Category: News

As a cornerstone of Kenya’s economy, the construction industry is characterised by complex and multi-phased contractual processes involving numerous sectoral players and significant sums of money. Inevitably, disputes in the construction industry arise and perennial issues such as payment disputes, cash flow bottlenecks, project delays, and protracted litigation plague the industry. Persistent inefficiencies in payment systems underscore the urgent need for dispute resolution mechanisms that are fast, cost-effective, and readily enforceable.

Article 159(2)(c) of the Constitution of Kenya, 2010, provides for the use of Alternative Dispute Resolution (ADR) mechanisms, such as reconciliation, mediation, arbitration, and traditional dispute resolution mechanisms.

Although adjudication is not expressly mentioned as an ADR mechanism, it is still contemplated under Article 159(2)(c) of the Constitution. Therefore, it can be argued that Kenyan courts are called upon to promote all ADR mechanisms, including adjudication.

The Adjudication Rules of the Chartered Institute of Arbitrators (Kenya Branch) define adjudication as “a dispute resolution procedure based on the decision-making power of an impartial, third party neutral natural person known as an adjudicator to reach a fair, rapid and inexpensive decision upon a dispute arising under a construction contract.”

The Construction Payments Adjudication Bill (the “Bill”), introduced through Sessional Paper No. 4 of 2024, on the National Alternative Dispute Resolution Policy, seeks to officially recognise adjudication as a dispute resolution mechanism in Kenya, for payment disputes in construction projects. The Bill was recently subjected to public participation, as required under Article 10 of the Constitution.

This article examines the resolution of payment disputes both historically and prospectively, with regard to the Bill.

 

A Walk Down Memory Lane

Payment disputes in construction projects often involve clients, contractors, subcontractors, manufacturers, and/or suppliers, among other stakeholders. Such disputes typically arise from delays in works, time extensions, cash flow shortages, cost overruns, tendering and quality of works, among others. If left unresolved, these disputes can derail the progress of the project and strain the relationship between the parties.

Such disputes have for a long time been subjected to arbitration, as the main ADR method in the construction contracts. This has been undertaken pursuant to the provisions of the Arbitration Act (Cap. 49) Laws of Kenya.

In rare instances where parties have sought to undertake adjudication, they have relied on standard form contracts, such as the International Federation of Consulting Engineers (FIDIC), with the necessary amendments to suit their individual needs.

Such clauses have included the use of Dispute Boards in construction projects as envisaged under FIDIC. Specifically, in its 2017 Red Book, FIDIC allows the use of Dispute Avoidance and Adjudication Boards (DAAB) in managing and avoiding disputes arising from construction projects. In this regard, parties have adopted ad hoc dispute adjudication boards or appointed the boards within timelines stipulated in the contract.

Ad hoc boards are set up at the onset of the project and remain in place throughout its duration, to assist the parties in resolving disputes arising in the course of the project. The DAABs further assist parties to avoid disputes by facilitating and improving communication, thereby encouraging resolution of contentious issues before their escalation into full-blown disputes (conflict avoidance). While DAAB decisions are binding, they remain subject to review in arbitration if challenged.

 

A New Legal Dispensation

The Bill seeks to promote timely payments and equitable remedies for disputes in Kenya’s construction sector by strengthening the adjudication practice with greater efficiency and accountability. It introduces statutory adjudication as a fast, cost-effective mechanism for resolving payment disputes. Statutory adjudication enables cash flow continuity in ongoing projects while preserving the parties’ rights to later pursue arbitration or litigation. If implemented effectively, the Bill has the potential to transform dispute resolution in the construction industry.

The Following are Key Highlights of the Bill:

1. The Bill applies to all construction contracts that either expressly provide for adjudication or where the parties, with mutual consent, submit disputes for adjudication. Conversely, the Bill shall not apply where the construction contracts prescribe a different procedure for the resolution of payment disputes or does provide for adjudication but under a different framework.
2. Construction contracts must contain an agreement in writing to adjudicate payment disputes. The agreement shall be deemed to be in writing if the parties sign a contract to this effect or have an exchange of correspondence between themselves in relation to the works being undertaken and adjudication as the payment disputes resolution mechanism.
3. Once enacted, the Bill shall apply to construction contracts regardless of whether the works are undertaken wholly or partly within Kenya, thereby extending its scope to cross-border projects.
4. The Bill covers a wide range of construction works, including building and engineering works, procurement, surveying, design, landscaping, and material supply, thereby ensuring comprehensive inclusion of all stakeholders.
5. The adjudication process involves:

