Alternative Dispute Resolution

Alternative dispute resolution may be defined as

the use of any form of mechanism, process and
method of dispute resolution other than judicial
determination. ADR includes a number of
dispute resolution mechanisms such as
arbitration, conciliation, mediation,
mediation/arbitration, negotiation, fact finding,
peer reviews and ombudsman.
The most compelling reasons for using ADR
techniques as alternatives to public judicial and
administrative processes is the cost saving in
terms of time and money. The cost of civil
litigation capture not only the actual costs of the
awards or settlements, but also the transaction
costs associated with dispute resolution such as
costs of inside and outside legal counsel, expert
witnesses, gathering evidence, engaging in
disclosure and so forth.
The transaction costs in litigation are sometimes
two or three times greater than the settlements
themselves.
ADR is also appealing as a substitute for
litigation because of expeditiousness or the time
saving associated with it. ADR rules are more
flexible and thereby more efficient in terms of
time. For example under ADR practices,
arbitrators may conduct expedited hearings,
dispense with pre and post hearing briefs and
schedule arbitrations, hearings, meetings and
other dispute resolution processes at the
convenience of the disputants rather than be
delayed due to backlog of cases on the docket of
a court or governmental regulatory agency.
Speeding up dispute resolution not only saves
valuable organisational time but also likely
contributes to higher post dispute resolution
levels of satisfaction for both parties.
A related benefit of ADR is control by the parties
rather than dependence on a court. Not only
can the parties design the ADR process
themselves, they can jointly select the mediator
or arbitrator. Since they control the process, the
disputants are more likely to comply with the
outcome generated by ADR.
ADR processes are being used in many
jurisdictions across a broad range of disputes,
including commercial contracts, employment
issues, construction disputes, product liability,
real estate intellectual property, environmental
issues, consumer rights, financial reorganisation
issues and corporate finance.
Also, increasingly, interest in and enthusiasm for
ADR has expanded beyond the legal
departments and is rapidly becoming a strategic
issue for general management in many business
firms, dispute resolution has become highly
integrated into the general corporate planning
process and those who implement ADR
processes (usually legal staff) are required to
develop an understanding of the broader
business issues facing the company and
industry. senior managers have come to
recognise not only the cost savings often
associated with ADR over litigation, but have
developed an appreciation for the power of ADR
in preserving relationships with customers,
suppliers and employers, the so called ‘dispute
-wise management’.
Dispute wise management practices are
associated with positive business outcomes,
including stronger relationships with a broad
array of stakeholders, a greater appreciation for
the speed and fairness of ADR in resolving
disputes, reduced legal department budgets and
more efficient utilisation of costly legal
resources.
Constitutional foundations of ADR
The constitutional basis of ADR is Article 159
which provides that judicial authority is derived
from the people, and shall be exercised by the
courts and tribunals guided by the principle that
alternative forms of dispute resolution including
reconciliation, mediation, arbitration and
traditional dispute resolution mechanisms shall
 ARBITRATION
be promoted.
Arbitration is a contractually created non-judicial
process wherein a neutral arbitrator is
empowered to resolve disputes between the
parties according to the terms and authority
granted to the arbitrator by the contract.
It is an adjudicative process where the arbitrator
makes a determination that is binding on the
parties to the dispute.
The advantages of arbitration includes: (a)
greater certainty about the enforcement of
awards due to the United Nations Convention
on the Recognition and Enforcement of Foreign
Arbitral Awards 1958 (The New York
Convention) which provides for recognition and
enforcement of arbitral awards made in
member countries.
Secondly, it enables parties to avoid specific
legal systems and national courts in dispute
resolution thereby according them greater
control rather than leaving matters to the
discretion of the courts.
Thirdly, it provides flexibility in terms of the
procedure by allowing parties to decide on
which procedures they will apply. Fourthly, it
safeguards confidentiality since proceedings are
not conducted in public. Fifthly, there are limited
grounds for challenges and appeals such as
where an award is tainted by corruption or
fraud.
The principal disadvantages are include
reluctance of some tribunals to issue sanctions
for non-compliance with deadlines, the limited
grounds for challenges and appeals which
together with the confidential nature can
compromise intellectual rigour in decision
making, and the high cost of arbitration due to
costs of arbitrators.
