Geza Ulole
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- Oct 31, 2009
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Kenya city shareholders refuse to pay foreign investors
British court order to pay $17m in damages is defied
Stephen Jennings: 'You’ve got to have the temperament and nerves to fight' © Bloomberg
John Aglionby in Nairobi YESTERDAY
A former Kenyan central bank governor and a prominent east African businessman are embroiled in scandal after they defied a British court order to pay $17m in damages to foreign investors over the development of a multibillion-dollar city outside Nairobi.
The case highlights the legal and commercial challenges many foreign investors encounter in east Africa’s dominant economy, analysts say.
The London Court of International Arbitration ruled this February that Vimal Shah, chairman of consumer goods manufacturer Bidco Africa, Nahashon Nyagah, former Central Bank of Kenya governor, and their associates should pay $17m for damages, interest and costs to SCF Holdings II after ruling they had defrauded the developer.
SCF Holdings II is a subsidiary of Rendeavour, which has projects across Africa. It is the majority shareholder and developer of Tatu City, a residential and industrial project 12km north-east of the capital.
Mr Shah and Mr Nyagah did not challenge the settlement awarded by the London court within the permitted 28 days — but failed to pay. SCF Holdings II has now begun legal proceedings in Mauritius to enforce the ruling.
Manhattan Coffee Investment Holding (MCIH), Mr Shah and Mr Nyagah’s holding company, is registered in the Indian Ocean tax haven. In response, MCIH, which is also a shareholder in the Tatu City development, has applied to the Mauritius courts to set aside the London ruling.
Stephen Jennings, Rendeavour chief executive, said the legal battle with the group’s Kenyan partners had delayed the Tatu City project by three years and illustrated the “significant obstacles to doing business” in Kenya.
“You’ve got to have the temperament and nerves to fight, because there are extortionists who take advantage of some institutions to drag out court cases,” said Mr Jennings, who founded Renaissance Capital, the Russian bank.
The case is centred around MCIH’s failure to pay a $20m deposit to the sellers of some of the land on which Tatu City is being built, despite repeatedly claiming it had.
The London court ruled that the “false misrepresentation” affected SCF Holdings II’s investment strategy. In his 127-page written judgment the arbitrator described part of Mr Shah’s testimony during the hearing as “insufficiently consistent with the documentary evidence”.
Tatu City is being built 12km north-east of the capital
Mr Shah said MCIH was refusing to comply with the award on the grounds that it “was procured by Jennings’ dishonest evidence” and because of “errors in the way the arbitrator handled the case”.
He did not explain why he had not challenged the arbitration ruling in London, saying he could not “discuss our strategy in public”.
Mr Nyagah did not respond to repeated requests for comment.
Mr Jennings rejected Mr Shah’s allegations, stressing that the Kenyan businessman participated in two years of arbitration proceedings, agreed to abide by the result and did not challenge it.
Kenya is often hailed as east Africa’s top investment destination as it boasts the region’s most industrialised economy. But it is blighted by weak rule of law and endemic corruption.
“Our companies largely get away with a lot of things,” said Samuel Kimeu, executive director of Transparency International Kenya, a non-governmental organisation that monitors graft. “Our law enforcement agencies have not been firm on companies and their role in driving corruption.”
Mr Jennings admitted he did not do sufficient due diligence on his local partners before investing. “They thought foreigners come here, they panic when things get tough and they pay up.
They thought we’d be like anyone else, panic and pay up,” he said of his Kenyan partners. “We’ve fought them instead and they didn’t expect that. “
In spite of persistent challenges, Mr Jennings added that Kenya’s business environment had “improved dramatically” in recent years, helped by the digitisation of many services, and that the “market share of the clean people is going up gradually”.
President Uhuru Kenyatta, whose family has vast business interests, recently launched an anti-corruption drive following the exposure of several government scandals.
Bob Godec, the US ambassador, to Kenya, said last week that corruption “is a cancer killing this country and the theft needs to end”.
However, Mr Kimeu said Kenyans would not take the president seriously until people close to him were punished. “Until we’re able to stop such people, it’s hard to see how we can make progress as a country,” he said.
Copyright The Financial Times Limited 2018. All rights reserved.
