Whose Law, Whose Forum? Governing Law, Jurisdiction and Dispute Resolution Clauses in Insurance contracts under Kenyan and English Law

Contractual freedom allows parties to a contract to choose and agree on clauses governing their relationship. In typical insurance contracts, an insured and insurer enter into an insurance contract where the insurer covers an insured for losses that fall within the scope of the insurance contract. A secondary relationship may be created by contract between the insurer and reinsurer, where the insurer (now reinsured) cedes or transfers part or all of its risks to the reinsurer, subject to regulatory requirements.

The nature of reinsurance

The manner in which courts interpret reinsurance contracts goes down to the purpose of the contractual relationship. Generally, reinsurance either indemnifies the reinsured’s liability under the underlying insurance contract or further insures the original subject matter of the underlying insurance contract. English courts have found reinsurance contracts to be independent contracts to be construed on their own terms and conditions and which only indemnify the reinsured’s liability under the underlying insurance contract to the extent that such liability is prescribed in the reinsurance contract.

This interpretation is key for parties negotiating cross-border reinsurance contracts, specifically on the choice of governing law, jurisdiction and dispute resolution clauses. A governing law clause identifies the substantive law to be applied when determining any disputes that may arise and interpreting the rights and obligations of the parties whereas a jurisdiction clause is a dispute resolution clause which identifies the method of hearing disputes, either through arbitration or court(s). These clauses have to be carefully considered with regards to the location of the parties, the location of the underlying risk, the governing law and jurisdiction clauses in the underlying insurance contract, and the enforceability of judgements and awards. 

A look at reinsurance in Kenya

Selecting governing law and dispute resolution mechanisms for Kenya-originating insurance programs determines whether coverage decisions hold, whether reinsurance recoveries flow, and how quickly parties reach a final enforceable outcome. While it is generally possible to enforce foreign judgements locally, Kenyan insurance market is subject to non-waivable statutory and supervisory expectations that override contractual clauses. The Kenyan market typically uses a two-track model with a local partner and a foreign reinsurer. Locally issued policies are ordinarily anchored in Kenyan law and local dispute resolution requirements governed by the Insurance Regulatory Authority (the ‘IRA’), while reinsurance layers are frequently placed under English law with London as the seat of arbitration. This set up ensures compliance with Kenyan public interest rules at the local level while benefiting from the stability and predictability of the English commercial insurance framework as well as the global enforceability of London-seated awards under the New York Convention. The preference for English law in international contracts is a global reality. Notably, the most recent Law Society of England and Wales reported that in 2024, English law continued to be the preferred governing law in international arbitration.

Is English law permissible for Kenya-connected insurance disputes?

Kenyan courts typically uphold express choices of foreign jurisdiction, provided the contract does not attempt to skirt non-waivable Kenyan statutes or offend Kenyan public policy. In insurance practice, the constraint is mostly at the direct policy level. Rules on local licensing, market-conduct obligations, claims-handling timelines and statutory cessions are embedded in the Insurance Act and prevail even where the policy references foreign law. In contrast, reinsurance contracts between a Kenyan insurer and foreign reinsurers are often governed by English law and subject to London arbitration, with the policy and reinsurance drafted to operate back-to-back.

Which law do parties prefer?

While there are no specific polls on governing law preference among insureds, available proxy data points towards local law being preferred for local or retail policies while English law is generally preferred for large cross-border and reinsurance placements. The IRA’s recommended wording urges parties to implement local multi-tier dispute resolution for policies, with consumer protection rules amplifying the need for local processes when dealing with customers. 

Foreign reinsurers often prefer English law and English courts or international arbitration. This flexibility is anchored by the purposive interpretation described above that reinsurance contracts are independent from the underlying insurance contract and are to be construed on their own terms and conditions. Importantly, while in facultative reinsurance, the underlying insurance contract is usually in force prior to reinsurance placement, treaty reinsurance contracts are usually already in force providing prospective reinsurance for future underlying insurance contracts. On this basis, it is not required that reinsurance contracts be construed in line with the governing law under the underlying insurance contract, granting parties freedom to elect their applicable law and dispute resolutions mechanisms.     

Are there any challenges to using Kenyan law in cross-border insurance structures?

Firstly, and most fundamentally, Kenyan insurance legislation and supervision are non-waivable in relation to locally issued policies. Even when parties contract to use foreign law, they remain bound by Kenyan licensing, claims, and market conduct provisions. Secondly, back-to-back slippage is a persistent operational risk. When the Kenyan-law policy and the foreign-law reinsurance are not carefully drafted, a settlement made under Kenyan-law obligations can fail to translate into reinsurance recovery upstream.