• Issuance of a payment claim by the contractor;
• Issuance of either a payment schedule or a schedule to pay less by the employer (this schedule must contain reasons and alternative amounts if contesting the claims);
• Issuance of a notice of reference to adjudication by an aggrieved party;
• Filing of a reference to the adjudication body, which then appoints the adjudicator. The adjudicators will be appointed from a panel maintained by a designated adjudication authority. Provisions on their appointment, independence, remuneration and code of conduct aim to uphold professionalism and impartiality. The National Dispute Resolution Council has the mandate of accrediting adjudication bodies, issuing codes of practice, and regulating the sectoral standards. Parties will be jointly and severally liable for adjudicator fees and expenses. The adjudicators will be entitled to lien over the decision until payment is made.
• Adjudicators must render decisions within fourteen (14) days after the date when the adjudicator receives the response to the reference or the date when a responding party should have submitted a response to the reference (extendable with consent). The adjudicators can use flexible procedures, including calling conferences, written submissions, and site visits. The process excludes strict application of the Evidence Act, allowing informality and speed.
• Decisions of adjudicators are binding and enforceable on an interim basis unless set aside in an arbitral or litigation process. The decision must outline the amount payable, interest, and due date and be accompanied by an adjudication certificate.
• Adjudication decisions/certificates can be adopted in the High Court and enforced as judgements for debts. The Application to set aside the decision must be filed within seven (7) days on the following limited grounds: statutory non-compliance, fraud/corruption, or excess of jurisdiction. However, the Applicant must deposit the adjudicated sum as security for costs.
• The binding nature of the decision ensures immediate enforcement (if not challenged), safeguarding project cash flow and maintaining project progress. Adjudicated amounts must be paid within seven (7) days from the date of the certificate, or as may be prescribed by the adjudicators.

The Bill seeks to promote timely payments and equitable remedies for disputes in Kenya’s construction sector by strengthening the adjudication practice with greater efficiency and accountability. It introduces statutory adjudication as a fast, cost-effective mechanism for resolving payment disputes. Statutory adjudication enables cash flow continuity in ongoing projects while preserving the parties’ rights to later pursue arbitration or litigation. If implemented effectively, the Bill has the potential to transform dispute

Conclusion

For Kenya’s construction sector to achieve timely and effective project delivery, it is essential to adopt flexible and fast-track dispute resolution mechanisms such as adjudication. As extensively discussed above, this mechanism makes it both costly and risky for the parties to stall payments, thereby curbing project delays and avoiding potential claims for liquidated damages.

If enacted, implementation of the statute will require widespread training and accreditation of adjudicators, as well as sensitisation of industry stakeholders. Contracts previously negotiated that lack adjudication clauses, may require transitioning through amendments, to facilitate the use of this mechanism. This is owing to the fact that adjudication under the Bill is not a matter of right but must be agreed upon in writing. In any event, jurisdictional issues as preliminary points when challenging an adjudication decision, may arise where the dispute is not covered by an adjudication agreement.

By contrast, in the United Kingdom, parties to a construction contract have an automatic right to adjudicate at any time, even if the contract does not expressly include the mechanism. This right to adjudicate cannot be taken away contractually.

Nevertheless, the effectiveness of the adjudication process will demand a multi-sectoral approach. Specifically, swift enforcement of the adjudication decision by the High Court will be critical, requiring a strong buy-in from the judiciary.

Therefore, the proposed Bill is a step in the right direction, as it provides a governing legal framework that secures statutory access to adjudication, while defining its procedural and substantive elements. Such legislation will strengthen the viability of adjudication as an efficient tool for safeguarding cash flow, preserving business relationships, and ensuring project completion within agreed timelines.

Introduction

The issue of migration of legacy tax balances to the iTax system has not been without its fair share of controversies, with some escalating to the Tax Appeal Tribunal for resolution. The most common denominator in these controversies has been issues relating to statutory time limits on amending self-assessment records, the appealability of legacy migration notifications, and the retrospective assessment of taxes on legacy balances.

The decision of the Tax Appeals Tribunal in TATC NO. E1217 of 2024: Sony Holdings Limited versus The Commissioner of Domestic Taxes, in which we represented the Appellant offers much-needed clarity on the statutory limits applicable to the KRA when issuing communications of migration of legacy balances that differ from taxpayer’s self-assessment records, and on whether such legacy balances may be deemed to constitute tax assessments.

