Explain the nature and advantages of commercial arbitration as a means of settling disputes

Business studies study module
  • Arbitration

This is a dispute resolution mechanism wheredisputes are settled of court arbitral tribunals which make arbitral awards as opposed to judgement.

This mechanism is only applicable in the settlement of civil disputes.

The law relating to Arbitration in Kenya is contained in the Arbitration Act, 1995. This Act repealed the Arbitration Act Cap 49.

This Act applies to both domestic and international arbitration. Under sec 3 (1) of the Act, an arbitration agreement is an agreement parties to submit to arbitration on all or certain disputes arising between them. An arbitral tribunal means a sole arbitrator or a KASNEB PANEL thereof. An arbitration agreement may take the form of a clause in the contract or a separate agreement between the parties.

A dispute may be referred to arbitration by:

  • The parties to the dispute
  • A court of law, if the parties to the dispute agree
  • Statute
  • Arbitration falls under the purview of alternative dispute resolution mechanism

Advantages of arbitration

  • Speed: it is faster method of dispute resolution
  • Convenience: parties are free to determine the venue of the proceedings, timing and the language to use for their convenience.
  • Informality: arbitral     proceedings    are     free     from    legal     technicalities     which characterize ordinary courts.
  • Cheap: it costs less to see a dispute through arbitration
  • Expertise: parties    to    the    dispute    have    an    opportunity    to    appoint    the most qualified/specialized person to determine their dispute.
  • Privacy: arbitral proceedings are conducted in private free from undue
  • Flexibility: arbitral tribunals are not bound their previous decisions, there is room for exploration.
  • Less acrimonious: arbitral proceedings tunes down the enemity between the parties
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