News & Analysis
The Regulations and Guidelines Relevant to Mining Activities in Kenya
By Dr. Kariuki Muigua, PhD (Leading Environmental Law Scholar, Natural Resources Lawyer and Dispute Resolution Expert in Kenya)*
The Mining Act, No. 12 of 2016, mandates the Cabinet Secretary responsible for Mining and Minerals Sector to make Regulations necessary or convenient for the proper administration and implementation of the law. The following Regulations have so far been passed under the Act: Mining (Dealings in Minerals) Regulations, 2017; Mining (Licence and Permit) Regulations, 2017; Mining (Work Programmes and Exploration Reports) Guidelines, 2017; Mining (State Participation) Regulations, 20I7; Mining (Use of Local Goods and Services) Regulations, 2017; Mining (Employment and Training) Regulations, 2017; and Mining (Use of Assets) Regulations, 2017. However, the following five (5) regulations are the key ones in regulating the core mining activities from licensing to dealing, state participation, exploration and use of mineral assets.
a) Mining (Dealings in Minerals) Regulations, 2017
The Mining (Dealings in Minerals) Regulations, 2017 were enacted by the Cabinet Secretary for Mining in exercise of the powers conferred by sections 100 and 223 (l) of the Mining Act, 2016. Section 100 of the Act deals with the sale of minerals won by an artisanal miner. These Regulations are to apply to the export of a mineral by a holder of a mining right; the removal of minerals by a holder of a mineral right for the purposes of sampling, assay or analysis; the holder of a mineral dealer’s licence or dealer’s permit; and the import of any mineral. However, these Regulations do not to apply to the export and import of rough diamonds.
There have been numerous reported and unreported cases of illegal dealings in extraction and/or sale of minerals in the country. These Regulations were meant to curb this illegal business and specifically spells out the duties of the holder of a mineral dealer’s licence which include to: commence or engage in the trading of a mineral in accordance with the terms and conditions of the licence within thirty days after the date of the issue of the licence; not trade in any mineral other than the mineral or minerals specified in the licence; not trade in minerals except in accordance with the terms and conditions set out in the licence; not knowingly engage in trading of a mineral with a person who has not acquired the minerals lawfully or is otherwise not lawfully entitled to deal in minerals; pay all taxes, charges or levies that are required under the terms and conditions of the licence, and keep complete and accurate records.
The Regulations, alongside the Mining Act 2016, were expected to provide more transparency and credibility for investors in solving issues affecting the mining sector in the country. These Regulations have, however, achieved little, if anything, in curbing illegal trading in minerals. This is exemplified by the continued reports of smuggling of gold and other precious stones in and out of the country It is therefore unlikely that these Regulations alone, without the support of other security institutions across the region, will curb the illegal dealings in trade. There is a need to ensure that the taxation and royalties regime is regularized and that the same is friendly not only to the multinationals but also the artisanal miners in the country as an incentive to discourage them from dealing with illegal traders in and outside the country.
b) Mining (Licence and Permit) Regulations, 2017
The Mining (Licence and Permit) Regulations, 2017 were enacted by the Cabinet Secretary for Mining in exercise of the powers conferred by sections 12 (3), 153 (3) and 223 (2), (c), (d), (g), (j), (k) and (1) of the Mining Act, 2016. These Regulations apply to all mineral rights. The Mining (license and permit) Regulations 2017 (Clause 4) provides that all applications for mineral rights shall be made through the On Line Mining Cadastre (OMC) in order for them to be considered for grant. It is a commendable step that these Regulations seek to regulate, inter alia, small-scale mining or artisanal mining operations in line with the Mining Act 2016, by granting permits. However, there is a need to ensure that the same are not used as a political tool in awarding permits for corrupt dealings in artisanal mining activities.
