Favourable rulings in cases against government save taxpayers billions
Arbitrator in October dismissed a Sh250 billion demand against the government by a Jacob Juma-linked company
Three different rulings by international arbitration centres and a Kenyan court saved Kenyan taxpayers from forking out Sh290 billion in compensation to several entities.
The claims filed against the Kenyan government by Cortec Mining Kenya, businessman Kamlesh Pattni and Kinangop Wind Park were decided in Nairobi’s favour.
The peak of these major victories was in October, when the International Centre for Settlement of Investment Disputes (ICSID) dismissed a Sh250 billion claim against the Kenyan government by Cortec, a firm associated with the late businessman Jacob Juma.
Government lawyers attributed the victory to the quality of the State’s defence and the impartiality of the arbitration centres and the court that ruled on the issues placed before them objectively.
“The decision vindicates the quality of the defence put forward by the State law office and shows the respect our domestic laws have gained [in] the international tribunal,” said lawyer Kamau Karori, a partner at Iseme Maema and Kamau Advocates, which represented the State in the case.
Mr Karori observed that since the tribunal had agreed that the licence was issued in contravention of Kenyan law, it becomes a lesson for any investor who will seek to break domestic laws due to any kind of perceived connections.
“The effect of the outcome demonstrates that Kenya, and by extension Africa, has come of age in terms of the ability to regulate their affairs. It is also a strong message to investors that the previous strategy of using the big men to obtain concessions are gone. All an investor needs to do is to know the law and not the leaders,” Mr Karori added.
The ICSID, in its decision in October, found that Cortec Mining used its political connections to procure the licences contrary to the law, rejecting what is billed to be the largest single claim against the Kenyan government.
The firm, alongside Uk-registered Cortec Limited and Stirling Capital, had filed the claim against the Kenyan government at the ICSID in November 2017 seeking compensation for loss of licences.
Cortec, before going for arbitration at the ICSID, had unsuccessfully fought the battle for the licences in Kenyan courts.
The dispute began after the then Mining Cabinet Secretary Najib Balala revoked the licences that were issued to the Canadian firm in 2013 to explore for minerals in Mrima Hills, Kwale County, on the grounds that the permits had been issued irregularly.
Cortec had estimated that deposits of niobium, used to make metal alloys for jet engines and to strengthen steel, were worth $600 billion (Sh60 trillion). The tribunal observed that “the freshly elected Jubilee government was not bound either under domestic law or international law by a purported mining licence issued under political direction” in disregard of Kenyan law.
The arbitrators directed the firms to pay the Kenyan government Sh358.4 million ($3,548,990), the legal costs incurred in defending the case, a big reprieve for Kenyan taxpayers.
The colossal amount reflects the magnitude of the case and the calibre of law firms the government used to defend itself. The charge will settle the payment to the firms of Iseme Kamau and Maema (IKM) Advocates and DLA Piper, which was retained by the government.
The three firms — Cortec Mining, Cortec (pty) Limited UK and Stirling Capital Limited, incorporated in England and Wales — filed the huge claim against the government. Cortec Mining is 70 per cent owned by Cortec UK and Stirling. In turn, Cortec UK and Stirling are wholly owned by Pacific Wildcat, a Canadian company listed on the Toronto Stock Exchange.
And still in October, the Kenya High Court declared illegal the hefty arbitration award that businessman Kamlesh Pattni got for the ouster of his company from two Kenyan airports, sparing taxpayers the burden of paying him Sh8.5 billion. The court found that the award was based on an agreement between the government and Mr Pattni’s firm, World Duty Free Company Limited (WDF), that 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 in settlement of a long-running battle with the airports authority.
Again, the ICSID decision saved the day.
The ICSID had ruled that the agreement, dated April 27, 1989, between KAA and WDF was obtained through corruption and bribery and should not be respected. This formed part of the ground on which the court relied to reject the claim.
Justice Tuiyot, in his ruling, noted that the arbitrator 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 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 in aggravated damages, Sh275 million in special damages, Sh247 million as revenue collected by KAA between 2005 and 2011 from advertising concessions granted to third parties, and Sh5 million in lost income from rent in 2011.
Justice Torgbor allowed Mr Pattni to charge interest at court rates from the date of the first default on the outstanding amount until paid in full.
Although Mr Pattni has since moved to the Court of Appeal to contest the decision, this is a major early victory for the State.
At the time of the ruling, lawyer Eric Mutua, who represented KAA in the Pattni case, described it as a big decision that will put to rest the ghost of the fake claim that had threatened taxpayers’ money.
And in July the International Court of Arbitration dismissed a claim by Kinangop Wind Park Ltd against the Government of Kenya for over Sh311 billion.
The effect of the outcome demonstrates that Kenya, and by extension Africa, has come of age in terms of the ability to regulate their affairs,” Lawyer Kamau Karori
A machine prospecting for niobium at Mrima Hills, Kwale County. The ICSID found that Cortec Mining used its political connections to procure its licences, contrary to the law, rejecting what is billed to be the largest single claim against the Kenyan government.