Footwear manufacturer Bata Shoe has suffered a legal setback after the High Court declined to overturn an arbitration award in favour of leather supplier Yetu Leather Limited, with whom it is locked in a dispute over a footwear stitching contract.
The dispute arose from allegations concerning product quality, the use of externally sourced leather, and a Sh22.4 million refund claim.
The court upheld the arbitration award as final and binding, effectively ending the commercial dispute between Bata Shoe Company (K) Limited and Yetu Leather Limited.
Central to the case were claims that Yetu supplied leather procured from third parties rather than Bata’s tannery, raising quality concerns that attracted regulatory scrutiny.
Employees working at Bata Factory located in Limuru sort through Toughees shoes into boxes on September 26, 2018.
Photo credit: File | Nation Media Group
Bata argued that this breach caused financial losses, prompting arbitration proceedings where Yetu prevailed in September 2024, securing a Sh22.4 million payment order.
Bata sought to nullify the September 19, 2024, arbitration ruling, contending that the arbitrator lacked jurisdiction. The company maintained that the disputed transactions stemmed from a separate 2015 arrangement governed by local purchase orders, which it claimed contained no arbitration clause.
However, the court dismissed this argument, stating it could not revisit factual assessments or reinterpret contractual terms.
“Except as otherwise agreed by the parties, an arbitral award is final and binding,” the court ruled, cautioning that appellate intervention would violate public policy and undermine arbitration’s finality.
The conflict originated from a November 1, 2014, contract requiring Yetu to cut and stitch leather uppers and footwear components for Bata.
The five-year agreement, valid until October 2019, included an arbitration clause mandating dispute resolution by a sole arbitrator in Nairobi.
Inferior materials
Kenneth Amdany, Bata’s Internal Audit Manager, testified that the 2014 contract had a limited scope and that a subsequent 2015 purchase-order arrangement for complete uppers led to losses.
He asserted that Yetu was contractually obligated to source leather exclusively from Bata’s tannery but instead procured inferior materials from third parties—allegedly colluding with some Bata employees—triggering regulatory quality complaints.
He said during the 2015 arrangement, oversight authorities raised concerns about the quality of Bata’s products. After investigations, the company said it discovered that Yetu, working with some of its employees, had sourced leather from third parties instead of the company’s tannery.
Bata further contended that the 2015 purchase orders lacked an arbitration clause and accused the tribunal of exceeding its mandate by addressing misrepresentation and undue influence claims. Mr Amdany contended that the arbitral award fell outside the scope of the 2014 labour contract and was therefore invalid.
Yetu’s response, through its director Kihia Mwangi, did not focus on defending or denying the claims of sourcing leather from third parties.
Instead, Yetu’s filings shifted the dispute to contract validity, arbitration jurisdiction, and the alleged unlawful deductions of Sh22.4 million.
The court, however, did not rule on whether the allegation of sourcing leather elsewhere was true or false. It focused on the written agreements placed before the tribunal, and noted that neither party produced evidence of a separate 2015 contract.
It highlighted a March 28, 2018, repayment plan that amended the 2014 contract’s payment terms while preserving all other clauses, including arbitration.
“The applicant is not being candid,” the judgment stated, noting that the repayment plan could not be isolated from the original agreement.
Since the 2018 document only adjusted payment terms, the court ruled that the arbitration clause remained enforceable for related disputes.
Additionally, the court observed that Bata failed to contest the tribunal’s jurisdiction during initial filings, raising objections only belatedly. Legal provisions require such challenges to be presented early, barring the company from revisiting the issue.
The court concluded that overturning an award requires proof that the arbitrator acted beyond authority, a threshold Bata did not meet.
