JOMO KENYATTA UNIVERSITY OF AGRICULTURE AND

TECHNOLOGY

SCHOOL OF LAW.

EFFECTIVENESS OF ARBITRATION IN DISPUTE RESOLUTION IN

CONSTRUCTIONS CONTARCTS.

RESEARCH PAPER SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE AWARD OF BACHELOR OF LAWS (LL.B)

DEGREE OF JOMO KENYATTA UNIVERSITY OF AGRICULTURE AND TECHNOLOGY, SCHOOL OF LAW.

PRESENTED BY:

GETANGITA STEPHEN NSONGO.

JKC-B11-0005/2011.

Ms. FAITH N. SIMIYU (RESEARCH SUPERVISOR)

MARCH 2014.

SIGNATURE……………………..

List of Statutes.

Arbitration Act of 1995

Arbitration Act of 1996

Arbitration (Amendment) Act of 2009

The Constitution of Kenya 2011

International Conventions & Statutes.

UNICITRAL Model Law Rules.

New York Convention on Arbitration.

ICC Rules.

Recognition and Enforcement of Foreign Arbitral Awards 1958, New York Convention.

1.0: CHAPTER 1

1.1: INTRODUCTION.

There are basic 1approaches in resolving disputes; power, right and interest. The right base

approach resolves disputes by focusing at the rights of the disputants. This process seeks to

determine who is right and who is wrong. The power based approach involve the use of

resources to resolve disputes for instance the use of war. Under this approach a win or lose

situation is created. Interest based approach resolve disputes in a way that acceptably addresses

the interest of the parties’. Alternative dispute resolution or ‘ADR’ falls under this approach. The

disputants are assisted to solve their disputes in which the outcome would be fair to all parties.

Alternative dispute resolution refer to a wide range of techniques that share one essential

characteristic: they all differ from the dispute mechanism of litigation in a federal or a state

court. These alternative mechanism include but not limited to; Arbitration, Mediation,

Conciliation, Fact-finding, minitrials, small claims courts and rent-a-judges.2

Arbitration therefore is a process 3whereby formal disputes are put to a private tribunal of the

parties’ choice for a final, binding and enforceable decision. It’s a traditional 4method of dispute

resolution for deciding controversies between individuals. Parties may agree to use arbitration

after a controversy has arisen or may need it for future conflicts.

Contractions projects are unique, limited for a period of time and accomplished with specific

period of time and accomplished with specifically created groups of experts. Additionally,

construction projects can become complicated because of different attitudes; different areas of

interest and because of the important issues of time, money and quality. Furthermore

globalization plays an always growing role in the field of construction. Impacts of globalization

can lead to two or even more parties from different countries accomplishing a project. Sites all

over the world.

1

Walton A. Victoria M, Russell on the law of Arbitration London Stevens and sons1987

2 Katherine V W Stone. ‘ Alternative Dispute Resolution ‘http://ssrn.com?=631346 accessed on 20Dec 20113 F. Khan et al (2002) “A.D.R”, a paper presented at Chartered Institute of arbitrators Kenya Branch4 www.Global Arbitration Mediation Associations Inc.

Disputes can concern various issues and are very common in construction industry5. The logical

consequences of two fighting parties with everyone asserting ones right, is to submit the case to a

legal court. Litigation disadvantages are overwhelming and the final judgment can lead to

bankruptcy of the losing party. Regarding to the field of construction disputes special knowledge

is required. In most cases the judge is lacking the necessary know how which necessitates

additional experts. Due to this there is need to envisage the dispute resolution clause in the

contractions contracts. 6In most common disagreement in construction contracts are between sub-

contractor or employer and the main contractor. It is important for the parties to choose a dispute

settlement mechanism that is practicable and effective; they mostly go for arbitration by

incorporating arbitration clause in their contracts.

