KIU to pay bank sh6.8b

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Kampala International University (KIU) has lost a bid to block the payment of shillings 46.8 billion to Housing Finance Bank.

The university had challenged the enforcement of an arbitral award issued in Kenya, arguing that the arbitration process was flawed and its enforcement in Uganda would contravene public policy.

This followed Housing Finance Company Ltd’s pursuit of recognition and enforcement of the award in Uganda under the New York Convention.

In a ruling dated March 10, 2025, Justice Stephen Mubiru of the Commercial Division of the High Court ruled that the bank is entitled to recover the awarded sum.

The judge ruled that the arbitral award handed down in Nairobi, Kenya between the parties by Collins Namachanja on September 17, 2019, is recognised and is to be enforced in the same manner as a judgement, order, or decree of the Commercial Court.

KIU was directed to pay the bank $12,767,503 (about shillings 48.8 billion) within 30 days from the date the award was taken up by either party, along with interest at a 9.5% annual rate, computed from January 16, 2018, until full payment is made.

Citing Section 36 of the Arbitration and Conciliation Act, the judge explained that where the time for making an application to set aside the arbitral award has expired, or if such an application has been made and refused, the award must be enforced in the same manner as if it were a decree of the court.

“The bank having met the statutory requirements for enforcement of the foreign award, and the objections to its recognition and enforcement having been dismissed, this court allows Arbitration Cause No. 38 of 2024, with costs,” Mubiru ruled.

Furthermore, the court held that enforcement cannot be denied on public policy grounds unless the award is fundamentally unjust.

Background

Court documents indicate that in 2010, KIU commenced a project to expand 15 existing facilities and construct new ones, including lecture rooms, administration blocks, hostels, dining facilities, library and staff accommodation, at its university campus in Kitengela, Kajiado County, Kenya.

To partially finance the construction, KIU sought funding of $15 million (about shillings 55 billion) from the Housing Finance Company of Kenya.

However, the company could only raise $10m (about shillings 36.6 billion) and initially proposed syndicating the facility with another financial institution to fund the remaining $5m (about shillings 18.3 billion).

Eventually, the company persuaded KIU to revise the project’s scope to fit within the available funding of shillings 36.6 billion.

The loan facility was subject to a first charge over the university’s immovable properties, comprising 62 acres in Kajiado/Kaputiei, Kenya, registered in its name, as well as its escrow account for receiving university income and various guarantees.

All agreed securities were executed in favour of the Housing Finance Company of Kenya.

According to court documents, the parties agreed that loan disbursement would be tied to project implementation progress, with payments made directly to contractors/suppliers, and service providers upon presentation of certificates for completed works or rendered services.

The construction period was estimated to last 18 months, with a 21-month loan grace period for principal servicing during project implementation. Upon expiry of the 21-month grace period, the facility would be converted into a 15-year long-term facility.