Breach of Contract: Kebs loses Sh2 billion to Dubai firm

by Wakili Liam
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The Kenya Bureau of Standards (Kebs) has lost a case at the Supreme Court and ordered to pay a Dubai-based firm Sh2 billion for breach of contract.

The agency signed a contract with Geo-Chem Middle East for inspection of imported petroleum products on June 5, 2009, ending the previous practice of letting oil marketers vouch for the quality of their products through self-regulation.

The contract was suspended in March 2010 after petroleum dealers raised pump prices by Sh3 per litre to cover the inspection fee which fell on them.

The move saw Geo-Chem, which was not compensated for the investment it made in fulfilling the contract, take the dispute to arbitration and winning.

Kebs then filed its objection at the High Court in a winding legal battle that was settled by the Supreme Court on December 18 in favour of the Dubai-based firm.

The arbitral tribunal on July 29, 2016 awarded Geo-Chem $15.4 million (Sh1.6 billion) less Sh87.9 million which Kebs was awarded on its counterclaim.

The money was to be paid within 45 days, failure to which it would attract interest at a rate of five percent per annum compounded.

The liability has since grown to Sh2 billion, including interest of more than Sh350 million.

Kebs went to the High Court to challenge the award but the arbitrators’ decision was upheld, prompting the agency to go to the Court of Appeal, which set aside the arbitral award.

Geo-Chem responded by heading to the Supreme Court that affirmed the High Court’s recognition of the arbitrators’ orders.

“The Appeal herein is allowed as prayed and the Judgement of the Court of Appeal dated November 2019 is hereby set aside,” the bench comprising Justices Philomena Mwilu, Mohamed Ibrahim, Smokin Wanjala, Njoki Ndung’u and Isaac Lenaola ordered.

The apex court said the Court of Appeal overstepped its mandated by setting aside the arbitral award.

Kebs plans to make a special appeal to challenge the Supreme Court’s decision, based on a legal opinion by its lawyers at Rachier & Amollo Advocates.

“The Supreme Court is a final court within the Republic. However, we advise that the Supreme Court has residual jurisdiction under Rule 28 (5) of the Supreme Court Rules to review any of its decisions in any circumstance which the court considers meritorious, exceptional and in the public interest, either on its own motion or upon application by any party,” the law firm wrote to Kebs on December 21, 2020.

The law firm says Kebs’ liability of Sh2 billion and counting makes the matter of great public interest that should invite the apex court to review its decision.

Kebs managing director Bernard Njiraini wrote to the Attorney-General Kihara Kariuki on December 21, notifying him of the agency’s intention to appeal the Supreme Court judgment.

“In light of the foregoing, Kebs will file an application to review that decision for reasons given above and will keep you posted on all developments relating thereto,” Mr Njiraini wrote in the letter.

“We have sought the Attorney-General’s legal advice and input through this correspondence.”

Geo-Chem’s claim before the arbitral tribunal included the sum of $2.4 million (Sh270.6 million) being unpaid invoices for services rendered and $468,629 (Sh50.9 million) incurred in equipping a laboratory.

Others were $1.2 million (Sh131.3 million) in expenses incurred in setting up at the port of Mombasa, $16.9 million (Sh1.8 billion) in income lost as a result of suspension of the contract and interest on each of the claimed amounts from April 1, 2010 until payment in full.

Kebs filed a counterclaim for Sh947.6 million being unremitted royalties of Sh699.3 million plus interest at the rate of five percent.


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