Safaricom has gone to the High Court to have a Sh944.5 million arbitration award to Popote Innovations Ltd set aside. The software developer alleged that Safaricom breached a partnership agreement and the disputed revolved around the unauthorized use of features from a proposed payment application that Safaricom later launched its own M-Pesa apps with similar functionalities.

Background of the Dispute

The case is based on an agreement between Safaricom and Popote Innovations Ltd in 2017. Popote developed a payment application that was to be white-labeled and deployed for Safaricom’s M-Pesa users, small-scale traders and businesses using Lipa na M-Pesa. The deal included revenue-sharing from transaction fees charged to users.

But Safaricom opted out of the partnership citing a change in business strategy. Despite this, Popote Innovations claimed Safaricom later launched two applications—the M-Pesa Consumer App and the M-Pesa Business App—mirroring the features of its software.

The Arbitration Ruling

The dispute was taken to arbitration and sole arbitrator Paul Ngotho ruled in favour of Popote Innovations. The arbitrator awarded:

  • Sh39.2 million for the work done by the developer.

  • Sh902.7 million as shared revenue for the applications.

  • Sh2.5 million to cover legal and case costs.

Safaricom never signed the agreement but the arbitrator deemed the partnership valid and binding.

Safaricom’s Argument Against the Award

Safaricom is contesting the award and argue that:

  • The agreement was never formalized as it was not signed by Safaricom.

  • The original revenue model was based on monthly subscriptions and transaction fees but the M-Pesa apps launched in 2021 were an extension of existing services.

  • Popote Innovations was fully compensated for development costs before Safaricom opted out of the agreement.

  • Popote Innovations was not involved in creating or deploying the M-Pesa Consumer App and M-Pesa Business App.

Additionally, Safaricom claims Popote Innovations was trying to unjustly benefit from a project it had no investment in. The company says the apps launched in 2021 were fundamentally different from the partnership project.

Legal Ramifications and Industry Implications

This raises questions on intellectual property, contracts and corporate partnerships in the Kenyan tech industry. A big question is whether an unsigned agreement can be considered legally binding as per the arbitrator. If upheld, this could set a precedent for future disputes between tech companies and business collaborations.

Also Safaricom’s appeal highlights the risks companies take when entering into informal agreements with software developers. This also shows the evolving legal landscape around fintech in Kenya.

What’s Next?

Safaricom is waiting for the High Court to rule on their petition to set aside the arbitration award. If the court upholds the arbitrator’s decision, Safaricom will have to pay the nearly Sh1 billion to Popote Innovations. But if the court sides with Safaricom, this could be a game changer on how tech partnerships are handled in Kenya’s legal system.

As the case unfolds, industry players will be watching closely given the industry implications.