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Challenges Related to Corporate Environmental Compliance in Kenya

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By Dr. Kariuki Muigua, PhD, Africa’s Leading Dispute Resolution and ESG Expert, Africa Arbitrator of the Year 2022/3, Africa ADR Practitioner of the Year 2022/3, Member of the Permanent Court of Arbitration nominated by the Republic of Kenya, Member of the National Environment Tribunal, University of Nairobi Senior Lecturer and Managing Partner at Kariuki Muigua & Co. Advocates.*

Corporate environmental compliance in Kenya is fraught with challenges, namely, environmental pollution, human rights violations and limitations to civil and criminal corporate environmental liability. The first two is what happens when corporates fail to adhere to environmental compliance requirement and the last is what happens in event of corporate environmental non-compliance. Thus, to avoid the challenges of environmental pollution, human rights violations and environmental liability, corporates are best advised to ensure corporate environmental compliance.

Environmental Pollution

EMCA defines pollution as ‘the direct or indirect alteration of any part of the environment through discharge, emission or deposition of wastes’. Environmental pollution has also been defined as ‘any discharge of material or energy into water, land, or air that causes or may cause acute (short-term) or chronic (long-term) detriment to the Earth’s ecological balance or that lowers the quality of life’. Environmental pollution occurs in various forms including water pollution, air pollution, noise pollution and land pollution and has become a major challenge across the world due to the rapid economic development to cater for the rising human population.

The problem of pollution especially by manufacturing industries is well documented in Kenya. It has been pointed out that a number of manufacturing industries discharge untreated effluent into rivers resulting in high pollution levels in the Nairobi and Ngong Rivers. According to the National Environment Management Authority (NEMA), many factories in the country have been contravening provisions of the Water Quality Regulations, 2006 by either discharging untreated effluent into a public sewer or discharging into the environment without an effluent discharge license. These incidences of pollution have recently been highlighted by the media resulting in crackdown by the National Environment Management Authority (NEMA) against the perpetrators.

In addition to water pollution through discharge of effluent, other forms of environmental pollution by corporations have also been reported in Kenya. Further, studies have also indicated that this has contributed to soil pollution in the area. Despite the existence of laws and regulations to curb against pollution such as the Water Quality Regulations, Waste Management Regulations and Air Quality Regulations, the problem of pollution has persisted in the country. This calls for concerted efforts involving both the regulatory agencies such NEMA and corporations to enhance effective environmental compliance.

Human Rights Violation

It has been noted that environmental rights are intertwined with other human rights especially the economic and social rights. The Constitution enshrines these rights which include the right to health, accessible and adequate housing, right to food, clean water and the right to education. Realization of the economic and social rights is largely dependent on the quality of the environment which is a basic condition of life, indispensable to the promotion of human dignity, welfare and the fulfilment of other human rights. Thus, acts and omissions by corporations related to the environment are likely to have impact on the realization of socio-economic rights enshrined in the Constitution.

Where water sources are polluted due to effluent discharge from industries, the rights to clean water and health are likely to be compromised. Further, soil pollution is likely to affect the right to food due to its effect on agricultural activities. The right to housing may be affected in instances where people are displaced to cater for economic activities by corporations such as mining. The link between environmental rights and other human rights was succinctly captured by the High Court of Kenya in Peter K. Waweru v Republic. Corporations therefore have a role to play in the attainment of socio-economic rights in Kenya through environmental compliance.

Environmental Liability by Corporations in Kenya

The violation of environmental regulations results civil and/or criminal environmental liability for corporations and/or their officers and employees. Civil liability against corporations for environmental breaches occurs in the form of compensation and damages aimed at bringing the property or person affected by such acts as far as possible to the condition they were before the breaches occurred. Civil remedies for environmental protection can be classified according to their intended function which could be preventive, compensatory, reparatory or natural restitution. In addition to enshrining the right to clean and healthy environment, the Constitution sets out obligations in respect of the environment. Breach of these obligations may result in enforcement of environmental rights under article 70 of the Constitution which empowers the Environment and Land Court to grant civil remedies such as compensation to the victim or orders of injunction to prevent, stop or discontinue any act or omission that is harmful to the environment.

