Court stops Sh1bn payment to Thiba dam contractor as state challenges award

The Court of Appeal has halted the payment of more than KSh1 billion to the German company that constructed Thiba Dam in Kirinyaga County, pending the determination of a legal dispute between the contractor and the National Irrigation Authority (NIA).

The ruling follows a challenge by the State agency against a High Court judgment that awarded Strabag International GmbH the disputed amount arising from disagreements over the implementation of the KSh8.2 billion irrigation project.

In a decision delivered on October 16, 2026, a three-judge Court of Appeal bench granted the Authority’s application to suspend execution of the High Court decree, finding that its intended appeal raised arguable legal issues and that recovering the money could prove difficult if the appeal succeeded.

The dispute dates back to May 2023, when Strabag filed a case seeking payment based on five decisions issued by a contract Dispute Board appointed in May 2019.

The contractor maintained that the decisions were binding and required prompt payment unless they were subsequently revised through settlement or arbitration.

The National Irrigation Authority challenged four of the five decisions, arguing that it had issued notices of dissatisfaction in 2021 and that the contractual dispute resolution process required further engagement before arbitration.

However, the High Court ruled in favour of Strabag on April 19, 2024, entering summary judgment after finding that the Authority had failed to invoke the arbitration process at the appropriate stage of the proceedings.

The Authority subsequently moved to challenge the judgment, arguing that the High Court had overlooked its notices of dissatisfaction and that its defence raised issues that deserved a full hearing.

In considering the application, the Court of Appeal examined whether the Authority had presented an arguable case and whether enforcing the payment before the appeal was determined could make it difficult to recover the money.

The judges expressed concern that the contractor was an international company and that transferring the substantial payment outside Kenya could complicate recovery if the State eventually won the appeal.

Strabag opposed the application, arguing that it had assets in Kenya that could be used to repay the money if the government’s challenge succeeded. It presented a valuation placing the market value of its vehicles and construction equipment in the country at approximately KSh425.3 million.

However, the judges found that the valuation did not establish whether the assets were free from encumbrances, would remain in Kenya or could realise their stated market value. The company also referred to land and buildings in Nairobi, but the court said sufficient property details, title documents and valuations had not been provided.

The court also rejected a proposal by Strabag for the Authority to deposit the disputed amount in a joint interest-bearing bank account, noting that this would tie up public funds while the appeal remained pending.

The decree comprises awards in euros and Kenya shillings, financing charges, interest and costs, cumulatively exceeding KSh1 billion.

Thiba Dam was completed in April 2022 at a contract price of KSh8.2 billion. The 40-metre-high and 1.1-kilometre-long structure has a storage capacity of 15.6 million cubic metres and was developed to improve water supply to the Mwea rice irrigation scheme.

According to the National Irrigation Authority, the project has supported an expansion of irrigated land in Mwea from 25,000 to 30,600 acres, benefiting approximately 14,850 farmers.

The dam was intended to provide more reliable water for rice production throughout the year, expand cultivated land and support farmers in growing two crops annually.

The latest court decision does not overturn the original High Court judgment or finally determine the contractor’s payment claim. Instead, it suspends execution of the decree until the Court of Appeal hears and determines the Authority’s substantive appeal.

The outcome will determine whether the earlier award to Strabag stands and how the outstanding contractual dispute over the irrigation infrastructure project is resolved.