KPC stopped from paying Sh4.5bn as contractors fight


Kenya Pipeline Company (KPC) petroleum storage facility in the Industrial area, Nairobi. FILE PHOTO | JEFF ANGOTE | NMG

The High Court has stopped Kenya Pipeline Company (KPC) from paying a Cypriot firm $31.31 million (Sh4.57 billion) pending the hearing and determination of a contract dispute.

Zakheem International Construction, the Cypriot firm, has been in dispute with Oilfields Engineering and Supplies over the performance of a sub-contract agreement dated November 2015.

The two firms first resorted to arbitration as per their agreement and an arbitral award was in June 2021 published in favour of Oilfields, triggering the escalation of the matter to court the same year in October.

Oilfields was seeking for the court to adopt the award while Zakhem wanted the award set aside.

But even before these applications were heard, the two firms filed other applications in July this year, with Oilfields seeking for an injunction stopping Zakhem from getting $31.31 million from KPC. It also wanted KPC enjoined in the suit as an interested party.

“The interested party (KPC) is hereby restrained by way of a Mareva injunction from paying or releasing to or in any way whatsoever parting with the sum of $31.31 million to Zakhem –pending the hearing and determination of the application for setting aside the award dated 29th October 2021 and the application dated 13th October 2021 for adoption of the award,” Justice F. Mugambi of Nairobi’s High Court said.

“The applications for setting aside and enforcement of the award shall be heard on a priority basis.”

The judge said that while she agreed with Zakhem that the multiple applications and suits filed by Oilfields “must be called out and frowned upon as this borders abuse of court,” the prayer for the injunction had never been heard.

She noted that both parties had submitted that all previous applications and suits were either dismissed or struck out, meaning that they were not heard on merit and that the prayer for the injunction had not been determined with finality.

“In the interests of justice and so as to avail an opportunity to Oilfields to ventilate its case substantively before court, I proceed on the basis that the application dated 4th July 2023 is not res judicata,” the judge said.

The judge said the relief sought by Oilfields is meant to protect the subject matter of the arbitration pending the hearing of the application for enforcement and the application for setting aside the award.

Oilfields also convinced the court that there is a real risk that the funds in question will be removed from the country or otherwise dissipated if the injunction is not granted.

“Oilfields apprehension is heightened by the fact that Zakhem is a foreign company registered in Cyprus, with no known assets in Kenya, which fact has also not been denied,” said the judge.

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