 

The Appeal

In the cutting-edge decision, the Tax Appeals Tribunal made conclusive determination on issues relating to the migration of legacy balances. The case stems from the notification of migration of legacy balances to the iTax platform. This was a common plight of many taxpayers in the first quarter of 2025, where the KRA issued notifications to many taxpayers informing them the intention to migrate legacy balances to iTax upon those balances being validated. Such similar notice was sent to Sony Holdings Limited notifying it of the intended migration of the alleged legacy balances for the period up to 2014 comprising KES. 171,584,860 in income tax and KES. 170,949,668 in VAT and was requested to provide supporting documentation for validation of the alleged debit balances.

Sony Holdings Limited disputed the alleged legacy balances and furnished documentation proving that it had no debit balances eligible for migration to the iTax-system. Notwithstanding such evidence, KRA proceeded to issue an Objection Decision without validating the balances and demanded KES. 201,125,150.88, purportedly arising from self-assessment returns for the years of income 2009, 2010 and 2012. The demand was issued despite the taxpayer having provided documentation for revalidation which clearly demonstrated that no tax liabilities existed for migration.

 

Determination

In its determination, the Tribunal concluded that once a migration notice has been issued and supporting documents requested, the Kenya Revenue Authority is obligated to validate the taxpayer’s balances on the basis of the information provided. Only after undertaking this validation can the Authority issue a tax decision capable of grounding a procedurally sound Objection Decision.

Further, the Tribunal affirmed that a taxpayer cannot be denied the right of appeal on the pretext that it did not exhaust Tax amnesty mechanism. It was held that such route is optional and can only be applicable where the taxpayer has conceded to the principal debt or in case of contentions, the debt has been confirmed by a court of law.

The Tribunal also affirmed that any action of coming up with migration balances different from the self-assessment record after five years of making such self-assessments was contrary to section 27 and 31 of the Tax Procedure Act unless gross or wilful neglect, evasion or fraud was proven.

Lastly, the Tribunal determined that KRA could not demand taxes allegedly arising from the migration balances without validating the said balances based on the documents provided by taxpayer.

 

The Significance of this Judgment

For practitioners and businesses, the key takeaway is that the Kenya Revenue Authority cannot, under the guise of migrating legacy balances, alter a taxpayer’s self‑assessment records that were filed more than five years ago unless it can demonstrate fraud, tax evasion or wilful neglect on the part of the taxpayer. In the absence of such statutory justification, any amended assessment issued by KRA outside the five‑year period following submission of a self‑assessment return is rendered void, as it is expressly barred by law.

Introduction

Can a company that has been dissolved be liable for tax? The issue was recently resuscitated by the Kenya Revenue Authority (KRA) when it decided to impose tax on a company which had been dissolved, raising the question of whether a company that has been dissolved continues to exist for the purposes of tax.

The issue fell for determination before the Tax Appeals Tribunal (Tribunal), bringing into focus the extent of KRA’s powers to raise or enforce purported tax liabilities once the company is dissolved.

 

The Appeal

The firm represented a Client before the Tribunal, where the question of enforcing alleged tax liabilities against a dissolved company was conclusively determined.

The Dissolved Company was deregistered in 2018 under the provisions of the Companies Act (Cap. 486). In accordance with the requirements of the Tax Procedures Act (TPA) it was required to apply for deregistration as provided under section 10 of the TPA. It applied for its PIN to be deregistered and provided the relevant documents as requested by KRA. As is common in many instances no decision was made or communicated by KRA.

In 2024, KRA issued a notice indicating its intention to migrate the legacy balances to the Dissolved Company’s iTax ledger. The alleged balances comprised unsubstantiated ledger balances spread over a period ending more than ten years prior to the date of migration. The Appellant, a former director of the Dissolved Company, objected to the migration on the basis that, at the time of dissolution, the Dissolved Company had no outstanding tax liabilities. KRA nevertheless issued an objection decision affirming its decision to migrate the disputed liabilities, prompting the Appellant to file an appeal before the Tribunal.

KRA contended that a director had no standing to file an objection because he was not the taxpayer to whom the notice of migration had been issued.

 

Determination

In its decision, the Tribunal determined that once a company is deregistered, it ceases to exist as a legal entity and cannot be subjected to tax enforcement proceedings unless it is first restored to the register of Companies. Attempting to enforce tax liabilities against a non-existent entity without such restoration was legally untenable.

The Tribunal found that a director like the Appellant was qualified as an “aggrieved person” under section 52(1) of the TPA and sections 3 and 12 of the Tax Appeals Tribunal Act and could appeal against an appealable decision. He was a person who could be directly affected under section 897(6) of the Companies Act, notwithstanding the Company’s dissolution. Accordingly, the former director had the requisite standing to file the appeal.

