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Court of AppealAllowedCivil Application 276 of 2009

Areva T & D India Limited v Priority Electrical Engineers Limited & another [2009] KECA 27 (KLR)

Court of Appeal of Kenya
11 December 2009
1,873 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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Kenya's Court of Appeal stopped High Court-ordered arbitration in Nairobi, protecting a contract that required arbitration in New Delhi.

What this practically means

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Executive summary

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The applicant, an Indian company, was awarded a contract by Kenya Power and Lighting Company Ltd to reinforce and upgrade the electricity distribution network and sub-contracted works valued at over Kshs. 222 million to the 1st respondent. The sub-contract provided for disputes to be finally settled by arbitration under the Indian Arbitration Act, 1996, with venue at New Delhi, and conferred exclusive jurisdiction on the courts of Delhi. After the applicant terminated the sub-contract, the 1st respondent sued in the High Court and sought interlocutory and mandatory injunctions. The applicant applied for stay of the suit under Section 6(1) of the Arbitration Act, but Kimaru, J. ruled that arbitration should proceed in Nairobi rather than New Delhi, reasoning that the subject matter was performed in Kenya, evidence and witnesses were in Kenya, and the paying entity was substantially state-owned. The applicant then brought this application under Rule 5(2)(b) of the Court of Appeal Rules for stay of that order pending an intended appeal. Applying the settled twin tests, the Court of Appeal found the intended appeal arguable on jurisdiction and on the High Court's power to vary the contractual venue when the variation was not pleaded, and found the appeal would be rendered nugatory if the applicant were compelled to arbitrate in a manner and place contrary to its agreement. The Court allowed the application, granting a stay of the order that arbitral proceedings commence in Nairobi, with costs in the appeal. This ruling binds subordinate courts and tribunals on the twin tests for Rule 5(2)(b) applications.

Questions the Court framed

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

  1. 1.Whether the intended appeal is arguable
  2. 2.Whether, unless the orders sought are granted, the intended appeal would be rendered nugatory

Key legal issues

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01

Whether the intended appeal was arguable

Holding

The Court found the intended appeal arguable on the questions of the superior court's jurisdiction to entertain a suit subject to an arbitration agreement and to vary the contractual venue of arbitration when that variation was not pleaded.

Reasoning

The Court held that the existence of a clear arbitration clause raised the question of the superior court's jurisdiction to entertain the suit. It also found arguable the point that the High Court made orders on the locus of arbitral proceedings, an issue neither pleaded nor prayed for in the plaint, and whether it had jurisdiction to vary a contract freely entered into by the parties. These sufficed to show the appeal was arguable, without needing to establish it would succeed.

p. 3
02

Whether the appeal would be rendered nugatory if stay was not granted

Holding

The Court was satisfied the appeal would be rendered nugatory because the applicant would be compelled to arbitrate in a manner and at a place not contemplated by, and in alleged violation of, its agreement with the 1st respondent.

Reasoning

The applicant faced being compelled to enter arbitration before an arbitrator chosen by the Institute of Engineers of Kenya, at a venue different from the contractually agreed New Delhi. The Court noted it did not know why the parties had chosen Indian Courts and not Kenyan Courts for their disputes, and that compelling arbitration outside the agreed terms would render the appeal nugatory if it ultimately succeeded.

p. 3

Legal principles established

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  • On a Rule 5(2)(b) application, the applicant must satisfy the Court both that the intended appeal is arguable and that, if successful, it would be rendered nugatory unless the orders sought are granted.
  • An arguable appeal is not one which must necessarily succeed, but one which ought to be argued fully before the Court.

Court orders

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  1. 1.Stay of the order of Kimaru, J. dated 2nd September 2009, specifically the order that arbitral proceedings commence in Nairobi, Kenya, pending the hearing and determination of the intended appeal
  2. 2.Costs of the application to be in the appeal

The bench

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

majority
majority
majority
On appeal from
High Court of Kenya at Nairobi
H.C.C.C. No. 535 of 2009
Jurisdiction invoked
Rule 5(2)(b) 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, we grant the orders of stay sought in the application dated 14 th September, 2009. Costs shall be in the appeal.
p. 3Final orders - stay granted and costs
An arguable appeal is not one which must necessarily succeed, but one which ought to be argued fully before the Court.
p. 3Test for arguability under Rule 5(2)(b)
We agree with the applicant that whether the superior court had the jurisdiction to vary a contract freely entered into by the parties, is an arguable point in the intended appeal.
p. 3Jurisdiction to vary an arbitration agreement

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 Limited & another [2009] KECA 27 (KLR)", Case Analysis (2009). Civil Application 276 of 2009. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2009/27/eng@2009-12-11

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