Mandatory arbitration can only come from an Act of parliament or a contract that is voluntarily

entered into where the parties agrees to solve any dispute that may or will occur through

arbitration. It therefore means that an agreement to use arbitration to resolve dispute or arbitrate

maybe envisaged into a contract defining the relationship between the parties and therefore arises

before the dispute. There is no particular prescribed form for an arbitration agreement. All that

we need in an agreement is to refer “a dispute” for resolution by arbitration apart from the

litigation process, the outcome of which will bind the parties. If the outcome is binding the

parties are refrained from appealing the award. Once a clause is incorporated in a contract it

binds parties of the contract to bring forward all disputes that may arise out of the transaction of

the transaction to arbitration. This therefore implies that it only applies7 to disputes not existing

when the agreement is executed.

However, if the parties did not incorporate the clause and the dispute has risen, they have a right

to enter into a submission agreements. This agreement permits the parties to resolve their dispute

through an agreed mode since an accurate description of the subject matter to be arbitrated is

known to the two parties. A clause that holds one party responsible for part of the cost or all the

cost, make the contract void.

5 Alfred 1 aluvaala. Arbitration process in contruction industry.

6 Clause 20 of the FIDIC Conditions of contracts for construction, 1 Ed 1999; clause 45 of The Buildings Council, Agreement and Condition of Contracts for Building Works(1999) and Clause 31 of The Kenya Association of Building and Civil Engineering Contractors, (2002).7 www.mindsprings.com.

Arbitration clause was originally used primarily in commercial contract; it has become

commonly included first in employment contract and later in contracts involving transactions by

consumers. Although arbitration clauses 8were frequently included in commercial contracts, such

clauses were frequently overturned by courts hesitant to yield power within their jurisdiction to

arbitration9. Responding to the widespread invalidation of these clauses, and claiming that such

clauses were in public interest, USA enacted the Federal Arbitration Act of 1925. The Act

provides that an arbitration agreement shall be valid, irrevocable and enforceable save upon such

grounds as existing at law or in equity. The Act thus provided the remedy of specific

performance against parties refusing to honour arbitration clause. It also pre-empt statute that

conflict with the arbitration clause by singling out arbitration clause from other contractual

provisions. The Act effectively holds that contracts law must be applied to an agreement to

arbitrate in exactly the same mode as any other contractual clause. The Federal Arbitration Act

was intended to govern the arbitration of contractual disputes involving commerce.

Arbitration laws in Kenya were first in 1968. The 1968 Act borrowed much from the UK

Arbitration Act of 1950. This Act based on different legal principles for example under the Act,

the courts had a wider role. The Act has undergone various amendments especially because of

the emergence of 10UNICITRAL MODEL ARBITRATION LAW. With these emergences the

1968 Act was repealed and replaced with the 1995 Act which is based on the Model Arbitration

Act of the United Nations Commission on Trade Law. Unlike the 1968 Act it cut short the

intervention of the court. Subsequently, the 1995 Act has been amended vide the Arbitration Act

of 2009. The Arbitration Act 1995 is applicable to both domestic and international. Section 3(2)

of 1995 Act gives circumstances that makes arbitration domestic while section 3(3) of the same

Act stipulates condition that qualify one to be an international one. UNICITRAL LAW 11defines

arbitration as international one similarly as section 3(3) of 1995 Act.

8 Bernstein R, the Handbook on Arbitration practice. London, Sweet and Maxwell 1998.

9 Mark E Budnitz, Arbitration of disputes between consumers and financial institutions (1995).

10 The model law has been enacted in many states especially developing world therefore influencing the contents and structure of many legislations.

11 UNICITRAL model law article 1 (3)

1.2: BACKGROUND.