 Arbitrator’s jurisdiction
The arbitrator’s jurisdiction is derived from the
parties agreement. In First Options v. Kaplan 514
US 938, the US Supreme Court stated that
arbitration is a matter of contract between the
parties [at 943]. As such parties ought to have
the freedom to contract for whatever they chose
in an arbitration. This is the principle of party
autonomy. This principle was explained by the
US Supreme Court in Volt Info. Sci. v. Board of
Trustees of Leland Stanford Jr University 489 US
468 at 479 thus: “Arbitration …is a matter of
consent, not coercion, and parties are generally
free to structure their arbitration agreements as
they see fit. Just as they may limit by contract
the issues which they will arbitrate, so too may
they specify by contract the rules under which
the arbitration will be conducted.”
For an arbitrator to have jurisdiction, all of the
following must apply under the Act: (a) there
must be a binding agreement to arbitrate; (b)
the arbitrator must have been validly appointed;
and (c) there must be a dispute that the parties
have agreed to arbitrate.
Jurisdiction can be challenged by attacking the
validity of the agreement or the tribunal’s
jurisdiction over certain subject matters. Section
17 of the Arbitration Act provides that the
arbitral tribunal may rule on its own jurisdiction
including the validity of the arbitration clause.
The plea of lack of jurisdiction should however
be raised before submitting the statement of
defence. Where the issue is that the tribunal has
exceeded the scope of its authority, the plea
must be raised as soon as the matter alleged to
be beyond the scope is raised during the
proceedings.
 The arbitration agreement
Any party aggrieved by the decision of the
tribunal may apply to the High Court to decide
the matter.
The formal requirements for the arbitration
agreement are provided in S. 4 which provides
that the agreement must be in writing. It will be
considered to be in writing if it is a document
signed by the parties, or an exchange of letters,
telex, telegram, facsimile, electronic mail or
other means of telecommunication providing
a record of the agreement, or an exchange of
statements of claim and defence in which the
existence of an agreement is alleged by one
party and not denied by the other party.
 Separability of arbitration agreement

Parties may however have a separate arbitration

agreement by reference to it in the contract, and
it would constitute an arbitration clause to the
contract in dispute: S. 4(4).
Section 17 provides that arbitration agreement
is treated as separate from the underlying
contract. Thus in Nedermar Technology Ltd v.
Kenya Anti-Corruption Commission and Another
(2006) eKLR, the court stated that an arbitration
agreement survives the contract’s termination.
Thus where death or insolvency occur, the
agreement is not terminated, and the rights and
obligations under it fall to the successors in title.
To be unenforceable, the arbitration clause
 Arbitrators
should be shown to have been affected by lack
of intention to create a legally binding
agreement, lack of legal capacity, lack of
consensus, or have been terminated.
The number of arbitrators is chosen by the
parties, and if there is a failure to determine the
number, there will be one arbitrator. Where the
arbitration agreement provides that there will
be two arbitrators, the two arbitrator will
appoint a third arbitrator after their
appointment unless a contrary intention is
expressed the agreement: S. 11.
The necessary qualifications for the arbitrators
will also be determined by the parties and set
out in the agreement. If a party fails to appoint
an arbitrator as required or is unwilling to
appoint, the arbitrator appointed by the other
party will be the sole arbitrator. But the party in
default may apply to court to set aside the
appointment on the grounds that there was
good cause for the failure to appoint in good
 Challenge of arbitrator
time or the refusal: S. 12
The arbitrator must disclose the circumstances
that could bring their independence or
impartiality into question: S. 13
An arbitrator may be challenged only if there are
circumstances exist which give raise to justifiable
doubts as to his impartiality and
independence or if he does not possess
qualifications agreed to by the parties or if he is
physically or mentally incapable of conducting
the proceedings or there are justifiable doubts
as to his capacity to do so: S. 13(3). But the
challenge must relate to grounds which the
party has become aware of only after the
 Termination of mandate
appointment of the arbitrator: S. 13(4).
A party who has unsuccessfully challenged an
arbitrator (who has refused to withdraw from
office) may apply to the High Court to determine
the matter: S. 14(3).
