Oilfields Engineering Seeks Intervention from Treasury to Halt Ksh. 4 Billion Payment to Zakhem International

Oilfields Engineering and Suppliers Limited has urged the National Treasury to intervene and stop the payment of over USD 31 million (approximately Ksh. 4 billion) to Zakhem International Construction Limited. The request, articulated in a letter dated July 22, 2024, highlights a contentious legal battle between the two companies, with Oilfields Engineering accusing Zakhem International of failing to adhere to a court order.

The dispute traces back to a sub-contract agreement signed in November 2015 between Oilfields Engineering and Zakhem International. The contract pertained to various construction services, but disagreements regarding performance and fulfillment have led to ongoing legal and financial disputes.

According to the letter addressed to the Treasury PS, Oilfields Engineering contends that the payment in question is both unwarranted and illegal. The company alleges that the Kenya Pipeline Company (KPC), a key player in this dispute, failed to inform the National Treasury about a critical legal injunction. This injunction, known as a mareva injunctive order, was issued by the High Court on August 31, 2023, and later upheld by the Court of Appeal on December 15, 2023, in case COACAPPL 463 of 2023. The court orders effectively blocked any financial transactions related to the disputed payment.

Oilfields Engineering’s grievance centers on the claim that KPC deliberately withheld information about these court orders from the Treasury. The company’s letter underscores that such omissions constitute a serious breach of legal and procedural norms, potentially jeopardizing their position in the ongoing dispute.

In the broader context, Zakhem International’s claim for payment is part of a complex legal struggle over the interpretation and enforcement of the sub-contract agreement. The contract has been a source of contention due to alleged non-performance and other contractual issues. Zakhem International, based in Cyprus, has asserted its right to the payment as part of its legal pursuit for what it views as a legitimate claim under the contract.

The financial stakes are high, with the USD 31 million payment representing a substantial sum that could have far-reaching implications for both parties involved. For Oilfields Engineering, halting this payment is critical to their defense, as they argue that proceeding with the payment would contravene the court’s directives and undermine their legal standing.

The situation has prompted significant attention from various stakeholders, including financial and legal experts, who are closely monitoring the developments. The National Treasury’s role in this matter is pivotal, as any action taken will directly impact the resolution of the dispute and the enforcement of legal orders.

As the case continues to evolve, the involvement of the Treasury underscores the intersection of legal and financial governance in large-scale disputes. The outcome of this dispute could set important precedents for how similar cases are handled in the future, particularly in terms of adhering to court orders and managing significant financial transactions.

Oilfields Engineering’s request to halt the payment to Zakhem International reflects broader concerns about transparency, legal compliance, and the protection of contractual rights. The resolution of this dispute will likely have implications beyond the immediate parties involved, affecting how contractual and legal conflicts are navigated in the business environment.

In conclusion, the ongoing dispute between Oilfields Engineering and Zakhem International highlights the critical role of legal and financial oversight in resolving high-stakes business conflicts. As the National Treasury considers Oilfields’ request, the outcome of this case will be closely watched for its broader implications on contract enforcement and financial governance in Kenya.