The first 12Arbitration Act in Kenya was enacted in 1968. This 1968 Act is the now repealed

Arbitration Act (Cap. 49) Laws of Kenya, which was describable as a near exact replica of the

Arbitration Act 1950 of United Kingdom. The 1968 Act, like the Arbitration Act 1950 of UK,

generally laid the framework for court’s intervention in arbitrations. Arbitration stakeholders

sought repeal of the Act for allowing courts such excessive leeway to interfere in arbitration. 13This, they argued, meant arbitration based on the Act did not enjoy the main advantages of

arbitration of speed and cost effectiveness. It is that clamour, combined with the emergence of

UNICITRAL MODEL ARBITRATION LAW- which provided parliaments an easy fix in

enacting an arbitration Act, led to legal reforms repealing the 1968 Arbitration Act and replacing

it with the Arbitration Act, 1995.

It is not exactly known when formal non-judicial arbitration of disputes first began. In England,

arbitration is older than common law system. By the eighteenth 14century arbitration was solidly

entrenched as a means of alternative dispute resolution within which judicial intervention now

extensively occurs because of the natural desire of the courts to keep all adjudications within

their sphere, or the fear of the growth of a new system of law, but most importantly due to the

fact that litigants in arbitrations needed the assistance of the courts who in turn exacted a price

for the assistance offered. 15In the nineteenth century comes the final fruition in the growth of

satisfactory judicial and arbitral modes of resolving commercial disputes. The zenith of the work

of absorption and growth which transmuted the practice of commerce into an effective part of the

ordinary law and brought the commercial arbitral tribunal under the control of the ordinary

courts. However, the first English law Act on arbitration was enacted in 1897. When it was

passed, arbitration was found to have common and in use people to engage in construction

contracts. Early arbitration at common law suffered from fatal weakness that either party to the

dispute could withdraw the arbitrators mandate right up until the delivery of the award.

12 Kariuki Muigai LL.B(HONS), LL.B(HONS) NAIROBI UNIVERSITY.

13 Farooq Khan (2002) ” Introduction to Arbitration.”

14 Lord Parker (2002) “Introduction to Arbitration”

15 Lord parker of Waddington (1959, pg 12-14)

This weakness was rectified by the implementation of 1697 Act.

Although arbitration has not yet achieved its full potential in Kenya, one will be right to say that

its use ha tremendously increased since the enactment of the Arbitration Act. In respect Kenya

has become one of the handful countries that have responded to the growing tide of new modes

of dispute resolution as an effective response to the well know setbacks of the conventional

mode of dispute resolution.

In the construction industry performance cost and time are the main goals, wherein focus is to

meet customer expectation, deliver within the budget and complete within the time limit. 16When

a person pursue a goals that are not compatible, brings about a conflict and end up compromising

or contradicting the interest of the other party in the construction contract. They are impossible to

evade in construction management and can be time consuming, expensive, and not pleasant in

that they can destroy the relationship between contractual parties and also add to the cost of the

contract.

Arbitration clause made between the parties in construction agreements binds the parties to

submit any dispute to Arbitration.

In drafting the clause, there are a few mandatory requirements that must be met by the parties

and few provisions that must be included. These provisions must be unequivocal and clear. In

additional to this provisions, however a clause maybe ornamental in virtually endless

combination with plenty covering topics as important as the situs of the arbitration. There is no

clause appropriate for all occasions. A word of caution is in order to the contracting parties since

no such things as a single or “ all purpose” clause appropriate for all occasions.

The importance 17of clearly and properly drafted arbitration clause in construction contracts are

obvious, the parties involved in the contract feel comfortable with their own standard term,

placing the dispute in their own courts or if more modern, inserting a reference to the ICC

arbitration. This will enable the parties to know where to go and how to resolve problems if

things goes wrong. It may be expressed in a variety of ways and with different degrees of

particularity.

16 Army Ohlendorf, conflict resolution in project management.17 www.admirality.com

Each clause 18should be carefully tailored to the exigencies of a given situation, taking into

account the likely type of disputes that may occur, the needs of the parties and the need of the

parties’ relationship and the applicable laws. Arbitration clause is typically one of the last

contractual provisions negotiated by the parties.

