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Heineken gets Sh250m bank guarantee as it fights Kiuna’s claim
Bottles of Heineken beer displayed at a bar. Heineken has secured a Sh250 million bank guarantee, halting payment of disputed interest on a Sh1.47 billion award pending appeal.
Dutch brewer Heineken has secured a Sh250 million guarantee from Equity Bank, enabling it to suspend the payment of disputed interest on a Sh1.47 billion compensation award to businessman Ngugi Kiuna’s Maxam Limited in a long-running distributorship fallout.
The Court of Appeal on May 29 granted Heineken a conditional stay of execution, directing the brewer to furnish a Sh250 million bank guarantee in favour of Maxam within 30 days, pending the hearing and determination of its appeal.
The dispute stems from the termination of a distributorship agreement in January 2016, for which the courts found Heineken liable to compensate Maxam.
In issuing the guarantee, Equity Bank stated that it would remain valid until the earlier of payment of any amount demanded under it or the determination of Heineken's appeal.
"This guarantee will automatically become null and void upon the earliest of payment by us of the amount demanded hereunder or upon pronouncement of the Court of Appeal's judgment in favour of our customer's appeal, without any further act or declaration on the part of the beneficiaries being required, and we shall no longer be bound under this guarantee," the bank said.
At the centre of the latest appeal is whether interest should be included in the compensation awarded to Maxam.
The distributor successfully persuaded the High Court to include interest in the final payout, a move disputed by Heineken, which argues that interest was not pleaded or awarded in the original judgments delivered by the High Court in 2019 and the Court of Appeal in 2024.
According to the brewer, the inclusion of interest would increase the amount payable from Sh1.47 billion to more than Sh1.7 billion.
In its intended appeal, Heineken maintains that interest cannot be added to the damages because the issue was never pleaded, considered or awarded during the original proceedings and was only introduced after judgment.
A three-judge bench of the Court of Appeal agreed that the brewer had raised an arguable issue deserving consideration.
"In the result, we are persuaded that this is an appropriate case for the grant of a conditional stay," the judges said while directing Heineken to provide the Sh250 million bank guarantee as security.
The dispute arose after Maxam Ltd and its sister companies—Uganda's Modern Lane Ltd and Tanzania's Olepasu Ltd—sued Heineken East Africa Import Company Ltd and Heineken International B.V over the cancellation of distributorship agreements entered into in May 2013.
The distributors argued that by the time the contracts were terminated, they had made substantial financial investments that were rendered worthless by the cancellation.
According to Maxam, it had entered into binding agreements with third parties for warehousing, logistics and delivery services, significantly expanding Heineken's market presence and boosting the brand's profitability in the region.
Through its advocate, the company accused the brewer of unilaterally terminating the agreements on flimsy, selfish and malicious grounds.
Mr Kiuna argued that the termination was intended to edge Maxam out of the business, deprive it of income and pave the way for new distributors to take over the contracts under more favourable commercial terms.
Last November, the High Court dismissed Heineken's application challenging the computation of the decree and allowed Maxam's request to include interest in the compensation award.
Heineken has maintained that the additional interest would substantially increase its financial liability. The brewer also argued that Maxam is no longer operational and would be unable to refund the disputed amount if the appeal succeeds.
It further contended that enforcing the decree before the appeal is heard would expose the company to irreparable financial and reputational harm, including the risk of insolvency proceedings.
