https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/11900

**REPUBLIC OF KENYA** **IN THE HIGH COURT OF KENYA AT LODWAR** **COMMERCIAL AND TAX DIVISION** **CIVIL SUIT NO. E003 OF 2025** **OPTIMAL POWER SOLUTIONS PTY LIMITED……………………………………1ST PLAINTIFF** **OPTIMAL POWER SYNERGY INDIA PVT LIMITED…………………………….2ND PLAINTIFF** **VERSUS** **KUDURA POWER EAST AFRICA LIMITED……………………………………1ST DEFENDANT** **VIVIAN POTGIETER RATO-VENDEIRINHO…………………………………2ND DEFENDANT** **JAMES IRUNGU WAKABA…………………………………………………...3RD DEFENDANT** **ERWA HUERRE………………………………………………………………….4TH DEFENDANT** **STEVEN LEE ROSS……………………………………………………………...5TH DEFENDANT** **CATHERINE SIAN HAYNES…………………………………………………...6TH DEFENDANT** **RULING** **Background of the Application** 1. The dispute in this suit has its foundation on a contract dated the 7th of April, 2023 and described in the plaint to have been for Engineering, Procurement, Construction, and Installation. That original agreement was executed between the 1st Defendant, Kudura Power East Africa Limited, a limited liability company carrying on the business of power supply in Kenya, and Wind-it S.A.S., a French corporation nominated as the supplier. 2. On the very same day the original agreement was executed, the two parties to it executed yet another agreement, a Tripartite Assignment Agreement, fully assigning the supplier role of Wind-it S.A.S. to the 1st Plaintiff, Optimal Power Solutions Pty Limited, a company registered and organized under the laws of Australia. The contractual venture aimed to deliver electricity power units to various remote mini-grid sites within Turkana County over a defined timeline of thirty-nine weeks at a total contract price of Euro 2,357,445.00. 3. The 2nd Plaintiff was subsequently engaged to coordinate offshore procurement, logistics, and supply chains from its registered headquarters in Salt Lake, Kolkata, India. In furtherance of the project, the 2nd Plaintiff appointed a local subcontractor, Epi Center Africwas a Limited, on the 5/09/2023, to manage local site works, storage, and importation. Under the Combined EPC model, the 1st Plaintiff was to design, procure, deliver, install and commission twenty power plants, while the 1st Defendant was contractually obligated to provide site accessibility, complete civil works, establish secure warehousing at Lodwar and make milestone payments. 4. The transaction was soon thereafter paralyzed by a series of delay-related events and operational hurdles. The Plaintiffs contend that the 1st Defendant delayed the project’s commencement by six weeks by failing to issue a formal Notice to Proceed, until the 13/06/2023, despite having accepted a Design to Cost exercise on the 25/05/2023, which reduced the target cost to Euro 1.9 million. The 1st Plaintiff also asserts that the 1st Defendant altered the scope of works verbally in August 2023, reducing the sites to nineteen before increasing them to twenty-two, which added approximately two-thousand-meter connections. From the plain, it emerges that the relationship continued to deteriorate leading to a declaration of a dispute by the plaintiffs 5. The 1st Plaintiff then issued a formal Notice to Invoke Arbitration on the 5th of November, 2024, to refer the disputes to the International Chamber of Commerce. However, the Defendants responded on the 8/11/2024, rejecting the 1st Plaintiff’s right to arbitrate. Following this rejection, the 2nd Defendant issued a Termination Notice on the 23/12/2024, citing late delivery of equipment under Clause 5.13.3. The Plaintiffs claim that during this period of non-communication, the Defendants went behind their backs and made a secret payment of Euro 35,000.00 to the subcontractor, Epi Centre Africa Limited, to bypass the Plaintiffs’ property rights under Clause 10.1 and take unauthorized possession of the project equipment stored in Nairobi. 6. Faced with what the plaintiffs consider to be contractual breaches, personal fraud and commercial defamation, they filed the Plaint herein on the 21/10/2025. In their Plaint, the plaintiffs seek contractual damages and ask this Court to lift the corporate veil of the 1st Defendant to hold the 2nd and 6th Defendants personally, jointly and severally liable for their conduct. **The Defendant’s Case** 1. In response, the Defendants entered a conditional appearance under protest on the 27/01/2026. They contemporaneously filed a Notice of Preliminary Objection and a Chamber Summons Application under Section 6 of the Arbitration Act, 1995, seeking to stay the court proceedings and refer the parties to arbitration under the ICC Rules in Geneva, Switzerland. Their case rests on the argument that this Court lacks jurisdiction to hear, try, or determine any part of the suit. 2. The Defendants point to Clause 15.17.2 of the EPC/Main Contract, which they contend is a valid, binding and fully operative arbitration agreement. The clause, the defendants contend, explicitly requires any dispute, controversy or claim arising out of or relating to the contract, including its breach, termination, or invalidity, to be referred to arbitration under the Rules of the International Chamber of Commerce, with the seat of arbitration in Geneva, Switzerland, and the governing law being that of England and Wales. 