Background and Introduction
1. For determination are two applications. The first in time is the one filed under MISC E864 OF 2024 for setting aside an arbitral award and the second is filed in MISC E970 OF 2024 which seeks the recognition of the same award.
Application for Setting Aside the Award:
2. The application brought under MISC E864 OF 2024 is dated 18th October 2024 and is brought under Section 35 of the Arbitration Act 1995, Rule 7 and 11 of the Arbitration Rules, 1997, Clause 14 and 15 of the Chartered Institute of Arbitrators (Kenya Branch) Arbitration Rules 2020 as well as Sections 1 A, I B and 3A of the Civil Procedure Act.
3. It seeks to set aside the arbitral award issued on 22nd July 2024 on the grounds that the award was made in excess of jurisdiction; that it determined matters beyond the scope of the arbitration agreement; that it contravenes public policy; that it violates the principles against unjust enrichment; that it is inconsistent with the decision of this Court in MISC E806 of 2020 and that it is unconscionable.
4. The application is supported by the affidavit of VIRJI MEGHJI PATEL (the 2nd applicant) sworn on even date. It is opposed through a replying affidavit sworn by JAMES MWANGI KABUGI, the 2nd respondent. Parties also filed their respective submissions which I have carefully considered. The arbitral proceedings giving rise to the present application stem from a dispute concerning a Shareholders’ Agreement dated 30th December 2015.
Analysis and Determination
5. The main issue for determination is whether the applicants have met the threshold of setting aside the award herein. It bears emphasis that the jurisdiction of this Court in arbitration-related matters is circumscribed. Section 10 of the Arbitration Act is categorical that:
“Except as provided in this Act, no court shall intervene in matters governed by this Act.”
6. This principle is grounded in the doctrine of party autonomy and the finality of arbitral proceedings. It is echoed in Synergy Industrial Credit Limited V Cape Holdings Limited, [2019] eKLR, where the Supreme Court held that:
“Once parties agree to settle their disputes through arbitration, the arbitral tribunal should be the core determinant of their dispute… Section 35 ensures courts can correct specific errors of law to prevent a miscarriage of justice, without undermining the efficiency of arbitration.”
7. The Court of Appeal in Mahan Limited V Villa Care Limited, [2019] eKLR similarly cautioned against transforming Section 35 into a backdoor appeal mechanism, stressing that challenges must fall within the narrow statutory grounds. The Court stated:
“This Court has considered the arguments made for and against setting aside the award. The Applicant argues that the Arbitrator misconstrued the evidence and law, typically an appeal argument. Section 35 application jurisdiction is limited. Parties elect to arbitrate to avoid court litigation and should not set aside an award simply because it is unfavorable. The applicant must demonstrate that the Section 35 grounds exist.”
8. It is against this well-settled backdrop of judicial restraint in interfering with arbitral awards that I now proceed to consider the specific grounds advanced by the applicants in support of the present application.
Whether the Tribunal Exceeded its Jurisdiction:
9. The applicants argue that the arbitral tribunal exceeded its jurisdiction by rendering findings against the 1st and 3rd applicants, who were allegedly not parties to the arbitration agreement. They rely on Clause 26 of the Shareholders Agreement dated 30th December 2015, which they state limited the reference to disputes strictly between shareholders.
10. Section 17 of the Arbitration Act provides a structured mechanism for challenging jurisdiction of the Tribunal:
“(1) The arbitral tribunal may rule on its own jurisdiction, including ruling on any objections with respect to the existence or validity of the arbitration agreement,
…
(2) A plea that the arbitral tribunal is exceeding the scope of its authority shall be raised as soon as the matter alleged to be beyond the scope of its authority is raised during the arbitral proceedings
…
(4) The arbitral tribunal may rule on a plea referred to in subsections (2) and (3) either as a preliminary question or in an arbitration award on the merits.
…
(6) Where the arbitral tribunal rules as a preliminary question that it has jurisdiction, any party aggrieved by such ruling may apply to the High Court, within 30 days after having received notice of that ruling, to decide the matter.”
11. The applicants did not invoke this procedure. Instead, they allowed the arbitral proceedings to run their course and raised the issue only in this application under Section 35, well beyond the 30-day statutory window. The failure to act within the statutory framework extinguishes their right to challenge the tribunal’s ruling on jurisdiction at this stage.
12. In any event, the arbitrator addressed this very issue at length and rendered a reasoned finding at paragraph 461 of the award, holding that:
“The 1st and 3rd defendants acquiesced to the jurisdiction of the Tribunal and are therefore proper and necessary parties to these arbitration proceedings.”