The mandate of an arbitrator terminates if he is
unable to perform the functions of his office or
he fails for any other reason to conduct the
proceedings properly with reasonable dispatch.
The mandates also terminates if he withdraws
from office following a challenge, and when
parties agree in writing to the termination of the
mandate. If there is a dispute concerning any of
the grounds for termination of the mandate a
party may apply to the High Court to decide the
matter: S. 15.
where the mandate of the arbitrator is
terminated, a substitute arbitrator should be
appointed in accordance with the procedure
that was applicable to appoint the arbitrator
being replaced.
 Immunity of Arbitrator;
Arbitral proceedings
An arbitrator is not liable for anything done or
omitted to be done in good faith in the
discharge or purported discharge of his
functions as an arbitrator: S. 16B.
The parties are bound to do all things necessary
for the proper and expeditious conduct of the
arbitral proceedings: S. 19A. The tribunal is
required to follow the procedure agreed by the
parties, and where there is no consensus, it is
entitled to conduct the arbitration as it
considers fit, having regard to the need to avoid
unnecessary delay or expense, while affording
the parties a fair and reasonable opportunity to
present their cases: S. 20
 Judicial intervention
The arbitral tribunal has power to determine
admissibility, relevance, materiality and weight
of evidence.
No court has power to intervene in matters
governed by the Arbitration Act on its own
initiative except as provided in the Act. in
particular, a court is allowed to intervene in the
following cases: (a) where the tribunal requests
assistance in the taking of evidence; (b) where
the parties institute procedures to challenge the
appointment of the arbitrator; (c) to determine
the tribunal’s jurisdiction; (d) to give interim
orders for protection during arbitration; and (e)
to determine questions of law on application by
the parties.
The limitation on judicial intervention is based
on the principle of independence of the arbitral
process. In Bowen v. Amoco Pipeline Co. 254 F.
3d 925 (2002), the 10th Circuit Court of Appeals
stated regarding the Federal Arbitration Act:
“The FAA’s limited review ensures respect for
the arbitration process and prevents courts from
 Remedies
enforcing parties agreements to arbitrate only to
refuse to respect the results of arbitration.
These limited standards manifest a legislative
intent to further the federal policy favoring
arbitration by preserving independence of the
arbitration process” [934-5].
The Arbitration Act provides that the tribunal
can order any party to take interim protection
measures it considers necessary in respect of
the subject matter of the dispute. However, the
types of relief are not specified. It can also the
same time order a party to provide security in
respect of any claim or any amount in dispute,
or order a claimant to provide security for costs:
S. 18.
The court can also grant interim orders under
S. 7 to maintain the status quo of the subject
matter of the arbitration before the tribunal has
been constituted.
The Arbitration Act does not specify what types
of remedies the tribunal can award the winning
party. Therefore, there is no limit as to the
remedies the tribunal can grant. They should,
 Appeals
however, be limited to the reliefs sought in the
statement of claim and defence.
A party to local arbitration can appeal to the
High Court on a point of law arising in the course
of the arbitration or out of the award where the
parties agreement provides for such appeal: S.
39(1).
The exclusion of the power of courts to review
the soundness of arbitral awards is attributable
to the incompatibility of the procedures of the
two dispute resolution systems. In UHC
Management Co. v. Computer Services Corp. 148
F. 3d 992 (1998), the 8th Circuit Court of Appeals
explained: “ Where arbitration is contemplated
the courts are not equipped to provide the same
judicial review given to structured judgments
defined by procedural rules and legal principles.
Parties should be aware that they get what they
bargain for and that arbitration is far different
from adjudication” [at 998].
The High Court’s decision is appealable to the
 Setting aside arbitral awards
Court of Appeal if the parties had agreed so or if
the Court of Appeal grants leave on the basis
that a point of law of general importance is
involved the determination of which will
substantially affect the rights of one or more of
the parties: S. 39(3).
Local awards can also be set aside on grounds
including incapacity on the part of a party,
invalid arbitration agreement, lack of notice to a
party of the appointment of an arbitrator or
proceedings, inability by a party to present his
case, the award dealing with a dispute not
contemplated by the reference, composition of
the tribunal not being in accordance with the
the agreement of the parties, and the making of
the award having been induced or affected by
fraud, bribery, undue influence or corruption: S.