In addition, while the artisanal miners may smoothly get licences and permits (which will cost money to apply), there may be a funding challenge. It has been observed that acute cash shortage caused by poor linkages with the financial sectors of the economy is one of the biggest impediments to the growth of the artisanal and small-scale mining sector. This is mainly attributed to the fact that being a nascent, capital intense and high-risk sector, it is difficult for local banks to finance it. However, government intervention can go a long way in addressing the funding challenge. It is therefore not enough to regulate licensing and permits relating to mining activities in the country, there is a need to create a level playing ground for the artisanal miners by creating a funding kitty to help them competitively carry out these mining activities. Such a kitty would be similar to those in other African countries whose artisanal and small scale mining sectors are doing well such as 2017 Nigeria’s Ministry of Solid Minerals and Steel Development and the Bank of Industry of Nigeria’s N5 billion fund to provide loans and bring the sector under a structured system; and Zimbabwe’s gold fund introduced in 2016 through the Reserve Bank of Zimbabwe.
c) Mining (Work Programmes and Exploration Reports) Guidelines, 2017
The Mining (Work Programmes and Exploration Reports) Guidelines, 2017 were enacted by the Cabinet Secretary in exercise of the powers conferred by section 221 (1) of the Mining Act, 2016. These Guidelines provide guidance to applicants for, and holders of, reconnaissance licences, prospecting licences, prospecting permits and retention licences on how to prepare work programmes and exploration reports; and are to assist the Director of Geological Surveys to review work programmes and exploration reports that shall be submitted by applicants for or holders of mineral rights.
While these reports would go a long way in enhancing the right of access to information for the local people as far as the activities of the mining companies are concerned, there is no evidence of any such reports being made public since 2017 or even any being filed with the government agencies at all. As such, there is a need to ensure that these Regulations are not only enforced but also such reports should be made available to the public in light of the right of access to information as guaranteed under Article 35 of the Constitution of Kenya 2010 and Access to Information Act, 2016.
d) Mining (State Participation) Regulations, 20I7
The Mining (State Participation) Regulations, 20I7 were enacted by the Cabinet Secretary in exercise of Section 48(4) of the Mining Act, 2016. The purpose of these Regulations is to provide for State participation in prospecting or mining operations carried out by a holder of a mineral right. These Regulations apply to all applicants and holders of any mineral right by entitling the State to a ten percent free carried interest; where the State acquires any additional interest that may be agreed with the holder of a mining licence; and where the State enters into an agreement to participate in prospecting operations or activities under a prospecting licence held by a holder other than the National Mining Corporation.
In line with the Mining Act 2016, the Regulations reiterate that the National Mining Corporation shall on behalf of the State, be the investment arm of the National Government in respect of all prospecting or mining operations. In this regard, the National Mining Corporation is to hold the State’s ten percent free equity participation or free carried interest in all mining operations; is responsible for engaging in any operations relating to any additional interest that the State may acquire and which may be agreed with the holder of a mining licence at a fair market value. The Corporation may also acquire any interest in or enter into a joint venture, farm-in agreement or any other arrangement with a holder of a prospecting licence for the purpose of conducting prospecting operations.
e) Mining (Use of Assets) Regulations, 2017
The Mining (Use of Assets) Regulations, 2017 were enacted by the Cabinet Secretary in exercise of the powers conferred by Section 149(6) of the Mining Act, 2016. These Regulations shall apply to holders of mining licences requiring them to maintain a complete, up to date and accurate register of all its immovable and movable assets. These regulations, if fully enforced, can be a useful tool in fighting corruption and tax evasion by the mining companies as they seek to promote accountability and transparency on the income and expenses incurred by these companies. These Regulations, alongside other transparency and accountability measures and practices are useful for developing countries such as Kenya, where non-declaration or under declaration of profits by the multinationals has been happening. They can however work well where the authorities involved work with different stakeholders such as the revenue colleting agencies to get the actual figures.