It is often merely insert form clauses or allow the party with the greatest or superior bargaining

power to dictate the contents of the arbitration clause. Companies on the other hand draft clauses,

and different arbitration clauses be crafted for each. In addition, a multi-tiered ADR clause may

be appropriate for major projects

The convention on the Recognition on the Enforcement of Arbitral Awards list the requirements

that the parties must meet for an arbitral agreement to be enforceable by the authority. The

arbitration agreement must be reduced in writing. Writing may consist of a separate arbitration

agreement or an arbitral clause contained in a contract. Writing is the most typical formal

validity requirements mostly found in national arbitration laws and New York Convention. The

definition of such an agreement in writing has not been without controversy. New York gave a

relatively definition of an agreement in writing. 19The term agreement in writing shall include an

arbitral clause in a contract or an arbitration agreement signed by the parties or contract in an

exchange of letters.

UNCITRAL Model law gave a broader definition.20 An agreement is in writing if it is contained

in a document signed by the parties or in exchange of letters or other means of

telecommunication which provides a record of the agreement or in exchange of statement of

claim and defense in which the existence of an agreement is alleged by one party and not denied

by another. The reference in a contract to a document containing an arbitration clause constitutes

an arbitration agreement provided that the contract is in writing and the reference is such as to

make the clause part of the contract. With broadened language of the model law was generally

welcomed, it was of questionable 21value if the model Law might deem an agreement to arbitrate

enforceable but the standards of the New York Convention would deny the resulting awards

enforcement based on the narrower requirements of the convention. Under the Kenyan

18 Stephen Bond, How to draft an arbitration clause (1990)19 Article 11(1) New York Convention on Arbitration.20 Article 7 UNICITRAL law21 Tody Landan the require ment of a written form for an Arbitration agreement, When Written means oral, ICCA congress series No 11 of 2003

Arbitration Act22, the reference in a contract to a document containing an arbitration clause shall

constitute an arbitration agreement if the contract is in writing and the reference is such as to

make the arbitration clause part of the contract. This section meets the requirement that it should

be in writing.

The principle of party autonomy23 allows them to select the law most appropriate to their

transactions. This principle may cause conflict of laws between law and that of the chosen law

and that of the state.

At common law 24an agreement to oust the jurisdiction of the courts was invalid. However, if the

parties agreed that their rights were to be determined by arbitration after the occurrence of the

dispute and therefore the courts having jurisdiction, such an agreement was valid. If the clause is

framed so there will be no cause of action until after arbitration, then parties must arbitrate

before seeking a remedy in the court of law but if the wording is such that the arbitration will

only arise after the cause of action has arisen, then the courts are not excluded.

The clause limits types of disputes available should difficulties arise; it precludes parties from

taking disputes covered by the clause to court. The limits created by the clause were reviewed by

the House of Lords as ways of limiting access to the judicial system able to enforce their rights.

It’s therefore clear that parties give up their rights to civil trial guaranteed by the constitution. It

therefore waives their rights to have those matters resolved by a court and to grant jurisdictional

powers to private individuals.

Importance of arbitration clause25 in agreement is that any court proceedings commence are

stayed pending the settlement of the dispute by arbitration. Most of the sales agreements indicate

that if the dispute cannot be solved by other mode of dispute resolution the arbitration should be

applied.

Provision by the clause that in case of a dispute it will be solved by arbitration questions will

arise as to how the arbitrators is to be appointed, qualification of the arbitrators, where the

22 Section 4 of the 1995 Arbitration Act23 http://en.wikipedia.org/wiki/conflict of laws24 Scott v avery 10 ER 1121 (1856)25 http://www.amelinyangu.net/legaladjudical.php

process will take place, number of arbitrators to arbitrate and which substantive and procedural

law is to apply.

