Court to hear Sh26bn Railway, contractor case

A Sh26-billion dispute pitting Kenya Railways retirees against a Chinese company, Ederman Property, will remain in court following the withdrawal of an arbitration option.

Lawyers Cecil Miller for Kenya Railways (KR), Benson Millimo for KR retirees and Gichuki King’ara for the company recorded a consent in court, agreeing to withdraw the retirees’ application to have the matter referred to an arbiter.

Consequently, Ederman Property’s case seeking Sh26 billion from the Kenya Railways Staff Retirement Benefit Scheme will go to full hearing.

The court will start by hearing an application by the company seeking to amend the case to capture an interim order that has preserved Kenya Railway’s properties pending determination of the suit.

An application by the contractor seeking to preserve the retirement scheme’s property pending arbitration was also withdrawn.

The Chinese company sued the retirement scheme after a dispute over a construction contract. The firm, which is undertaking massive projects in Kenyan housing industry, accused the corporation of changing a contract they had signed in 2009 for construction of a Sh40-billion golf city in Nairobi.

Kenya Railways, after awarding the tender, refused to execute the contract as per the conditions stipulated in bid documents, the construction company claims.

The alleged failure to comply with the conditions caused the construction company to suffer damages of over Sh26 billion, according to its lawyers.

That is the money that the firm now seeks through the suit. In June, the retirees, through registered trustees of the scheme, filed an application for the dispute to be taken to arbitration.

Through Mr Millimo, the trustees submitted that the court lacked jurisdiction over the matter, and the Arbitration Act required that the dispute be resolved through arbitration.

The Act creates a mechanism through which companies in a commercial dispute may resolve key issues without going to court. The parties, through the consent, seem to prefer court hearing.

Previously, the court had stopped Kenya Railways from transferring any of its assets in Nairobi, Nakuru, Mombasa, Kisumu and Eldoret until the suit is determined, but the scheme successfully applied for the order to be limited to properties identified as Kileleshwa K6-K21 in Riverside, Lavington and Elgon Road.

The case has been scheduled for hearing on September 20, 2012 by judge Jonathan Havelock.

Posted by the DAILY NATION - Sunday, September 9  2012