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, ADR Publisher of the Year 2021 and CIArb (Kenya) Lifetime Achievement Award 2021*
The Natural Resources (Classes of Transaction Subject to Ratification by Parliament) Act, 2016 was enacted in 2016 to give effect to Article 71 of the Constitution of Kenya and for connected purposes. Article 71 of the Constitution provides that a transaction is subject to ratification by Parliament if it—involves the grant of a right or concession by or on behalf of any person, including the national government, to another person for the exploitation of any natural resource of Kenya; and is entered into on or after the effective date. This Act was thus enacted in 2016 in line with the constitutional requirement that Parliament should enact legislation providing for the classes of transactions subject to ratification under clause (1). This provision is similar to the one found in Article 268 of the Constitution of Ghana which was hailed as a step forward in safeguarding the country’s resources against arbitrary grant of concessions to foreign companies by the country’s leadership including chiefs especially during the colonial period. This may not be very far from the reality in Kenya especially in such cases as the Lake Magadi soda ash mining concessions and the infamous Maasai community land disinheritance by the colonial masters.
Kenya has also suffered other instances of skewed contracts whose resultant activities have been characterised by past reported and unreported cases of non-disclosure and non-declaration of income by the mining companies in the country. Hence, the Natural Resources (Classes of Transaction Subject to Ratification by Parliament) Act, 2016 was a welcome move by the Parliament of Kenya. This article offers a critical appraisal of the Natural Resources (Classes of Transaction Subject to Ratification by Parliament) Act with a view to proposing some recommendations on how the Act can be used in ensuring that the natural resources are exploited and used in a way that benefits communities and the country at large.
Overview of the Natural Resources (Classes of Transaction Subject to Ratification by Parliament) Act, 2016
This Act applies to any transaction entered into on or after the effective date which, under Article 71 of the Constitution, is subject to ratification by Parliament on account of the fact that the transaction- involves the grant of a right or concession by or on behalf of any person to another person for the exploitation of a natural resource of Kenya; and falls within the class of transactions designated as subject to ratification by section 4 of this Act. The Act also applies to any transaction involving the – national government, county government, state organ and all county government entities; and grant of a right or a concession by a private person in cases in which such transaction is required by this Act to be ratified by Parliament. This clarification is important to reign in on county governments which, in an attempt to diversify their sources of income and possibly power struggles, may enter into exploitation agreements with foreigners or even worse, frustrate any investors with operations in their counties. The County governments must however be involved in the process.
In the case of Mui Coal Basin Local Community & 15 others v Permanent Secretary Ministry of Energy & 17 others [2015] eKLR, the Court affirmed that an issue involving prospecting and concessioning of minerals that potentially could affect hundreds of thousands of people in a county must be done in consultation with the County Government – even if the primary activity is assigned to the National Government in our scheme of devolution. It can therefore be said that the Parliament is to come in later on in the process after the due process as per the Constitution and other statutory requirements has been complied with. Section 4 of the Act provides that the classes of transactions set out in the schedule are subject to ratification by Parliament pursuant to Article 71 of the Constitution. The Act spells out the transactions relating to natural resources, which are subject to the Act.
The Act, however, in section 4(2) exempts some transactions from ratification by Parliament. While this exemption is well meaning, there is potential for abuse or confusion. For instance, where the Act exempts the grant of a concession or right to exploit a natural resource through a permit, licence or other authorization issued in accordance with the requirements of national or county government legislation from such ratification, what measures will be put in place to determine the seriousness of the transaction in question and the ramifications of such exemption? This, coupled with the exemption of the grant of a concession or right by a private person to exploit a natural resource through an agreement or a contract, are both likely to be used for personal gains especially in light of the rampant corruption in the country’s governance structures. Would Parliament be compromised to classify a particular transaction as qualifying under these two exemptions for purposes of bypassing the Act’s provisions? Again, how will grant of a concession or right by a private person to exploit a natural resource through an agreement or a contract be qualified against the constitutional provisions that vest all minerals and mineral oils as defined by law in the government of Kenya? How are the private persons to either benefit from the exploitation or the ones to grant the concession to be determined to prevent abuse? Is it possible for a private person to use the Parliament through insider lobbying to access or get a particular transaction for exploitation of a particular resource? These are some of the questions that may arise in light of the listed exemptions.
A transaction, which under this Act, is subject to ratification by Parliament, shall only be effective once it is ratified, and where Parliament has declined to ratify any transaction under this Act, the transaction shall be null and void. The Act spells out certain relevant considerations in deciding whether or not to ratify an agreement: the applicable Government policy; recommendations of the relevant regulatory agency; comments received from the county government within whose area of jurisdiction the natural resource that is the subject of the transaction is located; adequacy of stakeholder consultation; the extent to which the agreement has struck a fair balance between the interests of the beneficiary and the benefits to the country arising from the agreement; the benefits which the local community is likely to enjoy from the transaction; and whether, in granting the concession or right the applicable law has been complied with. These considerations, if fully upheld may be useful in giving the ratification process some credence. However, this is based on the assumption that Parliament is above reproach as far as following due process and putting into consideration the general public’s interests is concerned.
Notably, the Cabinet Secretary responsible for the transaction that is subject to ratification may, pursuant to Article 35 of the Constitution, grant a request that the agreement or portions of it ought not to be publicly disclosed on account of commercial confidentiality, national security or other public interest considerations. While this may be a useful safeguard for purposes of commercial confidentiality, there is need for Parliament and other stakeholders to ensure that the same is not abused to hide or deny the public access to useful information. Arguably, any such non-disclosure should also be done in line with the mining regulations as envisaged under the Mining Act 2016, as already discussed elsewhere in this paper. It is assumed that these regulations and other relevant statutory requirements are to be complied with before the agreements reach the ratification stage in order to avoid any foul play as far as due process is concerned. These Regulations, among others under different statutes dealing with natural resources exploitation, are meant to ensure that the benefits flowing from such exploitation get to benefit the communities and the economy in general. Notably, there are still complaints from communities about either lack of involvement or lack of direct benefits such as employment benefits. They have been feeling marginalized and sometimes outright ignored as far as benefit sharing is concerned. The Natural Resources (Classes of Transaction Subject to Ratification by Parliament) Act, 2016 was thus meant to include the Parliament in ensuring that natural resources are exploited in a responsible manner that benefits concerned communities and the people of Kenya in general.
*This article is an extract from the Article: Securing Our Destiny through Effective Management, (2020) Journal of Conflict Management and Sustainable Development Volume 4(3), p. 1. by Dr. Kariuki Muigua, PhD, Kenya’s ADR Practitioner of the Year 2021 (Nairobi Legal Awards), ADR Publisher of the Year 2021 and ADR Lifetime Achievement Award 2021 (CIArb Kenya). Dr. Kariuki Muigua is a foremost Environmental Law and Natural Resources Lawyer and Scholar, Sustainable Development Advocate and Conflict Management Expert in Kenya. 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 among the top 5 leading lawyers and dispute resolution experts in Kenya by the Chambers Global Guide 2022.
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