The Tribunal further held that, upon the Company’s application for cancellation of its PIN and in the absence of any substantive response from KRA within six months, the PIN was deemed deregistered by operation of law pursuant to section 10(7) of the TPA.

 

The Significance of this Judgment

This Judgment underscores that once a company is legally dissolved and its KRA PIN deregistered, its “tax life” effectively ends, unless the company is restored through a court order.

Proper compliance during dissolution is essential. Companies must notify KRA of their dissolution and make an application for cancellation of their KRA PIN in accordance with section 10 of the TPA. Where this is done correctly, the company cannot be pursued for tax liability unless it is first restored to the Companies register.

For practitioners and businesses, the takeaway is that dissolution of a company is not a loophole to escape pre-existing liabilities. Rather, it serves the purpose of finality and legal certainty by shielding the company from claims or debts that did not exist at the time of dissolution. For any claim to be sustained, due process must be followed as provided for under the Companies Act.

 

Introduction

Few events can unsettle a business, such as an unexpected call from the bank confirming that its accounts have been frozen. Payroll deadlines approach, supplier commitments go unfulfilled, and carefully structured transactions come to a halt unexpectedly. In Kenya, this disruption is increasingly linked not to insolvency or internal mismanagement, but to a single enforcement tool. This is the issuance of an agency notice by the Kenya Revenue Authority (KRA) as the tax administrator.

One of the most effective instruments in Kenya’s tax enforcement tools is an agency notice, which enables KRA to collect claimed, alleged tax liabilities by attaching funds held by third parties. Despite their statutory footing, the use of agency notices frequently lies at the intersection between effective or efficient revenue collection and the protection of taxpayer rights. In this case taxpayer includes a non-resident person who is subject to tax in Kenya. Accordingly, understanding or knowing how to respond to them is not simply a matter of compliance.  Any taxpayer operating in today’s enforcement climate must consider governance, financial continuity, and legal strategy.

In this article, we examine the legal framework governing agency notices in Kenya and outline some of the strategic considerations for taxpayers confronted with their issuance.

 

Legal Underpinning of Agency Notices in Kenya

The legal architecture governing agency notices in Kenya is anchored in Section 42 of the Tax Procedures Act, Cap 469B of the Laws of Kenya (TPA). The provision empowers KRA to appoint any person holding money for, or on account of, a taxpayer as an agent for the purpose of recovering unpaid taxes. Once appointed, that agent is required to remit to KRA any monies held on behalf of the taxpayer, up to the amount specified in the notice. The agency notice is simultaneously served on the taxpayer.

Section 42(2) of the TPA enumerates persons who may be an agent and who may be required to comply with an agency notice, and this includes the following persons:

• a. who owes or may subsequently owe the taxpayer, e.g., employer or debtors;
• b. who holds or may subsequently hold money, for or on account of the taxpayer, e.g., banks, trustees or escrow agents;
• c. who holds or may subsequently hold money on account of some other person for the taxpayer, e.g., financial advisors or executors of an estate; or
• d. who has authority from some other person to pay money to the taxpayer as specified in the notice, but this amount shall not exceed the amount of the unpaid tax or the amount the Commissioner believes will be paid by the taxpayer, e.g., holder of power of attorney, accountants, or trustees of a trust.

In practice, and despite having the various agents listed above, agency notices are frequently served on banks holding taxpayers’ deposits. Our understanding is that they are easy to reach and strictly apply the requirement to withhold funds in compliance with Section 42 of TPA. Upon receipt, the bank is required to ring-fence the affected accounts and remit funds to KRA until the tax liability is paid up. An agency notice, therefore, operates as a statutory demand directed at a third party, effectively interposing KRA between the taxpayer and its funds.

Given the immediacy and commercial disruption occasioned by agency notices, a structured response strategy is essential.

 

Navigating Agency Notices in Kenya

1. Settlement of the Tax Demand

The first consideration for a taxpayer is whether the tax liability is undisputed or contested. If the taxes are not in dispute, the most direct solution is to settle the outstanding amount or negotiate a payment plan with KRA. Under Section 42(8) of the TPA, KRA is required to revoke or amend an agency notice once the tax is paid in full or satisfactory payment arrangements have been made. In practice, confirmation of payment or approval of a payment plan typically results in the lifting of the notice and the release of frozen funds, restoring access to the affected accounts, and mitigating commercial disruption.

