Then Industrialisation minister Henry Kosgey (second right) and PS John Lonyang’apuo (third right) during the launch of the Geo Chem fuel inspection facility in Mombasa in 2009.
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Kebs’ costly blunder and epic battle for a slice of Sh2.3bn
What you need to know:
- Ms Priscilla Nyambura Njue claims Dubai firm Geo Chem Middle East is trying to cheat her out of nearly Sh300 million in agency fees.
- In December 2020, the High Court ordered the Kenya Bureau of Standards (Kebs) to honour an arbitration award that awarded Geo Chem Middle East Sh2.3 billion.
The High Court has frozen part of the Sh2.3 billion Kenya owes to Dubai's Geo Chem Middle East, following a battle over agency fees that has provided a behind-the-scenes glimpse of how the company won a seemingly impossible battle.
Ms Priscilla Nyambura Njue — the woman who secured crucial documents that Geo Chem Middle East used to successfully sue for illegal termination of its contract to inspect petroleum products — claims the Dubai firm is trying to cheat her out of nearly Sh300 million in agency fees.
While Ms Njue claims the two parties had a verbal contract entitling her to 12.5 per cent of any compensation package, Geo Chem Middle East denies employing her as its local agent.
Geo Chem Middle East admits that Ms Njue played a central role in gathering the evidence it presented to Senior Counsel Fred Ngatia, who won the protracted compensation battle, but that she only helped because of her close friendship with its managing director, Rajiv Bhal.
In December 2020, the High Court ordered the Kenya Bureau of Standards (Kebs) to honour an arbitration award that awarded Geo Chem Middle East Sh2.3 billion.
High Court judge Njoki Mwangi has now ordered Kebs to pay $1.925 million (Sh284 million) into an interest-bearing bank account registered with lawyers representing Ms Njue, Geo Chem Middle East and Kebs, pending the determination of the dispute.
The order, dated July 7, 2023, followed Ms Njue's argument that Geo Chem Middle East had closed its Nairobi offices and could avoid paying her if she won the case.
Justice Mwangi held that without the freezing order, she was also at risk of a paper tiger judgment if Ms Njue's arguments were proven.
Ms Njue has sued Geo Chem Middle East and its managing director, Rajiv Bhal, and listed Kebs as an interested party in the suit.
“This court has already found that the plaintiff (Ms Njue) has a prima facie case with a likelihood of success... It is undisputed that the defendants have since closed their East African offices located in Nairobi, Kenya, and relocated to the United Arab Emirates, Dubai, and have attached the accounts of the interested party (Kebs) with the sole intention of securing the arbitral award...,” said Justice Mwangi.
“If the present application is not allowed, there is a very strong possibility that at the conclusion of the dispute between the parties herein, if judgment is given in favour of the plaintiff, it will be reduced to a paper judgment as the plaintiff will not be able to realise its fruits,” the judge added.
Evidence and affidavits submitted to the court by the parties show how Ms Njue helped Geo Chem Middle East punish Kebs for one of the costliest blunders under the Mwai Kibaki government.
Ms Njue manoeuvred her way through several Kebs and Kenya Revenue Authority offices to obtain documents and correspondence that formed the linchpin of Geo Chem Middle East's push for compensation.
In June 2009, Kebs contracted Geo Chem Middle East to inspect all petroleum products imported into Kenya in a deal that could have earned the Dubai company billions over six years. The contract was initially for three years, with an option to extend for a similar period.
Kebs also appointed KRA to collect the monthly royalties due to Geo Chem Middle East and transfer them to the Dubai company.
Less than a year later, Kebs suspended the contract, even though Geo Chem Middle East had already pumped millions into securing a state-of-the-art testing facility.
Geo Chem spent $1.6 million (Sh249 million) setting up and equipping a testing laboratory in Mombasa.
The suspension, which eventually became a termination, was a legal minefield as it exposed the taxpayer to compensation for Geo Chem's withdrawal from the contract, unless there were unavoidable circumstances beyond the control of either party.
In this case, the government had increased the cost of fuel by Sh3 to cover Geo Chem Middle East's inspection fees.
The uproar over the increase forced the government to suspend the inspection process. Apart from effectively terminating Geo Chem Middle East's contract, the move also opened the door to the importation of substandard petroleum products.
