Kenya Electricity Transmission Company (Ketraco) is under pressure to pay a Spanish company more than Sh10 billion or face liquidation, over a debt arising from a botched contract nearly a decade ago.
The state corporation suffered the blow after the High Court declined to order C.A. Infraestructuras T & I SLU to deposit Sh185 million as security for costs, after the Spanish firm filed liquidation proceedings against Ketraco to enforce an award it won in 2019.
The court rejected Ketraco’s application, saying it was a ploy to delay or frustrate the liquidation process and shield the electricity transmission company from the consequences of its long-outstanding decree.
The High Court stated that compelling a party already holding a substantial decree to deposit further sums as security —while the debtor (Ketraco) remains in default— would amount to clear injustice and run contrary to settled legal principles.
“The creditor has demonstrated a bona fide claim founded on a final decree. The debtor has failed to show any real risk of prejudice or inability to recover costs, nor has it discharged the burden necessary to justify the invocation of this Court’s discretion,” the court said.
The case arose after Spanish firm Instalaciones Inabensa sued Ketraco following the termination of two contracts for the construction of a power line and a substation in 2016.
An arbitration tribunal awarded Inabensa €37 million plus interest and costs for wrongful termination.
The dispute stemmed from two engineering, procurement, and construction (EPC) contracts awarded to Instalaciones Inabensa in 2013.
Ketraco terminated the contracts on April 25, 2016, prompting the matter to be referred to arbitration, where the tribunal found Ketraco in breach of contract.
In July 2019, the tribunal awarded Inabensa €37,365,691 plus interest and costs.
Not satisfied, Ketraco unsuccessfully challenged the award at the High Court, the Court of Appeal, and the Supreme Court.
By a Deed of Subrogation dated July 28, 2023, all rights under the decree were assigned to the present claimant (C.A. Infraestructuras T & I SLU).
The claimant later filed a liquidation petition, but Ketraco sought to have the contractor compelled to deposit Sh185 million as security for costs.
Ketraco argued that the Spanish firm is a foreign company with no known assets in Kenya.
The court dismissed the argument, stating that being a foreign firm alone was insufficient grounds to seek security.
It further noted that the purpose of security for costs should not benefit a party in circumstances arising from “its self-induced impecuniosity.”
The High Court added that Ketraco bears the burden of proving that the Spanish company is unable to pay costs.
The creditor had stated that it is a financially sound international energy company, and the court noted that this evidence was not challenged.
Crucially, the court said the creditor holds a substantial, final, and quantified decretal sum exceeding €69 million and Sh195 million at the time of filing the petition.
“A party holding a decree of that magnitude within the jurisdiction cannot be described as a litigant unlikely to meet an order for costs,” the court said.
The court further noted that the decretal sum is an enforceable financial asset.
Should Ketraco succeed at the hearing of the petition and be awarded costs, those costs can be offset against the decretal sum, the court stated.
