 days had lapsed and that payment could not therefore be made.
6. The respondent further contends that in any case, it had no valid contract with the 1st applicant. Accordingly, the referral to arbitration has no basis and that the rights of parties should be determined in a court process.
7. Parties filed their respective submissions which I have carefully considered alongside the application, response and evidence presented.
Analysis and determination
8. The application before me is brought under section 12 of the Arbitration Act which provides in part as follows:
“(2) The parties are free to agree on a procedure of appointing the arbitrator or arbitrators and any chairman and failing such agreement—
…
(7) The High Court, if it grants an application under subsection (5), may, by consent of the parties or on the application of either party, appoint a sole arbitrator.
(8) A decision of the High Court in respect of a matter under this section shall be final and not be subject to appeal.
(9) The High Court in appointing an arbitrator shall have due regard to any qualifications required of an arbitrator by the agreement of the parties and to such considerations as are likely to secure the appointment of an independent and impartial arbitrator and, in the case of a sole or third arbitrator, shall take into account the advisability of appointing an arbitrator of a nationality other than those of the parties.”
9. It is well established that in all matters relating to arbitration processes, the extent of the court’s intervention is strictly limited as provided for under section 10 of the Act. The section is instructional that except as provided in this Act, no court shall intervene in matters governed by this Act. This provision has been strictly applied by our courts, consistently ensuring that they step back in situations where parties have chosen arbitration as their forum for dispute resolution.
10. It is equally settled that the consideration for referring a dispute to arbitration should be based on the existence of a valid arbitration clause capable of being performed and the presence of a dispute between the parties that is capable of referral to arbitration. If these two questions are answered in the affirmative, the court must then, in conformity with section 10, allow the parties to proceed with the forum of dispute resolution agreed upon by themselves.
11. In this case, the applicants rely on the Request for Quotations and particularly the conditions of the contract in the document dated 12th November 2021. It is important to point out that the Request for Quotations was sent to NERICO INVESTMENTS LIMITED, the 2nd applicant herein, and it is the 2nd applicant that executed those conditions of the contract.
12. Clause 5 of the conditions of contract contains an arbitration clause, which provides:
“The procuring entity and the supplier shall make every effort to resolve amicably by direct informal negotiation any disagreement arising between them under or in connection with the Contract. If the parties have failed to resolve their dispute or difference by such mutual consultation, either the procuring entity or the supplier may give notice to the other party of its intention to commence arbitration. The dispute shall be referred to adjudication or arbitration in accordance with the laws of Kenya.”
13. Pursuant to executing the contract, the respondent placed an order for branded uniform with the 2nd applicant, vide LPO No. 14235, on 17th November 2021. The uniforms were delivered on 18th October 2022 as evidenced by the Delivery Note, alongside an invoice. The delivery was done and invoice issued not by the 2nd applicant but by the 1st applicant. Subsequently, the 1st applicant wrote to the Chartered Institute of Arbitrators to have an arbitrator appointed over the dispute arising from the unsettled invoice, between itself and the respondent.
14. The protest by the respondent in the letter dated 15th January 2024 is therefore justified. The respondent correctly notes that the 1st applicant, having no contract with the respondent, means that no arbitration agreement existed between them. This lack of a contractual relationship is crucial because, under arbitration law, the existence of a valid arbitration agreement between parties is a fundamental prerequisite for any arbitration proceedings. Without such an agreement, the arbitration process cannot be initiated or sustained.
15. Since the 1st applicant was not a signatory to the contract containing the arbitration clause, it cannot invoke or be subjected to arbitration under that contract, neither can the respondent be forced into an arbitration with a stranger. This principle ensures that arbitration remains a consensual process, which respects the autonomy and agreement of the parties involved.
Disposition
16. Given these considerations, it is clear that the application dated 13th June 2024 lacks merit and is therefore dismissed with costs.
DATED, SIGNED AND DELIVERED IN NAIROBI
THIS 21ST DAY OF FEBRUARY 2025.
F. MUGAMBI
JUDGE