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The Role of Company Secretary in Corporate Environmental Compliance

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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*

In recent years, the world has experienced awareness in the area of environmentalism. Companies want to reduce pollution, engage in cleaner production, conserve the environment and generally engage in environmentally responsible corporate behaviour. Some companies have incorporated environmental goals into their vision and mission statements. Ideas such as conservation, pollution control, recycling waste, public awareness and education, use of cleaner fuels and the use of Environmental Impact Assessment and Audits have found their way into the management principles of corporations. In turn, the Company Secretary as a member of the management finds herself engaged in environmental issues at both policy and operational levels. The survival of the corporate body may well depend on how environmental issues are handled and the Company Secretary finds herself deeply embroiled in issues of environmental compliance as a matter of law.

There is thus a need for knowledge of what the law requires in this regard. Indeed, it has been observed that many private firms across the world are have adopted different forms of private environmental governance to improve their environmental footprints, going beyond mere compliance with rules of traditional environmental law. As already pointed out in another section, the current Constitution of Kenya 2010 outlines the national values and principles of governance which must guide all persons makes or implements public policy decisions. These values and principles include among others, sustainable development. This is affirmed under the Companies Act, 2015 which provides that a director of a company should act in the way in which the director considers, in good faith, would promote the success of the company for the benefit of its members as a whole, and in so doing the director shall have regard to, inter alia- the impact of the operations of the company on the community and the environment.

In addition to the foregoing statutory requirements on environmental reporting, corporations are also notably bound by the provisions of EMCA depending on the various projects or activities that they are involved in. Under the Environmental Management and Coordination Act, when an offence under the Act is committed by a body corporate, the body Corporate and every director or officer of the body corporate who had knowledge of the commission of the offence and who did not exercise due diligence, efficiency and economy to ensure compliance with this Act shall be guilty of an offence (emphasis added). A Company Secretary is increasingly being viewed as an officer of the company. The law thus imposes a duty on the Company Secretary to ensure compliance with environmental law, rules and regulations. The penalties under EMCA are harsh and can include imprisonment and fines that ran into hundreds of thousands of shillings.

Offences under EMCA relate among other things, failing to submit to inspection, offences relating to Environmental Impact Assessment; offences relating to records; offences relating to standards; offences relating to hazardous waste; offences relating to pollution; and offences relating to restoration orders. The Act imputes personal liability even where the offence complained of was committed on account of another person (corporate body). It is thus possible for a Company Secretary to be personally liable for environmental offences committed by the Company. In other words, the role of the Company Secretary in Environmental Compliance is a statutory one.

The imposition of liability on the directors and officers of a corporation is meant to act as a disincentive to ensure that they establish corporate mechanisms for environmental compliance, and thus avoid passing the cost of non-compliance to consumers and the general public. A Company Secretary as an officer of the company must then logically ensure that where an Environmental Impact Assessment is required to be prepared, the same has been prepared in accordance with the law. Similarly, where an Environmental Audit is required to be carried out, the Company Secretary should ensure that it is prepared in accordance with the requirements of EMCA and its regulations. In brief, the Company Secretary being an Officer of the Company has a duty to ensure compliance with standards set out under EMCA and if s/he does not do so, then liability in criminal law attaches. Similarly, the Company Secretary is bound to ensure that hazardous waste and other chemicals and radioactive materials are handled properly to avoid liability.

The way forward in enhancing for company secretaries is ensuring enhanced corporate environmental compliance, adhering to principles of sustainable development and taking corporate social and environmental responsibility seriously. Environmental compliance by corporate organizations is mandatory under EMCA. The foregoing discussion has demonstrated that breach of environmental compliance may result in civil and criminal sanctions upon an organization. This relates to the sanctions that may be imposed for breach of environmental compliance requirements such as damages or closure of the corporation. Indeed, officers of corporations such as directors and company secretaries have to ensure that all environmental laws, regulations and policies are adhered to and breach of this duty may attract both civil and criminal liability under EMCA.

In addition, adhering to Principles of Sustainable Development Sustainable development is enshrined as one of the national principles under the Constitution and binds all persons including corporations. Sustainable development is also captured under EMCA and incorporates the principles of public participation, international co-operation, inter and intra generational equity, polluter pays principle and the precautionary principle. Corporations should, therefore, adhere to the principles of sustainable development to ensure that their economic activities meet the needs of both the present and future generations.

Related to sustainable development is the idea of Corporate Social Responsibility (CSR) with the difference that sustainable development is a legal requirement while CSR is a voluntary corporate undertaking. CSR is a transparent business practice based on ethical values, legal requirements compliance and respect for the community, people and the environment within which the business operates and contributes to the economic success of an organization through meeting the needs of stakeholders who are critical to its existence. According to proponents of CSR, a firm’s success is dependent on how it is able to safeguard relationship with stakeholders such as employees, communities and customers since being socially responsible helps it gain support from such stakeholders. In Kenya, studies have shown that corporations that have undertaken CSR initiatives such as environmental conservation programs have witnessed success in areas such as sales and market share. Corporations should therefore pursue corporate environmental responsibilities such as environmental conservation programmes which may include clean up exercises, restoration activities, tree planting exercises and environmental awareness campaigns. These activities have the ability to contribute to the economic growth of an organization.

Environmental Insurance can be used as a tool for environmental management. This however is yet to be popularized in Kenya and EMCA does not have provisions on environmental insurance. It has however been suggested that environmental insurance can be popularized in the country for both medium and large corporations to shield them against environmental liability which could turn out to be too costly. Some insurance providers have packages on environmental liability covering environmental damage and clean-up costs for pollution. Company secretaries should consider and encourage use of environmental insurance by corporates in the country since some cases of environmental liability may not be foreseen by a corporation and could arise due to natural acts. However, the strict liability rule imposes liability on the corporation even where such acts could not be foreseen. Through environmental insurance, it may be possible to shield a corporation from cases of environmental liability.

*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.

References

Muigua, K., “Securing Our Destiny through Effective Management,” (2020) Journal of Conflict Management and Sustainable Development Volume 4(3), p. 1.  

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The Roles of the Three Parts of the Permanent Court of Arbitration

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H.E. Amb. Marcin Czepelak, the Fourteenth Secretary-General of the Permanent Court of Arbitration (PCA)

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Brief History of the Permanent Court of Arbitration (PCA)

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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”.

Reference

PCA Website: https://pca-cpa.org/en/about/introduction/history/ (accessed on 25th May 2023).

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Former KCB Company Secretary Sues Over Unlawful Dismissal

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Former KCB Group Company Secretary Joseph Kamau Kania who has sued the Bank for 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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