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Kenya prevails in lengthy legal case against cancellation of geothermal license

Valley view at Suswa, Kenya (source: flickr/ Wajahat Mahmood, creative commons)
Alexander Richter 19 Jul 2020

Kenya has won a legal case following the cancellation of the license for geothermal development at Suswa, Kenya in 2012. Canadian WalAm Energy brought the case against the Republic of Kenya aiming to reinstall the license.

The Republic of Kenya has prevailed in an ICSID international arbitration case, WalAm Energy Inc. vs the Republic of Kenya at the Washington based International Centre for Settlement of Investment disputes. This was announced in a press release by Kenya’s Attorney General.

The arbitration was filed by WalAm Energy Inc, a United States/ Canadian geothermal company headquartered in Canada. The dispute relates to Suswa geothermal fields and was filed in ICSID in February 2015. The hearing took place in London in May 2018.

WalAm Energy Inc. sued the Government following the cancellation of its Geothermal Resources Licence. WalAM Inc. contended that the Government of Kenya unlawfully revoked the Geothermal Resources Licence thereby breaching its obligations under the Geothermal Resources License and the Geothermal Resources Act, including, the unlawful expropriation and the violation of the minimum standard of treatment of foreign investors.

WalAM Energy Inc. sought to have the Geothermal Resources Licence reinstated and also sought compensation amounting to US$ 339.6 million ( Kshs 37 Billion) and interest for expropriation.

The Geothermal Resources License had been issued by the former Minister for Energy, Hon. Kiraitu Murungi on 5th September 2007 under the Geothermal Resources Act of 1982. It granted WalAm Energy Inc. exclusive rights to explore, drill for, extract, produce and dispose geothermal steam and other geothermal resources in the Suswa area for a period of thirty years.

However, in October 2012, the Government revoked the license after establishing that WalAm Energy Inc. had not performed its duties under the license and did not have capacity to undertake the required exploration and exploitation work.

The Tribunal in an award dated 10 th July 2020 thus decided as follows:

  • (1) All of WalAm’s Energy Inc. claims are dismissed; and
  • (2) That WalAm Energy Inc. shall bear its own legal fees and expenses and the entirety of the costs of the arbitration.

WalAm shall therefore pay the Government of Kenya US$648,857.75 ( Kshs 70,067,637) corresponding to its share of the costs of the arbitration.

WalAm shall also reimburse 75% of the Government of Kenya’s legal fees and expenses in the amount of EUR 3,586,039.28 (Kshs 441,082,797 ) and US$252,262.82 (Kshs 27,244,384.60)

The implication of this ruling is that the Ministry of Energy and the Geothermal Development Company (GDC) are now at liberty to exploit the geothermal resources in the Suswa Geothermal fields and grow the energy capacity of Kenya.

The Republic of Kenya was represented by The Office of the Attorney General, InHouse Legal Team comprising; The Attorney General Hon. P. Kihara Kariuki, Solicitor General, Mr. Kennedy Ogeto, Senior Deputy Solicitor General, Ms. Muthoni Kimani, Deputy Solicitor General, Ms. Njeri Wachira, Deputy Chief State Counsel, Ms. Pauline Mcharo , Senior State Counsels, Ms. Victoria Munyi and Mr. Charles Wamwayi, Freshfields Bruckhaus Deringer, Paris and Mr. Evans Monari and Mr. Njogu of Coulson Harney LLP.

Source: Government of Kenya Press Release