3. In their Notice of Preliminary Objection, the Defendants raise four main points of law. First, that the claims in the Plaint are directly connected to the EPC/Main Contract, making them subject to the exclusive jurisdiction of the ICC arbitral tribunal. Secondly, that Section 6(1) of the Arbitration Act, 1995, mandatorily requires this Court to stay the proceedings and refer the parties to arbitration upon a timely application by a party who has not taken any step in the litigation other than entering a conditional appearance. 4. They also argue that the Plaintiffs’ suit violates the agreed dispute resolution process and is an abuse of the court’s jurisdiction, running counter to the constitutional principle of promoting alternative dispute resolution under Article 159(2)(c) of the Constitution. Finally, they invoke the doctrine of *Kompetenz-Kompetenz* under Section 17 of the Arbitration Act, arguing that any objections to the scope, validity, or operability of the arbitration agreement must be decided by the arbitral tribunal itself, which has primary competence to rule on its own jurisdiction. 5. The Chamber Summons Application is supported by an affidavit sworn by the 2nd Defendant who reiterates that the Defendants have entered a conditional appearance under protest solely to challenge this Court’s jurisdiction. The Defendants argue that the disputes raised in the Plaint including delays, milestone payments, importation duties, subcontracting arrangements and equipment title transfers are standard contractual disputes that fall squarely within the scope of Clause 15.17.2. 6. It is asserted that the defendants have always been and remain, ready and willing to do all things necessary to facilitate the proper conduct of the arbitration. They argue that the court must hold the parties to their bargain and prevent them from using litigation to bypass the agreed dispute resolution forum. **Response by the Plaintiffs** 1. The Plaintiffs oppose both the Preliminary Objection and the Chamber Summons through Grounds of Opposition and a Replying Affidavit sworn by Stephen Phillips, a director of the 1st Plaintiff. Both documents are dated the 6th of March, 2026. The argument advanced is that the Defendants’ Preliminary Objection is procedurally improper under the classic rule in **Mukisa Biscuit Manufacturing Co. Ltd vs West End Distributors** **(1969) EA 696**. 2. The Plaintiffs contend that the objection does not raise a pure point of law, but instead requires this Court to conduct a fact-sensitive inquiry into whether the parties complied with the multi-tiered dispute resolution steps, whether executive board negotiations actually occurred, and whether the conditions for arbitration were met. 3. On the merits of the stay application, the Plaintiffs present a counter-argument. They exhibit a trail of documents, including the 1st Defendant’s Notice of Dispute dated the 9/09/2024, records of the subsequent executive board meetings, the 1st Plaintiff’s formal Notice to Invoke Arbitration dated the 5/11/2024, and the Defendants’ letter dated the 8/11/2024, which explicitly rejected the 1st Plaintiff’s attempt to arbitrate. 4. The Plaintiffs argue that by rejecting the invocation of arbitration when the dispute crystallized, the Defendants repudiated the arbitration agreement and rendered it inoperative and incapable of performance under Section 6(1)(a) of the Arbitration Act. They submit that a party cannot reject arbitration when it is contractually invoked and then turn around and use the same clause to stay court proceedings once litigation is filed. It is contended that the Defendants are equitably estopped from relying on the clause, and that the statutory requirement of readiness and willingness has not been met. 5. Furthermore, the Plaintiffs argue that the scope of the arbitration agreement is legally insufficient to cover the entire dispute on record. They point out that the 2nd Plaintiff is an independent Indian entity and a non-signatory to the EPC/Main Contract and its arbitration clause. They argue that under Sections 4 and 6 of the Arbitration Act, arbitration is strictly consensual, and a non-signatory cannot be compelled to arbitrate without its consent. 6. The Plaintiffs further stress that the 2nd to 6th Defendants are sued in their personal capacities for independent torts and fraudulent circumvention of contracts none of which fall within the scope of the arbitration clause. They argue that an arbitrator lacks the legal authority to lift the corporate veil, dismiss corporate structures or adjudge personal liabilities of non-signatories, this Court is the only forum capable of resolving the entire dispute. **Summary of the Defendants' Submissions in support of the preliminary objection** 1. The Defendants’ written submissions present a strong defense of party autonomy and the contractually agreed forum. They argue that when commercial entities of equal bargaining power voluntarily choose a private, international forum to resolve their disputes, the courts must step back and respect that choice. 