Kenya Airways loses court bid to block EPCO claim over 312 staff houses

Kenya Airways has lost a High Court bid to stop a compensation claim from real estate developer Epco Builders over 312 homes planned for the airline's staff in Embakasi, Nairobi. The court dismissed the carrier's application to overturn an interim decision by arbitrator Kyalo Mbobu, who had rejected the airline's objection that Epco's claim was filed outside the six-year statutory time limit.

The dispute dates to a 2009 agreement under which Kenya Airways was to transfer three land parcels — LR numbers 9042/18, 9042/229 and 9042/230 — to Epco, which would build and sell two-bedroom houses at Sh2.6 million and three-bedroom units at Sh3.9 million directly to airline employees. Epco says the airline failed to facilitate the transfers and provide vacant possession, delaying construction and raising costs, and sued in April 2014 for additional construction and financing costs.

Kenya Airways obtained an order sending the matter to arbitration in July 2018, which suspended the suit. Epco commenced arbitration on 20 March 2023. The airline filed its reply in November 2023 and then argued the claim was time-barred, saying the alleged breach occurred around 2010. In an interim award published on 7 June 2024, the sole arbitrator held that Kenya Airways had waived its right to challenge jurisdiction by failing to raise it in its initial reply.

Kenya Airways moved to court under Section 35 of the Arbitration Act, which allows an award to be set aside on limited grounds. Justice Moses Ado held that the airline should instead have used Section 17(6), which lets a party challenge a tribunal's preliminary ruling on jurisdiction within 30 days of receiving notice. “The statutory design of the Arbitration Act is clear,” the judge said, and the failure to use the prescribed route was “fatal to its attempt to re-agitate the Arbitrator's jurisdictional determination.”

The court also rejected the airline's public-policy argument, saying Section 35 could not serve as an appeal against an arbitrator's legal reasoning. Epco opposed the application through managing director Ramji Devji Varsani, who described it as an impermissible attempt to appeal the merits of the ruling on jurisdiction and limitation. The developer said it received possession of the land in September 2011, although construction was due to start in October 2009 and finish by September 2011.

The project had already produced separate litigation. After Epco sought price increases of Sh575,000 on two-bedroom units and Sh825,000 on three-bedroom units, the High Court in February 2018 enforced a 2015 award in favour of 312 employees who had challenged the proposed increases. The latest ruling clears the way for the compensation claim to proceed in arbitration.