By David Ochami and David Ohito
Eleven UK-based bank accounts through which donor funds are funnelled into the country have been frozen through a court decree.
Several others set up by donors are at risk as the bank involved argues they are not covered by the court order.
A British judge gave orders for the freezing and inspection of the accounts to a company demanding Sh778 million in a deal related to Anglo-Leasing payments.
The Government had agreed to pay the money in a settlement reached last year but failed to do so.
Kenya may suffer serious damage with High Commission property and other critical assets impounded in London as claimants press for payment of their dues.
“Our High Commission (premises) may be auctioned,” said a confidential source familiar with the developing story.
“We do not even have the money being demanded from us because it was not budgeted for in the first place.”
At the centre of the battle are the Government’s accounts at Crown Agents Bank Ltd, an institution donors use to disburse aid.
There are 11 Government-held accounts, some “empty”, but others loaded with huge sums of money. There are also an unknown number of other accounts in Kenya’s name controlled by foreign donors. There is a dispute over whether the court order applies to these special accounts, in which billions more are parked.
A company claiming 10,383,852 British pounds (Sh778 million) successfully secured court orders attaching the Kenyan accounts. Through lawyers Kirkland & Ellis, ICS Inspection and Control Services Ltd moved to a UK High Court and secured orders to freeze accounts “held on behalf of the Government”.
ICS had been hired by the Custom and Excise Department (Kenya Revenue Authority) in 1998 to provide pre-shipment inspection services.
The firm was to inspect goods imported into the country and verify prices, quality and quantities and tariff classification. A dispute over money owed at the end of the contract was settled in arbitration last year.
Financial Secretary at Treasury Mr Mutua Kilaka conceded the country would have to fork out Sh800m — the whole amount owed to the claimant — because there was a binding arbitration that settled the case.
Payment dispute
“The accounts belong to Treasury and one was meant to pay British pensioners (who worked for the colonial government),” he said.
“I do not have the exact figures but it is a lot of money at stake. It is a serious problem. It has the potential to eat into the country’s coffers massively and we have few options.”
Kilaka promised to provide the figures at stake and what it would cost the taxpayer today.
Finance Permanent Secretary Joseph Kinyua revealed the order sprung from payment dispute with Swipco, a private firm contracted by Kenya to carry out pre-shipment inspection services in the late 1990s. Swipco and ICS had an arrangement to provide the services. Kinyua admitted the country was hit by a court order but could not confirm the amount of money in dispute.
“There was a ruling last year compelling the Government of Kenya to pay Swipco which Kenya did not honour,” he said.
“Kenya contested the amount demanded by Swipco and could not also pay because there was no budget for it. The delayed payment was then considered inability to pay. The ruling two weeks ago was made because Kenya failed to honour last year’s warning.”
Donor projects
The PS explained the account was meant for Ministries of Medical Services and Health and but he would not remember the amounts involved. It was at this point Kinyua referred The Standard to Kilaka.
The orders to freeze the accounts were handed down on October 28, but very few Government officials are even aware of the order. Sources familiar with the closure of the accounts reveal the flow of donor funds into Kenya has been thrown into disarray.
At risk are billions of shillings from donors, including those meant for procuring essential medicines, which flow through donor projects including Ministry of Health (now Public Health and Ministry of Medical Services.)
Source: East African Standard
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