News & Analysis
The Role of Multi-National Corporations (MNCs) in Environmental Damage in Africa
By Dr. Kariuki Muigua, PhD (Leading Environmental Law Scholar, Policy Advisor, Natural Resources Lawyer and Dispute Resolution Expert from Kenya), Winner of Kenya’s ADR Practitioner of the Year 2021*
Natural resources have been exploited in many countries around the world and used to boost economic development in these countries through the revenue derived from these endeavours. However, the exploitation of Africa’s natural resources is normally carried out by foreign Multi-National Corporations (MNCs) which have shown almost no regard for the impact of their actions on people in Africa. Although there are advantages associated with MNCs, they have also been vilified because in some cases they take a country’s natural resources, paying but a pittance while leaving behind environmental and social disasters.
Many MNCs activities have had the result of destruction of the environment and livelihoods of local populations and caused widespread pollution and even war, with the desire to control economically profitable natural resources being the reason behind several conflicts in Africa, especially in Congo DRC. MNCs have contributed greatly towards conflicts and taken advantage of the occurrence of conflicts to continue exploiting these resources. This scenario is not unique to DRC Congo only but is a reflection of what is happening across Africa. MNCs usually enter into negotiations with governments for the exploitation of mineral resources and thereafter are usually awarded contracts to exploit these resources.
When entering into these negotiations, these corporations usually aim at ensuring maximum profits from the undertakings which in most cases is done at the expense of the host State. The concession contracts are usually drawn in a manner that ensures that the companies have unlimited rights to the natural resources leaving no room for future amendments by the host state. This makes the host states to lose out on revenue, where there are changes in the fiscal regime in the future. Some of the contracts and deals are concluded in questionable manner mostly influenced by high level corruption as recently evidenced in the Kenyan case of Cortec Mining Kenya Limited, Cortec (Pty) Limited and Stirling Capital Limited v. Republic of Kenya.
The contract involved investments in the Kenyan mining sector, including a 21-year mining license for the extraction of rare earths at the Mrima Hill project, southern part of the country. However, there arose a dispute and claims out of the Government’s allegedly unlawful revocation of claimant’s mining license, following the discovery of new rare earths deposits by the claimant. The investor filed a case against Kenya before the International Centre for Settlement of Investment Disputes (ICSID) claiming USD 2,000 Million. However, Kenya argued that the contracts were awarded irregularly and were marred with corruption and the process did not follow the laid out legal requirements.
Although the corruption allegations did not stand, the Tribunal concluded that the Claimants’ failure to comply with the legislature’s regulatory regime governing the Mrima Hill forest and nature reserve, and the Claimants’ failure to obtain an EIA licence (or approval in any valid form) from National Environment Authority (NEMA) concerning the environmental issues involved in the proposed removal of 130 million tonnes of material from Mrima Hill, constituted violations of Kenyan law that, in terms of international law, warrant the proportionate response of a denial of treaty protection under the BIT and the ICSID Convention. The case was thus dismissed with costs. This is just one of the many examples of irregular contracts that are signed between developing countries, in Africa and elsewhere, and MNCs without regard to the existing laws or the accruing benefits to the host states and their people.
Besides MNCs, Foreign Direct Investments (FDI) also has significant impact on Natural Resources exploitation and environmental conservation and damage. Foreign Direct Investment (FDI) is a form of international inter-firm co-operation that involves significant equity stake and effective management decision power in, or ownership or control of foreign enterprises. It also encompasses other broader, heterogeneous non-equity forms of co-operation that involve the supply of tangible and intangible assets by a foreign enterprise to a domestic firm. FDI reflects a lasting interest by a resident entity of one economy in an enterprise that is resident in another economy. The ideological underpinning of this concept is the transmission to the host country of a package of capital, managerial skill and technical knowledge, as a potent agent of economic transformation and development.
The role of natural resources in economic development touches on many issues, from FDI to the environment to the level and management of exchange rates. MNCs are the main players engaging in value adding activities based on cross-border transactions. They base most of their industrial activities on natural resources. They derive the raw materials from the host countries and export the same either in their raw form or semi-processed one for value addition, which later comes back as a finished product ready for the local market as well as the international markets. For instance, with regard to oil, the exploration and production of oil results in foreign direct investment (FDI) inflows only when the activities are financed by foreign MNCs.