13. This finding is neither perfunctory nor arbitrary; it followed full ventilation of the issue by all parties. As emphasized in Geogas S.A. V Trammo Gas Ltd, [1993] 1 Lloyd’s Rep 215, arbitrators are the “masters of facts,” and courts are not to interfere with their findings unless the award violates the grounds expressly set out in the statute.
Whether the Award Violates Public Policy:
14. The applicants assert that the award violates public policy by awarding damages that constitute unjust enrichment, awarding loss of user in disregard of the rights of a secured creditor, and by allegedly contravening a prior ruling of this Court in Misc. E806 of 2020.
15. Section 35(2)(b)(ii) allows an award to be set aside if it conflicts with the public policy of Kenya. However, the courts have consistently held that this ground must be interpreted narrowly. As Ringera, J observed in Christ for All Nations V Apollo Insurance Co Ltd, [2002] 2 EA 366:
“An award may be set aside as being inconsistent with public policy if it is inconsistent with the Constitution or other written law, or inimical to the national interest or morality.”
16. Similarly, in Dinesh Construction Limited & Another V Aircon Electronic Services (Nairobi) Limited [2021] eKLR, the court emphasized that allegations of conflict with public policy must not be vague or generalised; they must be particularized and substantiated.
17. The applicants have failed to meet this standard. No illegality has been demonstrated in the manner the arbitral tribunal assessed and awarded damages. The contention that an award of loss of user amounts to unjust enrichment is untenable. Whether or not loss of user was properly awarded is a merits-based issue, not a public policy question. As was held in Nyutu Agrovet Ltd V Airtel Networks Kenya Ltd, [2015] eKLR, courts are not permitted to substitute their own views for that of the arbitrator merely because they would have arrived at a different conclusion.
Alleged Conflict with an Existing Court Ruling:
18. The applicants further argue that the award is in conflict with this Court’s ruling of 8th December 2022 in Misc. E806 of 2020. That decision, rendered by Okwany, J, concerned an application for disqualification of the arbitrator. A perusal of the ruling, annexed to the replying affidavit, reveals that no findings were made on the substantive merits of the dispute, including on the issue of loss of user.
19. The applicants’ assertion that the arbitral award is inconsistent with a binding court ruling is thus unsupported. There is no factual or legal basis for finding that the arbitrator’s award is in breach of any prior order of this Court.
The Effect of a Registered Charge:
20. Finally, the fact that a third-party lender, Kenya Commercial Bank (KCB), holds a charge over the subject property does not render the award illegal or contrary to public policy. The rights of a secured creditor remain enforceable under general law and are not extinguished by an arbitral award rendered between disputing shareholders. In any event, no evidence has been tendered to demonstrate that the arbitrator’s award purports to defeat or interfere with the secured creditor’s rights under the charge instrument.
Conclusion
21. In view of the foregoing, I find that the applicants have failed to establish any of the statutory grounds for setting aside the arbitral award under Section 35 of the Arbitration Act. Their application is in substance an invitation for this Court to sit on appeal over the arbitral tribunal’s findings, a course expressly prohibited by the Arbitration Act and well-established judicial authority.
The Application for Recognition of the Award:
22. Having made the foregoing finding, I now turn to consider the application dated 18th November 2024 filed in MISC E970 OF 2024 which seeks the recognition and adoption of the Award dated 22nd July 2024 by the sole arbitrator, Prof. Paul Musili Wambua.
23. The applicable legal framework governing the recognition and enforcement of arbitral awards is set out under Section 36 of the Arbitration Act. Section 36(3) provides that the party relying on the award must furnish:
“(a) the duly authenticated original award or a duly certified copy thereof; and
(b) the original arbitration agreement or a duly certified copy thereof.”
24. Contrary to the assertion by the respondents, the application for recognition was filed on 20th November 2024, signifying that the applicant paid the requisite filing fee. The applicant has equally complied with the requirements of Section 36(3). In view of the foregoing, I find no legal or procedural bar to the grant of the orders sought.
Final Orders
25. Accordingly,
i. The application dated 18th October 2024 seeking to set aside the arbitral award is dismissed with costs;
ii. The application dated 18th November 2024 is allowed with the consequence that the arbitral award dated 22nd July 2024 by Prof. Paul Musili Wambua is hereby recognized and adopted as a judgment of this Court.
iii. The applicants shall have the costs of the application.