 

2. An Agency Notice is an Appealable Decision

Where the tax liability is disputed, the taxpayer’s next recourse is to challenge the agency notice through the statutory dispute-resolution framework as elucidated under the TPA. Jurisprudence confirms that an agency notice is not procedurally insulated from challenge, rather, it is considered an appealable decision under the TPA.

In Commissioner of Domestic Taxes vs. Pevans East Africa Ltd & 6 others [2022] KEHC 10392, the Late Justice Majanja DAS (as he then was) affirmed that the issuance of an agency notice constitutes an appealable decision within the meaning of Section 3 of the TPA.

This position was further reinforced in Mubea Group Ltd vs. Kenya Revenue Authority [2025] KEHC 12003, where the High Court struck out judicial review proceedings on the ground that an agency notice is a statutory appealable decision. The Court emphasized the doctrine of exhaustion of remedies, highlighting that where Parliament has provided a clear mechanism for objection and appeal, taxpayers must pursue that route before invoking the supervisory jurisdiction of the High Court under a judicial review. Therefore, the first point of call is to file an appeal with the Tax Appeals Tribunal.

 

3. Procedural Fairness and Conditions Precedent

Closely linked to the option of appealing to the Tax Appeals Tribunal is the requirement for procedural compliance. Courts have held that agency notices must be issued in accordance with the law.

Section 42(14) of the TPA sets out the specific conditions that must be satisfied before KRA can issue an agency notice. The provision ensures that agency notices are not issued arbitrarily and provides a clear statutory framework for enforcement. Under this section, KRA is directed not to issue an agency notice unless one of the following conditions is met:

• 1. The taxpayer or non-resident subject to tax in Kenya has defaulted in paying an instalment after extension of time to make payment as agreed under Section 33(2) of the TPA.
• 2. KRA has raised an assessment, and the taxpayer has not objected to or challenged the validity of the assessment within the prescribed period.
• 3. The taxpayer has not appealed against an assessment specified in an objection decision within the prescribed timelines.
• 4. The taxpayer has submitted a self-assessment and filed a return but has failed to pay the taxes due before the payment deadline.
• 5. The taxpayer has not appealed against an assessment specified in a decision of the Tribunal or Court.

These conditions collectively ensure that KRA exercises its powers judiciously and only after statutory avenues for compliance, assessment and objection have been exhausted.

 

4. Application for Stay

Once a taxpayer has lodged a substantive appeal, a critical strategic consideration is whether to seek a stay of enforcement of the agency notice pending the outcome of the appeal. The TPA does not automatically treat the filing of an appeal as a stay of execution, making it imperative for the taxpayer to proactively seek interim relief, which, if granted, will allow a taxpayer to access funds when the appeal is pending hearing and determination.

 

5. Obligations of the Agent

The agent is obligated to notify KRA within 14 days of receiving the agency notice if they do not hold any monies on behalf of the taxpayer as provided for under Section 42(6) of the TPA. Upon receipt of this communication, Section 42(7) of the TPA requires KRA to respond within 30 days to the agent by either accepting the notification and canceling or amending the notices or rejecting the notification.

The above provisions confirm that the agent is under a statutory obligation to honour the agency notice and a notification of lack of sufficient funds does not automatically extinguish the notice. Where the notice is rejected, the taxpayer must still seek intervention of the court to have the agency notice lifted, as any funds received by the agent in the future will be attached and utilized towards settlement of the demanded taxes.

 

Conclusion

Agency notices are among KRA’s most potent enforcement tools, capable of immediately impacting a taxpayer’s liquidity and operations, and should never be ignored. Jurisprudence confirms that such notices are appealable decisions, enforceable against third parties, yet subject to both procedural safeguards and constitutional scrutiny.

For taxpayers, the key lies in a balanced strategy which includes promptly assessing the underlying decision, pursuing the statutory objection and appeal process, seeking interim relief where necessary, and engaging constructively with your legal representatives. In doing so, taxpayers can protect their interests while ensuring compliance with Kenya’s evolving tax enforcement landscape.

Introduction

The Agreement and Conditions of Contract for Building Works (the JBC Contract) is Kenya’s predominant form of contract for private construction projects. It was published by the Joint Building Council in Kenya with the sanction of the Architectural Association of Kenya and the Kenya Association of Building and Civil Engineering Contractors.

Conversely, the International Federation of Consulting Engineers (FIDIC) Contracts have been developed as the international standard for the construction industry. They are recognised globally as a suite of standard form contracts for international construction and engineering projects.

Both regimes provide structured dispute resolution mechanisms aimed at ensuring efficiency, fairness, and continuity of project de livery. This article critically examines those mechanisms, contrasts their practical application, and highlights strategic approaches contractors may employ to recover outstanding sums and protect contractual rights.