35. These are also the grounds on which
international awards may be set aside.
The limitation of the grounds for setting aside
arbitral awards to competency and procedural
fairness and appeals to issues of law is founded
on the principle of finality of arbitral awards.
Thus in Chicago Typographical Union No. 16 v.
Chicago Sun Times, 935 F. 2d 1501 (1991), the
Union challenged the arbitrator’s interpretation
of a most favoured nation clause in the main
collective bargaining agreement it had with the
Defendant newspaper. The 7th Circuit Court of
Appeals stated: “Unless the arbitral award was
procured by fraud, or the arbitrator had a
serious conflict of interest-circumstances that
invalidate the contractual commitment to abide
by the arbitrator’s result- his interpretation of
the contract binds the court asked to enforce
the award or to set it aside. The court is
forbidden to substitute its own interpretation
even if convinced that the arbitrator’s
interpretation was not only wrong, but plainly
wrong” [1504-5].
In Nyutu Agrovet Limited v. Airtel Networks
Limited (2019)eKLR the Supreme Court held that
an appeal can lie from the High Court to the
Court of Appeal where the High Court went
beyond the grounds set out in Section 35 in
setting aside an arbitral award under the section
and made a decision so manifestly wrong and
which closed the door of justice to either of the
parties. The court affirmed the position in
 Enforcement of awards
Synergy Industrial Credit Limited v. Cape
Holdings Limited (2019) eKLR by holding that the
purpose of section 35 of the Act is to ensure that
courts can correct specific errors of law which, if
left unchallenged, would lead to a miscarriage of
justice.
Domestic awards are recognised as binding and
are enforced on written application to the High
Court. Foreign arbitral awards are recognised
and enforced under the New York Convention.
The award must have been awarded in a
signatory country. The party wishing to rely on
the foreign arbitral award or to enforce it must
produce the original award and arbitration
agreement or
certified copies.
In addition to the grounds set out in S. 35, the
High Court can refuse to recognise a foreign
arbitral award on the ground that it has not yet
become binding on the parties or has been set
aside or suspended by a court of the origin
state.
 MEDIATION
Mediation is a facilitative and confidential
structured process in which parties attempt by
themselves, on a voluntary basis, to reach a
mutually acceptable settlement to resolve their
dispute with the assistance of an independent
third party called a mediator. It is a flexible form
of ADR because parties use it to resolve disputes
that involve not only questions regarding law
and fact, but also non-arbitrable or non
-justiciable issues that an adjudicative type
process cannot settle. Whereas a court or
arbitral panel is neither equipped to handle nor
interested in these issues, a mediator can
explore them to perhaps bring about a quicker
and more creative solution: Stephen B. Goldberg
et al, Dispute Resolution, 97-98.
In mediation, parties themselves fashion a
unique solution that would work for them
without being strictly governed by precedent or
being unduly concerned with the precedent
they may set for others. They can consider a
comprehensive mix of their needs, interests and
whatever else they deem relevant regardless of
rules of evidence or strict adherence to
substantive law.
Unlike adjudicatory processes which include
arbitration emphasis is not on who is right or
who wins and who loses, but rather on
 Relevance
establishing a workable solution that meets the
parties unique needs. That is why mediation has
been described as a win/win process.
In terms of relevance, the litigation process
insists that facts that are relevant are those
which prove or disprove a subsequent fact,
inference or proposition. Thus legal relevance is
based on materiality. Materiality is defined as
relevant to a point in legal issue. The point to be
proved by the evidence must be based in the
governing law such as the legal element of the
claim, cause of action, charge, defence or
counterclaim.
There has been some movement towards a
common sense standard of basic relevance, that
is, a fact of consequence. A fact of consequence
includes helpful background information and
illustrative aids for the fact finder as well as the
foundational facts that explain the admissible
fact. Thus the fact of consequence standard
expands relevance and assists parties in
presenting their stories in an intelligent, humane
fashion.
