KBC incurs Sh200m legal fees as 13-year case drags on

Kenya Broadcasting Corporation (KBC) will pay Sh200 million in legal fees for the 2021-22 financial year following a 13-year dispute that threatens to bankrupt the State broadcaster.

The allocation was contained in the Supplementary Budget presented earlier this week by the National Treasury and is equivalent to more than half of KBC’s annual recurrent expenditure.  

In the budget, Sh100 million was moved from recurrent to capital expenditure, with the firm receiving another Sh142.2 million in allocations. 

“The increase is mainly on account of additional Sh200 million provision for legal costs in relation to the arbitration proceedings under a KBC Channel 2 court case,” said Treasury in a statement. 

Another Sh38.7 million was allocated to personnel emoluments while Sh39.5 million from donors will go towards the Kenya Yearbook.

The Sh200 million arbitration cost has cast the spotlight on the risk that the key State agency poses to taxpayers on account of a 13-year legal dispute that could lead to billions in losses.

Parliament’s Budget and Appropriations Committee last year raised the red flag on the case, currently under arbitration in London, as one of the risks to taxpayers. 

“The committee further observed that the Kenya Broadcasting Cooperation is facing a lawsuit estimated at Sh40 billion in London UK for termination of a contract it had with Amjam TV, which later incorporated British Virgin Islands,” stated the Budget and Appropriations Committee in its report.

The dispute dates back to 2009 when KBC terminated a joint venture agreement with Dubai-based businessman Ajay Sheth, owner of Channel 2 Group.

According to court documents, KBC and Channel 2 entered a joint partnership in 2006 where the State broadcaster would provide technical equipment while the latter supplied the new digital station with staff, programming content and resources. 

However, Channel 2 and Mr Sheth argue that KBC terminated the deal without notice in 2009, costing the businessman billions in foregone profits and expenses sunk into the joint venture.

The case is under arbitration in London where the KBC, and in extension taxpayers, are staring at a Sh40 billion payout should the case go in favour of Channel 2. 

According to the latest data from the National Treasury, KBC reported Sh1 billion in internally generated funds in the 2020-21 financial year, largely from State transfers, and Sh305 million in losses.