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The Nairobian

KBC sued for Sh49b over breach of contract in digital licence row

Business

By Otiato Guguyu | Feb 14, 2017

The award of exclusive digital rights to a Chinese firm has been thrown into the centre of a Sh49 billion dispute between national broadcaster KBC and Channel 2 Group Corp.

Former Law Society of Kenya CEO Apollo Mboya wants Parliament to review the award to StarTimes/Pan African Network Group, which he claims was riddled with kickbacks to senior Government officials.

In a petition filed for the second time in three months, Mr Mboya claims that the termination of a contract between KBC and Dubai-based businessman Ajay Sethi of Channel 2 Group Corp may have been done to pave way for StarTimes.

Deliberately engineered

As a result, Mr Sethi has sued KBC in a London court for Sh49 billion, which would be paid by the Kenyan taxpayer if awarded.

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“It appears that the termination of the contractual arrangements ... which resulted in the present arbitration was deliberately engineered by high-ranking business officials and their business associates in a web of corruption so as to grant StarTimes exclusive digital broadcasting rights to the detriment of indigenous Kenyan broadcasters, the general public and National Treasury,” the petition reads.

KBC said it terminated the venture because of programming and “poor financial performance” after picking StarTimes over Channel 2 Group for provision and installation of digital equipment for the Digital Terrestrial Television platform.

Sethi has sued KBC over breach and termination of a joint venture in what was supposed to be a 24-hour entertainment and sports channel in March 2009.

The State broadcaster is also accused of using information from a Channel 2 feasibility study on the digital television market to launch a distribution platform with China’s StarTimes.

Mboya now wants Parliament to scrutinise the process that led to the grant of a exclusive digital broadcasting licence to StarTimes, and consider if it has benefited the country in terms of taxes and the multiplier business effect.

He also asked Parliament to question Githu Mugai over the progress of the suit against KBC, and what chances Kenya has in beating Sethi at the arbitration court.

Mboya said Parliament should consider the cost of settling the case against going into arbitration that may result in substantial costs to the Treasury. The lawyer warns that if Kenya loses the case, it will not have the opportunity to appeal.

“The said arbitral award is not subject to an appeal and will become immediately payable. It will expose Kenyan assets abroad to legal attachment and will damage Kenya standing in the international financial markets and ability to access funding for development in such markets,” he said.

Mboya first filed the petition in October in Parliament, and was directed to consult with Prof Muigai. The former LSK boss said he had returned the matter to Parliament after the AG abandoned his duties, instead asking him to consult with Hamilton, Harrison & Mathews advocates, and Dentons LLP, a foreign law firm that was handling the matter.