2. The Defendants argue that Section 6 of the Arbitration Act is drafted in mandatory terms. Once a court is shown a valid arbitration agreement, and an application for a stay is made before taking any other steps in the suit, the court has no choice but to stay the proceedings and refer the parties to their chosen forum. They contend that all the claims in the Plaint, including the allegations of delays, warehouse disputes, unpaid invoices, and even the termination of the contract, fall squarely within the wide scope of Clause 15.17.2, which covers any dispute, controversy or claim arising out of or relating to this Contract. 3. Addressing the Plaintiffs’ allegations of bad faith and rejection, the Defendants argue that their letter of the 8th of November, 2024, was not a repudiation of the arbitration agreement itself, but a dispute over whether the contractual preconditions for arbitration had been met at that specific moment. 4. They further submit that under the doctrine of *Kompetenz-Kompetenz* as set out in Section 17 of the Arbitration Act, any question about whether the pre-arbitral negotiations were completed, or whether the clause is operative, must be decided by the ICC arbitral tribunal in Geneva, not by this Court. 5. The Defendants further contend that the joinder of the 2nd Plaintiff and the 2nd to 6th Defendants is a clever, artificial attempt to bypass the arbitration clause. They argue that the 2nd Plaintiff’s claims are entirely derivative, arising through or under the 1st Plaintiff’s contractual performance. Similarly, they argue that the directors are being sued solely because of their corporate roles, and that allowing a party to escape arbitration simply by naming directors in a lawsuit would make every arbitration clause in Kenya completely useless. They urge the Court to uphold the contract and refer the entire matter to arbitration under the ICC Rules in Geneva. **Summary of Plaintiffs' Submissions in opposition to the preliminary objection** 1. The Plaintiffs’ written submissions, dated the 8/06/2026 and their supplementary submissions are fashion along five primary arguments and urge the Court to reject and dismiss both Preliminary objection and the application for reference. The first argument is that the Preliminary Objection fails to meet the test in **Mukisa Biscuit Manufacturing Co. Ltd vs West End Distributors (1969) EA 696**. They contend that a valid preliminary objection must be argued on the assumption that all facts pleaded by the other side are correct. Because the Defendants’ objection requires the Court to evaluate contested evidence regarding the operability of the clause, the compliance with pre-arbitral negotiations, and the effect of the Defendants’ rejection letter, it is a mixed question of fact and law that cannot be resolved as a preliminary objection. 2. Second, the Plaintiffs address the non-signatory status of the parties on record. They rely on the decision in **Gilulu Investments Limited & 2 others v Gunga Properties Limited & 9 others [2021] KEHC 258 (KLR)**, where the court declined to refer a dispute to arbitration because doing so would fragment a composite case involving non-signatories and lead to parallel proceedings. They point out that the 2nd Plaintiff and the 2nd to 6th Defendants are non-signatories who cannot be bound by Clause 15.17.2. 3. They argue that under the chosen governing law of England and Wales, the Group of Companies doctrine is explicitly rejected, meaning the 2nd Plaintiff and the individual directors cannot be bound to the arbitration clause through corporate affiliation or group theories, as established in the English case of **Peterson Farms Inc vs C & M Farming Ltd [2004] EWHC 121**. Thirdly, the Plaintiffs argue that the remedy of lifting the corporate veil, as prayed for in Prayer Three of the Plaint, is an equitable power that belongs to national courts, not arbitral tribunals. They contend that an arbitrator's power is derived strictly from contract and does not extend to piercing corporate structures or holding individual directors personally liable for fraud. 4. The fourth argument goes that the Defendants have failed to demonstrate readiness and willingness under Section 6 of the Arbitration Act. Citing ***Mastermind Tobacco (K) Limited vs Maroa* [2023] KEHC 19923 (KLR)**, they submit that readiness is evaluated based on the party’s conduct when the dispute arises. Because the Defendants flatly rejected the First Plaintiff's Notice to Invoke Arbitration on the 8th of November, 2024, they cannot now claim they are ready and willing to arbitrate. 