Administration and Structure

JBC Contracts are administered by the Architect and Quantity Surveyor, who are appointed by the Employer. The contract clearly outlines their roles, powers, and duties. FIDIC Contracts, on the other hand, are administered by the Engineer, who is appointed by the Employer (under the Red and Yellow Books). Under FIDIC Contracts, the Red Book provides the conditions of contract for the construction of buildings and engineering works where the detailed design is done by the Employer (or his representative). It is not suitable if most of the works are Contractor-designed. The Yellow Book, on the other hand, lays out the conditions of contract for plant and design build for electrical and mechanical plant and for building and engineering works where the design is done by, or on behalf of, the Contractor.

In contrast, the Silver Book is only suitable for use with experienced Contractors who are familiar with sophisticated risk management techniques. It is thus suitable for the provision on a turn key basis of a process or power plant, of a factory or similar facility, or of an infrastructure project, or of other development where:

• A high degree of certainty of final price and time is required; and
• the Contractor takes total responsibility for the design and execution of the project with little involvement of the Employer.

Under the usual arrangements for turnkey projects, the Contractor carries out all the Engineering, Procurement and Construction (EPC), providing a fully equipped facility, ready for operation (at the turn of the key). In terms of administration of the Contract, there is no Engineer under the Silver Book, and the Employer directly administers the Contract. Both FIDIC and JBC Contracts can be amended to meet the tailored needs of the project.

Settlement of Disputes Under JBC

Settlement of disputes under the JBC is regulated under Clause 45 (the notice requirement). Where a dispute arises between the Employer or the Architect on his behalf and the Contractor, either during the progress of Works or after the completion of the Works, such dispute shall be notified in writing by either party with a request to submit it to arbitration and to concur in the appointment of an Arbitrator within thirty (30) days of the notice.

The dispute shall be referred to the arbitration, and the final decision on the appointment of the Arbitrator is to be made by the parties. If parties fail to agree on an Arbitrator, one shall be appointed by the Chair or Vice-Chair of the Architectural Association of Kenya or the Chartered Institute of Arbitrators (Kenya Branch). Arbitration proceedings must be preceded by a notice issued within ninety (90) days of the occurrence or discovery of the matter or issue giving rise to the dispute.

Matters that can be referred to arbitration before practical completion include the appointment of a replacement Architect, Quantity Surveyor or Engineer upon the said persons ceasing to act. Other matters can only be referred to arbitration after practical completion/abandonment of works/termination unless the Employer and Contractor agree otherwise in writing.

Arbitration provides a viable alternative to litigation, as an arbitral award is final and binding. Notwithstanding the foregoing, Clause 45.4 compels parties to first attempt to settle the matter amicably before referring it to arbitration. Disputing parties may attempt to resolve issues amicably, either independently or with the aid of third parties. Negotiation involves direct, informal, and flexible dialogue between parties, aimed at reaching a mutually acceptable solution.

Mediation, by contrast, engages a neutral third-party mediator to facilitate communication and guide parties toward a voluntary settlement. While the mediator does not impose a decision, an executed mediation agreement presented to the Court for adoption becomes legally enforceable. Alternative Dispute Resolution (ADR) is increasingly favored over litigation for being cost-effective, private, and less adversarial, fostering long-term relationships between parties.

Settlement of Disputes Under FIDIC

Under FIDIC Contracts, the dispute resolution process is substantially the same under the Red, Yellow, and Silver Books. The only difference arises from the fact that:

• The Red Book provides for a standing Dispute Adjudication Board (DAB), whereas under the Yellow and Silver Books, it is an ad hoc DAB (on a need basis); and
• There is no Engineer’s determination under the Silver Book because this contract is administered by the Employer directly. What we have is the Employer’s determinations under Clause 3.5.

Clause 20.4 onwards provides for a multi-tiered dispute resolution process which comprises of:

i. Procedure before the DAB

Members of the DAB must be mutually agreed upon by the parties within twenty eight (28) days from the date the Contract comes into force. This also includes provision for appointing DAB members where parties fail to agree on their initial appointment, replacing DAB members, terminating the appointment of DAB members and remunerating DAB members.

