Final is Final: Warts and All

The Meaning and Application of Finality of Arbitral Awards

1. Introduction

Arbitral awards are generally considered final and binding on the parties involved. This principle of finality is crucial in ensuring that arbitration remains an efficient and effective means of dispute resolution. However, the interpretation and application of this principle can vary across jurisdictions. This article explores the meaning of finality of arbitral awards and provides guidance on what parties need to consider when negotiating arbitration clauses and underlying contracts.

• Meaning of Finality of Arbitral Awards

The finality of an arbitral award means that once the award is rendered, it is conclusive and enforceable, subject to limited grounds for challenge or appeal. This principle is enshrined in various arbitration laws and conventions, such as the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards. The finality of arbitral awards ensures that the parties’ dispute is resolved definitively, without the need for prolonged litigation.

• Grounds for setting aside arbitral awards

Section 35 of the Arbitration Act provides that an arbitral award may be set aside by the High Court only if the party applying shows that:-

1. Incapacity: A party to an arbitration agreement was under some incapacity.
2. Invalidity of the Arbitration Agreement: The arbitration agreement is not valid under the law of the country where the award was made.
3. Lack of Proper Notice: A party was not given proper notice of the appointment of an arbitrator or of the arbitration proceedings or was otherwise unable to present their case.
4. Arbitral Tribunal Composition: The composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties.
5. Excess of Jurisdiction: The arbitral tribunal ruled on matters beyond the scope of the submission to arbitration.
6. Public Policy: The award is in conflict with the public policy of Kenya.
7. Corruption or Fraud: The award was procured by corruption, fraud, or undue means.
8. Timeline for setting aside arbitral awards

Section 35(3) of the Arbitration Act provides the timelines for applications to set aside an arbitral award as strictly within three months (3) after the party making the application receives the award. It is noteworthy that “receipt” means when notice is given that the arbitral award is ready for collection. Therefore, the three months timeline starts running after the arbitrator notifies the parties that the award is ready and not necessarily when the parties receive the physical copy.

• Case Law from Kenya

In Kenya, the principle of finality of arbitral awards has been upheld in several cases. The leading case is Nyutu Agrovet Limited v Airtel Networks Kenya Limited; Chartered Institute of Arbitrators-Kenya Branch (Interested Party) [2019]. In this landmark case, the Supreme Court of Kenya reaffirmed the principle that arbitral awards are final and binding but can be set aside under Section 35 of the Arbitration Act. The court emphasized that the finality of arbitral awards is a matter of public policy and should be respected to maintain the integrity of the arbitration process.

Other leading cases on setting aside arbitral awards are:

1. Kenya Shell Ltd v Kobil Petroleum Ltd (2006) eKLR. In this case, the Court of Appeal upheld the principle of finality of arbitral awards, stating that it is in the public interest to have an end to litigation. 
2. Synergy Industrial Credit Limited v Cape Holdings Limited [2020] eKLR: The Court of Appeal noted that from the use of the phrase“only if”in section 35, the list of grounds provided therein on the basis of which an arbitral award may be set aside constitute an exhaustive and closed list. No new or additional grounds may be introduced to impeach an arbitral award.
3. Christ for All Nations v Apollo Insurance Co. Ltd [2002] 2 E.A 366 : In this case, Ringera J disabused parties of this tendency that when a party is unable to identify a specific ground for setting aside, the fall back is public policy, in these often cited and famous words:

“Justice is a double-edged sword. It sometimes cuts the plaintiff and at other times the defendant. Each of them must be prepared to bear the pain of justice’s cut with fortitude and without condemning the law’s justice as unjust…in my judgment this is a perfect case of a suitor who strongly believed that the arbitrator was wrong in law and sought to overturn the award by invoking the most elastic of grounds for doing so. He must be told clearly that an error of fact or law or mixed fact and law or of construction of a statute or contract on the part of the arbitrator cannot by any stretch of legal imagination be said to be inconsistent with the public policy of Kenya. On the contrary, the public policy of Kenya leans towards finality of arbitral awards and parties to arbitration must learn to accept awards, warts and all, subject only to the right of challenge within the narrow confines of Section 35 of the Arbitration Act.”

1. Kenyatta International Convention Centre (Kicc) V Greenstar Sytems Limited 2018] KEHC 8936 (KLR) : In this case, the Court of Appeal while relying on the case of Anne Mumbi Hinga V Victoria Njoki Gathara [2009] eKLR, held that strict compliance with the timeline set out in Section 35(3) of the Act is imperative, and comports well with the principle of finality in arbitration. The court further reiterated thatin considering the timeline for setting aside an award, the time of delivery and receipt of an award is equivalent to the date of notice by the arbitrator that the award is ready for collection.
2. Case Law from Other Jurisdictions

The principle of finality of arbitral awards is also recognized in other jurisdictions. For example, in Swabir Mukungu v Kobil Uganda Ltd [2015] UGCommC 199 , the Commercial Court of Uganda held that arbitral awards are final and binding, and parties must comply with the award unless there are valid grounds for setting it aside.

Similarly, the UK Supreme Court has ruled that arbitration agreements are subject to the governing law of the main contract, reinforcing the finality of arbitral awards. This position was held in the landmark decision of Enka Insaat Ve Sanayi AS v OOO Insurance Company Chubb [2020] UKSC 38 and reiterated in the recent decisions of Kabab-Ji-SAL v Kout Food Group [2021] UKSC 48 and UniCredit Bank GmbH v RusChemAlliance LLC [2024] UKSC 30.

• Negotiating the Arbitration Clause and the Underlying Contract

When negotiating an arbitration clause and the underlying contract, parties should consider the following:

1. Scope of the Arbitration Clause: Clearly define the scope of disputes that will be subject to arbitration. A well-drafted arbitration clause should specify the types of disputes that are arbitrable and those that are not .
2. Qualifications of the arbitral tribunal:  It is advisable for parties to agree in advance on the qualifications of the arbitral tribunal. This decision can have a major impact on the fairness, efficiency, and outcome of the arbitration process. For instance, arbitration often deals with specialized or complex issues. By agreeing on the qualifications in advance, parties can ensure that the arbitrators have the relevant expertise and experience necessary to understand and adjudicate the disputes effectively.
3. Governing Law: Specify the agreement governing law of the arbitration and the underlying contract. This ensures that the arbitration process is conducted under a consistent legal framework.
4. Procedural Rules: Choose the procedural rules that will govern the arbitration process. Parties can opt for institutional arbitration rules, such as those of the International Chamber of Commerce (ICC) or the London Court of International Arbitration (LCIA), or they can agree on ad hoc arbitration rules, like the Chartered Institute of Arbitrators of the United Kingdom.
5. Enforceability: Consider the enforceability of the arbitral award in relevant jurisdictions. The New York Convention provides a framework for the recognition and enforcement of foreign arbitral awards, but parties should also be aware of any local laws that may affect enforceability.
6. Confidentiality: Address the issue of confidentiality in the arbitration clause. Arbitration is often chosen for its confidential nature, so parties should ensure that the arbitration process and the award are kept confidential.
7. Appeals on Points of Law: Despite finality of arbitral awards, section 39 of the Arbitration Act, 1995 provides that in respect of domestic arbitrations, parties may agree that the arbitral award can be subject to appeal to the High Court and the Court of Appeal on points of law.
8. Conclusion

The finality of arbitral awards is a fundamental principle that ensures the efficiency and effectiveness of arbitration as a dispute resolution mechanism. By understanding the meaning of finality and considering key factors when negotiating arbitration clauses and underlying contracts, parties can ensure that their disputes are resolved in a fair, timely, and enforceable manner.

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