In mediation, the definition of relevance is still
broader. It is a fact of consequence to the
disputant. This includes their issues, reactions to
each other, verbal and non-verbal exchanges in
responses to the mediator and the entire
process.
When attorneys import a court focused
approach to legal relevance into mediation, the
inhibit expression of the disputants perceptions,
reactions, feelings, needs and concerns and
ignore issues the disputants may consider
important. In mediation, the point is not legal
relevance which causes the disputants to retreat
into rigid positions, reduces the possibilities for
effective communication and diminishes the
range of potential workable solutions. Rather
parties should be allowed to present their best
arguments and challenge each other in
mediation. One of the key tasks of a mediator is
to help all parties explore the strengths and
 Hearsay
weaknesses of their own and each other’s
positions in the case.
Hearsay is a term for any oral, non-verbal or
written statement made by a person testifying in
court that is offered to prove the truth of the
statement. The basic premises of hearsay
analysis reflect public values regarding the
trustworthiness of each piece of evidence that is
used to support a desired conclusion.
Hearsay rules thus present a public policy
determination that the poor quality of
statements by out of court speakers mandates
that the fact finder or decision maker should not
hear this evidence. Several types of these out of
court statements are inadmissible in a court
proceeding because they are regarded as easily
fabricated and unreliable and not reasonably
verifiable or capable of corroboration by
independent means.
There are nevertheless several exceptions to the
hearsay rule that allows certain types of out of
court statements to be admissible in a court
proceeding because they are quite reliable and
often the best evidence on a particular issue. For
example records maintained in the ordinary
course of business, admissions by a party-
opponent or declarations against interest by a
party unavailable to testify.
Nevertheless, hearsay is important in mediation
because if statements made in mediation are
not protected by the law of confidentiality, then
the hearsay rule will probably control
admissibility in a later court proceeding.
Protection against disclosure of facts and the
use of the knowledge gained in mediation can
be attained by a contracted agreement of the
parties to mediate.
 confidentiality
In private civil context, the general rule is that
private confidentiality agreements are
enforceable in a court of law. this is because in
general contract doctrine, competent parties are
free to negotiate the specifics of their
relationship, so long as public policy or law is not
violated.
Effective communication in mediation requires
that parties feel free to be candid with the
mediator and each other. if the mediator cannot
overcome the disputants hesitation to speak
freely, progress towards a mutually satisfactory
solution becomes exceedingly difficult, if not
impossible.
At the same time disputants must have some
assurance that the mediator will not disclose
revealed facts or statements made in the
mediation. A majority of courts asked to rule on
the issue have upheld the necessity for
confidentiality in mediation even though the
extent of protection varies.
In the Evidence Act, Section 23 provides that
admissions made in civil cases on a without
prejudice basis are not admissible.
However, the confidentiality privilege applicable
in mediation is not absolute. In an action to
enforce a settlement agreement, the
confidentiality of mediation proceedings are
deemed to be waived. Thus in Olam v. Congress
Mortgage Co. 68 F. Supp. 2d 1110 (N.D. Cal.
1999), all parties had earlier signed a
memorandum of understanding containing the
the provision intended as a binding document
itself, but the Plaintiff refused to sign a formal
settlement agreement at the end of the
mediation and claimed that she signed the MOU
under duress. The issue was whether the
mediator could be compelled to testify as to
what occurred in the mediation. It was held that
in an action to enforce a settlement agreement
the confidentiality of mediation proceedings was
not absolute and had been waived. The court’s
decision to hear the mediator’s testimony relied
heavily on the parties waiver of their
confidential privileges and the fact that the
mediator had essential information that would
held the court without imposing an unjust
outcome on the Plaintiff.
Nonetheless, courts generally only compel a
mediator ‘s testimony in very narrow
circumstances. In re Anonymous 283 F. 3d 627
(4th Circuit 2002) it was held that the overriding
importance of confidentiality to the integrity of
mediation requires a court to deny disclosure by
litigants in subsequent court proceedings unless
a manifest injustice results from that denial.
Furthermore, the standard requiring a mediator
to disclose statements during mediation is much
higher (at 640). In addition to manifest injustice
the court must find the mediator’s testimony
indispensable on the matter, and that disclosure
by the mediator will not damage the mediation
programme (ibid).