• Either party may refer a dispute to the DAB for its decision, including any dispute as to any certificate, determination, instruction, opinion or valuation of the Engineer (or Employer under the Silver Book).
• The notice of dispute must be in writing and provided to the other Party and the Engineer.
• The DAB (acting as experts and not Arbitrators) is required to give notice of its decision to the parties, including reasons supporting the decision, no later than the 56th day after it received such reference.
• Following the DAB decision, if either Party is dissatisfied with the decision, it may give a notice of dissatisfaction (NOD) within twenty eight (28) days of its receipt.
• Similarly, if the DAB fails to give a decision within the 56-day period, either Party (on or before the 28th day after the day of receipt of the notice of the decision) may give a NOD. The notice shall set out the matters in dispute and reasons for dissatisfaction.
• The parties may then refer the dispute to amicable settlement and ultimately to arbitration for “final” determination.
• Parties may contractually incorporate expert determination during this period to resolve technical, financial or valuation disputes before escalating to formal arbitration.
• If DAB gives a notice of its decision and no NOD has been given by either Party during the 28-day period, then the DAB’s decision shall become final and binding upon the Employer and Contractor.

 

ii. Enforcing a DAB decision (Clause 20.7)

• Where a party fails to comply with a DAB decision that is final and binding, clause 20.7 expressly allows the other Party to refer this failure directly to arbitration. It does not have to go back to the DAB or through an amicable settlement process.

iii. Amicable Settlement (Clause 20.5)

• Parties are required to attempt an amicable settlement of any dispute before commencing arbitration.
• This, however, only applies where the dispute has been referred to the DAB and/or where either party has given a NOD.
• Unless parties otherwise agree, arbitration may be commenced on or after the 56th day after the day on which the NOD was given – even if no attempt at an amicable settlement was made.

iv. Arbitration

• All 3 books provide that the disputes will be finally determined by arbitration.
• Clause 20.6 provides that disputes will be finally settled under the Rules, institution, and language set out in the Appendix to the Tender.
• Such disputes include ones in respect of which the decision (if any) of the DAB has not become final or binding, settlement has not been reached, and/or where the DAB’s appointment expires

Conclusion

Incorporating ADR clauses in contracts, leveraging expert reconciliation for technical disputes, and engaging with government entities through structured alternative dispute resolution mechanisms protects Contractors’ financial interests and secures recoveries for work done while maintaining long-term relationships with the Employer.

Time, they say is money; and this aphorism of commerce has been acknowledged by the Courts in Ghana. To address complaints by litigants about delays and the waste of productive hours in long drawn-out litigation, the rules of court allow parties in a lawsuit to choose more expeditious procedures, under the right circumstances.

These short cuts could however turn into lengthy labyrinths if not managed properly.

This article discusses some of the expedited litigation procedures in Ghana and how these options, albeit well intended, do not always produce the desired results. The article also draws the attention of potential litigants to some of the unintended consequences of these expedited litigation procedures.

The Summary Judgment

Summary Judgments allow for an early resolution of a matter when there is no real dispute on the facts or law, thereby avoiding a full trial.

This rule is designed to allow a party who has initiated a lawsuit to obtain judgment without a trial by filing a Motion for Summary Judgment and demonstrating to the Court that the Defendant has no reasonable defence to the claim (or a part of the claim to which the Motion relates). It must be noted however that, a Defendant on whom a Motion for Summary Judgment has been served is at liberty to oppose the Motion for Summary Judgment by also demonstrating to the satisfaction of the Court that he/she has a good defence to the lawsuit (or the part of the lawsuit to which the Motion relates).

If the Motion for Summary Judgment is refused, the Court may grant the Defendant permission to file a Statement of Defence for the case to take its normal course to the trial stage.

Even when the Motion for Summary Judgment is granted in respect of a part of the claim, the Court may order that the execution of the judgment be deferred until after the trial of the other part of the claim or any counterclaim raised by the Defendant has been dealt with.

It must however be noted that, a Defendant against whom a Summary Judgment has been granted may apply to set aside or vary the Summary Judgment if the Defendant was absent at the hearing of the Motion within fourteen days of being notified of the Summary Judgment.

 

The Default Judgment

Default Judgments are designed to ensure compliance with the procedural deadlines for key steps in the litigation process such as entry of appearance or the filing of a statement of defence and a counterclaim as the case may be.

If a party fails to comply with procedural deadlines, the court could grant default judgment without proceeding to trial.

The drawback of this shortcut is that since the courts are keen on having cases determined on their merits instead of technicalities, a party against whom default judgment is granted may apply to set aside the default judgment for the case to take its normal course subject to payment of cost to the affected party. This reverses all the time saved and puts the case back on its regular track, to follow the standard court procedures.