It is so ordered.
1. For determination are two applications. The first in time is the one filed under MISC E864 OF 2024 for setting aside an arbitral award and the second is filed in MISC E970 OF 2024 which seeks the recognition of the same award.
Application for Setting Aside the Award:
2. The application brought under MISC E864 OF 2024 is dated 18th October 2024 and is brought under Section 35 of the Arbitration Act 1995, Rule 7 and 11 of the Arbitration Rules, 1997, Clause 14 and 15 of the Chartered Institute of Arbitrators (Kenya Branch) Arbitration Rules 2020 as well as Sections 1 A, I B and 3A of the Civil Procedure Act.
3. It seeks to set aside the arbitral award issued on 22nd July 2024 on the grounds that the award was made in excess of jurisdiction; that it determined matters beyond the scope of the arbitration agreement; that it contravenes public policy; that it violates the principles against unjust enrichment; that it is inconsistent with the decision of this Court in MISC E806 of 2020 and that it is unconscionable.
4. The application is supported by the affidavit of VIRJI MEGHJI PATEL (the 2nd applicant) sworn on even date. It is opposed through a replying affidavit sworn by JAMES MWANGI KABUGI, the 2nd respondent. Parties also filed their respective submissions which I have carefully considered. The arbitral proceedings giving rise to the present application stem from a dispute concerning a Shareholders’ Agreement dated 30th December 2015.
Analysis and Determination
5. The main issue for determination is whether the applicants have met the threshold of setting aside the award herein. It bears emphasis that the jurisdiction of this Court in arbitration-related matters is circumscribed. Section 10 of the Arbitration Act is categorical that:
“Except as provided in this Act, no court shall intervene in matters governed by this Act.”
6. This principle is grounded in the doctrine of party autonomy and the finality of arbitral proceedings. It is echoed in Synergy Industrial Credit Limited V Cape Holdings Limited, [2019] eKLR, where the Supreme Court held that:
“Once parties agree to settle their disputes through arbitration, the arbitral tribunal should be the core determinant of their dispute… Section 35 ensures courts can correct specific errors of law to prevent a miscarriage of justice, without undermining the efficiency of arbitration.”
7. The Court of Appeal in Mahan Limited V Villa Care Limited, [2019] eKLR similarly cautioned against transforming Section 35 into a backdoor appeal mechanism, stressing that challenges must fall within the narrow statutory grounds. The Court stated:
“This Court has considered the arguments made for and against setting aside the award. The Applicant argues that the Arbitrator misconstrued the evidence and law, typically an appeal argument. Section 35 application jurisdiction is limited. Parties elect to arbitrate to avoid court litigation and should not set aside an award simply because it is unfavorable. The applicant must demonstrate that the Section 35 grounds exist.”
8. It is against this well-settled backdrop of judicial restraint in interfering with arbitral awards that I now proceed to consider the specific grounds advanced by the applicants in support of the present application.
Whether the Tribunal Exceeded its Jurisdiction:
9. The applicants argue that the arbitral tribunal exceeded its jurisdiction by rendering findings against the 1st and 3rd applicants, who were allegedly not parties to the arbitration agreement. They rely on Clause 26 of the Shareholders Agreement dated 30th December 2015, which they state limited the reference to disputes strictly between shareholders.
10. Section 17 of the Arbitration Act provides a structured mechanism for challenging jurisdiction of the Tribunal:
“(1) The arbitral tribunal may rule on its own jurisdiction, including ruling on any objections with respect to the existence or validity of the arbitration agreement,
…
(2) A plea that the arbitral tribunal is exceeding the scope of its authority shall be raised as soon as the matter alleged to be beyond the scope of its authority is raised during the arbitral proceedings
…
(4) The arbitral tribunal may rule on a plea referred to in subsections (2) and (3) either as a preliminary question or in an arbitration award on the merits.
…
(6) Where the arbitral tribunal rules as a preliminary question that it has jurisdiction, any party aggrieved by such ruling may apply to the High Court, within 30 days after having received notice of that ruling, to decide the matter.”
11. The applicants did not invoke this procedure. Instead, they allowed the arbitral proceedings to run their course and raised the issue only in this application under Section 35, well beyond the 30-day statutory window. The failure to act within the statutory framework extinguishes their right to challenge the tribunal’s ruling on jurisdiction at this stage.
12. In any event, the arbitrator addressed this very issue at length and rendered a reasoned finding at paragraph 461 of the award, holding that:
“The 1st and 3rd defendants acquiesced to the jurisdiction of the Tribunal and are therefore proper and necessary parties to these arbitration proceedings.”
