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Case Brief · caselaw.co.ke
Court of AppealAllowedCivil Appeal No 103 of 2011

Areva T & D India Limited v Priority Electrical Engineers & Ezetec Limited

Court of Appeal
30 May 2012
2,934 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~12 min to read original · ~4 min brief

The bottom line

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Kenya's Court of Appeal ruled that parties must honour agreed foreign arbitration clauses unless they prove special, exceptional reasons to depart.

What this practically means

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Executive summary

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This Court of Appeal decision, delivered under rule 31(3) of the Court of Appeal Rules, concerned a sub-contract between Areva T & D India Limited and Priority Electrical Engineers for works on KPLC's electricity distribution network. The sub-contract contained an arbitration clause with venue at New Delhi, India, under the Indian Arbitration Act 1996, and a clause conferring exclusive jurisdiction on the Courts of Delhi. When Priority sued in the High Court alleging wrongful termination, Areva applied under section 6(1) of the Arbitration Act to stay the suit and refer the dispute to arbitration. Kimaru J declined the stay, holding that the subject matter, payment, evidence and witnesses were all in Kenya, and further ordered the parties to agree on a single arbitrator within fourteen days. Visram JA, writing the lead judgment with which Koome JA expressly agreed, allowed the appeal. Applying The Fehmarn, The EI Amria, The Makefjell and Madan JA's reasoning in United India Insurance v East African Underwriters, the court held that exclusive jurisdiction clauses must normally be respected and can be departed from only on special and exceptional circumstances affording strong reason. The respondent's assertions of 'oppressive conduct' lacked particulars, and urgency actually favours arbitration. The High Court's order appointing an arbitrator was held to be without jurisdiction, as a court cannot re-write a contract. The appeal was allowed, the High Court orders set aside, and costs awarded to the appellant in both courts.

Questions the Court framed

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The issues the Court set itself to decide, in its own words.

  1. 1.Whether the Court should give effect to the exclusive jurisdiction clause conferring jurisdiction on the Courts of Delhi, India, in a contract performed in Kenya
  2. 2.Whether the respondent established special and exceptional circumstances to depart from the exclusive jurisdiction/arbitration clause
  3. 3.Whether the High Court had jurisdiction to order the parties to agree on a single arbitrator and to fix timelines for arbitration

Key legal issues

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01

Effect of exclusive jurisdiction and arbitration clauses in contracts performed in Kenya

Holding

The clause must be given effect; the party seeking to avoid it bears the burden of showing strong, special and exceptional reasons, which mere inconvenience, oppression allegations without particulars, or urgency do not satisfy.

Reasoning

The court adopted the English line of authority (The Fehmarn, EI Amria, Makefjell) and Madan JA's formulation in United India Insurance. Business people choose arbitration for expeditious resolution, so urgency negates rather than supports departure. The respondent's affidavits asserted 'special and exceptional circumstances' without specifying them, so the burden was not discharged.

p. 3
02

Jurisdiction of the High Court to appoint an arbitrator and set arbitration timelines

Holding

The High Court exceeded its jurisdiction by ordering the parties to agree on a single arbitrator within fourteen days, failing which the Chairman of the Institution of Engineers of Kenya would appoint one.

Reasoning

Having declined to stay the suit, the Judge went 'one step further' and effectively varied the parties' agreed dispute-resolution mechanism. The court held this order was without jurisdiction, as the choice of arbitrator and procedure was a contractual matter the court could not impose.

p. 5

Legal principles established

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  • An exclusive jurisdiction/forum-selection clause freely agreed by the parties must be honoured unless special and exceptional circumstances affording strong reason for departure are shown, and the burden lies on the party resisting the clause.
  • A court has no jurisdiction to re-write a contract or to impose an arbitrator and arbitration timelines on parties who agreed otherwise.

Court orders

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  1. 1.Appeal allowed
  2. 2.Orders made by the High Court set aside
  3. 3.All prayers in the Memorandum of Appeal allowed
  4. 4.Costs awarded to the appellant both in the Court of Appeal and in the High Court

The bench

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One judgment of the whole court — no separate or dissenting opinions.

VI
majority

Wrote the judgment

Wrote the lead judgment: exclusive jurisdiction clauses must be honoured absent special and exceptional circumstances; none were established; the High Court's order appointing an arbitrator was without jurisdiction.

I fully agree that the rule that the parties should be held to their bargain should only be departed from in a special and exceptional case.p. 5
Martha Karambu Koome
KoomeJA
Currently serving
concurring

Wrote the judgment

Concurred with Visram JA, adopting his recitation of facts; held no exceptional circumstances justified departing from the agreed New Delhi arbitration venue, and a court cannot re-write a contract.

It is trite that a court cannot re-write a contract for the parties.p. 5
BO
majority
On appeal from
High Court of Kenya at Nairobi
H C C C No 536 of 2009
Jurisdiction invoked
First appellate jurisdiction over an interlocutory ruling of the High Court; judgment delivered under rule 31(3) of the Court of Appeal Rules

Quotable passages

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Verbatim from the judgment, each located to the page it appears on in the official PDF — so these can be cited and checked directly.

Accordingly, and for reasons stated, I allow the appeal, and set aside the orders made by the High Court, and I allow all the prayers outlined in the Memorandum of Appeal. I also award costs to the appellant, both here and in the High Court.
p. 5Final orders and disposition
I fully agree that the rule that the parties should be held to their bargain should only be departed from in a special and exceptional case.
p. 5Sanctity of exclusive jurisdiction clauses
The burden of proving such a strong case is on the plaintiffs.
p. 4Burden of proof for departing from forum-selection clause
It is trite that a court cannot re-write a contract for the parties.
p. 5Limits of judicial intervention in contract terms
Business people choose arbitration over courts mainly because they want a more expeditious resolution of disputes.
p. 4Urgency does not justify avoiding arbitration

Issues in the judgment

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minor

United India Insurance citation appears inconsistently as [1985] KLR 998 and [1985] KLR 898

minor

Bosire JA appears in coram but no judgment by him is included

Key timeline

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Practical implications

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Frequently asked questions

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Cite this brief

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Cite this brief

Caselaw, "Areva T & D India Limited v Priority Electrical Engineers & Ezetec Limited", Case Analysis (2012). Civil Appeal No 103 of 2011. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2012/258/eng@2012-05-30

Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.