Striking Out Pleadings

The Court may either on its own or on the application of a party strike out another party’s pleadings if the pleadings

1. disclose no reasonable cause of action or defence;
2. are scandalous, frivolous or vexatious
3. seek to prejudice, embarrass and delay the fair trial of the action; or
4. are an abuse of the process of the Court.

Where an entire Statement of Claim is struck out for instance, the lawsuit may terminate immediately. Striking out portions of pleadings found to be frivolous or irrelevant, also removes immaterial facts from the case, narrows the issues and enables the trial to focus on the relevant issues only. This considerably reduces the complexity of the case and length of the trial.

Unfortunately, taking advantage of this shortcut could result in the affected party filing an appeal against the ruling striking out the pleadings and the pursuit of the appeal could lead to delays in the resolution of the case. A party whose pleadings have been struck out may also file an application to restore the pleadings in accordance with the rules.

Interrogatories

A party may request the permission of the Court to serve on the other party in the suit, questions relating to the case and ask that party to answer those questions. Non-compliance by a party on whom Interrogatories are served may, in the case of a plaintiff, result in the action being dismissed, or, in the case of a defendant, the defence being struck out.

The responses to the questions asked may substantially clarify and narrow the issues in dispute and enable the trial to be focused on relevant issues only. Fewer issues generally translate to a less complex case and a shorter trial. The trial may be avoided altogether if an admission is made that triggers a judgment to be obtained on admission.

On the other hand, a party seeking to delay proceedings may either file frivolous questions or refuse to respond to the questions on grounds of privilege. Also, where the responses do not sufficiently answer the Interrogatories, the Court may make orders requiring the party to furnish additional responses either by affidavit or on oral examination. Consequently, significant time maybe spent at the Interrogatories stage only for the matter to later take its normal course.

The Judgment on Admissions

A party may serve on the other party in the lawsuit, a request to admit the truth of a fact or the authenticity of a document. The party on whom the request is served must specifically admit or deny the truth of the fact or the authenticity of a document mentioned in the request.

Where a party admits the truth of certain facts or the authenticity of documents, it clarifies and narrows the issues in dispute and reduces the scope of the trial, which significantly shortens it.

The downside of this procedure however is that where the facts admitted to, do not dispose of the matter, time would have been wasted on the request.

In addition, admission by a party to a fact is not conclusive as that party may subsequently withdraw the admission either with the Court’s permission or with the consent of the other party. The decision to withdraw an admission may also be the basis for substantial delays especially where the withdrawal is contested.

The Pre-Trial Settlement Conference

For commercial disputes, the rules of the Commercial Court require parties to attend a mandatory Pre-Trial Settlement Conference within a period of thirty days after the close of pleadings. The Pre-Trial Settlement Conference is essentially a court assisted alternative dispute resolution process presided over by a judge who affords the parties an opportunity to settle their disputes without going to trial. Pre-Trial Settlement Conferences are designed to settle cases or clarify the issues before trial, potentially resolving the case early or simplifying the trial process. The pre-trial judge may encourage settlement or issue directions to streamline the proceedings, making the eventual trial quicker. It is noteworthy that the pre-trial judge does not conduct the main trial.

There are instances where parties exploit the pre-trial process by feigning cooperation—requesting extension of time or engaging in drawn-out negotiations—not with the aim of resolution, but rather to intentionally delay the commencement of trial.

 The Offer to Settle

In the course of proceedings before the Court, offers for settlement may be made by a party for the consideration of the other party. Court-connected alternative dispute resolution may also be an option for the parties to explore to expedite the resolution of their disputes.

Offers to settle cases encourage early negotiations and resolutions outside of court and if an offer is accepted, the case may be concluded without a trial. In practice, the parties may agree to resolve the dispute amicably, in which case the agreed terms are reduced into writing, signed by the parties, and filed in court. To conclusively end the case, the Court must adopt the filed terms of settlement as consent judgement and strike out the case as settled.

The courts in Ghana are usually supportive of parties settling their disputes outside the courtroom. But this goodwill can be exploited when a litigant pretends to pursue the settlement, simply to buy time and stall the progress of the case. Another common tactic is the use of poorly drafted settlement terms. Bad drafting, especially of key clauses, can act as a Trojan horse which conceal potential new disputes that surface during the execution of the consent judgment. Parties must ensure that the terms of settlement  reflect exactly what the parties intended.

Conclusion

It is ironic that the very rules designed to expedite litigation can, in the hands of mischievous litigants, be manipulated to achieve the opposite effect. Lawyers and litigants alike must remain vigilant to such tactics and take proactive measures to prevent avoidable delays along the litigation express way.