Saturday, April 25, 2009


The Kenya Government is engaged in parallel negotiations to secure a controversial naval ship after it was slapped with claims of Sh6.46 billion by the contractor for the vessel held at a Spanish shipyard, the Sunday Nation has learnt. In addition to arbitration at the United Nations Commission on International Trade Law (UNCITRAL), the government is also involved in secret negotiations with Euromarine Industries who were awarded the contract to construct the ship in April 2003 in a deal linked to the Anglo Leasing scandal.

Well-placed sources say the government is conducting parallel negotiations with the firm to have the matter settled out of the international court.

A source, who cannot be named for fear of reprisal, said military officers, who face possible questioning by Euromarine, want the government to withdraw the case from UNCITRAL. Euromarine claims Sh6.46 billion, but the government is willing to pay only Sh3.3billion. It has already paid Sh1.3 billion for the KNS Jasiri. A high-powered Kenyan team visited Europe in February for negotiations, and early this month lawyers representing Euromarine visited Nairobi.

The visit coincided with a statement by Britain’s Serious Fraud Office (SFO) announcing the end of its probe into the Anglo Leasing scandal in which Kenyan taxpayers are believed to have lost Sh54 billion in 18 shady contract deals. Five companies, including Euromarine, which is not a constructor, were identified in May 2004 as having tendered. Euromarine was awarded the contract for Sh4.1 billion (euros 51,997,000).

Last week Spanish Defense minister Carmen Chacon Piqueras visited Kenya and said her country was ready to release the ship.

The negotiations went into high gear following the release of a Pricewaterhousecoopers (PWC) report on the 18 Anglo Leasing contracts in which PCW recommended that the government renegotiate with Euromarine to pay them 40 million euros (Sh3.1 billion) and not the 51 million euros (Sh4.1 billion) it committed to in 2003. The report says the selection process was seriously flawed and that Euromarine’s bid was not the best.

In February 2008 Euromarine, linked to Sri Lankan tycoon Anura Pereira, wrote to the head of public service Francis Muthaura complaining that the government was stalling on payment and threatening to sell the vessel. 

Spain’s ambassador to Kenya Nicolas Martin Cinto declined to comment by telephone; his secretary said he would not be available until Monday. 

Department of Defence (DoD) spokesman Bogita Ongeri also declined to comment on the issue.