In addition to these remedies, EMCA provides for environmental restoration orders, conservation orders, and easements as part of civil remedies for environmental breaches. Consequently, corporations in Kenya found liable for environmental breaches have been imposed with civil consequences. Civil liability for environmental breaches by corporations follows common law principles such as the strict liability rule. The rule was laid down in the case of Rylands vs Fletcher which imposes strict liability on the owner of land for damage caused by the escape of substances to his or her neighbour’s land. Courts in Kenya have applied the strict liability rule and imposed civil liability on corporations for actions that have resulted in damage to the adjacent lands. Corporations therefore have to guard against instances of environmental damage since their actions can give rise to civil liability.

On the other hand, EMCA imposes criminal liability by stipulating various environmental offences which including offences related to inspection, offences related to Environmental Impact Assessment, offences related to records and standards and offences related to hazardous wastes. The Act also prescribes penalties for these offences. The Act also empowers environmental inspectors appointed under the Act, subject to the Constitution and section 29 of the Office of the Director of Prosecution Act, to institute and undertake criminal proceedings against any person before a court of competent jurisdiction (other than a court martial) in respect of any offence alleged to have been committed by that person under EMCA. Corporates need to be aware of the legal provisions in regard to civil and criminal liability and comply accordingly to avoid incurring liability.

*This article is an extract from the Article: Securing Our Destiny through Effective Management of the Environment, (2020) Journal of Conflict Management and Sustainable Development Volume 4(3), p. 1.  by Dr. Kariuki Muigua, PhD, Senior Advocate of the High Court of Kenya, Chartered Arbitrator, Kenya’s ADR Practitioner of the Year 2021 (Nairobi Legal Awards), ADR Lifetime Achievement Award 2021 (CIArb Kenya), African Arbitrator of the Year 2022, Africa ADR Practitioner of the Year 2022, Member of Permanent Court of Arbitration nominated by Republic of Kenya and Member of National Environment Tribunal (NET). 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 Managing Partner of Kariuki Muigua & Co. Advocates and Africa Trustee Emeritus of the Chartered Institute of Arbitrators 2019-2023. Dr. Muigua is recognized among the top 5 leading lawyers and dispute resolution experts in Band 1 in Kenya by the Chambers Global Guide 2022 and was listed in the Inaugural THE LAWYER AFRICA Litigation Hall of Fame 2023 as one of the Top 50 Most Distinguished Litigation Lawyers in Kenya.

References

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

 

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Brief Overview of Kenyan Bankruptcy Law

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Bankruptcy refers to the state where a debtor is unable to pay their debts when the debts become due. For a person to be bankrupt there must be an order by the court stating that they are unable to pay their debts.

Who can apply for a bankruptcy order?

Either the debtor or the debtor’s creditor(s) may apply to court for the issuance of bankruptcy Order.

What conditions must be met for the court to issue bankruptcy order?

Where the application for bankruptcy order is made by a debtor, they must satisfy the court that:

  • They are either domiciled in Kenya, personally present in Kenya or three years preceding the date of the application they have been ordinarily resident or carried business in Kenya.
  • Their debt meets the minimum prescribed threshold
  • They have not previously been adjudged bankrupt
  • They are not in the process of being adjudged bankrupt

When the application for bankruptcy order is made by creditor(s), they must satisfy the court that:

  • The debtor is either domiciled in Kenya, personally present in Kenya or three years preceding the date of the application they have been ordinarily resident or carried business in Kenya.
  • The debtor owes them a sum of money equal to or above the prescribed threshold
  • The debt is for a liquidated amount payable to the applicant creditor(s) either immediately or at some certain future time, and is unsecured
  • The debt is one that the debtor appears to be unable to pay or to have no reasonable prospect of being able to pay
  • There is no outstanding application to set aside a statutory demand in respect of the debt
  • They have given a notice of not less than twenty one days seeking payment of debt due immediately and the duration has lapsed without being paid
  • They obtained Judgment, served it on the debtor and after 21 days the decretal sum has not been paid
  • They have served on the debtor a demand requiring the debtor to establish to their satisfaction that there is a reasonable prospect that the debtor will be able to pay a debt payable in future, when it falls due and 21 days have lapsed without the demand being complied with or set aside.