Parties26are therefore free to determine the number of arbitrators. If they fail to determine the

number will be one or an odd number. The nature of the dispute should dictate how many

arbitrators to go for. If the problem is wide and involves different professions, the arbitrators

called should have knowledge on the different field’s. Mode of appointing arbitrators should be

indicated .Section 12 of the Arbitration Act allows the parties to seek court directions on

appointments when they fail to agree. They have an option to choose an institution to help in

appointing arbitrators for instance the chattered instituted of arbitrators.

The issue of time 27should be well spelt out well in the Arbitration Agreement for the following;

The time for the giving of the notice of claim, the time for the giving notice to appoint an

arbitrator and lastly the time limit for the commencement of arbitration.

These gives certainty and a time frame within which the parties should agree is essential.

Parties should then decide how the arbitration cost should be shared. The losers of the disputes or

both parties share the cost.

1.3: STATEMENT OF THE PROBLEM.

It is clear and certain that arbitration is an acceptable forum for the resolution of construction

disputes between the contracting parties that is the contractor and the developer. However, since

the controlling arbitration agreement language is commonly unilaterally devised and

implemented by the stronger or superior party in the contract. This therefore implies that

arbitration agreements are unilaterally made; parties who have inferior bargaining power are

relegated to adhere to the contract or reject the contract. Adoption of adhesive arbitration clause

is a means to manage the risk of litigation and perceived “run away” jury awards.

This is a sharp deviation from the cornerstone of arbitration mainly party autonomy and being

consensual. It is that regard that this dissertation seeks to have a review to contraction contracts

26 Arbitration Act 1995,Section 11

27 Enid A Marshall, Gill The Law of Arbitration 4th Ed, Sweet and Maxwell

with arbitration clause with a view of establishing viability of the clause and further recommend

appropriate means of salvaging the situation.

1.4: OBJECTIVES OF THE STUDY.

1) To review construction contracts with Arbitration clause with a view of establishing

viability of the Arbitration clause and if the clause is enforceable.

2) To find out the various difficulties and limitation of arbitration in construction dispute

resolution.

3) To explore alternative ways to resolve disputes apart from arbitration in construction

contracts.

4) To find out the available remedies to an aggrieved party after an arbitral award has been

issued to either party.

5) To find out the necessary reforms for construction contract dispute resolution via

arbitration.

1.5: HYPOTHESIS.

Arbitration has not been disseminated to all Kenyans particularly in the field of commercial

transaction [construction contract] when dealing with disputes arising in that field. Underlying

my research is the question whether arbitration clause in construction contracts are [not] viable

and therefore need to be reviewed and that all construction contracts have an arbitration clause.

The extent to which this is true or not is what my research grapples with. I will also attempt a

critical examination of the importance of involving arbitration clause in construction contracts

with a view of establishing whether its inclusion will be a faster way of resolving disputes that

will arose out of the contract. Lastly I will also try to find out whether there is a conflict of power

between the power and limitation created by the clause and the powers that Arbitration Act grant

to the arbitral tribunal.

1.6: SIGNIFICANCE OF THE STUDY.

It is wished that all the effort and knowledge spent in writing this paper shall not be an effort in

futility. This piece of work is expected to be useful to legal scholars, practitioners and the public

at large as it seeks to extend knowledge integrated and used in construction contracts.

The study will also try to provide directive as the viability of arbitration clause in construction

contracts with a view of directing how appropriate legislation maybe enacted to ensure an

effective arbitration clause.

1.7: SCOPE OF THE STUDY.

The research paper is specifically carried out with reference to Kenya. This research will narrow

down arbitration as an alternative dispute resolution mechanism especially its application and

effects on construction contracts. This paper gives a critical appraisal of arbitration clauses that

have been entrenched in construction contracts. In application, this can only be used to solve

problems in Kenya premised on the fact that special reference is made to construction contracts

in Kenya.

1.8: LITERATURE REVIEW.

