Khartoum firm targets South Sudan assets with Nairobi suit
Monday May 04 2015
A Khartoum-based multinational company has turned to Kenyan courts for enforcement of a $40.9 million claim against the Government of South Sudan, setting the stage for a possible diplomatic row between Nairobi and Juba.
Active Partners Group was awarded the colossal amount of money by an arbitration panel in January as settlement for a failed mega power project contract with the Juba government.
The company, through its Kenyan subsidiary, had won a tender for the electrification of South Sudan in 2008 but the deal fell through after Africa’s youngest nation was hit by ethnic war and severe drought.
Active Partners is targeting South Sudan’s assets in Nairobi after it failed to enforce the arbitration settlement in Juba, whose courts it says are hostile and partisan.
Arbitrators Philippe Pinsole, Karel Daele and Richard Omwela in January found South Sudan responsible for the failed contract and ordered Juba pay Active Partners $40.9 million (Ksh3.8 billion).
South Sudan is yet to respond to the suit filed at Milimani Law Courts but it is feared that enforcement of the claim by a Nairobi court could extend ongoing Juba-Khartoum tensions to Kenya.
“If the situation of the debt is not arrested fast enough there is every likelihood that some of Active Partners’ creditors may file for winding it up, a situation that might bring to naught all the effort, energy and expenses that I have put in pursuing the claim,” says Mohammed Fagir, the firm’s managing director.
A possible casualty of the suit is Kenya’s diplomatic ties not only with South Sudan but also with the Khartoum government. Kenya has maintained cordial diplomatic relations with both nations despite their differences with each other.
South Sudan awarded Active Partners the $197 million (Ksh18.7 billion) project from which the contractor says it expected to make a 35 per cent profit or $69.7 million (Ksh6.4 billion).
Active Partners reckons that South Sudan’s failure to provide a bank guarantee is the cause of its frustrations. The firm told arbitrators that South Sudan had sufficient funds to issue a guarantee but opted to use the money for other purposes.
South Sudan had in its defence said its financial fortunes were changed by the 2008 ‘dura saga’ in which it lost $4 billion (Ksh378 billion) through irregular contracts with 441 companies contracted to supply relief food.
Dura is the South Sudanese name for sorghum, one of the grains involved in the scandal.
Juba also argued that the ongoing war in key northern and eastern towns like Bentiu and Jonglei forced it to close oil wells in Heglig, a decision that ripped its financial reserves apart.
Active Partners says it spent $12.1 million (Ksh1.1 billion) in project survey, design, salaries, air charters and assorted equipment and urgently needs to be paid the money.
South Sudan was to pay Active Partners $19.7 (Ksh1.8 billion) for excessive delays in commencement of the project in the eight towns that were earmarked for electrification. The contractor argued that Juba had delayed the project for 1,479 days after signing the deal.
South Sudan, however, held that Active Partners jumped the gun by spending lavishly on the project before getting the green light from the government.
South Sudanese authorities also argued that the contractor was to bear the cost of survey and design, making false its claim for a refund of the same.
“Damages can only arise from delays, but the contract had not been implemented. The claimant was not entitled to start preparations without receiving a letter of commencement from the government,” the Juba government argued.
The arbitrators found that South Sudan had breached clauses of the contract it signed with Active Partners, which provided for a bank guarantee to secure the multi-billion-shilling project.
They further held that Active Partners was right to terminate the contract following South Sudan’s negligence.
“South Sudan breached its obligations to Active Partners. Active Partners is entitled to damages under the clauses of the technical contract in the amount of $35 million with interest amounting to $4.1 million as of January 20, 2015,” the arbitrators said.
Mr Fagir says he was forced to flee Khartoum in 2009 after some of the firm’s creditors instituted court cases against Active Partners after it failed to pay for supplied equipment intended for the electrification project.
Some of the Khartoum cases were criminal, forcing the company’s managing directors to seek refuge in Kenya in a bid to rescue the multinational.
Mr Fagir has been living in Nairobi for six years pursuing South Sudan through the arbitration and now wants the High Court to help him collect the sum awarded to his firm.
The company has been unable to pay salary arrears for its employees as its investment in the project took a toll on its finances, he says in court papers.
“Some creditors initiated criminal proceedings against Active Partners directors, necessitating me in particular to come and camp in Nairobi to pursue the claim. As a result I have stayed away from my family for six years to the detriment of my children and the entire family,” Mr Fagir says, adding that the amount awarded by the arbitrators could get Active Partners’ creditors off its back, and allow him to return home to help the firm pick itself up.
Active Partners says the failed project cost it several other planned deals with other countries that would have earned it significant profit.
The firm says it was forced to abandon a multi-million-dollar deal with Egypt’s Elsewedy Company that was to see it construct factories for the production of prepaid electricity meters. The factories were to be based in Kenya, Ethiopia and South Sudan.
Justice Eric Ogola certified the matter urgent, and allowed Active Partners to furnish South Sudan with the suit papers and court summons through courier services. The firm has already notified South Sudan of the suit, but a hearing date is yet to be set.