HEINEKEN BREWER CONTESTS SH1.7B AWARD TO KENYAN DISTRIBUTOR.

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BY SAM ALFAN.

Dutch beer brewer, Heineken, has formally challenged the Sh1.7billion compensation awarded to it’s Kenyan distributor five years ago.

Heineken East Africa Import Company is aggrieved by the decision made by a three-Judge appellate bench on May 24 upholding the hefty award to Maxam Ltd.

In it’s second and final appeal, the subsidiary of Heineken International has petitioned the Supreme Court to quash the award of special damages for alleged breach of contract.

As a first step, the international firm is seeking orders to suspend execution of the judgment rendered by Appellate Judges Pauline Nyamweya, Abida Ali-Aronya and David Mativo pending the outcome of the appeal.

The brewer has already secured a bank guarantee for the contested award but fears restitution would be impossible in case Maxam Ltd pockets the money and has no known assets.

“The petitioner is part of the Heineken Group of Companies, one of the most respected companies in the world, with operations in Kenya and 170 other countries. The petitioner, as a law-abiding global citizen, respects the rule of law and will honour the judgment of this court and be bound by it,” Senior Counsel Fred Ngatia, said in court papers.

Ngatia has raised eight legal questions for determination, arguing that the judgment could disrupt the entire beer industry by fundamentally altering commercial relationships between manufacturers and distributors.

The major bone of contention by the brewer is that the Appellate Judges did not consider that the distributorship agreement between Heineken and Maxam expressly excluded compensation for any losses incurred during the pendency of the contract.

The brewer claims the Appellate Judges invoked Article 10 of the Constitution as the normative basis for application of principles of good faith, equity and fairness, which the court held to be applicable in the interpretation of contract law. None of the parties had pleaded for protection under the Constitution, the brewer has protested.

Already, Deputy Chief Justice and Vice-President of the Supreme Court, Philomena Mwilu, has certified the urgency of the case.

Deputy Registrar Nelly Kariuki has directed both parties to file and exchange documents both manually and electronically. The virtual mention will be on July 12 to confirm compliance and for further directions regarding the hearing.

Commercial Court Judge Aaron Makau slapped the brewer with the contested award of Sh 1,799,868 as special damages for breach of contract. The court had barred the the brewer and it’s agents from purporting to terminate the three-year distributorship agreement dated May 21, 2013.

Further, the court had stopped the appointment of any other distributors after finding that the notice of termination by Heineken to Maxam Ltd, dated January 27, 2016, was “unlawful, irregular, null and void.”

The Judge had pointed out that Heineken’s decision to offer lower market prices to other distributors, approving higher market prices to Maxam on the same products and arbitrarily reducing it’s profit margins amounted to “discrimination.”

The Judge declared that the pricing model imposed on Maxam Ltd without prior consultation or express consent after the court’s intervention was “exploitative, oppressive and unfair.”

Maxam Ltd and it’s sister companies-Uganda’s Modern Lane Ltd and Tanzania’s Olepasu Ltd-were seeking Sh5.3billion compensation from the international company. Heineken had cried foul over what it termed as “excessive and unwarranted damages” claiming Maxam Ltd neither pleaded nor proved special damages for alleged loss of business.

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