When the 450-km Mombasa-Nairobi oil pipeline was commissioned in 2018 after a four-year construction period laced with delays and design changes, it was expected to make the Kenya Pipeline Company’s (KPC) core business – transporting petroleum – a breeze.
Since 2018, KPC has paid Zakhem International Construction Ltd $608.396 million (Sh79 billion), part of it stemming from legal battles. But the Lebanese firm’s claims for more billions are far from over.
In the newest chapter of the protracted saga, KPC has accused its former Lebanese contractor of using lawyers and one of its directors’ diplomat status to shield assets from creditors, while transferring assets to other companies for a song as part of the alleged ruse. For a fifth time, Zakhem has sued KPC seeking billions.
And while making that demand, KPC has alleged asset stripping by Zakhem, the use of its director Abdalla Salim Zakhem’s diplomat status and disguising its money as legal fees paid to Ahmednasir Abdullahi Advocates LLP to evade creditors.
Ahmednasir Abdullahi Advocates LLP, KPC further claims, has received over Sh3.6 billion in legal fees that allegedly defy the law that dictates how much clients are allowed to pay their lawyers – the Advocates Remuneration Act.
KPC claims in court papers that Zakhem International Construction Ltd has transferred land, cars and heavy construction equipment to Mokowe Traders Ltd and Bangal Marina Resorts Ltd “at a pittance”, all to evade creditors holding court and arbitration awards allowing attachment of assets owned by the Lebanese firm or its directors.
Nelson Nyaduwa, KPC’s in-house legal counsel, claims that Mokowe Traders Ltd and Bangal Marina Resorts Ltd are nominees of Ahmednasir Abdullahi Advocates LLP.
The creditors referenced in court papers were Zakhem’s subcontractors when building a 450-km Mombasa-Nairobi oil pipeline between 2014 and 2018.
The pipeline firm says that Multiple ICD (Kenya Ltd), Azicon Kenya Ltd and Quality Inspectors Ltd have been unable to satisfy awards totalling Sh1.215 billion.
It adds that another firm, Oilfields Engineering and Supplies, is still before a judge to seek adoption of a Sh2.255 billion arbitration award as an order of the court.
“Abdalla Salim Zakhem, a director of the plaintiff/respondent of Lebanese nationality, is the Honorary Consul of Lebanon in Nairobi, Kenya and the premises given and publicised as the address of the plaintiff/respondent along Thika Road, walled and bearing the generic name ZAKHEM are guarded by the General Service Unit (GSU) of the National Police Service and that ipso facto restricts creditors to the plaintiff/respondent,” Wekesa Simiyu Advocates argue for KPC.
KPC says that Abdalla Salim Zakhem is the Honorary Consul of Lebanon in Kenya and has been using his diplomat status to stop creditors from attaching Zakhem International Construction Ltd’s assets.
That police protection, KPC argues, has been deployed to Zakhem International Construction Ltd’s headquarters in Ruaraka, and has successfully blocked lawyers and auctioneers from going after the Lebanese firm’s assets.
Zakhem International Construction Ltd in May sued KPC for the fifth time in seven years, claiming $84.117 million (Sh10.9 billion) in damages for alleged contract breaches during construction of the Mombasa-Nairobi pipeline.
Kenya Pipeline Company headquarters in Nairobi.
Photo credit: File | Nation Media Group
The new case, much like the one withdrawn in January, seeks payment for losses Zakhem says were occasioned by additional work, design changes, and extra materials, all of which were not part of the original scope as per the contract signed with KPC in 2014.
For that limb, Zakhem wants KPC ordered to pay it $65.081 million (Sh8.45 billion). Zakhem claims that some of those variations to the contract were assessed and deemed allowable for payment by Nyara Consultants, a firm that was hired as the project’s scheduler.
Additionally, the Lebanese firm holds that some of KPC’s payments during construction of the pipeline were made late, hence should attract interest. For that, the Lebanese firm is claiming $19.036 million (Sh2.472 billion).
In January 2023 KPC and Zakhem held negotiations aimed at settling the Lebanese firm’s dues in return for a withdrawal of court cases filed against the publicly listed pipeline firm.
Following those talks, KPC paid Zakhem $113 million (Sh14.6 billion) for some of the claims that the latter made in regard to contract breaches.
In its fresh suit, Zakhem now argues that during negotiations in 2023, the parties were unable to agree on the Lebanese firm’s claims for additional works, design changes and interest on delayed payments in the past, hence, the court case is aimed at settling that dispute.
“The sum of $19,036,187, being the valued, allowable items, remains due and outstanding from the defendant (KPC) in total breach of the contract. The same could not be settled or agreed upon by the parties following the withdrawal of the court cases and the subsequent negotiations notwithstanding, thus necessitating a recourse to this honourable court for redress and remedy,” Ahmednasir Abdullahi Advocates LLP argue for Zakhem International Construction Ltd.
KPC has filed an application seeking to have Zakhem deposit Sh269 million in an interest earning joint account in the names of advocates for the two parties, as security for legal costs.
KPC claims that it is seeking the security deposit because Zakhem has become a master at dodging creditors, as several subcontractors from the pipeline project have for years been unable to squeeze any money out of the Lebanese firm despite obtaining court and arbitration awards.
In court papers, the publicly listed pipeline company argues that Zakhem International Construction Ltd, its directors and Ahmednasir Abdullahi Advocates LLP have been simulating legal fees, which has allegedly aided the Lebanese firm to stash more than Sh3.4 billion received from KPC with its lawyers and from the reach of creditors.
“The postured agreements between Zakhem International Construction Ltd and its advocates Ahmednasir Abdullahi Advocates LLP dated 5th September, 2019 and 15th November, 2022 are void “ab initio” being in violation of section 46 of the Advocates Act that prohibits an advocate from entering a percentage based agreement on fees and the whole fees edifice is a weapon to attain fraudulent preferential transfer of the assets of the plaintiff/respondent to its alter ego to the detriment of legitimate lawful prior existing creditors with court decrees, arbitral awards and others,” Wekesa Simiyu Advocates add.
KPC alleges that Abdalla Salim Zakhem and Ibrahim Salim Zakhem, two of the Lebanese firm’s directors, have transferred over four acres of land they owned in Nairobi’s Spring Valley, which are worth over Sh1.6 billion, to Mokowe Traders Ltd.
The court papers allege that Mokowe Traders Ltd paid Sh100 million for the two parcels of land in Spring Valley in a move that could have been asset stripping aimed at dodging debts.
KPC says that land in that area goes for up to Sh400 million an acre; hence, it should have fetched at least Sh1.6 billion without considering the two palatial homes that sit on the two properties.
The court documents further claim that another piece of land in Ruaraka measuring 5.2 acres registered to Zakhem International Construction was transferred to Mokowe Traders Ltd for Sh250 million despite current market rates placing its value at Sh1.3 billion without considering any developments on it. That land hosts Zakhem’s headquarters.
KPC says that another piece of land in Voi, 17 cars and 22 heavy construction equipment like earthmovers, steamrollers, excavators and others were transferred to Mokowe Traders Ltd and Bangal Marina Resorts Ltd as part of the alleged asset stripping move. Justice Francis Gikonyo will hear rival arguments in regard to KPC’s application for Sh269 million security for costs on November 19.
