KPC wants arbitrator in oil row removed

Lawyer Ahmednasir Abdullahi has been arbitrating in a case pitting oil marketer KenolKobil and Kenya Pipeline Company. He made a decision in 2010 in favour of KenolKobil which the pipeline company is contesting. FILE I NATION

What you need to know:

  • Kenya Pipeline accuses lawyer of making utterances which it says show lack of impartiality in the handling of the review of an arbitration ruling made in favour of KenolKobil

A protracted tussle between the Kenya Pipeline Company and oil marketer, KenolKobil, is back in court after the State agency applied to the High Court to have the current arbitrator removed.

KPC says the utterances made by the arbitrator, lawyer Ahmednasir Abdullahi, show that he cannot be an impartial arbiter.

Mr Abdullahi is currently reviewing the award he granted KenolKobil in line with a Court of Appeal directive made last year.

In 2010, Mr Abdullahi awarded KenolKobil Sh5.8 billion against the KPC for contravention of a transportation and storage agreement.

Seek redress

KenolKobil won Sh970 million for loss or damage suffered as a result of delayed offloading of cargo at the Port of Mombasa, Sh4.5 billion for breach of contract, and Sh172 million for loss of contract.

However, KPC successfully challenged the award in the High Court, where it obtained an order referring the case back to the arbitrator. This prompted KenolKobil to seek redress at the Court of Appeal, which upheld the High Court decision, leading to the current proceedings. KPC now wants this suspended until a new arbitrator is appointed. The case started in 2006.

Last week, KPC filed an urgent application in the High Court, seeking the removal of Mr Abdullahi based on the remarks he made during a live television interview on 11 June, 2014, criticising a tender awarded to a Lebanese company, Zakhem International Corporation Ltd.

The corporation said the remarks have “dampened” its faith that it would get a fair treatment as long as Mr Abdullahi remains the arbitrator in the dispute.
KPC said all the challenges against the award of the tender have been determined in its favour.

For instance, KPC maintained that it followed the procedure in the Public Procurement and Disposal Act, 2005, in awarding to Zakhem the tender for the construction of Line 1 replacement pipeline.

The firm said the arbitrator’s comment in relation to the matter means he has “a pre-conceived view of KPC which may in all likelihood inform his decision on the matters now pending for determination”.

Concern regarding perceived impartiality had been raised before the arbitrator. Abdullahi, however, proceeded to deliver his decision in which he dismissed KPC’s contentions. KPC was dissatisfied with the decision and sought redress in the High Court.

The state corporation had, by a transportation and storage agreement dated 10 May, 1999, with KenolKobil, agreed that all disputes would be referred to an arbitrator.

However, dissatisfied with the award to KenolKobil, KPC appealed to the High Court, which allowed the appeal in a judgment dated 26 January, 2012, and directed that the matter be sent to the arbitrator for reconsideration.

KenolKobil challenged the ruling before the Court of Appeal. The judges dismissed the appeal but held that the matter could only be referred to the arbitrator for reassessment of losses and damages.

Petroleum products

KPC owns, operates, and maintains a pipeline together with related facilities for the storage, transportation, and delivery of petroleum products between Mombasa, Nairobi, Nakuru, Eldoret, and Kisumu.

The application will be heard Tuesday.