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The Doctrine of Public Policy: A Limit to Enforcement of Arbitral Awards in Kenya

The Doctrine of Public Policy: A Limit to Enforcement of Arbitral Awards in Kenya. Enforcement of an arbitral award against a liable party can be achieved by an application to the court, by a successful party, for the recognition and enforcement of the award. Often times however, it proves quite challenging to enforce an award against an unscrupulous liable party, because the law gives a variety of instances where the courts may refuse to recognize and enforce an arbitral award. A claim of public policy limitation is one such instance.

Public policy is one of the grounds for setting aside and refusal of recognition and enforcement of arbitral awards provided under the New York Convention and the UNCITRAL Model law on International Commercial Arbitration. However, public policy is not defined, and different countries have adopted different interpretations of what constitutes public policy. 

An award may be argued to be against public policy if it is against the laws, it deals with a matter which is against the public interest of the country or where it is against justice and morality of the people.

The phrase ‘public policy’ is problematic as it is not capable of an absolute definition. In the case of Richardson Vs Mellish [1824], the Court branded public policy an:

‘Unruly horse [that] when you get astride it, you never know where it will carry you’. English courts have interpreted the phrase ‘against public policy’ to include fraud, illegality, bribery and other forms of corruption.

As stated by Buchanan M. in the American Business Law Journal, “Public Policy is the final parameter of the law that, while it is reflected in and often expressed by statutory and constitutional statements of law, also dictates either consent or constraint, permission or prohibition, when statutes and constitutions are silent.”

The UNCITRAL Model Law (1985), Article 36 (2) (b) provides the grounds for refusing recognition or enforcement of an arbitral award, irrespective of the country in which it was made. It provides that an award may be refused if the court finds that the recognition or enforcement of the award would be contrary to the public policy of this state. A Perusal of the International laws laid down at Geneva Convention, 1927, Article 5(2) of the New York Convention 1958 & UNCITRAL Model Law 1985 reveals that any country’s Public Policy has a significant impact on the International/Foreign awards.

Public Policy Doctrine in Kenya

Arbitral awards are considered final and binding in Kenya with no recourse to an appeal save for cases where the parties have agreed to adopt the provisions of Section 39 of the Arbitration Act, which permits parties to appeal an arbitral award on points of law only. Recourse to the High Court against an arbitral award may, however, be made only by an application for setting aside the award under Section 35 of the Arbitration Act if the award is contrary to public policy.

The importance of an award being aligned with Kenyan public policy concerns is highlighted in Section 35(2)(b)(ii) of the Arbitration Act of 1995 which provides that, if an award is in conflict with the public policy of Kenya, it shall be set aside.

An award may be argued to be against public policy if it is against the laws, it deals with a matter which is against the public interest of the country or where it is against justice and morality of the people.

Justice Ringera J (as he then was) addressed himself to the question of what constitutes ‘public policy of Kenya’ in the case of Christ of All Nations v Apollo Insurance Co. Ltd [2002] and concluded that an act is contrary to public policy if it is:

  • Inconsistent with the Constitution or other laws of Kenya whether written or unwritten; or
  • Inimical to the national interests of Kenya; or
  • Contrary to justice or morality.

What amounts to a ‘public policy consideration’ has also been expounded further by Kenyan courts. The court in Rwama Farmers Co-operative Society Limited v Thika Coffee Mills Limited [2020] quoted the case of Glencore Grain Limited v TSS Grain Millers Limited, where it was held that: “A contract or arbitral award will be against the Public Policy of Kenya in my view if it is immoral or illegal or that it would violate in clearly unacceptable manner basic legal and/or moral principles or values in the Kenyan society. It has been held that the word illegal here would hold a wider meaning than just ‘against the law.’ It would include contracts or acts that are void. ‘Against Public Policy’ would also include contracts or contractual acts or awards which would offend conceptions of our justice in such a manner that enforcement thereof would stand to be offensive.”

In a recent decision in Kenya Airports Authority v World Duty Free Company Limited [2018], the High Court set aside a domestic award on the grounds that the arbitral award was in conflict with public policy. Primarily, the Court noted that the arbitral tribunal ought to have taken note of undertones of bribery and corruption, which had been picked up in a prior ICSID award in which the tribunal had more or less dealt with the same subject matter.

Further, in National Oil Corporation of Kenya Limited v Prisko Petroleum Network Limited [2014], the court stated that, ‘…neither the Court nor the Legislature can provide an exhaustive list of the elements or items that constitute public policy; are inimical to the national interest or Kenya; or contrary to Justice and Morality. It will all depend on the circumstances of the particular case, the facts being pleaded, and the evidence offered in support of those facts.’5

Conclusion

The lack of a concise definition for public policy as a ground for setting aside an arbitral award has complicated the inherent nature and perception of the arbitral process as an expeditious and effective mode of resolution of disputes. The controversy surrounding the public policy exception is that it is incapable of being precisely determined and it varies from one jurisdiction to another. This situation can lead to an award not being contrary to the public policy of the state of the seat but may be contrary to the public policy of the enforcement state.

The authority of courts to set aside awards on the grounds of public policy in Kenya is discretionary. This places a hurdle on achieving the principle of finality of awards in Kenya. While Justice Ringera attempted to define what public policy would mean in Kenya, different judges appear to adopt their own preferred definitions. This disparity brings about uncertainty and provides uncooperative parties an avenue to delay enforcement of arbitral awards.

The uncertainty often associated with the definition of what amounts to Public Policy in Kenya could hamper the enforceability of arbitral awards and also erode the gains made in fronting arbitration as an expeditious dispute settlement mechanism in Kenya.

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