The dominance of MNCs in Africa’s extractive industries is because mineral extraction is capital-intensive, requires sophisticated technology, has long gestation periods and is also risky. There is no guarantee that oil may be discovered after spending an extensive amount of resources on exploration. As a consequence, the increased exploration and production in the region has led to a substantial increase in extractive industry FDI. Further, countries that are rich in natural resources, in particular oil, tend to have weak institutions, suggesting the direct link between FDI and natural resources exploitation. In such arrangements, the host countries often derive little benefits while the lion’s share goes to the MNCs and their home countries.
Indeed, it has been argued that MNCs investment distorts industrial growth in poor areas, and confirms their dependence and underdevelopment, rather than promoting the widespread effects of genuine development. Further, the unsustainable development of natural resource endowments has been linked to several basic limitations as a means of promoting broad-based economic development. Primary product exports have low value added compared to processed and manufactured goods, and the lion’s share of value addition occurs in developed countries, where raw materials are converted into manufactured goods with MNCs play a central role. In the end, the developing countries producing the natural resources end up bearing the brunt of environmental damage as the developed countries which are home to the MNCs reap the bulk of economic benefits.
*This is article is an extract from an article by Dr. Kariuki Muigua, PhD,Kenya’s ADR Practitioner of the Year 2021 (Nairobi Legal Awards): Muigua, K., “Multinational Corporations, Investment and Natural Resource Management in Kenya,” http://kmco.co.ke/wp-content/uploads/2018/11/Multinational-Corporations-Investment-and-Natural-Resource-Management-in-Kenya-Kariuki-Muigua-November-2018.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.
Africa Europe Faith & Justice Network (AEFJN), The Plundering of Africa’s Natural Resources, available at http://www.aefjn.org/tl_files/aefjnfiles/publications/Fact%20Sheets%20EN/120521-NatResources-Factsheet-eng.pdf [Accessed on 16/11/2018].
Asiedu, E., ‘Foreign direct investment, natural resources and institutions,’ Working Paper, March 2013, p. 2.
Batware, B., ‘Resource Conflicts: The Role of Multinational Corporations in the Democratic Republic of Congo,’ (MA Peace and Conflict Studies, EPU, 2011), available at http://acuns.org/wp-content/uploads/2012/06/RoleofMultinationalCorporations.pdf [Accessed on 16/11/2018 ].
Cortec Mining Kenya Limited, Cortec (Pty) Limited and Stirling Capital Limited v. Republic of Kenya ICSID Case No. ARB/15/29.
Cronin, R., et al, (eds), ‘Exploiting Natural Resources: Growth, Instability, and Conflict in the Middle East and Asia,’ Natural Resources and the Development-Environment Dilemma, 2009, p. 72
Duce, M. & Espana, B., ‘Definitions of Foreign Direct Investment (FDI): a methodological note,’ available at http://bis.hasbeenforeclosed.com/publ/cgfs22bde3.pdf [Accessed 16/11/2018].
Ezekiel, A., “The application of international criminal law to resource exploitation: Ituri, Democratic Republic of the Congo,” Natural Resources Journal (2007): 225-245.
Helleiner, G.K., “The role of multinational corporations in the less developed countries’ trade in technology,” World Development 3, no. 4 (1975): 161-189.
Kojima, K., ‘A Macroeconomic Approach to Direct Foreign Investment,’ Hitotsubashi Journal of Economics, June 1973, 3.
Langdon, S., “Multinational corporations, taste transfer and underdevelopment: A case study from Kenya,” Review of African Political Economy 2, no. 2 (1975): 12-35.
Mello, R., ‘Foreign direct investment-led growth: evidence from time series and panel data,’ Oxford Economic Papers, No. 51, pp.133-151, p. 135, (Oxford University Press, 1999).
Patrick, S.M., “Why Natural Resources Are a Curse on Developing Countries and How to Fix It.” Available at The Atlantic. < http://www. theatlantic. com/international/archive/2012/04/whynaturalresources-are-a-curse-on-developing-countries-and-how-to-fix-it/256508/>, [Accessed on 16/11/2018].
Pérez, R.T., “Structural Problems and Changes in Cuba’s Economic Model,” In No More Free Lunch, pp. 5-22. Springer, Cham, 2014.
Stiglitz, J., “Resource Rich, Cash Poor.” Slate, August 12 (2012). Available at https://slate.com/business/2012/08/why-resource-rich-countries-usually-end-uppoor.html [Accessed on 16/11/2018].