Alan Scott Rau in their book stated 28that if any challenges are raised about the composition of

the Arbitral Tribunal to use to disqualify them should be according to the Arbitration Law that

the parties stipulated. In ruling on such challenges it requires that a balance is struck to maintain

the appearance of fairness in the arbitration process with the need to reduce disruption and delay.

According to them arbitration must be based on consent not coercion. Arbitration therefore

results to the imposition of private norms that are not consonant with public policy and may

dampen the possibility of redress for legitimate complaints.

Folberg Gollann and Kloppenberg Stipanowich stated in their book that 29an important issue

to consider when drafting a clause is a language use. It should be extreme in describing the scope

of arbitration agreement that is what disputes relates to the contract and party relationship will be

subject to arbitration. Broad provision minimizes the likelihood of court intervention over what

is arbitral.

28 Allan Scott et al. Processers of Dispute resolution 4th Edition Foundation press 29 Folberg Gollann and Kloppernberg Stipanowich, Resolving disputes, theory practice and law Aspen publishers

Martin A. Frey and Phyllis H. FREY in their book stated that, 30Disputants’ loss control to

resolve disputes once a third party is involved. They lost their control over the procedural,

evidentiary and substantive rules that govern the resolution process. These powers go against the

rule of parties’ autonomy. In the presence of different legal systems, international arbitration

laws are used.

Albert Jan Van Den Berg in his Article claimed that 31the choice of law to be used may cause

emergence of foreign awards. A party seeking enforcement of such awards needs to supply to the

court; the award and the agreement. Court can refuse to enforce the award if it’s not go in

accordance with public policy. It therefore leaves a task of finding out what constitute an

enforceable award.

Ened Marshall in his book 32 states that agreements must be in writing, oral agreement also

referred as parole submission is effective under common law but rare in modern commercial

transaction. A clause must be specific on condition that is spelt out. If it is ambiguous and

uncertain to the extent it renders it meaningless, the court will not give effect to it and dispute

will be decided by the court. A claim is time barred either by limitation of time imposed by

statute or by the agreement. Under the statute, claimant losses ones right after 6 years from the

date of occrual of the cause of action.

Walton A and Victoria M in their book stated 33that the parties cannot by contract oust the

jurisdiction of the courts, they can agree that no right of action shall accrue in respect of any

difference which may arise between them until such difference have been adjudicated upon by an

arbitrators. Since the jurisdiction of the court is not ousted, to what extent then its interference is

accepted.

P. Fenn 34argues that disputes and conflicts in projects divert valuable resources from the overall

30 Martin A. Frey and Phyllis Hurley Frey, Introduction to the law of contract, 4th Edition

31 Albert Jan Van Den Berg, Recognition and enforcement of Foreign Arbitral Award, A paper presented in The New York Convention on Arbitration of 1956.

32 Supra no. 22

33 Supra no. 1

aim, which is completion of the projects on time, on time on budget and to quality specified. He

further stated that they generally cost money, take time and destroy relationships, which may

have taken years to develop.

1.9 THEORETICAL FRAMEWORK.

The group of jurists which has developed the hybrid theory is convinced that the perfect

operation of international commercial arbitration relies on both jurisdictional and contractual

elements. The hybrid theory, in fact, is a compromise theory which is mixed between the

contractual theory and jurisdictional theory.

The hybrid theory was created by Professor Surville, 35and developed by Professor Sauser-Hall.

Suggesting that international commercial arbitration is a mechanism with a dual character,

Professor Sauser-Hall maintained, on the one hand that a contractual element in arbitration is

reflected in the argument that arbitration has its origins in a private contract, where the parties

have the power to choose the arbitrators and the rules to govern the arbitration procedures and

substantive matters. On the other hand, he agreed with the jurisdictional theory that arbitration

has to be conducted within national legal regimes in order to determine powers of the parties, the

validity of the arbitration agreement and the enforceability of the awards.

