Finality vs fairness: When arbitration brings a dilemma

A section of Dusit D2 hotel in Nairobi located along river driver. [Edward Kiplimo, Standard]

The auctioneer's hammer will not come down on 14 Riverside Drive as the property, which faces auction over a dispute that has spiralled far beyond its commercial origins, was granted a stay order by the High Court at the eleventh hour.

Having followed this case closely, I am struck by the risks that arise when fairness in arbitration is lacking. Arbitration is designed to deliver speed, certainty, and finality.

But those benefits depend on procedural fairness and care by both arbitrators and parties. Without these safeguards, arbitration risks producing outcomes that are not only harsh but also irreparably unjust.

The dispute itself began unremarkably. According to recent reporting, in 2010, Cape Holdings agreed to sell one block of the 14 Riverside development to Synergy Industrial Credit. Synergy paid Sh 577 million toward a total purchase price of Sh 703.2 million.

Shortly thereafter, the relationship deteriorated, which is hardly unusual in commercial transactions. What followed, however, defies both proportionality and common sense.

After terminating the agreement in 2011, Synergy initiated arbitration. In 2015, an arbitrator appointed by the Chartered Institute of Arbitrators issued an award of Sh 1.66 billion in Synergy’s favour, including an extraordinary 18% annual compound interest rate.

Over time, that award has ballooned to approximately Sh 10.7 billion, transforming a disputed deposit into an existential financial threat.  

By the time the auction proceeds, the sum will be far above this. Such an outcome raises a fundamental question: can arbitration still claim to serve justice when its results become so disproportionate?  

Compound interest at 18% over more than a decade is not merely compensatory; it is punitive in effect. Yet Kenyan courts have largely declined to interrogate the proportionality of the award, prioritising procedural finality instead.

Arbitration, meant to ensure efficiency and certainty, appears here to have morphed into a mechanism capable of financial destruction.  

The consequences for Cape Holdings are severe. The proposed auction reportedly targets the entire 14 Riverside complex, all six blocks and a parking silo, far exceeding the single block originally in dispute.

The disparity between claim and asset value is stark. A valuation places the entire development at about Sh 7.5 billion, with a forced-sale value of Sh 5.4 billion, barely half the current award. The specific block at the heart of the dispute is valued at just over Sh 1 billion.

Even selling the entire complex would not satisfy the claim. This suggests a situation that risks unjust enrichment rather than fair compensation.  

This legal drama unfolds against a broader human and national context. In 2019, 14 Riverside was the site of the Dusit terror attack, which claimed 21 lives. That a site so closely associated with a national tragedy could be used to enrich a corporate entity through a legal process that seems fundamentally unjust is deeply troubling. 

Arbitration derives its legitimacy from fairness. Finality matters, but it cannot override proportionality, good faith, and common sense. Where these principles are breached, courts must be willing to examine whether arbitration has ceased to function as a fair dispute resolution tool and instead become a blunt instrument of harm.  

Kenya has long cemented its position as a commercial hub, supported by a sophisticated arbitration community. We should not allow what is happening at 14 Riverside to taint Kenya’s standing.  

Where an arbitrator fails to uphold the fairness of the process, courts should ensure that the principle of finality does not prevent intervention where the outcomes are abhorrent.

Without meaningful judicial willingness to review awards that shock the conscience, arbitration risks becoming an instrument of injustice. And when that happens, confidence in both arbitration in Kenya and the rule of law itself is what ultimately stands to be auctioned.

The writer is an academic and strategist with a keen interest in regulatory policies