BY SAM ALFAN.
Kenya Petroleum Refineries Limited (KPRL) has failed in its bid to stop a Sh2.3 billion dispute between it and an oil marketer from being referred for arbitration.
Justice Joseph Sergon dismissed the application by the state corporation saying the company failed to submit substantial evidence to show why the matter shouldn’t be handled through arbitration.
“Upon perusal of the record this court notes that KPRL did not present any substantial evidence that is in line with the Arbitration Act that would necessitate this court to interfere with the Arbitration that has already begun,” ruled the judge.
Energy Regulatory Commission participated in the matter as interested party through veteran lawyer Wambua Kilonzo.
KPRL moved to court seeking to declare that the dispute between it and Total Kenya is no longer subject to arbitration.
The corporation urged the court to order that Total Kenya fully and effectually waived the right to refer the dispute to arbitration pursuant to a processing agreement signed by the parties.
The company further sought the appointment of Kyalo Mbonu as the sole arbitrator be set aside pursuant to section 12 (5) of the Arbitration Act.
In a supporting affidavit of Charles Nguyai, KPRL argued that the company and Total Kenya entered into the processing agreement dated 17th June 1966 for the processing of feed stocks by the applicant for the respondent.
Pursuant to the agreement the parties were required to refer to any dispute arising between them to arbitration.
Sometime in March 2013 however, a dispute arose with regard to oil yield shifts and notwithstanding the said agreement, Total Kenya as a member of the Oil Markets Companies (OMC’s) and the company agreed to refer and did refer the dispute to the Energy Regulatory Commission (ERC) for adjudication.
A decision by the ERC was rendered on 19th April 2016 and published in accordance with the requirements of Section 25 of the Energy Act.
Total Kenya as part of the OMC’s appealed the said decision to the Energy Tribunal under section 26 of the Energy Act.
However, Yotal Kenya sought to refer the dispute to arbitration, notwithstanding the said appeal process.
By virtue of section 25 (2) of the Energy Act the decision of the ERC rendered on 19/4/2016 upon gazetement became effective and binding on all the parties.
In having elected the ERC as the forum in which to agitate their claim Total Kenya cannot now turn to arbitration.
Total Kenya opposed the case and stated in a replying affidavit of Boniface Abala that under the Arbitration Act the appointment of an arbitrator and the jurisdiction of an arbitrator are dealt with separately.
Section 12 refers to appointment whereas section 17 refers to the jurisdiction therefore the issue as to whether the parties have waived the right to arbitration is a question that goes to the heart of the jurisdiction of the arbitrator which is reserved for determination by the arbitrator.
However, it is Total’s position that there was no waiver as alleged and that the arbitration clause contained in the agreement was clear and equivocal and continues to bind the parties.
The company in their submissions argued that the principle of Sub judice prevents the continuation of proceedings in a matter in which the issue tried is also directly and substantially in issue in a previously instituted suit of proceeding.
The company argued the whole decision of the Energy Regulatory Commission on the question of yield shift cost recovery is a determination of a matter in issue between it and Total and therefore a matter which was directly in issue in a previously instituted suit between it and Total.
