The Lake Basin Development Authority (LBDA) and a property developer are locked in a court battle over a Sh475 million arbitration award arising from a dispute over the construction of Lake Basin Mall in Kisumu.
LBDA is seeking permission from the Court of Appeal to file a late appeal challenging a High Court judgment that upheld an arbitral award ordering it to pay Erdemann Property Limited the amount.
The dispute stems from a 2013 agreement under which Erdemann was to build the mall for Sh2.45 billion. The contract sum later rose to Sh3.86 billion amid disagreements over financing and payments.
In February 2024, an arbitrator ordered LBDA to pay Erdemann Sh344.5 million, plus interest at 14 percent annually from the start of arbitration. Accrued interest stood at Sh107.7 million when the award was issued. The arbitrator later assessed costs at Sh23 million.
The principal and accrued interest totalled about Sh452.3 million at the award date. With costs, the sum rose to Sh475.3 million, before further interest. The principal attracts about Sh132,175 in daily interest until payment.
LBDA asked the High Court to set aside the awards, alleging that the arbitrator ignored crucial evidence, shifted the burden of proof and was biased. It argued that the decision exposed tax-payers to an unjustified financial burden.
The State agency said the award was inimical to the national interest and contrary to public policy. It accused the arbitrator of displaying open bias against the authority.
LBDA relied on an expert report which found, after reviewing bank statements, no basis for the interest claimed on Erdemann’s loans.
The authority questioned whether Erdemann used loans obtained from Development Bank, Kenya Commercial Bank and Co-operative Bank to finance the mall’s construction. It argued that the developer’s bank statements showed transactions unrelated to the project and did not establish how the borrowed money was spent.
LBDA said Erdemann had not produced payment vouchers, local purchase orders, subcontractors’ receipts or other records linking the loan disbursements to specific construction costs.
The authority told the court that Erdemann had received Sh4.51 billion from the Exchequer and Co-operative Bank, exceeding the revised contract sum. It cited a Sh4.14 billion final account and said the architect had certified full payment. It further argued that the amount paid exceeded both the Sh3.86 billion contract sum and the Sh4.13 billion final account certificate submitted by the quantity surveyor.
However, Erdemann said LBDA was asking the court to re-examine the merits of the arbitration. Managing director Zeyun Yang said both parties had been allowed to call witnesses, cross-examine them and present documents. He argued that LBDA had identified no issue decided outside the arbitration agreement.
The court dismissed LBDA’s challenge on January 27, 2026, and allowed Erdemann’s application to have the awards recognised and enforced as a High Court judgment. The judge said the com-plaints concerned the assessment of evidence and did not constitute grounds for setting aside an award under the Arbitration Act.
‘The fact that public funds are involved and that the outcome imposes a financial burden on the taxpayer, without more, does not bring the award within the definition of a public-policy violation,’ the court said.
Dissatisfied with the decision, LBDA moved to the Court of Appeal, seeking more time to apply for permission to challenge the judgment.
The Court of Appeal referred the application to a full bench to avoid conflicting decisions. The application is awaiting hearing.