f) Mining (Use of Local Goods and Services) Regulations, 2017
The Mining (Use of Local Goods and Services) Regulations, 2017 were enacted by the Cabinet Secretary in exercise of the powers conferred by section 223(l) of the Mining Act, 2016. The purpose of these Regulations is to promote job creation through the use of local expertise, goods and services, businesses and financing in the mining industry value chain and their retention in the country; achieve the minimum local level and in-country spend for the provision of the goods and services in the mining industry value chain; increase the capability and international competitiveness of domestic businesses; create mining and mineral related support industries that will provide jobs and sustain economic development; achieve and maintain a degree of participation for Kenyans or companies incorporated in Kenya for the supply of goods and the provision of services; and provide for a robust, transparent monitoring and reporting system in relation to the use of goods and services.
g) Mining (Employment and Training) Regulations, 2017
The Mining (Employment and Training) Regulations, 2017 were enacted by the Cabinet Secretary in exercise of powers conferred by sections 46(3) and 223(l) of the Mining Act, 2016. The purpose of these Regulations is to promote job creation through the use of local expertise in the mining industry, the entire mining value chain and to retain the requisite skills within the country; develop local capacities in the mining industry value chain through education, skills and technology transfer, research and development; and achieve the minimum local employment level and in-country spend across the entire mining industry value chain. An application for any licence shall not be granted by the Cabinet Secretary-unless the applicant has submitted a plan outlining the proposals for the employment and training of Kenyans.
*This is article is an extract from an article by Dr. Kariuki Muigua, PhD Muigua, K., “Regulating Mining: A New Vision for Kenya? http://kmco.co.ke/wpcontent/uploads/ 2019/07/Regulating-Mining-A-New-Vision-Kariuki-Muigua-12th-July-2019.pdf. Dr. Kariuki Muigua is Kenya’s foremost Environmental Law and Natural Resources Lawyer and Scholar, Sustainable Development Advocate and Conflict Management Expert. Dr. Kariuki Muigua is a Senior Lecturer of Environmental Law and Dispute resolution at the University of Nairobi School of Law and The Center for Advanced Studies in Environmental Law and Policy (CASELAP). He has published numerous books and articles on Environmental Law, Environmental Justice Conflict Management, Alternative Dispute Resolution and Sustainable Development. Dr. Muigua is also a Chartered Arbitrator, an Accredited Mediator, the Africa Trustee of the Chartered Institute of Arbitrators and the Managing Partner of Kariuki Muigua & Co. Advocates. Dr. Muigua is recognized as one of the leading lawyers and dispute resolution experts by the Chambers Global Guide 2021 and nominated as ADR Practitioner of the Year (Nairobi Legal Awards) 2021.
News & Analysis
The Roles of the Three Parts of the Permanent Court of Arbitration
News & Analysis
Brief History of the Permanent Court of Arbitration (PCA)
By Dr. Kariuki Muigua, PhD, C.Arb, Current Member of Permanent Court of Arbitration (PCA) Representing the Republic of Kenya.
The Permanent Court of Arbitration (PCA) is a 124 Years Old Intergovernmental Organization currently with 122 contracting states. It was established at the turn of 20th Century during the first Hague Peace Conference held between 18th May and 29th July 1899. The conference was an initiative of then Russian Czar Nicholas II to discuss peace and disarmament and specifically with the object of “seeking the most effective means of ensuring to all peoples the benefits of a real and lasting peace, and, above all, of limiting the progressive development of existing armaments.” The culmination of the conference was the adoption of a Convention on the Pacific Settlement of International Disputes, which dealt not only with arbitration but also with other methods of pacific settlement, such as good offices and mediation.
The aim of the conference was to “strengthen systems of international dispute resolution” especially international arbitration which in the last century had proven effective for the purpose with number of successful international arbitrations being concluded among Nations. The Alabama arbitration of 1871-1872 between the United Kingdom (UK) and the United States (US) under the Treaty of Washington of 1871 culminating in the arbitral tribunal’s award that the UK pay the US compensation for breach of neutrality during American Civil War which it did had demonstrated the effectiveness of arbitration in settling of international disputes and piqued interest of many practitioners in it as a mode of dispute resolution during the latter years of the nineteenth century.
