Companies

Lawyer seeks House intervention in Sh49 billion KBC lawsuit

KBC

The Kenya Broadcasting Corporation's offices in Nairobi. PHOTO | FILE

A suit filed by a Dubai-based businessman against the Kenya Broadcasting Corporation (KBC) for breach of contract has been brought before MPs for intervention.

Former Law Society of Kenya chief executive Apollo Mboya has petitioned parliament to step in and avert a situation that could either leave the national broadcaster bankrupt or burden the taxpayer with a Sh49 billion external bill.

Businessman Ajay Sethi of Channel 2 Group filed papers at the London Court of International Arbitration alleging that KBC had in March 2009 unlawfully terminated a contract between the two firms that was supposed to create a 24-hour entertainment and sports channel.

According to Mr Sethi, the joint venture had projected that by August 2017, it would have earned a profit of Sh48.2 billion.

Channel 2 in its suit says it had carried a feasibility study on the local digital television market, but claims that KBC had (without consent) used this information to launch a distribution platform with China’s StarTimes.

Could win

Mr Mboya argues that an adverse arbitral award in the amount excess of Sh49 billion claimed by Mr Sethi appears to be a likely outcome of the arbitration.

He also says the arbitral award is not subject to an appeal and will immediately become payable and be demanded against the National Treasury.

“The potential arbitral award will expose Kenyan assets abroad to legal attachment and will damage Kenya’s standing in international financial markets and its ability to access funding for development in such markets,” Mr Mboya says in the petition papers.

He also accuses high-ranking government officials and their business associates of engineering Mr Sethi's suit in order to grant some parties exclusive digital broadcasting rights to the detriment of indigenous Kenyan broadcasters.

Mr Mboya wants parliament to direct the Attorney-General to urgently appraise the public on the legal steps being taken by the State to defend against Mr Sethi's claim, as well as the current status of the case and cost implications.

“The Attorney General should also address parliament on the practical financial steps being taken by the National Treasury to expeditiously satisfy an adverse arbitral award if any, and the likely impact such an award may have on the operations and independence of KBC,” he said.

Senior officials

Senior government officials mentioned in suit papers filed in the London court include former Minister of Information and Broadcasting Mutahi Kagwe (now Nyeri Senator), his Permanent Secretary Bitange Ndemo, former Tourism minister Morris Nzoro as well as former senior KBC officials.

In a letter dated March 2009, KBC said it terminated the joint venture because of programming and “poor financial performance”, but Mr Sethi said that this was caused by a weak and unreliable signal.

KBC had issued a public tender for the provision and installation of digital equipment for the Digital Terrestrial Television platform, with Mr Sethi’s firm among those invited to bid.

The tender was later awarded to China’s Star Times, which entered into a digital television memorandum of understanding with KBC, but which Mr Sethi considers a breach of their agreement.

KBC however argued that it was entitled to terminate the agreement after Mr Sethi failed to provide films and other programmes in sufficient quantity.