The High Court in Kampala has allowed the enforcement of an arbitration order against Kampala International University, which has to pay US dollars 12,767,503 (approximately UGX 46,815,752,197) to Housing Finance Company Limited of Kenya.
In his ruling, High Court judge Stephen Mubiru said the finance company had satisfied all the conditions to allow for the recognition and enforcement of an arbitration order given in Kenya against KIU, which is owned by businessman Hassan Basajjabalaba.
“The respondent having met the statutory requirements for enforcement of the foreign award, and the objections to its recognition and enforcement having been dismissed…, it is hereby allowed with costs to the respondent herein.
The respondent is entitled to the recovery of the sums awarded. Hence the Arbitral Award handed down in Nairobi, Kenya between the parties hereto by Mr. Collins Namachanja on 17th September 2019 is hereby recognised and is to be enforced in the same manner as a judgement, order or decree of this court,” the ruling reads in part.
According to the arbitration order, KIU was ordered to pay Housing Finance Company Limited US$ 12,767,503.33 within 30 days when the order was made in 2019. The order also gave a 9.5% interest per annum computed from January 2018 until the full payment. The order also condemned the university to bear 90 percent of the costs of the arbitration.
Background.
According to court records, in 2010, KIU commenced a project to expand existing facilities and construct new ones, including lecture rooms, administration blocks, hostels, dining facilities, a library, and staff accommodations at its campus in Kajidao in Kenya. It sought US$ 15 million from the Housing Finance Company of Kenya to part-finance the construction. However, the financing company could only afford US$ 10 million.
It persuaded Kampala International University to revise the scope of works to fit within the available US$10 million. As security, the university mortgaged the 62-acre land on which it sits. One of the conditions was that the financing company would pay the contractors directly for the work done or for the material delivered.
For payment, it was agreed that interest of 9.5 % would be levied on the monies already disbursed. The loan repayment was scheduled for 15 years. However, along the way, the two entities developed a misunderstanding over the amount of money paid in interest and how much the financing company had to give KIU.
At that time, the financing company had already given the university US$ 11.3 million. The two parties agreed to go for arbitration in Kenya. In resolving the matter, the single arbitrator indeed discovered that the university had been overcharged in interest but that the financing company had outstanding monies that had not been paid.
When added to the US$ 11.3 million already disbursed, it amounted to $13,817,270.87, which also continued to attract interest and other associated charges. In the end, the tribunal subtracted US$ 1.049 million that had been overcharged and then ordered the university to pay the finance company US$ 12,767,508.33.
It is this amount that KIU objected to and decided to file suit first in a Kenyan court and eventually in the Ugandan High Court. It is this suit that the judge dismissed and reaffirmed the tribunal ruling.