DISTRIBUTORS RUSH TO COURT TO BLOCK KBL,UDV (K) LTD FROM TERMINATING CONTRACTS.

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East African Breweries limited.

BY SAM ALFAN.

Two distributors of products of Kenya Breweries and UDV (Kenya) limited have moved to court to block the beer makers from terminating or interfering with their contracts.

In a case filed under certificate of urgency, Tony West limited and Outlook Index limited want the High Court to grant them temporary orders restraining the two beer makers from terminating their contracts, pending the determination of their case.

The two distribute say they have contracts to supply the products in some parts of Nairobi and neighboring counties.

The distributors say they supply the beer in Kawangware, Kitengela, Athi River, Ngong Road, Bissil, Satellite, Kenyatta Market, Hurlingham, Upper Hill, Dagoretti Ndonyo Kajiado and Namanga.

They claim the distributorship agreements have been in place since October 17, 2016 and May 15, 2019:

The areas covered by Outlook Index include Industrial Area, South B, Nairobi West, Lang’ata, and Rongai.

“We are appreciably apprehensive that unless an injunction is granted pending referral and determination of the dispute through arbitration as aforesaid, the actions by the Defendants-will cause the Plaintiffs massive economic losses and significant harm,” says the distributors.

Through lawyer Peter Wanyama, the distributors said they have invested more than Sh1.5 billion in the business to fulfill their obligations

He said Tony West ltd had invested Sh750 million after securing agreements in October 2016, which was renewed in 2019.

The companies claim they were granted distributorship right to sell and distribute alcoholic and non alcoholic beverage products in the named areas.

Outlook on its part said it invested over Sh600 million after securing the contract to distribute both alcoholic and none alcoholic from the brewer.

They argue that they will suffer significant losses and harm should Kenya Breweries and UDV (Kenya) ltd grant a third-party exclusive distributorship right over the said territories covered by the existing distributorship agreements.

The loses the two distributors will suffer include termination of leases that supports the warehousing infrastructure that is necessary for the distributorship supply chain, loss of jobs to permanent employees and temporary staff who are employed by the distributors and wastage of significant investments in heavy commercial trucks and vehicles that are a core component of the distributorship agreements.

They are also apprehensive that lenders might recall commercial bank guarantees that are a condition precedent for the grant of the distributorship agreements.

Distributors’ bankers will most certainly recall loans that were obtained to support cash flow in the businesses, he said.

“The Plaintiffs will in the circumstances be unable to repay those loans as they rely on the continuation of the distribution agreements top service those loans,” Wanyama said.

The distributors allege that the impeding breach of contract has potential of exposing them to unnecessary third-party litigation arising from the third-party contract breaches.

The inability to operate because of sudden termination of contract will potentially lead to winding up and insolvency proceedings and eventually to closure of the companies, the distributors claim.

“The underlying distributorship agreements provide for the resolution of dispute between the parties through arbitration. It is necessary for the High Court to grant an order for interim measures by way of an injunction pursuant section 7 of the Arbitration Act, Chapter 49 of the Laws of Kenya-pending the determination of the question of the referral, and determination of the dispute through arbitration,” says the two distributors.

Tony West ltd managing director Shadrack Oriah says distributorship agreements between the parties provide for the resolution of dispute(s) between the parties through arbitration. 

“I am appreciably apprehensive that unless an injunction is granted pending referral and determination of the dispute through arbitration as aforesaid, the actions by the Defendants-will cause my company massive economic losses and significant harm in the sum of Kshs. 650 million,” says the managing director.

He says the application is extremely necessary because all of a sudden, the beer makers are about to kick out the company from its lawful business yet it has a valid distribution contract and the actions of Kenya Breweries and UDV (Kenya) ltd will cause the company massive economic losses and irreparable harm.

They said they have operated the business smoothly and uninterrupted until February 20, 2023 when a representative of the manufacturers informed them that they intend to grant another company exclusive distributorship rights over the territories covered by the aforesaid distributorship agreements which are still valid and operational.

“The actions by Kenya Breweries and UDV (Kenya) ltd comprise a massive breach of the provisions of the section 21 of the Competition Act 2011 that prohibits restrictive trade practices. Moreover, the intended actions by the defendants also constitute a fundamental breach of the distributorship agreements,” says the distributors.

“The Plaintiffs are appreciably apprehensive that unless an injunction is granted, pending referral and determination of the dispute through arbitration as aforesaid, the actions by the Defendants, will cause the Plaintiffs massive economic losses and significant harm,” says distributors.

They claim that because the Kenya Breweries and UDV (Kenya) ltd have already notified the two distributors of their intended repudiation of valid contracts, the application and suit herein is extremely urgent and should be determined as soon as possible.

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