Subscribe to read | Financial Times
British court order to pay $17m in damages is defied
Stephen Jennings: 'You’ve got to have the temperament and nerves to fight' © Bloomberg
John Aglionby in Nairobi YESTERDAY
A former Kenyan central bank governor and a prominent east African businessman are embroiled in scandal after they defied a British court order to pay $17m in damages to foreign investors over the development of a multibillion-dollar city outside Nairobi.
The case highlights the legal and commercial challenges many foreign investors encounter in east Africa’s dominant economy, analysts say.
The London Court of International Arbitration ruled this February that Vimal Shah, chairman of consumer goods manufacturer Bidco Africa, Nahashon Nyagah, former Central Bank of Kenya governor, and their associates should pay $17m for damages, interest and costs to SCF Holdings II after ruling they had defrauded the developer.
SCF Holdings II is a subsidiary of Rendeavour, which has projects across Africa. It is the majority shareholder and developer of Tatu City, a residential and industrial project 12km north-east of the capital.
Mr Shah and Mr Nyagah did not challenge the settlement awarded by the London court within the permitted 28 days — but failed to pay. SCF Holdings II has now begun legal proceedings in Mauritius to enforce the ruling.
Manhattan Coffee Investment Holding (MCIH), Mr Shah and Mr Nyagah’s holding company, is registered in the Indian Ocean tax haven. In response, MCIH, which is also a shareholder in the Tatu City development, has applied to the Mauritius courts to set aside the London ruling.
Stephen Jennings, Rendeavour chief executive, said the legal battle with the group’s Kenyan partners had delayed the Tatu City project by three years and illustrated the “significant obstacles to doing business” in Kenya.
“You’ve got to have the temperament and nerves to fight, because there are extortionists who take advantage of some institutions to drag out court cases,” said Mr Jennings, who founded Renaissance Capital, the Russian bank.
The case is centred around MCIH’s failure to pay a $20m deposit to the sellers of some of the land on which Tatu City is being built, despite repeatedly claiming it had.
The London court ruled that the “false misrepresentation” affected SCF Holdings II’s investment strategy. In his 127-page written judgment the arbitrator described part of Mr Shah’s testimony during the hearing as “insufficiently consistent with the documentary evidence”.
Tatu City is being built 12km north-east of the capital
Mr Shah said MCIH was refusing to comply with the award on the grounds that it “was procured by Jennings’ dishonest evidence” and because of “errors in the way the arbitrator handled the case”.
He did not explain why he had not challenged the arbitration ruling in London, saying he could not “discuss our strategy in public”.
Mr Nyagah did not respond to repeated requests for comment.
Mr Jennings rejected Mr Shah’s allegations, stressing that the Kenyan businessman participated in two years of arbitration proceedings, agreed to abide by the result and did not challenge it.
Kenya is often hailed as east Africa’s top investment destination as it boasts the region’s most industrialised economy. But it is blighted by weak rule of law and endemic corruption.
“Our companies largely get away with a lot of things,” said Samuel Kimeu, executive director of Transparency International Kenya, a non-governmental organisation that monitors graft. “Our law enforcement agencies have not been firm on companies and their role in driving corruption.”
Mr Jennings admitted he did not do sufficient due diligence on his local partners before investing. “They thought foreigners come here, they panic when things get tough and they pay up.
They thought we’d be like anyone else, panic and pay up,” he said of his Kenyan partners. “We’ve fought them instead and they didn’t expect that. “
In spite of persistent challenges, Mr Jennings added that Kenya’s business environment had “improved dramatically” in recent years, helped by the digitisation of many services, and that the “market share of the clean people is going up gradually”.
President Uhuru Kenyatta, whose family has vast business interests, recently launched an anti-corruption drive following the exposure of several government scandals.
Bob Godec, the US ambassador, to Kenya, said last week that corruption “is a cancer killing this country and the theft needs to end”.
However, Mr Kimeu said Kenyans would not take the president seriously until people close to him were punished. “Until we’re able to stop such people, it’s hard to see how we can make progress as a country,” he said.
Copyright The Financial Times Limited 2018. All rights reserved.
Subscribe to read | Financial Times
