Introduction

The inclusion of alternative dispute resolution (ADR) mechanisms within employment contracts has gained traction over the past couple of years. This trend follows that which was witnessed in commercial contracts where parties now invariably include arbitration as a means of dispute resolution.

Arbitration as an ADR mechanism is anchored upon Article 159 (2) (c) of the Constitution of Kenya, 2010 (the Constitution) which provides that:

“In exercising judicial authority, the Courts and tribunals shall be guid- ed by the following principles…alternative forms of dispute resolution including reconciliation, mediation, arbitration and traditional dispute resolution mechanisms shall be promoted.”

It has thus become common practice for employers to include an arbitration clause in the employment contracts offered to employees. The increasing popularity of arbitration is also informed by the various advantages attributed to the arbitration process, including its confidentiality, speed and cost-effectiveness.

In practice however, the jury is still out as to whether arbitration as an ADR process, is really advantageous to the employee especially when one considers the issue of its affordability.

The Employment and Labour Relations Court (ELRC) has in recent times received numerous applications filed on behalf of employees challenging the enforcement of arbitration clauses in employment contracts. Most of the arguments against proceeding to arbitration have been centered around the exclusive jurisdiction donated to the ELRC by the Employment and Labour Relations Court Act, 2011 (the ELRC Act) as read together with Article 162 (2) (a) of the Constitution.

It has been argued that the jurisdiction of the ELRC cannot be ousted by the parties’ contract. On the other hand, employers who seek to enforce the arbitration agreements, have mounted equally formidable arguments asserting the freedom of contract which en- tails the parties’ right to agree on terms of engagement including the manner in which disputes in employment contracts are to be settled.

Jurisdiction of the ELRC

The establishment and jurisdiction of the ELRC is pursuant to the provisions of Article 162 (2) (a) of the Constitution, as read together with section 12 of the ELRC Act. The ELRC’s key mandate in broad terms, is to hear and determine disputes arising out of employment and labour relations.

In addressing the tension between the arguments raised by employees when seeking to oust arbitration clauses in employment contracts and the rival arguments mounted by employers for sustaining arbitration clauses in employment contracts, the ELRC has adopted jurisprudence from the High Court and the Court of Ap- peal with respect to the approach to be followed in contracts that provide for arbitration as an ADR mechanism.

In cases such as Kenya Pipeline Company Limited v Kenolkobil Limited (2013) eKLR and Nyutu Agrovet Limited v Airtel Networks Limited (2015) eKLR the Courts have consistently stated that they will not rewrite contracts for parties and where a dispute arises, the Court will uphold the terms of the instrument governing the relationship between the parties. In the case of National Bank of Kenya Limited v Pipeplastic Samkolit (K) Ltd & Anor (2001) eKLR the Court expressed itself thus:

“A court cannot re-write a contract between the parties. The parties are bound by the terms of their contract, unless coercion, fraud or undue influence are pleaded and proved.”

As such, Courts have invariably leaned towards holding parties to their bargain with regard to the agreed way of resolving their disputes, in essence upholding the principle of freedom of contract.

Court Intervention in Arbitrable Disputes

Many a time, it is the employees who seek the intervention of the ELRC when employment disputes arise. Where such intervention is sought, the ELRC’s consideration has been given to section 6 of the Arbitration Act, 1995 (the Arbitration Act) whereby the Court is called upon to stay proceedings in Court and to refer the dispute to arbitration in accordance with the parties’ agreement.

In instances where a party files a suit in respect of a dispute which is subject to an arbitration clause, the other party wishing to enforce the arbitration clause is required under section 6 of the Arbitration Act to limit Court intervention by entering appearance and con- currently applying to the Court for an order to stay the proceedings and refer the dispute to arbitration in accordance with the arbitration agreement.

In the case of Eunice Soko Mlagui v Suresh Parmar & 4 Others (2017) eKLR the Court stated:

“After 2009, the provision still requires a party to apply for referral of the dispute to arbitration at the time of entering appearance or before acknowledging the claim in question. In our minds, filing a defence constitutes acknowledgement of a claim within the meaning of the provision.”

The Court nevertheless retains the jurisdiction to protect or pre- serve the subject matter of the dispute even as the matter proceeds to arbitration.

As such, Courts have invariably leaned towards holding parties to their bargain with regard to the agreed way of resolving their disputes, in essence upholding the principle of freedom of contract.

Advantages and Disadvantages of Arbitration

Arbitration as an ADR mechanism has some notable benefits. Some of the benefits are that the parties possess greater control over the procedure and can modify the procedural rules to suit their needs and the nature of their dispute more appropriately. For instance, parties to an arbitration are free to agree on the procedure to be followed by the arbitral tribunal in the conduct of the proceedings such as oral hearing or documents only procedure.

Moreover, the arbitration process limits some of the strict stipulations provided in the rules and procedures of Court and ensures expeditious resolution of disputes. Furthermore, selecting an arbitrator with expertise in a specific field, for instance employment law, is viewed as an added advantage. In certain circumstances, particularly where the dispute involves a niche industry, it may be more sensible to appoint an arbitrator with a particular profession- al expertise.

Another advantage of choosing arbitration is the simplified rules of evidence. Court litigation is ordinarily subject to the strict rules of evidence, which are oftentimes cumbersome and difficult to surmount. In arbitration, the rules of evidence may be relaxed thus making it easier to produce evidence. Evidential processes such as discovery may be largely reduced in arbitration and many matters, such as who will be called as a witness and what documents must be produced and by whom, do not require the strict formalities that ordinarily apply in litigation.

One major drawback to arbitration in employment disputes is that an unfavorable arbitral award has a limited scope for challenge, as an arbitral award can only be challenged on the grounds set out under section 35 of the Arbitration Act. The arbitration decision is final and no appeal process is available unless parties have agreed on a right of appeal. The Court process on the other hand, offers an unsuccessful litigant the opportunity to appeal a decision to the Court of Appeal or the Supreme Court, where applicable.

The cost of arbitration in some instances may be higher than that of Court litigation. The high costs may further be compounded by a number of preliminary issues to be decided such as the seat of arbitration, appointment issues if the agreement calls for more than one arbitrator, where the dispute is complex or where parties present several applications before the hearing of the main suit, the costs can multiply significantly. These costs may be substantial thus constraining most employees from pursuing their claims through arbitration. In addition, the simplification of the rules of evidence may end up being detrimental to a party by allowing the production of evidence that would ordinarily not be allowed in a Court of law and thereby resulting in an unfair outcome.

Conclusion

Arbitration clauses are becoming commonplace in employment contracts as more and more employers opt to adopt this form of ADR to settle employment disputes. Its growing prominence in employment contracts calls for a more critical interrogation regard- ing its efficacy, affordability and sustainability. Whereas some may posit that arbitration is advantageous in resolving disputes expeditiously while minimizing the costs, many employees would argue to the contrary and opt to refer their disputes to the ELRC. Either way, it is advisable for employers and employees alike to seek legal advice when incorporating arbitration clauses into employment contracts.