The Institut de Droit International adopted a code of procedure for arbitration in 1875 to answer the need for a general law of arbitration governing for countries and parties wishing to have recourse to international arbitration. The growth of arbitration as a mode of international dispute resolution formed the background of the 1899 conference and informed its most enduring achievement, namely, the establishment of the PCA as the first global mechanism for the settlement of disputes between states. Article 16 of the 1899 Convention recognized that “in questions of a legal nature, and especially in the interpretation or application of International Conventions” arbitration is the “most effective, and at the same time the most equitable, means of settling disputes which diplomacy has failed to settle.”
In turn, the 1899 Convention provided for the creation of permanent machinery to enable the setting up of arbitral tribunals as necessary and to facilitate their work under the auspices of the institution it named as the Permanent Court of Arbitration (PCA). In particular, Article 20 of the 1899 Convention stated that “[w]ith the object of facilitating an immediate recourse to arbitration for international differences which it has not been possible to settle by diplomacy, the signatory Powers undertake to organize a Permanent Court of Arbitration, accessible at all times and operating, unless otherwise stipulated by the parties, in accordance with the rules of procedure inserted in the present Convention.” In effect, the Convention set up a permanent system of international arbitration and institutionalized the law and practice of arbitration in a definite and acceptable way.
As a result, the Permanent Court of Arbitration (PCA) was established in 1900 and began operating in 1902. The PCA as established consisted of a panel of jurists designated by each country acceding to the Convention with each country being entitled to designate up to four from among whom the members of each arbitral tribunal might be chosen. In addition, the Convention created a permanent Bureau, located in The Hague, with functions similar to those of a court registry or secretariat. The 1899 Convention also laid down a set of rules of procedure to govern the conduct of arbitrations under the PCA framework.
The second Hague Peace Conference in 1907 saw a revision of the 1899 Convention and improvement of the rules governing arbitral proceedings. Today, the PCA has developed into a modern, multi-faceted arbitral institution perfectly situated to meet the evolving dispute resolution needs of the international community. The Permanent Court of Arbitration has also diversified its service offering alongside those contemplated by the Conventions. For instance, today the International Bureau of the Permanent Court of Arbitration serves as a registry in important international arbitrations. In 1993, the Permanent Court of Arbitration adopted new “Optional Rules for Arbitrating Disputes between Two Parties of Which Only One Is a State” and, in 2001, “Optional Rules for Arbitration of Disputes Relating to Natural Resources and/or the Environment”.
PCA Website: https://pca-cpa.org/en/about/introduction/history/ (accessed on 25th May 2023).
News & Analysis
Former KCB Company Secretary Sues Over Unlawful Dismissal
Former KCB Group Company Secretary Joseph Kamau Kania has sued the lender seeking reinstatement or be compensated for illegal sacking almost three years ago. Lawyer Kania was the KCB Group company secretary until restructuring of the lender in 2021 that saw some senior executives dropped.
Through the firm of Senior Counsel Wilfred Nderitu, Kamau wants the court to order KCB Group to unconditionally reinstate him to employment without altering any of the contractual terms until his retirement in December 2025.
In his court documents filed before Employment and Labour Relations Court, the career law banker seeks the court to declare the reorganization of the company structure a nullity and amounted to a violation of his fundamental right to fair labour practices as guaranteed in Article 41(1) of the Constitution. He further wants the court to declare that the position of Group Company Secretary did not at any time cease to exist within the KCB Group structure.
He further urged the Employment Court to declare that the recruitment and appointment of Bonnie Okumu, his former assistant, as the Group Company Secretary, in relation to the contemporaneous termination of his employment, was unprocedural, insufficient and inappropriate to infer a lawful termination of his employment.
