What you need to know:
- KRU was set to receive Sh607 million from SportPesa over five years from 2016.
- The firm terminated the deal and wound up operations after the introduction of a betting tax of about 35 per cent.
Embattled gaming firm SportPesa wants the government to pay Sh417 million to the Kenya Rugby Union (KRU) following the suspension of its business license.
The company has argued in court that the introduction of more taxes in the industry forced it out of business and botched a sponsorship deal with the sports federation.
Through its parent firm, Pevans East Africa, it has asked the High Court to stop the enforcement of an arbitration award of Sh417 million to KRU, the balance of a sponsorship contract terminated in 2019.
The firm’s legal representatives, Iseme, Kamau & Maema Advocates, have called for the suspension of the award. They also want Attorney-General Paul Kihara Kariuki to be enjoined in the suit.
KRU was set to receive Sh607 million from SportPesa over five years from 2016, but the firm terminated the deal and wound up operations after the introduction of a betting tax of about 35 per cent.
SportPesa now argues that the government caused it to terminate sponsorship deals, “hence should be compelled to chip in on compensation claims arising from the adverse action”.
Under the deal, any party seeking to terminate the sponsorship was required to give notice of at least 30 days. SportPesa, however, gave sports federations and clubs it had sponsored a three-day notice.
In a move that further irked the KRU, SportPesa took out a paid advertisement in a local daily newspaper to claim that it had paid the federation Sh600 million.
KRU dismissed SportPesa’s claim, arguing that the government was not party to the sponsorship contract signed in 2016.
The union’s award in the arbitration has left SportPesa exposed as it could open the door for several other federations and sports clubs, whose contracts were abruptly terminated, to claim millions.
“Since the introduction of the betting tax by the national government, which was beyond control of Pevans East Africa resulted in the incident of force majeure, the national government should be held wholly or jointly liable for the consequent termination of the agreement.
“The joinder of the intended second respondent is necessary to enable this honourable court determine the real issues in controversy between the parties and effectually and completely adjudicate upon and settle all questions involved in these proceedings,” SportPesa chief legal officer Robert Macharia said in court papers.
Through lawyer Brenda Karanja, the AG argued that he was not party to the contract between SportPesa and KRU, “hence has no business being in a dispute arising from the botched deal”.
KRU lawyer, Jared Orare, said the government was neither a party, nor witness, in the arbitration proceedings, “hence has no place in the court proceedings for adoption and enforcement of the Sh417 million award”.
Mr Orare said when the parties appeared before the sole arbitrator, Mr Wilfred Mutubwa, there was no attempt to enjoin the government.
“There is no provision in the Arbitration Act to enjoin a third party in proceedings at enforcement stage when such third party was neither a party nor witness in arbitration proceedings. The application (by SportPesa) is contrary to public policy which demands finality in arbitration proceedings,” Mr Orare stated.
“A lot of prejudice will be occasioned to the KRU if the application was to be allowed, since Pevans East Africa has employed every effort geared towards denying it (KRU) the fruits of the award.”
Dr Mutubwa ruled on November 20 last year that SportPesa had violated the sponsorship by failing to give the required 30-day notice.
Iseme, Kamau & Maema Advocates insisted that the sponsorship deal did not provide for consequences of giving an irregular termination notice. Dr Mutubwa held that courts and tribunals have a duty to offer reprieve when contract breaches, like irregular termination, occur.
SportPesa had not challenged the arbitration decision by the close of the legally allowed appeal period of three months. KRU filed an application seeking to recognise the arbitration award as a court judgment.
Justice Alfred Mabeya will on October 28 determine whether to allow KRU’s application, or enjoin the AG in proceedings.