Upon being satisfied that the above conditions have been met, the court issues a bankruptcy Order.

Can court issue a bankruptcy order on an application by secured creditors?

Court can make bankruptcy order on application by secured creditor(s) only when:

  • The application contains a statement by the person having the right to enforce the security that the creditor is willing, in the event of a bankruptcy order being made, to give up the security for the benefit of all the bankrupt’s creditors; OR,
  • The application is expressed not to be made in respect of the secured part of the debt and contains a statement by that person of the estimated value at the date of the application of the security for the secured part of the debt.

Under what circumstances can court dismiss an application for bankruptcy order?

The Court may dismiss an application if it is satisfied that either the debtor is able to pay all of the debtor’s debts; OR—

  • That the debtor has made an offer to secure or compound for a debt in respect of which the application is made
  • That the acceptance of that offer would have required the dismissal of the application; and
  • That the offer has been unreasonably refused.

What are the consequences of a Bankruptcy Order?

  • Where a trustee in bankruptcy has been appointed, the property of the bankrupt vests in the trustee. If no trustee has been appointed, the property of the bankrupt will vest in the Official Receiver to act as the interim trustee.
  • The bankrupt suffers all the disabilities of law for instance: they cannot run for elected positions, they can’t directors of a company, they can’t file suits in their own name, and they can’t enter into contracts.
  • No civil proceedings can be instituted or continued against the bankrupt once the order is made
  • The bankrupt has an obligation to provide a true and accurate account of all his assets, income and liabilities
  • The official receiver is entitled to recover assets that the bankrupt has transferred within two years immediately preceding the bankruptcy.
  • Does not extinguish debts of a bankrupt but only protects them from creditors commencing recovery proceedings without leave of court.

Kiragu Wathuta & Company Advocates was established in 2013 by Mr. Kiragu Wathuta, an Advocate of the High Court of Kenya called to the bar in the year 2009. Our firm is run by an organized team of proffessionals who are highly skilled and widely exposed to diverse areas of law and the industry in general.

We have built a name for PROFESSIONALISM AND EXPERTISE in various disciplines of legal services including but not limited to civil and commercial litigation, conveyance and property matters as well as commercial and corporate law practice.

We provide value-added service in consonance with each individual client’s needs. For our clients, their interests are paramount and the client is our number one priority.

Our Portfolio of Clients is drawn from Property Owners, Developers, Investors and Joint Ventures, Corporate Entities, Financial institutions, Parastatals, Manufacturing Companies, Mortgage Institutions as well as individuals. We continue to endear our services to reach beyond our borders.

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What is Carbon Markets?

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Written by Faith Nyambura Kabora, Advocate.

Carbon markets are a mechanism designed to reduce greenhouse gas emissions which are essentially gases that trap heat in the atmosphere and contribute to the negative impacts of climate change such as prolonged drought and rising of sea levels.

Carbon markets operate on the principle of putting a price on carbon emissions to create commercial/economic incentives for public and private entities to reduce their carbon footprint and invest in cleaner, sustainable practices.

