How oil company Glencore lost Sh4 billion appeal

KPC has been sued by a UK firm in a decade-long compensation battle. FILE PHOTO | NMG 

A decade-long battle between the Kenya Pipeline Company (KPC) and London-based Glencore Energy over Sh4 billion compensation came to an end in a recent decision after the Supreme Court declined to hear the case.

Judges said it was cynical for Glencore, upon burning its fingers in a scheme it consummated with Triton, to turn around and sue KPC when the State corporation was not a party to the finer details of their dealings.

The judges said the Constitution cannot protect rights supposedly acquired through violation of law. “It espouses and commands a respect for the rule of law and enjoins courts to do justice in accordance with the law,” they said.

According to five Judges of the highest court in the land, the issues raised by UK Company were not substantial points of law, which could have a bearing on public interest.

The Judges led by Chief Justice David Maraga said the matter surrounded the interpretation of the provisions of the private Transportation and Storage Agreement between Triton Petroleum Company Limited (Triton) and Glencore Energy, and the Collateral Financing Agreement between the two companies. But the matters raised are not issues of general public importance.


The dispute started when Triton Petroleum Company, belonging to runaway businessman Yagnesh Devani withdrew oil worth over Sh7 billion from KPC storage facilities and sold it to marketers.
Glencore, one of the financiers of Triton, sued KPC arguing that the State agency was at fault for not informing financiers that it had released the oil for sale.

In a letter dated January 5, 2009 addressed to Glencore, KPC recalled and rescinded its confirmation as to the stock of gas oil it held, stating that an earlier confirmation, on December 2008, was erroneous.

The correct position, KPC said, was that the quantity it held for Glencore was nil. The company then demanded the immediate return or delivery of 31,752.390 metric tonnes of gas oil and when this was not complied with, it moved to court claiming the value of the gas oil as the loss and damage it suffered.

Glencore said in the Transportation and Storage Agreement dated December 8, 2001 between the company and Triton, KPC would receive, store petroleum products imported into Kenya and deliver them to Triton.

The deal was contained in a Collateral Financing Agreement, which also said that KPC would not release oil products in its custody without the express instructions of the financiers.
After hearing the case, the High Court found KPC at fault and ordered the corporation to pay Sh4 billion.

KPC appealed and three judges of the Appellate Court reversed the decision noting that there was an elaborate scheme hatched and executed by Glencore, using Triton as a front, which allowed the company to enter and trade in the Kenyan oil market without a licence, a move in itself, a “flagrant illegality”.

“That illegality defeats all its claims herein against the appellant and the learnt judge should have so found. In failing to do so despite pleadings and strident pleas by the appellant, he fell into error and must be reversed,” Justices Patrick Kiage, Gatembu Kairu and Kathurima M’Inoti said.

The firm then sought to move to the Supreme Court but the application was rejected by the Court of Appeal. Not satisfied, it moved to the Supreme Court directly, seeking to be heard.

In the decision, Justices Maraga, Deputy Chief Justice Philomena Mwilu, Smokin Wanjala, Njoki Ndung’u and Isaac Lenaola said the matters are not substantial points of law, which will have a bearing on public interest.

“In the circumstances, we find no merit in this application and we accordingly dismiss it with costs to the respondent,” they said.