Uganda sues Kenya over oil importation deal

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Uganda sues Kenya over oil importation deal

The government of Uganda has taken legal action against Kenya regarding the recent deadlock concerning the petroleum oil importation agreement from the Mombasa port. 

This comes after Kenya rejected a plea for the Uganda National Oil Company (UNOC) to register as a local oil marketing company, enabling it to utilize the Kenya Pipeline Company (KPC)’s network for the transportation of fuel destined for Uganda. 

In a petition submitted to the East African Court of Justice, Uganda, represented by its Attorney General, alleges that the Kenyan government has imposed impractical restrictions, hindering access to Kenya’s pipeline system for the transportation of its petroleum products from the Port of Mombasa.

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Uganda is additionally alleging that Kenya has violated multiple articles outlined in the EAC Treaty and the Protocol for the Establishment of the East African Community Common Market.

 Specifically, the landlocked nation asserts that, in accordance with the EAC, it is not obligated to obtain a license from the Energy and Petroleum Regulatory Authority (EPRA) to utilize the Kenya Pipeline Company (KPC) system for the transportation of petroleum products.

Furthermore, Uganda has accused the Kenyan Attorney General of impeding the Energy and Petroleum Regulatory Authority (EPRA) from granting a license to the Uganda National Oil Company (UNOC) for the importation of oil from Mombasa to Uganda.

Uganda’s plea

Uganda is pursuing multiple declarations, including the assertion that the limitations imposed by the Energy and Petroleum Regulatory Authority (EPRA) and a court order secured from the High Court in Kenya towards the end of last year, which restrained the regulator from issuing a license to the Uganda National Oil Company (UNOC), violate the articles outlined in the EAC Treaty.

“A declaration that the Republic of Kenya shall accord unconditionally, to UNOC, a service supplier of the Republic of Uganda commercial terms for the use of the Kenya Pipeline Company system no less favourable than it accords to like service suppliers of other partner State or any third party,” the reference stated.

Uganda is additionally seeking a declaration that the Republic of Kenya’s prohibition on granting any waiver of licensing requirements for the license contravenes the Articles of the Treaty for the Establishment of the East African Community, as well as Articles 3(2), 4(2)(a), 5(1), 18, and 38 of the Protocol.

“We import approximately 90 per cent of its refined Petroleum products through the Port of Mombasa in Kenya and the products are transported to Uganda using the pipeline owned and operated by the Kenyan Pipeline Company Limited (KPC),” Uganda AG states in the lawsuit papers.

Uganda argues that the historical process of importing and supplying refined petroleum products to its territory has conventionally been managed by Oil Marketing Companies (OMCs) based in Kenya, facilitated through the Kenya Open Tender System (OTS). 

Subsequently, this process evolved to include Government-to-Government arrangements between Kenya and foreign governments, a system adopted by Kenya in early 2023. 

According to this arrangement, OMCs in Kenya import petroleum products and then distribute the same products to Uganda’s Oil Marketing Companies (OMCs).

“The complete reliance and dependency on Kenyan OMCs to import and supply petroleum products to Uganda have exposed the Republic of Uganda to supply vulnerabilities resulting in an avoidable increase in fuel pump prices,” Uganda states in court documents.

Furthermore, the Ugandan government discloses that it underwent a significant policy shift in the approach to sourcing, importing, and supplying petroleum products for the Ugandan market. In alignment with this shift, Uganda designated its National Oil Company (UNOC) as the exclusive importer and supplier of all petroleum products for the Ugandan market.

Subsequently, around April 2023, Uganda initiated discussions with Kenyan authorities regarding the new policy governing the sourcing, importation, and supply of petroleum products intended for the Ugandan market. The Kenyan authorities, adhering to the principles and provisions outlined in the Treaty and Protocols, assured the Ugandan authorities of Kenya’s steadfast support in the implementation of this policy.

