Heineken has been ordered by a court in Kenya to pay KES 1.8 billion (USD 12.6 million) in special damages to its former distribution partner Maxam Limited after the Court of Appeal upheld a previous ruling that found the Dutch beer maker in breach of the Kenya Distribution Agreement.
Heineken had appointed Maxam as its exclusive distributor in Kenya starting May 1, 2013. On January 27, 2016, the Dutch company sent a termination notice, which was contested by Maxam. The distributor argued that the termination was invalid due to the lack of proper notice and reasons as required by the agreement. Additionally, the agreement automatically extended yearly, with the first extension on June 1, 2016.
Heineken appealed the High Court's ruling, arguing that the damages awarded were excessive and that the judge failed to consider the terms of the distribution agreement. Heineken also claimed that the judge was incorrect in determining that Maxam had a legitimate expectation that the agreement would not be terminated. (inside.beer, 14.8.2019)
The appellate court has now affirmed the High Court's January 2016 decision, declaring Heineken's termination of its distribution agreement with Maxam as unlawful and unprocedural. Heineken East Africa and Heineken B.V were held liable for the breach.
The court highlighted that there was no direct contract between Maxam and Heineken International B.V, which issued the termination notice from the Netherlands, making the notice invalid. The judges ruled that the termination letter could not be accepted as valid evidence and that the Kenya Distribution Agreement was still in effect as of January 27, 2016.
The appellate judges considered Maxam Ltd's valuation report, which outlined the loss of business if Heineken discontinued the distributorship. They concluded that Maxam Ltd was entitled to a share of Heineken's profits from the sales it made and found no reason to question the KES 1.8 billion awarded in 2016.
Maxam was founded in October 2006 as the sole distributor of Heineken beer in Kenya. Initially, Heineken was introduced in Kenya in 2004 but did not achieve the expected growth. In 2011, together with Heineken International, Maxam expanded the business beyond Kenyan borders and established the brand's presence in the rest of the East African region.