Ideally, by putting a price on carbon, the carbon markets encourage sustainable environmental practices and help counties meet their emission reduction targets under international treaties, like the Paris Agreement, which Kenya is a signatory to. For a broader understanding, here is how a carbon market works;

  1. A Government establishes a limit on the total amount of greenhouse gas emission/pollution is allowed within its geographical limits;
  2. A grant, say permissions are created and distributed to eligible participants. This allowance represents the right to emit a certain amount of greenhouse gas;
  3. The participants can then buy and sell the allowances. Ideally, those who reduce their emissions more efficiently sell their surplus allowance to those who find it more challenging to reduce the emissions. If a company pollutes a lot, they need to buy more permissions, and if they do not pollute as much, they can sell their extra permissions.
  4. Entities are required to hold enough allowances to cover their actual emissions. If they exceed allocated allowances, they face penalties or, as expounded above, they buy additional allowances. This is the part where compliance becomes mandatory for all the key players.
  5. The price of the allowances fluctuates based on supply and demands and reflects the cost of emitting greenhouse gases. It is essentially like paying for pollution.

A carbon market plays a pivotal role in advancing climate action and promoting sustainable practices by incentivizing companies to reconsider their pollution practices, which can result in financial consequences as pollution becomes a costly endeavor. In Kenya, the introduction of a Carbon Market is imperative as the world confronts the dire consequences of climate change. Furthermore, it offers a commercial opportunity for investors considering the growing demand for environmentally friendly and carbon neutral products and services.

As mentioned above, the Paris Agreement is one of the most important international treaties dedicated strengthen global response to the negative impact of climate change. Ultimately, the Agreement’s goal is to motivate countries to limit global emissions and more importantly, to hold them accountable for their actions around reducing their carbon footprints.

Kenya as a signatory to the Paris Agreement has made significant contributions towards fulfilling the obligations under the Paris Agreement of limiting global temperature. The Climate Change (Amendment) Act 2023, nudges Kenya towards the realization of Article 6 of the Paris Agreement by introducing provisions and regulation of and participation in carbon markets.

As one of the top law firms in Nairobi, MMA Advocates is renowned for its proactive strategy and innovative legal lawyer advice. Our firm is committed to delivering strategic assistance that not only tackles current difficulties but also equips clients for future legal trends and advancements. As top lawyers in Nairobi Kenya, we take great satisfaction in our ability to combine in-depth legal knowledge with creative problem-solving. We keep a close eye on business trends and legal advancements to deliver timely guidance that enables our clients to make wise choices.

Our main goal as MMA Advocates is to establish long-lasting partnerships based on integrity, decency, and reliability. Since every client’s circumstance is unique, our best advocates in Kenya offer timely service and individualized attention at every stage of our collaboration. We make sure our clients are informed and empowered throughout their legal journey because we value openness and transparency in communication. In every case we take on, we are deeply committed to obtaining positive results and client satisfaction. This is just one aspect of our unwavering commitment to quality.

Whether you are a startup negotiating regulatory obstacles, an established corporation expanding, or a private citizen seeking legal assistance on personal problems, our Best Corporate Lawyers in Kenya are dedicated to becoming your legal partner. Our expertise include Commercial Litigation, Real Estate & Development, Fintech, Public Procurement (Public Private Partnerships), Project Finance, Public Law Litigation, Legal Audits & Compliance Advisory and Crisis Management.

We hope to arm you with the legal know-how and strategies needed to achieve your objectives. Our team enjoys taking on challenging legal matters with creativity and strategic understanding, protecting your rights and effectively achieving your goals. With a thorough comprehension of both regional laws and global norms, we are prepared to confidently and competently lead you through the complexities of corporate law.

In the intensely competitive legal arena, our tailored legal and strategic solutions distinguish us. We value depth over breadth, guaranteeing our clients our full dedication and unparalleled efficiency. Where many spread themselves wide, we narrow our focus to a select few of the most challenging cases. We tread the path less traveled.

To find out more about how MMA Advocates in Nairobi Kenya can help you with your legal issues, get in touch with us. With our team of committed professionals and our standing as one of the top law firms in Nairobi, we are well-positioned to offer outcomes that surpass expectations and guarantee your success in a legal environment that is always changing.

