Kenya & Tanzania & Uganda: Heineken loses bid to terminate contract with three African distributors for the second time

Dutch brewer Heineken has for the second time lost a bid to terminate a multibillion-shilling contract with African distributors, The Star reported on April 22.

In a ruling on April 21, Justice Eric Ogola said notices issued by the brewer purporting to terminate contracts with Kenya’s Maxam Ltd, Uganda’s Modern Lane Ltd and Tanzania’s Olepasu Ltd lack evidence and goes against their agreement.

The judge said the notice dated January 27, 2015, and letters of appointments filed by the beer maker shall not be executed pending the hearing and determination of the dispute.

He also directed the case to be mentioned on May 3, 2016, for further directions.

The distributors have sued Heineken International BV and its subsidiaries Heineken East Africa Import Company and Heineken Brouwerjen BV, claiming they were not given reasons for the termination.

Heineken has defended its decision to terminate contracts saying it acted within terms of their agreement, and did not have to give any explanations to the firms.

But the local distributors told the court the action was in bad faith.

Through their lawyer, Philip Nyachoti, the companies said they stand to lose millions in their investments considering what they have put in into the business just to ensure compliance of the agreement entered in 2013 between the parties.

Nyatochi said the parent company had no authority to cancel their licences and the notice of termination goes against the spirit of the agreement by parties.

The distributors have made massive investment in ensuring Heineken brands are distributed, as agreed, with the three East African countries, he said.

“The move by the defendants is unlawful, unprocedural, irregular and contrary to the contracts so entered”.

The distributors, the court heard, have entered into contracts with third parties to ensure availability of proper equipment for distribution of the products, and they will suffer financial loss if the notice is executed.

The court heard the three companies boosted Heineken's turnover to Sh1.8 billion in 2015 up from Sh1.4 billion, and as a result opened up and expanded the East African Market for Heineken Beer Brand Larger in the three East African countries.

22 April, 2016