Uganda sues Kenya over ‘unrealistic restrictions’ to access Kenya Pipeline system

Uganda has accused Kenya of placing unrealistic restrictions to the Uganda National Oil Company (UNOC) in order to access the Kenya Pipeline Company (KPC) system to transport its petroleum products from the Port of Mombasa.

In a case filed at the East African Court of Justice, Uganda’s Attorney General accuses Kenya of breaching various articles establishing the EAC Treaty and the Protocol for the Establishment of the East African Community Common Market.

Uganda says in the reference to the EACJ that it does not require a license from Energy and Petroleum Regulatory Authority (EPRA) to access the KPC system to transport petroleum products.

Among the orders sought by Uganda is a declaration that restrictions placed by EPRA and a court order obtained from the High Court in Kenya, late last year, blocking the regulator from issuing the license to UNOC, contravening articles establishing 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 imports 90 percent of her refined petroleum products through the Port of Mombasa and which is transported by KPC.

The products have been traditionally handled by Oil Marketing Companies operating in Kenya through the Kenya Open Tender System (OTS) in the government-to-government arrangement between Kenya and Uganda. The OMC in turn sell the products to Uganda’s OMCs

Uganda, a landlocked country says the complete reliance on Kenyan OMCs to import and supply petroleum products has exposed her to supply vulnerabilities resulting in increase in fuel pump prices.

Late last year, Uganda made a policy shift in the manner in which it sources, imports and supplies petroleum products by empowering UNOC, a state corporation to be the sole importer and supplier of all petroleum products for its market.

UNOC later engaged Kenya in the new policy shift and Nairobi allegedly promised her neighbour of unwavering support in the implementation of the policy.

To roll out the plan, UNOC says it sought to enter into a storage and transportation agreement with KPC. It then required certain regulatory requirements including obtaining an import, export and wholesale of petroleum products (except LPG) license from EPRA.

The license would allow Uganda use the petroleum transit infrastructure. The regulations, according to Uganda’s Attorney General, included the incorporation of a subsidiary or registration of UNOC as a company or a branch in Kenya.

Uganda says the requirements are an unnecessary hindrance to the implementation of the policy. It, however, registered a branch in Kenya with the sole purpose of processing the license.

Court documents state that EPRA further required UNOC to provide several documents and meet a raft of requirements to facilitate the issuance of the license.

The requirements include a certificate of incorporation, CR12 from the Registrar of Companies, copies of identity cards or passports for all directors, valid work permits for all foreign directors working in Kenya and a valid tax compliance certificate from the Kenya Revenue Authority (KRA).

Others were proof of financial capability by either providing proof of operations in Kenya as a wholesaler with an annual sales volume of 6,600 cubic meters of either o a combination of premium motor spirit, automotive gasoil, Jet A1, or illuminating kerosene or certified audited accounts for the last three years indicating an annual turnover of US$10 million.

The application was rejected on September 30, 2023, over alleged failure to prove the annual sale of 6.6 million liters of ownership of five licensed retail petrol stations of ownership of a licensed petroleum depot.

Uganda’s Ministry of Energy and Mineral Development then wrote to his counterpart in Kenya requesting for a waiver of certain requirements, arguing that some of them were not applicable or rational.

But as the response was being awaited, a case was filed at the High Court and orders were granted blocking EPRA from issuing the licence.

Uganda now says the action contravenes various articles of the Treaty establishing the EAC and East African Community Common Market protocol.

“That whereas UNOC is being subjected to the Kenyan regulatory regime on licensing of importation of fuel, it is not an Oil Marketing Company and does not desire to conduct the sale of petroleum products to be consumed in the Republic of Kenya,” Mr Rashid Musa Otika, the acting general manager of the National Pipeline Company (U) ltd.

He said UNOC’s sole intention is to access and use the Kenya petroleum infrastructure in importing and supplying of petroleum products to the Ugandan OMCs.

He said Uganda has a right under the Treaty and the United Nations Convention on the law of the Sea, to which Kenya is a signatory, access to and from the sea and freedom of transit through the Kenyan territory by all means of transport.

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