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Review: Alternative Dispute Resolution (ADR) Journal, Volume 12(3), 2024

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The Alternative Dispute Resolution (ADR) Journal, Volume. 12, No.3, 2024 covers pertinent and emerging issues across all ADR mechanisms. This volume exposes our readers to a variety of salient topics and concerns in ADR including Building Peace in Africa, Public Policy as a Ground of Setting-Aside an Arbitral Award, Ethics, Integrity and Best Practice in Mediation, Accessing Justice in Kenya, Sports Arbitration, ESG Arbitration, Arbitration of Investor-State Dispute in Kenya, Article 159(2) of the Constitution of Kenya 2010 and issuance of interim measures by Arbitral Tribunals. The ADR Journal is a publication of the Chartered Institute of Arbitrators, Kenya Branch. It provides a platform for scholarly debate and in-depth investigations into both theoretical and practical questions in Alternative Dispute Resolution.

The journal is edited by Professor of Law at the University of Nairobi, Faculty of Law Hon Prof. Kariuki Muigua, a distinguished law scholar, an accomplished mediator and arbitrator with a Ph.D. in law from the University of Nairobi and widespread training and experience in both international and national commercial arbitration and mediation. Prof. Muigua is a Fellow of Chartered Institute of Arbitrators (CIArb)- Kenya chapter and also a Chartered Arbitrator. He is a member of the Permanent Court of Arbitration, The Hague. He also serves as a member of the National Environment Tribunal. He has served as the Chartered Institute of Arbitrator’s (CIArb- UK) Regional Trustee for Africa from 2019 -2022.

In the paper “Building Peace in Africa through Alternative Dispute Resolution”  Hon. Prof. Kariuki Muigua critically discusses the role of Alternative Dispute Resolution (ADR) mechanisms in peace building in Africa. The paper argues that ADR mechanisms can play a fundamental role in building peace in Africa. The paper further posits that ADR mechanisms are able to enhance sustainable peace in Africa due to their focus on reconciliation and restorative justice. It proposes solutions towards building peace in Africa through ADR.

In “the Emergence of the International Commercial Court: A Threat to Arbitration of Investor-State Dispute in Kenya” Marion Injendi Wasike and Dr. Kenneth W. Mutuma argue that the proliferation of international commercial courts, including their introduction in Kenya, necessitates a thorough analysis of their implications on arbitration’s role in investor-state disputes. By juxtaposing these emerging judicial entities against traditional arbitration paradigms, the discussion aims to unravel the complexities and potential shifts in dispute resolution preferences, highlighting the balance between innovation in legal adjudication and the sustenance of arbitration’s revered position in the international legal order.

Kamau Karori SC, MBS in “Striking a Balance: A Delicate Dance Between Sanctity and Scrutiny” notes that the continuing debate —between upholding the inviolability of arbitral awards and judicial intervention in cases of egregious injustice points to the need for delicate balancing between non-interference and the need to correct unmistakably unjust awards. The urgency of this discourse is informed by the need to prevent consumers or potential consumers of arbitration services opting to exclude arbitration clauses due to perceived deficiencies. The article seeks to navigate the genesis of the debate, delicately dissect the different perspectives, and draw comparisons with global practices.

The article “Reforming Kenya’s Law on Probation and Aftercare Services to Promote Alternative Dispute Resolution” by Michael Sang engages in a comprehensive exploration of Kenya’s Probation of Offenders Act within the context of the growing role of Alternative Dispute Resolution (ADR) principles in the nation’s criminal justice system. Drawing inspiration from international legal instruments such as “The Beijing Rules,” “Bangkok Rules,” and “Tokyo Rules,” the study evaluates the Act’s provisions, strengths, and limitations. It concludes with a call for thoughtful reforms that align Kenya’s criminal justice system with international standards, emphasizing a balanced and compassionate approach to justice.