United Nations Expert Group Meeting on ‘Natural Resources and Conflict in Africa: Transforming a Peace Liability into a Peace Asset,’ Conference Report, 17-19 June 2006, Cairo, Egypt. Organized by the Office of the Special Adviser on Africa (OSAA) in cooperation with the Government of Egypt.
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.
News & Analysis
Court of Appeal Upholds Eviction of Radcliffes from Karen Land
The Court of Appeal has stayed the decision of the Environment and Land Court purporting to reinstate Adrian Radcliffe into possession of the 5.7 Acre Karen Land by Kena Properties Ltd after eviction by the lawful owners in February 2022. Adrian Radcliffe who was evicted by Kena Properties Ltd, the innocent purchaser of the Land for value.
Before his eviction, Mr. Radcliffe had been living on the land as a squatter expatriate for 33 years without paying any rent. Since he moved into the property as a tenant, he only paid deposit for the land in August 1989 despite corresponding severally with the owner of the land. His attempt to acquire the land by adverse possession claim filed in 2005 was dismissed by Court in 2011 on the basis that he has engaged with the owner of the land July 1997 and agreed to buy the land which he failed to do. The High Court [Justice Kalpana Rawal as she then was] concluded that:
“His [Mr. Adrian Radcliffe] averments that he did not have any idea of the whereabouts of the Defendant and that he could possibly be not alive, were not only very sad but mala fide in view of the correspondence on record addressed by him to the Defendant’s wife. I would thus find that the averments made by him to the contrary are untrue looking to the facts of this case.”
On 10th March 2022, Mr. Adrian Radcliffe and Family purported to obtain court orders for reinstatement into the land. However, the Court of Appeal issued an interim stay of execution of the said orders. The Court of Appeal has now granted the application of Kena Properties Ltd and stayed the execution of the Environment and Land Court Order pending the hearing and determination of the Appeal.
The Court also stayed the proceedings at the Environment and Land Court on the matter during the pendency of the Appeal. In effect, the eviction orders issued by the Chief Magistrate Court for eviction of Mr. Adrian Radcliffe in favour of Kena Properties as the purchaser of the property for value were upheld and the company now enjoys unfettered ownership and possession of the suit property until the conclusion of the Appeal.
The Court of Appeal in granting the orders sought by Kena Properties Ltd concurred with Kena Properties Ltd that as the property owner it had an arguable appeal with a high probability of success which would be rendered nugatory if Adrian Radcliffe a trespasser was to resume his unlawful possession of the suit property, erect structures thereon, recklessly use or abuse the said suit property as he deems fit. In any case, that is bound to fundamentally alter the state of the suit property and render it unusable by Kena Properties Ltd as the property owner.
At the same time, the Appellate Court rubbished the argument of Adrian Radcliffe in opposition to the application for stay that he has been in occupation of the suit property for more than 30 years and that he and his family were unlawfully evicted from the suit property on 4th February, 2022. The Court also rejected Radcliffe’s claim that Kena Properties Ltd has no valid title to the suit property and held that as the purchaser, the company was entitled to enjoy ownership and possession of their property during the pendency of the appeal.
The Court dismissed claims of Mr. Adrian Radcliffe that Kena Properties Ltd as the property owner acquired title to the suit property illegally and unprocedurally finding to the contrary. Further, it rejected Adrian Radcliffe’s claim that Kena Properties as the purchaser cannot evict a legal occupier of a property putting paid to the claim that he was a legal occupier at the time of eviction.
As a matter of fact, Mr. Adrian Radcliffe cannot claim to be the legal occupier of the property having attempted to acquire it by adverse possession before the High Court thwarted his fraudulent scheme on 28th February 2011. Mr. Radcliffe did not appeal the 2011 High Court decision meaning it is still the law that he is not the owner of the land nor the legal occupier of the land having attempted to adversely acquire against the interests of the lawful owner who sold it to Kena Properties.
Mr. Adrian Radcliffe is a well-to-do Water, Sanitation and Hygiene (WaSH) UNICEF consultant and former UN employee (who has been earning hefty House Allowance). Many have wondered why he has been defaulting in paying rent for 33 years on the prime plot of land in Karen while living large and taking his kids to most expensive schools in Kenya. No question, a local Kenyan could never have gotten away with such selfish impunity.
