Kenya Pipeline Company (KPC) has asked the High Court to dismiss Lebanese contractor Zakhem International Construction's Sh10.8 billion claim linked to the replacement of the Mombasa-Nairobi fuel pipeline.

KPC, an NSE-listed company, argues that the dispute was settled through earlier court cases, negotiated agreements and a consent judgment.

Zakhem sued in May this year, seeking $19.04 million (Sh2.45 billion) it says arose from the pipeline contract's allowable extension-of-time items and $65.08 million (Sh8.39 billion) in interest, bringing the total claim to Sh10.84 billion.

In a statement of defence, the regional fuel transporter says the fresh suit seeks to reopen claims arising from the same 2014 contract despite past settlements, withdrawn cases and payments.

It says the claim is time-barred, seeks to relitigate matters already settled and amounts to an abuse of the court process.

The court battle stems from KPC's flagship Line 1 Replacement Project, one of Kenya's biggest energy infrastructure investments, valued at $484.5 million (Sh62.5 billion).

The project replaced the ageing Mombasa-Nairobi petroleum products pipeline with a larger-capacity line to meet growing domestic demand and strengthen fuel supplies in Kenya and the region.

Construction began in 2015 after the contract was awarded to Zakhem International in 2014 and was completed in 2018 after several delays.

Zakhem maintains the project should have been completed within 18 months but took 21 months because of delays attributable to KPC.

In earlier court filings, the contractor accused the corporation of late approvals, delayed procurement of equipment, delayed issuing of construction drawings, design changes, work suspensions and failure to remove physical and third-party obstructions along the pipeline corridor.

“From the outset and throughout the project, we diligently performed our contractual obligations. However, the progress and completion of the works were affected by numerous acts, omissions, defaults and breaches attributable to the defendant,” Zakhem International Ltd chairman said in an affidavit.

The contractor says the delays forced it to seek extensions of time and compensation for additional costs incurred during construction.

Court papers show it lodged five extension-of-time claims between 2016 and 2018 after an independent consultant concluded in 2018 that the project had extended beyond its original completion period.

The dispute first reached court in 2019 when Zakhem sought more than $126 million arising from unpaid valuation certificates, extension-of-time claims and retention payments.

In June 2020, the High Court entered a partial judgment awarding the contractor about $44 million. The parties later entered negotiations that culminated in a consent judgment of September 25, 2023. KPC says the agreement settled every outstanding claim under the contract.

It adds that under that consent judgment, Zakhem accepted $69.68 million (Sh8.9 billion), comprising $48.14 million (Sh6.2 billion) in outstanding contractual sums and $21.55 million (Sh2.7 billion) in interest. It says Zakhem had already been paid $24.1 million (Sh3.1 billion).

According to the defence, the consent expressly provided that “all claims in respect to contract shall be deemed to have been fully and finally settled” once its terms had been fulfilled.

KPC says it complied with every obligation under that settlement and that Zakhem cannot revive claims arising from the same contract.

“The defendant having fulfilled all the terms under the Consent Agreement... it is untenable... for the plaintiff to purport to initiate this suit to litigate on the same statutory public procurement contract,” the company states in its defence.

The corporation also says Zakhem withdrew the remainder of its 2019 suit and later abandoned another case filed in January 2026 before instituting the present proceedings.

The fresh lawsuit seeks $19.04 million for what Zakhem describes as allowable extension-of-time items and a further $65.08 million in interest, bringing the total claim to Sh10.84 billion.

→ jwangui@ke.nationmedia.com

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