The “Upholding Ethics, Integrity and Best Practice in Mediation” by Hon. Prof. Kariuki Muigua, OGW critically discusses the need for standardization of mediation practice in Kenya by adopting best practices. It examines some of the challenges facing mediation practice in Kenya. It is also explores measures adopted towards fostering best practices in mediation at both the global and national level. The paper further suggests recommendations aimed at upholding ethics, integrity and best practice in mediation. In “Exploring the Role of Mediation in Promoting Small and Medium Enterprises (SMEs) and Fostering Economic Growth in Kenya” Atundo Wambare offers an in-depth analysis of the use of mediation in promoting the growth of small and medium enterprises (SME’s). He makes recommendations on how best mediation can be harnessed as a tool for economic growth in Kenya.

James Njuguna and Nyamboga George Nyanaro in “Compulsory Resolution or Autonomy Erosion? The Debate on Mandatory Sports Arbitration delve into the contentious issue of mandatory sports arbitration, questioning its role as a potential future pathway for dispute resolution. Their research examines the implications of compulsory arbitration on athletes’ autonomy, juxtaposing it with the benefits of expedited dispute resolution.

Paul Ngotho in “Constitution of Kenya 2010 Article 159.2.(c): Ancestry, Anatomy, Efficacy & Legacy” traces the rather odd origin and everlasting effect of the often-cited Article 159.2.(c) of the Constitution of Kenya 2010. It acknowledges the central role played by two members of the Chartered Institute of Arbitrators Kenya Branch, quietly and privately, away from the mainstream constitution making process. One of them chairman of the Branch, the other the Minister of Justice, National Cohesion and Constitutional Affairs.

David Onsare in “Navigating The ESG Maze: Emerging Trends in Arbitration and Corporate Accountability” embarks on a timely exploration of the dynamic interplay between Environmental, Social and Governance (ESG) factors and arbitration, a field gaining critical importance in the realm of corporate accountability. By offering a comprehensive view of the complexities and practical implications of ESG in arbitration, the article serves as a crucial guide for legal professionals navigating the evolving landscape of corporate responsibility and arbitration. In “Public Policy as a Ground of Setting-Aside an Arbitral Award: Musings on the Centurion Engineers Civil Appeal Judgment”

Ibrahim Kitoo argues a case for upholding of public policy as a ground for the nonrecognition, non-enforcement and setting aside of an arbitral award in cases where to recognise and enforce such awards proves to be a clear violation of the law and against the public good. Juvenalis Ngowi in “Arbitral Tribunals: Do they have the power to issue interim measures during the proceedings?” discusses the powers of the Arbitral Tribunal to grant such orders and examines some procedural rules which empower arbitrators to issue such orders, the scope of those powers, and the factors to be considered when granting interim measures in the arbitral proceedings.

In “Examining the Efficacy of Mediation as A Tool for Accessing Justice in Kenya: Opportunities, Challenges, and Future Perspectives” Murithi Antony undertakes a thorough examination of mediation as a form of ADR in the Kenyan context. He identifies opportunities arising from the integration of mediation into the country’s legal system and explores barriers impeding its widespread adoption. The article concludes with a resounding call to action for all stakeholders to champion the use of mediation collaboratively and proactively, given its proven efficacy in dispute resolution.

Kariuki Muigua & Company Advocates is a Top-Tier Kenyan law firm situated at the heart of Nairobi city in Kenya. We are a broad-based practice with a reputation for offering a full range of quality services to our domestic and international clients.

At KM&CO, we take pride in offering personalized attention to our diverse clientele. Our practice aspires to offer efficient and cost-effective legal solutions that meet our esteemed clients’ needs in a timely and competent manner.

KM&CO was founded in 1993 by the current senior Advocate, Dr. Kariuki Muigua. It is based in the Central Business District of Nairobi at the Pioneer Assurance House located opposite 7th August Bomb Blast Memorial Park enjoying the convenience of close proximity to major financial, commercial and governmental institutions.

We are open for consultations with our clients worldwide; we have lawyers on standby for 24 hours to cover diverse time zones that impact on our global clients.

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