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Court of AppealDismissedApplication dated 24th February 2021 (Civil Application, Court of Appeal, Mombasa)· [2021] KECA 151 (KLR)

Kenya Electricity Transmission Co. Limited (Ketraco) v Instalaciones Inabensa S.A (Miscellaneous Application E56 of 2021) [2021] KECA 151 (KLR)

Court of Appeal of Kenya
19 November 2021
ASAsike-MakhandiaMMMbogholi MsaghaMNMumbi Ngugi
2,606 words in judgment
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The bottom line

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Kenya's Court of Appeal ruled it cannot hear a stay application where the High Court's required leave to appeal an arbitration ruling was never obtained.

What this practically means

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Executive summary

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The applicant, Kenya Electricity Transmission Company Limited, a state corporation, sought leave to appeal to the Court of Appeal against a High Court ruling of 12th February 2021 by Odero J, and a stay of execution of that ruling. The ruling had dismissed the applicant's application under section 35 of the Arbitration Act to set aside an arbitral award of over Euro 30 million in favour of the respondent, a Spanish construction company, and had allowed the respondent's application under section 36 for recognition and enforcement of the award. The applicant argued that the award unjustly enriched the respondent, was contrary to Kenyan public policy, and that the High Court had summarily allowed enforcement, denying it due process protections under section 37 of the Act, relying on Nyutu Agrovet and Synergy Industrial Credit. The respondent contested the court's jurisdiction, noting that no leave to appeal had been granted by the High Court, that a dismissal is not capable of being stayed, and that Rule 5(2)(b) thresholds were unmet. The Court of Appeal (Asike-Makhandia, Mbogholi Msagha and Mumbi Ngugi JJA) held that appeals from section 35 decisions require leave of the High Court; absent such leave there is no valid notice of appeal, and without a valid notice of appeal the court has no jurisdiction under Rule 5(2)(b). Assuming jurisdiction hypothetically, the court found the first limb (arguability) satisfied, but held that a dismissal is not a positive order capable of being stayed, that a money award ordinarily cannot render an appeal nugatory, and that the claim of the respondent's inability to repay was unsupported by evidence. The application was dismissed with costs to the respondent.

Key legal issues

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01

Whether the Court of Appeal has jurisdiction under Rule 5(2)(b) where leave to appeal has not been granted by the High Court

Holding

No. The application for leave under section 35 of the Arbitration Act must first be made to the High Court; without such leave there is no valid notice of appeal and the Court of Appeal has no jurisdiction to entertain the application under Rule 5(2)(b).

Reasoning

Appeals under section 35 of the Arbitration Act lie only with leave of the High Court. Where leave has been sought but refused, Rule 39 of the Court of Appeal Rules allows the application to be made to the Court of Appeal. But where leave has not been obtained at all, following Peter Nyaga Muvake v Joseph Mutunga, no valid notice of appeal can be filed. Since Rule 5(2)(b) jurisdiction depends on a valid notice of appeal, the Court lacked jurisdiction to consider the stay application.

p. 4
02

Whether, assuming jurisdiction, there was a positive order capable of being stayed

Holding

No. The only decision the applicant sought to appeal against was the dismissal of its application to set aside the arbitral award; a dismissal is not a positive order capable of stay of execution.

Reasoning

The High Court dismissed the applicant's application under section 35 of the Arbitration Act and allowed the respondent's recognition and enforcement application under section 36. The applicant sought stay of the High Court's decision itself rather than of execution of the arbitral award. Since the impugned ruling contained no positive order against the applicant capable of being stayed, the first practical prerequisite for relief under Rule 5(2)(b) was absent.

p. 4
03

Whether the intended appeal was arguable and would be rendered nugatory absent stay

Holding

The first limb (arguability) was satisfied, but the second limb failed: the award was a money award and the claim that the foreign respondent could not repay was unsupported by evidence.

Reasoning

Under Rule 5(2)(b) an applicant need only show an arguable appeal, not one that will succeed; the court accepted the applicant met that limb. On the nugatory limb, the award was a money decree, which ordinarily does not render an appeal nugatory. The applicant's assertion that the respondent, a foreign company whose parent had sought voluntary bankruptcy in Spain, could not repay was not supported by evidence, so the second condition failed.

p. 5

Legal principles established

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  • An appeal from a decision setting aside or refusing to set aside an arbitral award under section 35 of the Arbitration Act does not lie as of right and requires leave of the High Court; where leave has not been obtained from the High Court, there can be no valid notice of appeal and the Court of Appeal has no jurisdiction to entertain an application under Rule 5(2)(b).
  • The jurisdiction of the Court of Appeal to entertain an application under Rule 5(2)(b) is dependent on a valid notice of appeal; without one the court has no jurisdiction.
  • An order of dismissal of an application to set aside an arbitral award is not a positive order capable of being stayed.
  • Ordinarily, an appeal is not rendered nugatory by the payment of a money decree, and allegations that a judgment debtor is unable to repay must be supported by evidence.

Court orders

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  1. 1.The application dated 24th February 2021 is dismissed
  2. 2.Costs of the application are awarded to the respondent

Authorities

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Legislation

  • Constitution of KenyaArticle 164(3)
  • Constitution of KenyaArticle 159(2)(c)
  • Constitution of KenyaArticle 201
  • Constitution of KenyaArticle 227(1)
  • Appellate Jurisdiction Act Cap 9Sections 3, 3A, 3B
  • Court of Appeal Rules 2010Rule 5(2)(b)
  • Court of Appeal Rules 2010Rule 39(b)
  • Court of Appeal Rules 2010Rules 41, 42, 43
  • Arbitration Act 1995Section 19
  • Arbitration Act 1995Section 35(1), 35(2)(b)(ii), 35(3)
  • Arbitration Act 1995Section 36
  • Arbitration Act 1995Section 37
  • Arbitration Rules 1997Rules 6, 7, 11
  • Civil Procedure ActSection 3A
  • Civil Procedure ActSection 75
  • Civil Procedure RulesOrder 43
  • Companies Act (now repealed)incorporation of state corporation

Cases cited (3)

  • Nyutu Agrovet Limited v Airtel Networks Kenya Limited
    [2019] eKLR
  • Synergy Industrial Credit Limited v Cape Holdings Limited
    [2019] eKLR
  • Peter Nyaga Muvake v Joseph Mutunga
    [2015] eKLR
On appeal from
High Court of Kenya
Misc. Application No. E445 of 2019 (arbitral award registered; ruling of 12th February 2021)
Jurisdiction invoked
Article 164(3) of the Constitution of Kenya; sections 3, 3A and 3B of the Appellate Jurisdiction Act Cap 9; Rules 5(2)(b), 39(b), 41, 42 and 43 of the Court of Appeal Rules 2010

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, "Kenya Electricity Transmission Co. Limited (Ketraco) v Instalaciones Inabensa S.A (Miscellaneous Application E56 of 2021) [2021] KECA 151 (KLR)", Case Analysis (2021). Application dated 24th February 2021 (Civil Application, Court of Appeal, Mombasa). Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2021/151/eng@2021-11-19

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