According to the Kenya National Bureau of Statistics, the real estate and construction sectors continue to be some of the key drivers of economic growth in Kenya for the last five years. The Kenyan construction industry contributes 7 percent of the gross domestic product (GDP), which makes it clear that Kenya has a well-developed construction industry. With an increase in population, opportunities exist in the construction of residential, commercial and industrial buildings, including prefabricated low-cost housing.

The mindset of the industry is that the moment there is a dispute that arises is to pass over the matter to their lawyers who would than institute legal proceedings in court and the rest of what happens thereafter is well known. There is however a gradual change that is now taking over the traditional mindset in that the companies are now more geared towards training their key people with resolving matters through Alternative Dispute Resolution mechanisms(ADR). This training is done through various institutions that offer training in Arbitration, Mediation and Adjudication. These three being the most popular in Kenya.

The Kenyan legal system being adversarial in terms of litigation many of the lawyers that are involved in the construction business prefer to arbitrate. In a typical arbitration there is a neutral arbitrator both parties can agree on or have one appointed by a neutral body. (A lot depends on how the clauses for the dispute resolution are drafted).  The parties are than represented by their lawyers who present their cases before the neutral arbitrator. The arbitration process is normally conducted mostly like in the court except here you have a fully dedicated “judgeâ€. Technically the process is faster as the parties can set the pace and the hearing dates.

Some common questions that I often get asked are:

What if the agreement does not have a clause for Alternative Dispute Resolution? Can the matter be arbitrated?

The Arbitration Act No 4 of 1995 (Amended) under Section 4 says:

(1) An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement.

(2) An arbitration agreement shall be in writing.

(3) An arbitration agreement is in writing if it is contained in—

(a) A document signed by the parties;

(b) An exchange of letters, telex, telegram, facsimile, electronic mail or other means of telecommunications which provide a record of the agreement; or

(c) An exchange of statements of claim and defense in which the existence of an agreement is alleged by one party and not denied by the other party.

(4) 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 that arbitration clause part of the contract.

Reasons why the construction business should embrace Alternative Dispute Resolution (ADR):

The increasing litigation costs, delays, and uncertainty with the increase in the volume of these construction alternative dispute resolution was the motivating factor behind the development of ADR. In earlier contracts especially the FIDIC (The International Federation of Consulting Engineers (commonly known as FIDIC, acronym for its French name Fédération Internationale Des Ingénieurs-Conseils) is an international standards organization for the consulting engineering & construction) contracts there were methods of resolving issues but not as structured as it is today.

What is the difference between Arbitration and Mediation?

Arbitration: Here the matter is submitted to an impartial third party for decision making. This person is known as an arbitrator and his decision is known as the award. The arbitrator is in charge of the process and it’s very similar to a court trial. Both parties are heard and unlike a court trial the chances of appeal in an arbitration is minimal.

Important Features:

  • It is private and confidential and therefore preferred by businesses unless there is an appeal in the court.
  • Less formal than the courts depending on the parties and the rules agreed
  • Less expensive in the long run as its expeditious especially in Kenya.
  • Parties can choose and arbitrator based on his skills unlike in a court where one cnnot choose a judge.
  • The award by the arbitrator can be enforced in the court.

Mediation: This is an interesting aspect of ADR. It’s a voluntary process where an impartial or neutral person helps to communicate and reconciliation between the parties to reach a mutually acceptable agreement.  The mediator manages the process and the most important aspect is the mediator does not make decisions or force an agreement. The parties control the process and are responsible for negotiating a settlement.

Important Features:

  • Confidentiality is the core feature and thus a preferred method for businesses and family issues.
  • Tailored agreements by the parties to the dispute to suit their needs.
  • Uncertainty, time, cost and stress of going for a full trial are avoided.
  • Many a times the outcomes are a beneficial result for both parties. The business can focus on its core issues instead of a trial and loss of a customer.
  • It promotes and clarifies communication and cooperation between the disputants.

Conclusion: There are definite advantages in the two methods of ADR as shown above and it would be in the interest of the construction industry to be able to resolve their disputes in an efficient and professional way. This will enable the businesses to focus on their core function. It is also important to realize dealing with the matters out of court means you don’t need lawyers and the matters can move at a faster pace than the courts where constant hearing dates and adjournments delay the matters for years. This delay is an opportunity cost lost and ties down the business functioning at its peak.

In both the ADR methods the most crucial feature is that it maintains business relationships as both parties are communicating directly unlike where they are represented in a trail court.