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Govt risks losing its assets abroad in Anglo Leasing debt

30 April 2014, 15:31 Samuel Kisika

Nairobi - National Treasury Cabinet Secretary Henry Rotich has said that the government should honor court orders to settle the Anglo-leasing debt to forestall its assets abroad in addition to maintaining its international reputation in meeting lawful obligations.

Rotich said settling the debt will save the nation an annual penalty interest of KES 96.6 million which he noted that it would be better to pay the demanded KES 1.4 billion shillings than to defy the order thereafter pay an accrued amount of KES 20 billion arising from higher domestic interest rates.

"It is important to note that the Government has already received a notification for attachment of Government assets. Therefore, failure to pay the negotiated amounts will result in attachment of government assets abroad," warned Rotich.

The Treasury CS faulted allegations from the Opposition that Jubilee Government is the only one paying Anglo-leasing debt reiterating that Kibaki's Government resolved two cases, namely the project Nexus worth KES 1.54 billion and KES 3.74 billion for Naval Ship which were successfully negotiated  settled between 2008 and 2012.

"The Government has appealed and re-appealed the two cases and the final judgement with no further recourse to appeal was made on December 20, 2013. This period coincides with the issuance of the proposed issuance of the Sovereign Bond, whose issuance cannot take place unless all obligations related to the court awards are paid," stated Rotich.

The CS revealed that from his Ministry's records, the estimated value of 18 security contracts signed between 1997 and 2004 in Anglo-leasing contracts amounts to KES 56.3 billion which he noted the Ethics and Anti-Corruption Commission is still investigating most of them.

"The 18 contracts can be classified into three broad categories; four cancelled contracts amounting to KES 18.908 billion, three contracts fully delivered and paid for worth KES 6.795 billion, and 11 contracts partially completed amounting to KES 30.554 billion," explained Rotich.

The CS added that efforts are ongoing to recover funds worth KES 16.6 billion in six out of the 11 partially completed contracts.

He further said that the rest of five cases valued at KES 13.9 billion are partly completed contracts and have remained active.

"Two contracts amounting to KES 7.9 billion were successfully negotiated and paid off between 2008-2012; one contract is still in dispute; two contracts valued at KES 2.9 billion were subject of court process and judgement entered between 2012 in a Geneva court and 2013 in a London court," noted the CS.

Moreover, Rotich stated that the court awards in the two cases are subject of the current Anglo-leasing debate associated with First Mercantile Securities Corporation and Universal Satspace, excluding legal cost and interest accruing daily from the judgement date.

"From our elaborated record data, it is clear that the press statement that Government wants to pay KES 125 billion is not true and misleading. The true position is that the amount awarded by the court was KES 1.6 billion and after negotiations this figure was reduced to KES 1.4 billion," said Rotich.

He said the government was taken to court in Switzerland by First Mercantile Securities Corporation mandated with supply of Broadband Network facilities while the Universal Satspace mandated with Bandwidth Network Project in a 10-year contract took it to the United Kingdom court. Rotich noted that Government lost both cases, appealed and lost again then payments on the two cases were suspended in August 2004.

"There are no legal avenues left for the government as all appeals have been exhausted, and the Attorney General has advised that these amounts be paid to avoid further loss," stated the CS.

Rotich noted that the two cases are accruing daily penalty interests at the rate of USD 1 413 for First Mercantile Securities Corporation and USD 1 665 for Universal Satspace which the Government would be liable to pay an additional annual amount of KES 96.6 billion if not settled in advance.

Rotich was speaking in the National Assembly's Public Investment and Appropriation committee after being summoned to give clear information on the amount to be paid in the debated Anglo-leasing saga.

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