The High Court has declared the hefty arbitration award businessman Kamlesh Pattni got for the ouster of his World Duty Free company from two Kenyan airports illegal, sparing taxpayers the burden of paying him Sh8.5 billion. Justice Francis Tuiyot found that the award was based on an agreement between the government and Mr Pattni’s World Duty Free Company Limited (WDF), which was procured through bribery and corruption.
The arbitrator, retired Ghanaian judge Edward Torgbor, had in December 2012 ordered the Kenya Airports Authority (KAA) to pay the Kenya Duty Free (KDF) Complex the amount as settlement of a long running battle with the Kenya Airports Authority (KAA).
KAA said the court decision has brought to closure to the long outstanding disputes and court cases between KAA and WDF, which date back 30 years.
It further reckoned that the decision means Mr Pattni has no right to operate duty free shops or to advertise at Jomo Kenyatta International Airport (JKIA) in Nairobi or Mombasa’s Moi International Airport.
At the centre of the dispute is an advertising concession and permission to operate duty-free shops that KAA is alleged to have granted third parties without consultation. Mr Pattni accused the KAA of breaching his company’s sole and exclusive rights to construct, maintain, furnish and operate duty-free shops by granting concessions to third parties at JKIA and Moi International Airport.
The International Center for Settlement of Investment Disputes (ICSID) ruled that the agreement dated April 27, 1989 between KAA and WDF was obtained through corruption and bribery and should not be respected.
Justice Tuiyot in his ruling noted that the arbitrator had ignored the ICSID ruling while awarding Mr Pattni the colossal amount.
Justice Torgbor on December 5, 2012 ruled in favour of Mr Pattni and gave KAA two months to pay Mr Pattni Sh4.2 billion in full . The amount had accumulated interest to Sh8.5 billion by the time the latest judgment was made.
The Sh8.5 billion claim included Sh2.4 billion in lost and unearned revenue, Sh860 million general damages, Sh430 million aggravated damages, Sh275 million special damages, Sh247 million as revenue collected by KAA between 2005 and 2011 from advertising concessions granted to third parties and Sh5 million lost income from rent in 2011.
Justice Torgbor allowed Pattni to charge interest at court rates from the date of the first default on the outstanding amount, until paid in full.
KAA challenged the award and obtained interim orders stopping the payments until the dispute was heard and determined.
KAA told the court that the agreement between it and WDF, which formed the basis of the arbitral proceedings, was procured through bribery and corruption and “is thus not valid or enforceable under the laws of Kenya”, a position that the court has agreed with.
The authority further claimed that the arbitration was conducted in a manner that deprived it of fair and reasonable opportunity to ventilate its case.