5. Finally, the decision in **UAP Provincial Insurance Company Ltd vs Michael John Beckett [2013] KECA 209 (KLR)** is cited for the argument that the doctrine of *Kompetenz-Kompetenz* does not prevent the court from performing its statutory gatekeeping duty under Section 6. They argue that the court is expected and required to determine whether the arbitration agreement is null, void, inoperative, or incapable of performance before it can refer the parties to arbitration. **Issues, Analysis and Determination** 1. The court views the Notice of Preliminary Objection and the Chamber summons to underscore the requirements of section 6 Arbitration Act, that where parties agree that their dispute be dealt with by arbitration, the court must defer to that choice and election. 2. With that appreciation, the court has anxiously considered the records before it and identifies the pertinent issue for determination be, whether or not, the matter should be stayed and referred to arbitration. The resolution of that single question is sufficient to dispose both application and the notice of motion. 3. Central and concomitant to the issue is the question the scope of arbitration being, who can be compelled to arbitrate? Arbitration is fundamentally a creature of consent. When parties agree to arbitrate, they choose to give up their constitutional right to have their disputes resolved by a national court, opting instead for a private forum. However, being contractual, the general rules of the law of contract are never excluded from application. 4. Because this represents a significant waiver of rights, the law requires clear, written consent from the parties involved. This consensual foundation is protected by the doctrine of privity of contract, which dictates that a contract cannot impose obligations or confer rights on anyone who is not a party to it. This principle was affirmed in **Savings & Loan (K) Limited vs Kanyenje Karangaita Gakombe & another [2015] eKLR**, where the court held that a contract cannot be enforced by or against a third party. 5. Here, even a cursory review of the EPC/Main Contract and the Tripartite Assignment dated the 7th of April, 2023, shows that the only contracting parties are the 1st Plaintiff and the 1st Defendant. The 2nd Plaintiff is an independent corporate entity organized under the laws of India. The Defendants argue that the 2nd Plaintiff’s claims are derivative, arising through or under the 1st Plaintiff. However, the Plaint reveals that the 2nd Plaintiff has distinct, independent legal and commercial interests. It was the 2nd Plaintiff that formally appointed the local subcontractor, Epi Center Africa Limited, on 5th September 2023, and it may have suffered direct loss when the Defendants allegedly bypassed this subcontracting framework. 6. The Defendants have failed to show any assignment, novation, or legal mechanism that would bind the 2nd Plaintiff to Clause 15.17.2. The court notes that while it is true that the 2nd Plaintiff acted as a subcontractor and was involved in the logistics of the project, it is not a signatory to the EPC Contract or its arbitration clause. Consequently, forcing the 2nd Plaintiff into a Swiss arbitration without its consent would violate the voluntary nature of arbitration and run counter to the rules of privity. 7. On the same prism, the court must look at the status of the 2nd to 6th Defendants. They are named in the suit as individuals and directors of the 1st Defendant. The Plaint does not merely seek contractual damages from the company; it accuses these directors of personal negligence, bad faith and a fraudulent conspiracy to circumvent the subcontracting agreements and unlawfully seize the Plaintiffs’ equipment. The claim against the five is apparently tortious and not contractual. Crucially, the Plaintiffs have asked the Court to lift the corporate veil of the 1st Defendant to hold these directors personally, jointly and severally liable for their conduct. 8. The power to pierce the corporate veil is an equitable judicial remedy developed in company law to address extraordinary circumstances where a corporate structure may have been used or employed to commit fraud or defeat contractual rights. It is a remedy that belongs to the national courts, and it is highly doubtful that an arbitral tribunal, whose jurisdiction is strictly limited to the consenting signatories of a contract, has any power to pierce the corporate veil of a non-signatory or hold directors personally liable. 9. If this Court were to grant a stay and refer the dispute between the 1st Plaintiff and the 1st Defendant to arbitration, it would be forced to split the lawsuit. The claims against the 1st Defendant would go to Geneva, while the claims against the non-signatory directors, the non-signatory 2nd Plaintiff, and the tort claims of commercial defamation would remain before this Court. Such a division would lead to untidy fragmentation forcing the parties to fight parallel battles in two different fora across different continents, dealing with the exact same facts and witnesses. such would lead to a massive duplication of legal costs with risk of conflicting decisions from the court and the arbitrator. 