Conservatory orders are not automatic - International Law Office

International Law Office

Arbitration - Kenya

Conservatory orders are not automatic

October 28 2010

Background
Ruling
Comment


Background

On June 15 1966 and October 1 1979 Kobil Petroleum Limited and Kenya Oil Company Limited entered into oil processing agreements with Kenya Petroleum Refineries Limited.

A dispute arose after Kenya Petroleum gave the two companies 12 months' notice to terminate the contract on July 10 2009. Kobil and Kenya Oil contested the move, arguing that it amounted to breach of contract.

The plaintiffs sought the right to import petroleum and refine the product in Kenya Petroleum's refinery. They also sought to protect their rights not to be discriminated against and to have the dispute determined by an arbitrator. On May 24 2010 the plaintiffs filed an interlocutory application seeking interim protection measures under Section 7(i) of the Arbitration Act 1995, which states that:

"it is not incompatible with an arbitration agreement for a party to request from the High Court, before or during arbitral proceedings, an interim measure of protection and for the High Court to grant that measure."

This provision grants the High Court the authority to award interim measures before or during arbitral proceedings at the request of the party.

Kobil and Kenya Oil argued that the court had the power to issue an interim injunction order to protect the status quo of the subject matter under dispute.

Ruling

The suit was dismissed on July 9 2010. Having heard the case, Lady Justice Martha Koome held that the application was defective. One of the issues to be determined regarded the issuance of conservatory orders. Addressing Section 7 of the Arbitration Act, Koome pointed out that the issuance of conservatory orders is not automatic. Rather, the applicant's good faith must be examined before such orders are issued. In this case, there were no grounds on which to issue conservatory orders.

Comment

Section 7 makes interim measures available in the sense that it permits such relief when the parties are in dispute. This is a lacuna that needs to be sewn up. As Koome observed, interim orders by the court are never automatic; rather, they are issued after consideration in light of the well-known principles governing the grant of an interim measures (ie, the concepts of the balance of convenience, a prima facie case, irreparable injury, just and convenient issue and the applicability of substantive law).

The party seeking interlocutory measure should establish that:

  • it has a likelihood of success on the merits;
  • irreparable harm might be caused if the interim relief were denied; and
  • the balance of convenience is in its favour.

For these reasons, the courts must be vigilant when considering interim orders.

For further information on this topic please contact Patricia Kirui at Njoroge Regeru & Company by telephone (+254 20 271 8482), fax (+254 20 271 8485) or email (patricia.kirui@njorogeregeru.com).


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