Enforceability pathways also differ depending on the forum. While Kenya is generally welcoming of foreign judgments, the inverse is uncertain. Enforcing a Kenyan court judgement abroad depends on the destination state’s reciprocity and public policy filters, which vary from country to country. Another possible risk is the ‘public policy’ ground initially envisioned as a narrow gateway to challenge arbitral awards, but which losing parties have increasingly used to challenge Kenyan-seat arbitral awards. This can delay settlements or even get an arbitral award set aside.

Kenya’s evidentiary practicalities can impede smooth settlement. Dispute resolution in Kenya is generally beholden to strict statutory channels for foreign involvement in civil proceedings, as laid out in Ingang’a & 6 others v James Finlay (Kenya) Limited [2023] KESC 22 (KLR). This can complicate cross-border discovery and evidence-taking, particularly when a matter is seated in Kenya while much of the evidence and expert analysis is abroad.

Finally, commercial insurance case outcomes are unpredictable in Kenya as compared to jurisdictions like the UK. Kenya does not have a commercial insurance code comparable to the UK’s Insurance Act 2015. As such, complex disputes may rely more on general statute and common law reasoning. This is less attractive to international participants when compared to English law’s modernised scheme of fair representation and proportionate remedies.

Enforceability of English decisions and other foreign decisions in Kenya

The Kenyan legal system generally respects party autonomy and upholds express choices of foreign law, as evidenced by statutory enforcement options of the Foreign Judgments (Reciprocal Enforcement) Act (CAP 43) (the ‘Enforcement Act’) and the Arbitration Act (CAP 49) (the ‘Arbitration Act’) and the common law route as set out in Jayesh Hasmukh Shah v Navin Haria & another [2016] KECA 762 (KLR) (the ‘Jayesh Shah Case’). 

The Enforcement Act allows for the registration of interim and final monetary and conclusive judgments issued by both courts and arbitral tribunals from designated ‘reciprocating countries’ in the High Court of Kenya within six (6) years of the date of the judgment, where reciprocating countries include Commonwealth countries and non-commonwealth countries designated as such by the Cabinet Secretary. The monetary settlement sought should be specific and its registrability is hinged on the assessment of jurisdiction, timeliness, and not contrary to public policy. Upon registration, the judgment is treated similarly to a judgment issued by the High Court of Kenya and can be similarly enforced. Foreign arbitral awards can also be recognised through the Arbitration Act, which domesticates the New York Convention. This is subject to limited grounds for refusal which must be proved before a Kenyan High Court.

Where the judgment is neither issued by a reciprocating country nor an arbitral award under the New York Convention, common law enforcement is an avenue for enforcement. As was decided in the Jayesh Shah Case, a foreign judgement may be enforceable in Kenya as a claim in common law, emphasising that the Kenyan High Court is competent to hear and determine any issue relating to enforceability of foreign judgments from non-designated countries.

Mitigation and drafting techniques that would work

An explicitly aligned split-law architecture would result in the least friction. This means keeping the underlying insurance contract under Kenyan law and incorporate a time-bound multi-tier dispute resolution clause and place the reinsurance under English law with London as the seat of arbitration, or as the case may be, the relevant foreign jurisdiction. 

Where parties intend for back-to-back coverage by reference to the underlying contract, including an express ‘back-to-back’ clause formalising the parties’ intention to align coverage and claims obligations across the chain, save for non-waivable Kenyan rules. To preserve reinsurance recovery, aligning the elements that often create gaps such as triggers, exclusions, aggregation, notice, and claims control/co‑operation using a follow-the-settlements clause in the reinsurance contract that allows reasonable local settlements to bind reinsurers. 

A reinsurance contract that elects the jurisdiction of English courts should contain a clear submission-to-jurisdiction clause confirming that the parties agree to have disputes determined by those courts. This ensures that any resulting judgment can be efficiently registered and enforced in Kenya. For the purposes of streamlined enforcement, the agreement should also specify the currency of account and the method for calculating interest so that the judgment reflects a definite sum.

Conclusion

With the complex interaction between Kenyan insurance regulation, English law reinsurance frameworks, and the scrutiny applied by Kenyan courts to cross border dispute mechanisms, it is imperative that parties prioritise contractual clarity and structural alignment across the insurance–reinsurance chain. 

Local insurers should retain Kenyan law and IRA compliant dispute resolution mechanisms at the policy level, while ensuring that reinsurance contracts governed by English law incorporate back to back drafting, particularly on triggers, exclusions, aggregation, notice, and claims control obligations to avoid slippage that could prejudice recovery. Embedding robust settlements language, such as follow the settlements provisions, remains critical to ensuring that reasonable local settlements bind reinsurers, especially where local statutory constraints or consumer protection requirements shape claims outcomes. For their part, reinsurers should continue favouring English law and London seat arbitration to leverage predictability, international enforceability, and Kenya’s participation in the New York Convention, while reinforcing fair presentation processes and proportionate remedies under the UK Insurance Act.

Ultimately, this ensures that coverage decisions are enforceable, reinsurance recoveries flow efficiently, and cross border disputes are resolved with reduced friction.