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Heineken set to pay distributor Sh1.7bn in Supreme Court blow

Business

The Supreme Court on Thursday declined to suspend orders requiring beer maker, Heineken, to pay a Kenyan distributor Sh1.7 billion for breach of rights to distribute its products in the country.

Instead, Deputy Chief Justice Philomena Mwilu ordered the international firm to serve Maxam Ltd with the court papers and appear for a mention on July 5.

Heineken moved to the Supreme Court after the Court of Appeal and the High Court found that it had illegally terminated Maxam’s contract to distribute its products in Kenya.

In the meantime, Equity Bank gave a guarantee that it would pay the money, meaning since the highest court in the land has declined to suspend the orders, Maxam can now demand its pound of flesh.

Heineken also dropped its former lawyers- Anjarwalla and Khanna Advocates for Ngatia and Associates.

In its application filed by senior lawyer Fred Ngatia, Heineken claimed that it would be impossible to recoup the money if Maxam was paid.

It claimed that Maxam has no known assets that could be sued as security. In addition, it argued Maxam could at any time ask go for a bank guarantee if the orders were not issued.

Heineken said that it is currently in 170 countries.

“The restitution of the sum will be impossible as the second respondent (Maxam) has no known assets capable of seizure and no certainty exists that such assets will be available by the time this court determines the appeal. A bank guarantee of a substantial sum of Sh1.7 billion is at risk of being called in any time from now,” argued Ngatia.

On May 21, 2013, Heineken East Africa Import Company Limited (Heineken EA) wrote to Maxam appointing the only distributor of its products.

Two months earlier, on February 28, 2013, Heineken International B.V, on behalf of Heineken EA appointed Modern Lane Ltd, which is Maxam’s subsidiary to distribute Heineken Lager in Uganda from February 1 the same year. This was to await the preparation of a formal distribution contract.

Heineken Brouwerijen B.V. wrote a letter to Olepasu Tanzania Ltd, confirming that it would be the importer in Tanzania from April 2013.

Nearly four years into the respective contracts, on January 27, 2016, Heineken B.V wrote to Maxam terminating its deal on May 1, 2016. This, according to Heineken B.V was also supposed to affect Modern Lane and Olepasu.

The three companies challenged the move before the High Court.

High Court judge Eric Ogola ordered Heineken not to terminate Maxam’s distribution rights, but the two firms went ahead to appoint one of Maxam’s sub-distributors as the exclusive distributor.

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