Accordingly, arbitration has been defined as “a mixed juridical institution, sui generis, which has

its origin in the [parties’] agreement and draws its jurisdictional effects from the civil law.” 36In

short, arbitration has a jurisdictional nature involving the application of the rules of procedure

while it derives its effectiveness from the arbitration agreement between the parties. Professor

Sauser-Hall’s argument is accepted by some practitioners, such as Messrs Redfern and Hunter,

who expressly state:

34 Peter Fernn, “Introduction to Civil and Commercial Mediation”, in chartered Institute of Arbitration, (CIArb, London,2002)

35 This theory was developed by Professor Sauser-Hall in 1952, in Sauser-Hall, L'arbitrage enDroit International Privé, 44(I) ANN. INST. DR. INTERN. 469 (1952) & 47(II) ANN. INST. DR.INTERN. 394 (1957);

36 Sauser-Hall, id. at 398-99.

37International commercial arbitration is a hybrid. It begins as a private agreement between the

parties. It continues by way of private proceedings, in which the wishes of the parties are of great

importance. Yet it ends with an award which has binding legal force and effect and which, on

appropriate conditions being met, the courts of most countries of the world will be prepared to

recognize and enforce. The private process has a public effect, implemented by the support of the

public authorities of each state expressed through its national law.

In accordance with the hybrid theory, on the one hand the parties’ freedom to contract an

arbitration agreement, select arbitrators and choose the governing laws is based on the

contractual nature of arbitration. On the other hand, the jurisdictional character of arbitration

requires the issues relating to arbitral proceedings and the validity of arbitration agreements to be

subject to the mandatory rules and public policy of the lex fori. Also, in relation to the

recognition or enforcement of arbitral awards, the validity of arbitral awards will be scrutinized

according to the mandatory rules and public policy of the country in which the recognition or

enforcement is sought.38Robert Hunter also suggests that it is inappropriate to deny the dual character of arbitration:

[T]he arbiter is required to decide the whole matters submitted to him or her by means of a

“decree arbitral” or ”award”, and in so doing must not merely adhere to some rule, principle,

criterion or standard; he or she must not contravene the law.

Though the power of the arbiters over the submitters is based on contract, there is thus a

jurisdictional as well as a contractual element in arbitration.

The fundamental dual character of arbitration is also stressed by Ancel, who believes that the

dual nature of arbitration is a concept “at the same time both contractual, because of its origin

(the agreement binding the parties) and jurisdictional, because of the way in which it is expressed

(Arbitral award, decision on jurisdictional issues and decision by private judicial authority).39

Based on the discussed Hybrid theory, an agreement made between parties to make an arbitration

clause for dispute resolution in contraction contracts. The agreement has a contractual element 37 ALAN REDFERN ET AL., LAW AND PRACTICE OF INTERNATIONAL COMMERCIAL ARBITRATION 8 (2d ed., 1991).

38 ROBERT L. C. HUNTER, THE LAW OF ARBITRATION IN SCOTLAND 3 (1987).

39 J. P. Ancel, French Judicial Attitudes towards International Arbitration, 9(2) ARB. INT’L 121,121 (1993).

which is in the argument that arbitration has its origins in a private contract, whereby the parties

have power to make an arbitration clause and also power to choose an arbitrator in times of

contraction disputes. The agreement has jurisdictional theory, in Kenya arbitration has to be

conducted within national legal regimes, for example the Arbitration Act, 1995. In order to

determine arbitration clause which will contain among other things, powers of the parties, the

validity of the arbitration agreement, the enforceability of the arbitral awards and the time or

period which the arbitration clause is valid.

The mixture of the jurisdiction theory and contractual theory, which brought the hybrid theory,

shows the effectiveness of arbitration in resolving disputes in contraction contracts.

2.0 CHAPTERS BREAKDOWN.

CHAPTER 1

I. Introduction.

II. Background.

III. Statement of problem

IV. Objectives

V. Hypothesis

VI. Justification of the study scope

VII. Literature review.

VIII. Theoretical framework.