10. This Court finds guidance in the cited case of **Gilulu Investments Limited & 2 others v Gunga Properties Limited & 9 others [2021] KEHC 258 (KLR)**, where the court declined to refer a dispute to arbitration because doing so would fragment the proceedings among non-signatories and prevent a complete resolution of the claims. Accordingly, the court holds that where a lawsuit involves necessary non-signatory parties and independent claims of personal fraud and defamation that fall outside the contract, the court must protect its jurisdiction to ensure a single, complete and fair trial. 11. Even if this Court were to ignore the issue of non-signatories, the Defendants remain under obligation to satisfy the statutory requirements of Section 6 of the Arbitration Act, 1995. Section 6(1) is indeed drafted in mandatory terms, and it is thus never automatic that wherever an application for reference is made, it must be granted. The courts have made it clear that to earn a stay of proceedings, the applicant must satisfy the court that they were, at the time the court case started, and still remain, ready and willing to do everything necessary for the proper conduct of the arbitration. 12. Readiness is a key requirement, and it is evaluated based on the party's conduct, not just their statements in court. The Court of Appeal in **East African Power and Lighting Company Ltd vs Kilimanjaro Construction Ltd [1983] eKLR** held that if a party is asked to refer a dispute pursuant to the arbitration provision in the contract and rejects the invitation, they cannot later file a court application and claim they are ready and willing to arbitrate. 13. The facts before this court are even more dramatic. When the dispute over the Milestone Five invoice and the project delays boiled over in late 2024, the 1st Plaintiff followed the contractual path in Clause 15.17.2, issuing a formal Notice to Invoke Arbitration on the 5/11/2024. The Defendants did not respond with cooperation. Instead, in their letter of the 8/11/2024, they flatly rejected the notice and denied the 1st Plaintiff’s right to proceed to arbitration. 14. As a matter of fact, the steps to start the arbitration must be actively supported by the party seeking the stay. An arbitration clause is not a magical contract that runs on its own but a bilateral agreement that requires both parties to cooperate in good faith to set up the tribunal and run the proceedings. When one party flatly rejects a notice to arbitrate and denies the other party’s right to use the process, they create a complete deadlock. The Defendants cannot slam the door on arbitration when it is contractually invoked, forcing the 1st Plaintiff to spend time and resources filing a lawsuit and then turn around and try to use the same arbitration clause as a shield to block the court’s jurisdiction. Their rejection of the arbitration notice in November 2024 is clear evidence that they lacked the good-faith readiness and willingness required by Section 6 of the Act. The Plaintiffs were left with no choice but to seek justice in the public courts. They failed the statutory test when the dispute crystallized, and they cannot now claim a change of heart to escape this Court. 15. The Defendants have argued that under Section 17 of the Arbitration Act, this Court must step aside and allow an ICC arbitrator in Geneva to decide whether the clause is operative and whether the court case should be stayed. They rely on the doctrine of *Kompetenz-Kompetenz*, which allows a tribunal to rule on its own jurisdiction. The court notes that while Section 17 is a key part of arbitration law, it does not strip national courts of their statutory duties under Section 6. As the Court of Appeal clarified in **UAP Provincial Insurance Company Ltd vs Michael John Beckett [2013] eKLR**, when a court is faced with a Section 6 application, it is legally required to perform a threshold check. 16. This check imposed on the court by Parliament, obligates the court to determine whether there is a valid, operative agreement, and whether the applicant is ready and willing to arbitrate. It cannot be bypassed by pointing to Section 17. The doctrine of *Kompetenz-Kompetenz* only applies once a tribunal is properly set up under a valid, functioning agreement. It cannot be used to force parties into a foreign arbitration when the agreement itself has been rendered inoperative, and when the case involves necessary parties who never consented to arbitrate in the first place. 17. In conclusion, the court holds that the consensual foundation of arbitration must be protected, and when a party rejects that path, they must be prepared to face the dispute in the public courts. Consequently, the Court finds the Defendants’ Notice of Preliminary Objection dated the 26th of January, 2026, and the Chamber Summons Application seeking a stay of these proceedings and a referral of the parties to arbitration as unmerited and are hereby dismissed. 18. The costs of both the Preliminary Objection and the Chamber Summons Application are awarded to the Plaintiffs, to be paid by the Defendants. 19. The suit shall proceed to a full trial and determination on its merits. Dated, signed and delivered virtually this 30th day of July, 2026. Patrick J O Otieno Judge