Pipeline Operator Rejects Contractor Sh10.9bn Project Claim

Kenya Pipeline Company (KPC) has asked High Court in Milimani to dismiss fresh Sh10.9 billion lawsuit filed by Lebanese contractor Zakhem International Construction Limited.

State corporation maintains all financial claims stemming from 450-kilometre Mombasa-Nairobi petroleum pipeline project were fully resolved.

State firm filed its formal defense through law firm Wekesa & Simiyu Advocates. Defense documents show contractor is seeking 84.1 million US dollars, which translates to roughly Sh10.9 billion at current exchange rates.

Lawsuit includes 19 million US dollars for extension-of-time claims during delayed construction work. Remainder of 65.1 million US dollars represents accrued interest on unpaid invoices.

State energy firm told court that current demands are legally untenable. It noted that both parties reached comprehensive consent judgment before court in September 2023, following detailed negotiations between January and February that year.

State firm argues all contractual disputes under original 2014 tender agreement were settled. It confirmed fulfilling every financial requirement outlined in negotiated agreement.

Lawyers representing pipeline owner argue that contractor cannot reopen previously settled issues. They contend suit is barred under doctrines of res judicata, estoppel, and limitation of actions.

Contractor had originally secured US dollar 484.5 million contract in 2014 to build Line 1 replacement infrastructure. Construction work faced several delays before line was finally commissioned to transport fuel across country.

Dispute over delayed payments led to multiple court applications over past decade. Contractor claims prolonged project delays entitled it to extra compensation beyond initial contract sums.

State firm counters that contract allowed interest on overdue payments at rate of 0.5 percent per month. It maintains agreement never permitted interest calculations based on prevailing commercial bank lending rates.

State corporation confirmed paying earlier partial judgments directly to relevant authorities. Payments included tax remittances executed under Kenya Revenue Authority (KRA) agency notices.

Additional funds were remitted through court-ordered garnishee proceedings to clear outstanding liabilities. State company maintains these disbursements fully satisfied its remaining financial obligations.

State corporation issued cautionary notice to investors regarding pending court proceedings. It reassured shareholders that litigation will not disrupt ongoing fuel transportation operations across nation.

High Court will determine whether contractor can pursue new claims after previous consent judgment. Case remains pending before Commercial and Tax Division in Milimani.