Nairobi — A contract dispute over oil processing between local companies has found its way to a court in Britain.

Kobil Petroleum Ltd and Kenya Oil Company Limited have filed an application for appointment of an arbiter after Kenya Petroleum Refineries Ltd (KPRL) gave them a 12-month notice to terminate a contract for processing oil.

According to the suit filed at the High Court of Justice, Queen's Bench Division Commercial Court, the parties signed two contracts for processing of oil with KPRL on October 1, 1979 and June 15, 1966.

However, on July 10, 2009, the KPRL threatened to terminate the contracts by giving a 12-month notice.

Kenol and Kobil contested the move, saying it amounted to breach of contract.

They suggested that an arbiter be appointed to resolve the matter amicably, but this did not happen.

Consequently, the companies filed a case before the Milimani Commercial Courts but it was dismissed on technical grounds.

Lady Justice Martha Koome held that the application was defective because it was based on Kenyan law and not English law which is provided for in the agreement signed between the parties.

Kobil had also sought the appointment of an arbiter to hear the dispute with the oil processor and determine it.

But the court declined because the qualifications of the suggested candidates were not provided to guide the court on whom to appoint.

Following this decision the two companies then moved to Britain to lodge their case.

On September 2, the High Court of Justice in Britain ordered the two companies to be given permission to issue an Arbitration Claim Form and serve it on the Kenya Petroleum Refineries.

The court also gave Kenya Petroleum Refineries 22 days within which to indicate whether it has been served with suit papers.

KenolKobil is one of the biggest petroleum dealers in Kenya.