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Business
When one party fails to perform obligations or performs them in a way
that does not correspond with an agreement, the innocent party is
entitled to a remedy.
What form the remedy would take depends on what type of breach the
guilty party has committed. In all cases the innocent party is entitled
to claim damages.
Therefore, as the clamour for prosecution of persons suspected to have
been involved in suspect contracts gathers momentum, it appears lost to
many that the country may never be exempt from paying for valid
contracts.
Many are oblivious of the fact that some of the contracting parties
have instituted legal proceedings in international arbitration courts
to compel the Government to honour its contractual obligations.
Arbitration is a formal dispute resolution process in which two or more
parties refer their dispute to an independent third person (the
arbitrator) for detennination. The result of the arbitration, known as
the Award, is enforceable in the same manner as a Court judgment.
The selection of arbitration as a dispute resolution procedure is a
question which parties (and their legal representatives) should address
at the time of entering into commercial contracts, so that an
appropriate agreement can be included in the terms of the contract (an
"arbitration clause.") Alternatively, an agreement to submit disputes
to arbitration can be made by the parties after a dispute has arisen.
For instance, Universal Satspace, Nedemar Technology BV and Euromarine
Industries have commenced arbitration proceedings against Kenya in the
UK and the Netherlands.
The trio - alleged to be involved in some of the 18 controversial
security contracts placed under special audit after being questioned by
anti-corruption authorities - have commenced the arbitration
proceedings after the government refused on the payments on advice from
then-Ethics and Governance permanent secretary, Mr John Githongo.
Universal Satspace entered into a $28.1 million contract with the
Government on July 11, 2002, for the provision of Internet services to
the Postal Corporation of Kenya (PCK) post offices. The cheap and high
speed Internet access was cut off last month due to non-payment.
Universal Satspace, had to disconnect the service after the government
failed to pay its bills amounting to more than $12.3 million (Sh897
million).
The Government is supposedly holding back payment to Universal Satspace
because it suspects that the company was involved in corrupt deals.
Universal Satspace is, understandably, fervently denying any
allegations of wrong doing, claiming that the government is using the
claims of corruption as a way of getting out of making the necessary
payments.
Nedemar Technology BV of Netherlands was awarded a contract for $36.9
million (Sh2.7 billion) on November 19, 2002. The contract is now a
subject of arbitration proceedings. The dispute arose out of a top
secret contract, code-named Project Nexus, for the supply of an
advanced military communications and surveillance system to the
Department of Defence.
But payment for the deal - one of 18 controversial security contracts
placed under special audit after being questioned by anti-corruption
authorities - was stopped in 2004. Consequently, in March this year,
Nedemar sued Kenya at the International Arbitration Court in The Hague.
The court ruled in favour of the company after the Government failed to
enter a defence.
The Government has since moved to court in The Hague in a bid to quash
orders that could see Kenyan property in the Netherlands seized in a
Sh2.7 billion dispute over the contract.
Euromarine Industries was contracted on July 17, 2003, for the
Oceangraphic survey vessel programme. It was to specifically provide a
naval ship. The contractual sum was Sh4.l billion. The company has
since taken the government to an international arbitration court in
France for failure to pay for the vessel.
Interestingly, members of the Parliamentary Defence and Foreign
Relations Committee visited Spain on September 26 to see KNS Jasiri,
the controversial navy vessel at the centre of much speculation.
The committee comprised former senior military officers - Major-General
(rtd) Joseph Nkaissery who is the Kajiado Central member of parliament
(MP), and Major (rtd) Marsden Madoka, also Mwatate MP. Other committee
members in attendance were Captain Davis Nakitare (Saboti MP) and Mr GG
Kariuki (Laikipia West MP).
They were accompanied by a parliamentary clerk and Lt. Col. Kituku who
had previously been stationed at the shipyard to oversee the
construction of the vessel on behalf of the Navy. Nominated MP Ms Njoki
Ndungu and Shinyalu MP Mr Daniel Khamasi who were detailed for the trip
failed to turn up because of commitments elsewhere in Europe.
Through impeccable sources, The Standard has learnt that the committee
met with Euromarine's managing director, Mr Salvador Surroca and were
given a full presentation and tour of the 85 metre vessel. It is
understood that the committee was shown details of the tender submitted
to the Department of Defence.
Up until now, no details of the procurement of the vessel have been
made public as the Department of Defence remained tight lipped over the
modality in which the contract was awarded. It emerged that the
procurement was by way of tender where the Navy's own specifications
were sent to eight European shipbuilders requesting their quotations.
It has been confirmed that Euromarine was awarded the contract because
it was the lowest bidder.
A member of the tender committee at the time has confirmed that all
procedures were correctly followed and he was not sure why the military
had kept quiet about the project. The MPs are the only politicians to
have seen the vessel first.
In the aftermath of the Githongo graft report it had previously been
reported that the vessel did not actually exist and later that it was a
fishing vessel that had been converted to a naval ship.
After a thorough inspection of the vessel and its plans and drawings, a
member of the committee is quoted as saying, "There is no doubt that
this is a military vessel of the highest order. We cannot understand
why matters have been allowed to reach the stage they are at now. The
vessel has our name and our shield on it, but it is not ours. There are
some important questions that need to be answered."
The committee also expressed shock at learning that the vessel had been
ready for delivery for more than a year. They were also shocked by the
fact that the matter was now the subject of an international
arbitration where full military specifications of the vessel will be
open to the public.
It would be interesting to see the Government's position on the vessel after the visit by the committee.
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