A Kenyan engineering firm has accused Lebanese-owned construction company Zakhem International of using insolvency proceedings to frustrate its efforts to recover KSh2.26 billion for civil works undertaken during the replacement of the Mombasa-Nairobi oil pipeline.
Oilfields Engineering & Supplies Limited argues that Zakhem's petition to liquidate it over an alleged KSh75.87 million debt is intended to weaken its ability to pursue a much larger claim arising from the same infrastructure project.
The dispute dates back to a subcontract agreement signed on November 17, 2015, under which Oilfields was engaged by Zakhem to undertake civil works during the replacement of the 450-kilometre petroleum pipeline operated by Kenya Pipeline Company (KPC).
The two companies subsequently disagreed over payments, prompting arbitration proceedings that culminated in a final award published on June 30, 2021.
The arbitrator directed Zakhem to pay Oilfields US$17.41 million, equivalent to approximately KSh2.26 billion, excluding interest, taxes and arbitration fees.
Oilfields subsequently approached the High Court seeking recognition and adoption of the award, while Zakhem challenged it and sought to have it set aside. The dispute over enforcement remains before the courts.
In its latest application, Oilfields says Zakhem's liquidation petition, filed on September 15, 2025, amounts to an attempt to settle a commercial dispute through insolvency proceedings rather than allow the larger claim to be determined.
The Kenyan firm also accuses Zakhem of failing to disclose material information, including the arbitration award and previous court orders intended to preserve funds owed to the contractor by KPC.
On August 31, 2023, the High Court issued orders restraining KPC from releasing US$31.3 million held in favour of Zakhem pending determination of the related arbitration applications.
Oilfields argues that the preserved funds provide security against which it could pursue recovery of its award.
The company further maintains that it is solvent and that its assets, including its entitlement under the arbitration award, exceed its liabilities. It disputes Zakhem's claim that it failed to meet a statutory demand and says it was not properly served with the liquidation petition and related court notices.
Zakhem, however, maintains that Oilfields owes it KSh75,866,678.67 in legal costs arising from earlier proceedings. It says the amount was taxed by the court and confirmed through a certificate issued on April 29, 2025.
The contractor argues that it demanded payment and subsequently served a statutory demand, which Oilfields failed to satisfy within the required period. It is asking the court to liquidate the engineering firm and appoint an insolvency practitioner to oversee its assets.
Oilfields wants the liquidation proceedings stayed and the petition dismissed, arguing that it has a genuine and substantial counterclaim exceeding the alleged debt. Alternatively, it wants Zakhem ordered to deposit US$31.3 million as security for costs.
The liquidation dispute is scheduled for a hearing on November 26, 2026.
The case adds another chapter to the prolonged legal battles surrounding the Mombasa-Nairobi pipeline, one of Kenya's major petroleum infrastructure investments. Its outcome could determine whether Oilfields remains able to pursue the multibillion-shilling arbitration award or faces insolvency proceedings before the underlying payment dispute is resolved.