13. This finding is neither perfunctory nor arbitrary; it followed full ventilation of the issue by all parties. As emphasized in Geogas S.A. V Trammo Gas Ltd, [1993] 1 Lloyd’s Rep 215, arbitrators are the “masters of facts,” and courts are not to interfere with their findings unless the award violates the grounds expressly set out in the statute.
Whether the Award Violates Public Policy:
14. The applicants assert that the award violates public policy by awarding damages that constitute unjust enrichment, awarding loss of user in disregard of the rights of a secured creditor, and by allegedly contravening a prior ruling of this Court in Misc. E806 of 2020.
15. Section 35(2)(b)(ii) allows an award to be set aside if it conflicts with the public policy of Kenya. However, the courts have consistently held that this ground must be interpreted narrowly. As Ringera, J observed in Christ for All Nations V Apollo Insurance Co Ltd, [2002] 2 EA 366:
“An award may be set aside as being inconsistent with public policy if it is inconsistent with the Constitution or other written law, or inimical to the national interest or morality.”
16. Similarly, in Dinesh Construction Limited & Another V Aircon Electronic Services (Nairobi) Limited [2021] eKLR, the court emphasized that allegations of conflict with public policy must not be vague or generalised; they must be particularized and substantiated.
17. The applicants have failed to meet this standard. No illegality has been demonstrated in the manner the arbitral tribunal assessed and awarded damages. The contention that an award of loss of user amounts to unjust enrichment is untenable. Whether or not loss of user was properly awarded is a merits-based issue, not a public policy question. As was held in Nyutu Agrovet Ltd V Airtel Networks Kenya Ltd, [2015] eKLR, courts are not permitted to substitute their own views for that of the arbitrator merely because they would have arrived at a different conclusion.
Alleged Conflict with an Existing Court Ruling:
18. The applicants further argue that the award is in conflict with this Court’s ruling of 8th December 2022 in Misc. E806 of 2020. That decision, rendered by Okwany, J, concerned an application for disqualification of the arbitrator. A perusal of the ruling, annexed to the replying affidavit, reveals that no findings were made on the substantive merits of the dispute, including on the issue of loss of user.
19. The applicants’ assertion that the arbitral award is inconsistent with a binding court ruling is thus unsupported. There is no factual or legal basis for finding that the arbitrator’s award is in breach of any prior order of this Court.
The Effect of a Registered Charge:
20. Finally, the fact that a third-party lender, Kenya Commercial Bank (KCB), holds a charge over the subject property does not render the award illegal or contrary to public policy. The rights of a secured creditor remain enforceable under general law and are not extinguished by an arbitral award rendered between disputing shareholders. In any event, no evidence has been tendered to demonstrate that the arbitrator’s award purports to defeat or interfere with the secured creditor’s rights under the charge instrument.
Conclusion
21. In view of the foregoing, I find that the applicants have failed to establish any of the statutory grounds for setting aside the arbitral award under Section 35 of the Arbitration Act. Their application is in substance an invitation for this Court to sit on appeal over the arbitral tribunal’s findings, a course expressly prohibited by the Arbitration Act and well-established judicial authority.
The Application for Recognition of the Award:
22. Having made the foregoing finding, I now turn to consider the application dated 18th November 2024 filed in MISC E970 OF 2024 which seeks the recognition and adoption of the Award dated 22nd July 2024 by the sole arbitrator, Prof. Paul Musili Wambua.
23. The applicable legal framework governing the recognition and enforcement of arbitral awards is set out under Section 36 of the Arbitration Act. Section 36(3) provides that the party relying on the award must furnish:
“(a) the duly authenticated original award or a duly certified copy thereof; and
(b) the original arbitration agreement or a duly certified copy thereof.”
24. Contrary to the assertion by the respondents, the application for recognition was filed on 20th November 2024, signifying that the applicant paid the requisite filing fee. The applicant has equally complied with the requirements of Section 36(3). In view of the foregoing, I find no legal or procedural bar to the grant of the orders sought.
Final Orders
25. Accordingly,
i. The application dated 18th October 2024 seeking to set aside the arbitral award is dismissed with costs;
ii. The application dated 18th November 2024 is allowed with the consequence that the arbitral award dated 22nd July 2024 by Prof. Paul Musili Wambua is hereby recognized and adopted as a judgment of this Court.
iii. The applicants shall have the costs of the application.
It is so ordered.