“Upon engagements with the relevant authorities in Kenya, UNOC sought to enter into a Storage and Transportation Agreement with KPC. Consequently, UNOC was required by the Respondent to meet certain regulatory requirements including obtaining an Import, Export and Wholesale of Petroleum Products (except LPG) Licence (hereinafter referred to as “the Licence”) from EPRA to utilize the petroleum transit infrastructure in Kenya, especially the Kenya Pipeline systems in furtherance of the new Ugandan policy,” Ugandan AG states.

The Ugandan government expresses its view that the requirements imposed were an unnecessary obstacle to the implementation of its petroleum policy, emphasizing that the petroleum products in question were exclusively transit goods not intended for Kenya.

Despite objections, the Uganda National Oil Company (UNOC) reluctantly registered a branch in Kenya with the sole purpose of fulfilling the licensing requirement to import all petroleum products for the Republic of Uganda under the revised policy.

Upon registration, the Energy and Petroleum Regulatory Authority (EPRA) demanded several documents and compliance with various conditions for processing and issuing the license. These conditions included a certificate of incorporation, CR12 from the Registrar of Companies, identity cards or passports for all directors, valid work permits for foreign directors in Kenya, and a valid tax compliance certificate from the Kenya Revenue Authority (KRA).

Additional requirements comprised proof of financial capability, either through evidence of operations in Kenya as a wholesaler with an annual sales volume of 6,600 cubic meters of specified petroleum products or certified audited accounts for the past three years indicating an annual turnover of US$10 million.

On September 30 of the previous year, EPRA rejected UNOC’s license application, citing alleged failure to demonstrate the annual sale of 6.6 million liters of fuel, ownership of five licensed retail petrol stations, and ownership of a licensed petroleum depot.

In response, the Ugandan Minister of Energy and Mineral Development, on behalf of UNOC, requested a waiver of certain requirements for the license, deeming them not applicable, practical, or rational. The Kenyan Cabinet Secretary, Ministry of Energy and Petroleum, indicated an intention to present UNOC’s waiver request to the Kenyan Cabinet for consideration.

Following the Cabinet’s decision, the Cabinet Secretary requested EPRA to urgently review and align the petroleum import logistics arrangement in light of Uganda’s policy shift.

On November 7, 2023, a petition was filed in the High Court of Kenya at Machakos while UNOC’s reapplication remained pending with EPRA for over two weeks after resubmission.

“The High Court of Kenya at Machakos on 7 November 2023 without according the Applicant and/or UNOC a hearing, inter alia, issued conservatory orders restraining EPRA from granting an Import, Export and Wholesale of Petroleum Products (Except LPG) licence to UNOC”, the court documents read.

Additionally, the interim orders issued on November 7, 2023, which included restraining the Energy and Petroleum Regulatory Authority (EPRA) from granting a license to the Uganda National Oil Company (UNOC), were first extended from December 6, 2023, to December 19, 2023. Subsequently, on December 19, 2023, these orders were further extended to January 22, 2024.

Uganda asserts that throughout the relevant period, it consistently sought the intervention of the Republic of Kenya to prevent its state organs from violating the principles and provisions of the Treaty and Protocols.

Uganda contends that, as a landlocked country, it possesses the right, as stipulated in the Treaty for the Establishment of the East African Community and the United Nations Convention on the Law of the Sea (to which the Republic of Kenya is a signatory), to access to and from the sea and freedom of transit through the territory of Kenya using all means of transport.

“The actions of EPRA in requiring UNOC to provide several documents and meet a raft of requirements in order for EPRA to issue the Licence is an action of the State for which the Respondent is responsible,” Ugandan AG states.

The landlocked country adds that ” the actions of the Judiciary of the Republic of Kenya in issuing the conservatory orders restraining EPRA from granting the Licence to the Applicant amounts to an action of the State for which the Respondent is responsible.”

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Uganda sues Kenya over oil importation deal

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