For the next five years, it seemed that Geo Chem had accepted its fate and gone home with its tail between its legs.
On June 15, 2015, the High Court in Milimani, Nairobi, received a new case filed by Geo Chem Middle East Limited against Kebs and KRA.
Geo Chem Middle East Limited, claiming to be a local subsidiary of the Dubai company, was seeking Sh381 million from Kebs and KRA — a principal of Sh296.9 million and compound interest of Sh84 million.
For the five months that Geo Chem inspected imported petroleum products in Kenya, the taxman collected Sh296.9 million in royalties that should have been remitted to the Dubai company.
On July 5, 2015, Judge David Onyancha was presiding over the case when Senior Counsel Ngatia stood up and said he had been hired by Dubai's Geo Chem Middle East, which had no relationship with the company, and claimed Sh381 million before the judge.
A KRA lawyer had tipped Mr Ngatia off about the High Court case during arbitration proceedings.
It turned out that Geo Chem Middle East had filed an arbitration case just five months before the High Court case.
Justice Onyancha and lawyers representing Kebs and KRA embarked on a mission to end the confusion. Every scenario seemed to point to lifting the corporate veil and revealing who was behind the fake company registered in Nairobi to eat the fruit of Geo Chem Middle East.
In September 2015, Geo Chem Middle East filed a notice of withdrawal of the case before the company’s directors — former Kebs managing director Kioko Mang'eli and a person identified as Kenny Alois Kioko — could be questioned about the mystery.
Dr Mang'eli was the managing director of Kebs when the government agency hired Geo Chem Middle East, but was sacked in September 2009 before the Dubai firm's contract was terminated.
Mr Ngatia told the court that there may have been collusion between government officials to try and steal the money owed to Geo Chem Middle East, hence the failed ruse before Justice Onyancha.
On December 3, 2015, Justice Onyancha agreed to withdraw the case but ordered the Nairobi-registered company to pay the legal costs incurred by the real Geo Chem Middle East, Kebs and KRA.
Dr Mang'eli died in March 2019, just nine months before the High Court awarded the real Geo Chem Middle East billions for wrongful termination of the contract.
On July 29, 2016, the arbitral tribunal of John Ohaga, Njeri Kariuki and Collins Namachanja found that Kebs had unlawfully terminated Geo Chem Middle East's contract and awarded the company $12.2 million (Sh1.8 billion) in damages.
When Geo Chem sought court orders to enforce the award, Kebs challenged the outcome in a separate application.
The High Court, through Justice Fred Ochieng, dismissed Kebs' application, which interestingly challenged the authority of the arbitral tribunal to preside over the dispute, despite the fact that the government agency had appointed Ms Kariuki to the panel.
Before Justice Ochieng, Ms Njue had already claimed agency fees of 12.5 per cent of the award, and Geo Chem Middle East had already denied any contract between them.
Ms Njue filed an application in the High Court to compel the Dubai firm to honour what she claimed was her share of the deal.
Kebs appealed to the Court of Appeal, where judges Wanjiru Karanja, Fatuma Sichale and Jamila Mohammed ruled in favour of the government agency.
When the award was set aside, Ms Njue's claim for agency fees was withdrawn by her lawyer.
Geo Chem Middle East took the case to the High Court.
Justices Philomena Mwilu, Mohamed Ibrahim, Smokin Wanjala, Njoki Ndung'u and Isaac Lenaola reinstated the award on December 18, 2020.
The Supreme Court's decision revealed the depth of the government's error of March 1, 2010. By then, the award had accrued interest and grown to Sh2.3 billion.
The Supreme Court decision also prompted Ms Njue to revive her claim for agency fees in the High Court.
But High Court Justice John Mativo refused to revive the case, which Ms Njue had filed in 2016, despite her claim that it had been withdrawn by her lawyer and without instructions.
Judge Mativo maintained that since the case had been withdrawn, no action could be taken on the same file.
On May 24, 2021, Ms Njue filed a new suit against Geo Chem, its managing director, and listed Kebs as an interested party.
Judge Njoki Mwangi has now been tasked with determining the next chapter in the saga, which court proceedings suggest is far from over.
