Coretec Solutions Africa Limited v. Export Processing Zones Authority [2024] KEHC 11321 (KLR)

Court: High Court of Kenya at Machakos
Judge: Hon. Justice M.W. Muigai
Date: 24 September 2024
Case No.: Civil Suit E005 of 2023
Outcome: Application for recognition and enforcement of arbitral award granted; Respondent’s objections dismissed.

Background
Coretec Solutions Africa Limited (formerly Coretec Systems & Solutions Limited) entered into a contract with the Export Processing Zones Authority (EPZA) in 2015 to supply and install an Enterprise Resource Planning System. A dispute arose when EPZA failed to pay the balance of Kshs. 34,224,727.60 despite Coretec’s performance. The matter was referred to arbitration as per the contract’s dispute resolution clause.

Arbitral Proceedings
The parties reached a consent agreement during arbitration, which was adopted as a Final Arbitral Consent Award on 14 May 2024. The terms included:

• EPZA to pay Coretec Kshs. 14,667,740.40 within 14 days.
• Coretec to provide technical support to resolve outstanding issues.
• EPZA to pay additional sums in installments.

Application for Enforcement
Coretec sought court recognition and enforcement of the award under Section 36 of the Arbitration Act. EPZA opposed enforcement, citing:

• A Kenya Revenue Authority (KRA) Agency Notice requiring EPZA to remit Kshs. 49.4 million (later revised to Kshs. 14 million) for Coretec’s tax liabilities.
• Concern that enforcing the award would leave Coretec unable to fulfill its contractual obligations.

Court’s Decision

  1. Validity of the Arbitral Award

• The court held that the consent award was binding and final under Section 32A of the Arbitration Act.
• EPZA did not challenge the award on grounds of fraud, duress, or illegality under Section 35.

  2. KRA Agency Notice Not a Bar to Enforcement

• The tax dispute was a post-arbitration issue and did not affect the validity of the award.
• The court lacked jurisdiction to adjudicate tax matters under Section 10 of the Arbitration Act, which limits judicial intervention.

  3. Public Policy Argument Rejected

• EPZA’s claim that enforcement would waste taxpayer funds was dismissed. The court found no conflict with public policy under Section 37.

Ruling

1. EPZA’s objections were dismissed.
2. The Final Arbitral Consent Award was recognized and adopted as a judgment of the court.
3. Each party to bear its own costs.

Significance
This case reaffirms:

• The finality of arbitral awards and limited court intervention under Kenyan arbitration law.
• Tax disputes between a party and KRA do not invalidate arbitral awards unless they directly relate to the arbitration process.
• Courts will enforce consent-based arbitral awards unless set aside on specific statutory grounds.