KEBS Blunder Costs Taxpayers Ksh2 Billion

  • The Kenya Bureau of Standards has been ordered to pay Ksh 2 billion to a Dubai based company over contract malpractice.

    The Supreme Court of Kenya ruled that KEBS had acted in breach of a contract it had entered with Dubai based Geo-Chem Middle East on June 5, 2009, for the inspection of petroleum products.

    The deal had intended to end the prior practice of having oil marketers vouch for the quality of petroleum products themselves through self-regulation.

    A photo of Supreme Court judges from left: Njoki Ndung'u, Smokin Wanjala, Philomena Mwilu, David Maraga, Jackton Ojwang' and Isaac Lenaola. Photo published on March 21, 2019.

    Supreme Court judges from left: Njoki Ndung’u, Smokin Wanjala, Philomena Mwilu, David Maraga, Jackton Ojwang’ and Isaac Lenaola. Photo published on March 21, 2019.

    Daily Nation

    KEBS, however, terminated the contract in March 2010 after dealers in petroleum hicked prices which saw a Ksh3 increase per litre. The quality regulator failed to compensate Geo-Chem for their commitment to the contract.

    Geo-Chem sued KEBS and won the case. KEBS, however, filed a countersuit which was determined by the Supreme Court on December 18, and in favour of the Dubai based company.

    Geo-Chem had on July 29, 2016, been awarded Ksh1.6 billion by the arbitral tribunal which was less than the Ksh87.9 million that was given to Kebs on their counterclaim.

    The quality regulator was asked to pay the money within 45 days, failure to which, it would attract interest at a rate of five percent per year compounded.

    The money owed to Geo-Chem has since risen to Ksh2 billion, which is inclusive of over Ksh350 million in accrued interest.

    Kebs had moved to the High Court to challenge the arbitral tribunal’s verdict, but the ruling was upheld, and Kebs sought to seek justice at the Court of Appeal. The award to Geo-Chem was suspended.

    The Dubai-based firm then countered by heading to the Supreme Court and the ruling by the High Court was upheld.

    “The Appeal herein is allowed and the judgement of the Court of Appeal dated November 2019 is hereby set aside,” the Supreme Court ruled.

    The bench comprising Philomena Mwilu, Smokin Wanjala, Isaac Lenaola, Mohamed Ibrahim and Njoki Ndung’u stated that the court of Appeal overstepped by setting aside the award.

    In a rare move, the lawyers acting for KEBS, Rachier and Amollo Advocates, have advised the agency to seek a review of the Supreme Court ruling by the very same court. They argue that the amount is an unnecessary burden on Kenyan taxpayers. 

    “The Supreme Court is a final court within the Republic. However, we advise that the Supreme Court has residual jurisdiction under Rule 28 (5) of the Supreme Court Rules to review any of its decisions in any circumstance which the court considers meritorious, exceptional and in the public interest, either on its own motion or upon application by any party,” the law firm wrote to Kebs on December 2, 2020.

    The firm argues that the Ksh 2 billion liability is a matter of enormous public interest and should prompt the court to review the case.

    Kebs Managing Director Bernard Njiraini on December 21, wrote to the attorney general, detailing the agency’s intent to appeal the ruling by the apex court.

    “In light of the foregoing, Kebs will file an application to review that decision for reasons given above and will keep you posted on all developments relating thereto,” Njiraini stated.

    Geo-Chem in their initial suit had demanded they be paid Ksh270.6 million for unpaid invoices, Ksh 50.9 million on expenses incurred in equipping a laboratory. Ksh 131.3 million for setting up a port at Mombasa, Ksh 1.8 billion as income lost due to the termination of the contract and interest on each of the claimed sums from April 1, 2010.

    Left to right: Supreme Court Judge Philomena Mwilu, CJ David Maraga during a past ruling

    Left to right: Supreme Court Judge Philomena Mwilu, CJ David Maraga during a past ruling


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