“A declaration that the factual and legal circumstances of the Petitioner’s termination of employment were insufficient and inappropriate to infer a redundancy against him, and that any redundancy declared by the KCB Group in relation to him was therefore null, void and of no legal effect and amounted to a violation of his fundamental right to fair labour practices as guaranteed in Article 41(1) of the Constitution,” seeks lawyer Kamau.
Kamau says he was subjected to discriminatory practices by the KCB Bank Group in violation of his fundamental right to equality and freedom from discrimination as guaranteed in Article 27 of the Constitution and the termination of his employment was unfair, unjustified, illegal, null and void.
Lawyer Kamau further seeks the court to declare that the Non-Compete Clause in the 2016 Contract is unenforceable by the KCB Group as against him and is voidable by him as against the Bank ab initio, byreason of the termination of the Petitioner’s employment having been a violation of Articles 41(1) and 47(1) and (2) of the Constitution, and of the Employment Act.
He also wants the Employment Court to find that finding that KCB’s group legal representation by Messrs of Mohammed Muigai LLP Advocates law firm in respect of his claim for unlawful termination of employment resulted in a clear conflict of interest by reason of the fact that a Founding and Senior Partner at the said firm lawyer Mohammed Nyaoga is also the Chairman of the CBK’s Board of Directors.
“A Declaration that the circumstances of KCB’s legal representation by Messrs. Mohammed Muigai LLP Advocates resulted in a violation of the Petitioner’s fundamental right to have the employment dispute decided independently and impartially, as guaranteed in Article 50(1) of the Constitution,” seeks lawyer Kamau.
Kamau is seeking damages against both KCB Group and Central Bank of Kenya jointly and severally for the violation of his constitutional and fundamental right to fair labour practices.
He wants further wants court to declare that CBK is liable to petitioner on account of its breach of statutory duty to effectively regulate KCB Group to ensure that KCB complied with the Central Bank of Kenya Prudential Guidelines and all other Laws, Rules, Codes and Standards, and that, as an issuer of securities, it complied with capital markets legislation.
Kamau through his lawyer Nderitu told the court that he was involved in Shareholder engagement in introducing the Group aide-mémoire that significantly improved the management of the Annual General Meetings, including obtaining approval without voting through the Memorandum and Articles of Association of Kenya Commercial Bank Limited among others.
He said that during his employment at KCB Bank Kenya and with the KCB Group, he initially worked well with former KCB CEO Joseph Oigara until 2016 when the CEO allegedly started sidelining him by removing the legal function from his reporting line.
He further claims he was transferred from the Group’s offices at Kencom House to its offices Upper Hill under the guise that the Petitioner was merely to support the KCB Group Board.
He adds that at that point his roles were given to Okumu for reasons that were not related to work demands. He stated that Oigara at one time proposed that he should leave his role in the KCB Group and go and serve as the Company Secretary of the National Bank of Kenya Limited, a subsidiary of the Group, a suggestion which he disagreed with to Oigara’s utter annoyance.
Kamau stated that his work was thenceforth unfairly discredited, leading to his being taken through a disciplinary process whose intended outcome failed miserably, and the Petitioner was vindicated.
“More specifically, the Petitioner contends that the purported creation of a new organizational structure towards the end of 2020 was in fact Oigara’s orchestration targeted to remove certain individuals by requiring them to undergo interviews in the pretext that new roles were created, and amounted to a further violation of the Petitioner’s fundamental right to fair labour practices under Article 41(1) of the Constitution,” said in his court documents.
He further adds that this sham reorganization demonstrates how the role of the KCB Group Company Secretary purportedly ceased to be and was then very briefly replaced with a new role of the KCB Group General Counsel. The role of KCB Group Company Secretary then ‘resurfaced’ immediately thereafter, in total violation of legal and regulatory requirements.
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