News & Analysis
Review: Journal of Conflict Management and Sustainable Development, Vol. 9, No. 1
The Journal of Conflict Management and Sustainable Development, Volume 9, Issue No. 1, which is edited by and published by Dr. Kariuki Muigua, PhD is out and stays true to the reputation of the journal in providing a platform for scholarly debate on thematic areas in the fields of Conflict Management and Sustainable Development. The current issue published in September 2022 covers diverse topics including Resolving Oil and Gas Disputes in Africa; National Environment Tribunal, Sustainable Development and Access to Justice in Kenya; Protection of Cultural Heritage During War; The Role of Water in the attainment of Sustainable Development in Kenya; Property Rights in Human Biological Materials in Kenya; Nurturing our Wetlands for Biodiversity Conservation; Investor-State Dispute Resolution in a Fast-Paced World; Status of Participation of Women in Mediation; Business of Climate Change and Critical Analysis of World Trade Organization’s Most-Favored Nation (MFN) Treatment.
Dr. Wilfred A. Mutubwa and Eunice Njeri Ng’ang’a in “Resolving Oil and Gas Disputes in an Integrating Africa: An Appraisal of the Role of Regional Arbitration Centres” explore the nature of disputes in the realm of oil and gas in Africa taking a look into the recent continental and sub-regional developments in a bid to establish regional integration. Additionally, it tests the limits of intra-African trade and dispute resolution and the imperatives for the African regional courts and arbitration centres. In “National Environment Tribunal, Sustainable Development and Access to Justice in Kenya,” Dr. Kariuki Muigua discusses the role played by the National Environment Tribunal (NET) in promoting access to justice and enhancing the principles of sustainable development in Kenya. The paper also highlights challenges facing the tribunal and proposes recommendations towards enhancing the effectiveness of the tribunal.
Dr. Kenneth Wyne Mutuma in “Protecting Cultural Heritage in Times of War: A Case for History,” argues that cultural heritage is at the heart of human existence and its preservation even in times of war is sacrosanct. It concludes that it is thus critical for states to take positive and tangible steps to ensure environmental conservation and protection during war within the ambit of the existing international legal framework. In “The Role of Water in the attainment of Sustainable Development in Kenya,” Jack Shivugu critically evaluates the role of water in the attainment of sustainable development in Kenya and argues water plays a critical role in the attainment of the sustainable development goals both in Kenya and at the global stage. The paper interrogates some of the water and Sustainable Development concerns in Kenya including water pollution, water scarcity and climate change and suggests practical ways to enhance the role of water in the Sustainable Development agenda.
Dr. Paul Ogendi in “Collective Property Rights in Human Biological Materials in Kenya,” reflects on property rights in relation to human biological materials obtained from research participants participating in genomic research. He argues that property rights are crucial in genomic research because they can help avoid exploitation or abuse of such precious material by researchers. In “Nurturing our Wetlands for Biodiversity Conservation,” Dr. Kariuki Muigua notes that Wetlands have a vital role in not just delivering ecological services to meet human needs, but also in biodiversity conservation. Wetlands are vital habitat sites for many species and a source of water, both of which contribute to biodiversity protection. The paper examines the role of wetlands in biodiversity conservation and how these wetland resources might be managed to improve biodiversity conservation.
Oseko Louis D. Obure in “Investor-State Dispute Resolution in a Fast-Paced World,” preponderance of disputes between States or States and Investors created need for a robust, effective, and efficient mechanisms not only for the resolution of these disputes but also their prevention. He notes that developing states lead in being parties to Investor-State Disputes (ISD) particularly as respondents. He proceeds to conceptualize and problematize investor-state disputes resolution in a fast-paced world. Lilian N.S. Kong’ani and Dr. Kariuki Muigua in “Status of Participation of Women in Mediation: A case Study of Development Project Conflict in Olkaria IV, Kenya” review the status of participation of women in mediation to resolve conflicts between KenGen and the community. The paper demonstrates a need for further democratization of the mediation processes to cater for more participation of women to enhance the mediation results and offer more sustainable resolutions.
Felix Otieno Odhiambo and Melinda Lorenda Mueni in “The Business of Climate Change: An Analysis of Carbon Trading in Kenya analyses the business of carbon trading in the context of Kenya’s legal framework. The article examines the legal framework that underpins climate change into the Kenyan legal system and provides an exposition of the concept of carbon trading and its various forms. Michael Okello, in “Critical Analysis of World Trade Organisation’s Most-Favored Nation (MFN) Treatment: Prospects, Challenges and Emerging Trends in the 21st Century,” highlights the rationale behind MFN treatment and also restates the vision of multilateral trade to achieve equitable and special interventions with respect to trade in goods, services and trade related intellectual property rights in the affected states.
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