Kenya High Court: PPP Act Unconstitutional, Lacks Oversight

• Kenya's High Court declared Sections 59, 60, and 72 of the Public-Private Partnerships (PPP) Act unconstitutional on September 17.
• The ruling mandates parliamentary approval for PPP projects that create financial obligations for the national government, such as expenditure, guarantees, or public debt.
• The court emphasized Parliament's constitutional duty to oversee public finances and rejected the use of PPPs to bypass this oversight.
• The declaration is suspended for six months to allow Parliament to amend the law, with a compliance review scheduled for May 11.
• The court upheld the legality of privately initiated PPP proposals but stressed the ongoing need for constitutional public procurement principles like transparency and competition.

The court affirmed that the government cannot utilize a PPP arrangement as a means to circumvent parliamentary approval when a project generates a financial obligation for the nation.

On September 17, the High Court in Kenya delivered a significant ruling, declaring several sections of the country's Public-Private Partnerships (PPP) Act unconstitutional. The court found that Sections 59, 60, and 72 of the Kenya Public-Private Partnerships Act failed to adequately provide for parliamentary oversight of PPP projects that create financial obligations for the national government. This landmark decision stems from a petition that challenged the legal framework governing privately initiated PPP proposals, initially prompted by concerns over projects such as the Greenfield International Airport (GKIA) and the Kenya Electricity Transmission Company (KETRACO).

Despite the cancellation of the GKIA and KETRACO projects by the time the petition was heard, the court opted not to dismiss the case. It determined that the broader constitutional questions raised by the petitioners regarding the legality of PPP approval processes, the protection of public funds, and accountability in managing government financial obligations remained pertinent. The core issue revolved around whether the Kenya Public-Private Partnerships Act granted Parliament sufficient oversight over projects that could impose substantial financial burdens on the government.

Crucially, the court has suspended the effect of its declaration for a period of six months. This grace period is intended to allow Parliament sufficient time to amend the PPP Act, ensuring it aligns with constitutional requirements. The matter is scheduled to return to court on May 11 for a compliance assessment and further orders.

The High Court's ruling underscored Parliament's constitutional responsibility to oversee public finances, encompassing government expenditure and public liabilities. The court affirmed that the government cannot utilize a PPP arrangement as a means to circumvent parliamentary approval when a project generates a financial obligation for the nation. Such obligations can manifest in various forms, including direct payments to a private partner, government guarantees, contributions of public funds, or the assumption of debt and other liabilities.

The judgment clarified that the structure of a project as a PPP, or its initial financing by private investors, does not negate the necessity for parliamentary oversight if public financial obligations ultimately arise. The court explicitly stated that parliamentary approval is not required for every single PPP project. Instead, this requirement is triggered specifically when a PPP arrangement creates a financial obligation for the national government, involving taxpayers' money, government guarantees, borrowing, or other forms of public liability. Given the often long-term nature and significant financial implications of PPP arrangements, the court deemed parliamentary financial oversight essential.

While the petitioners also challenged provisions related to privately initiated PPP proposals, arguing they could allow government agencies to select private companies without adequate competition, the court rejected this particular aspect of the petition. It held that the law permits alternative public procurement methods when there are lawful and sufficient grounds. However, public agencies must consistently adhere to constitutional requirements for public procurement, including principles of transparency, fairness, competition, and value for money. The court cautioned against using privately initiated proposals to unfairly favor a specific company or bypass applicable procurement regulations.

The High Court's decision carries significant implications for the future of public-private partnerships in Kenya. By declaring parts of the Kenya Public-Private Partnerships Act unconstitutional, the court has mandated enhanced parliamentary oversight for projects that commit the national government financially. This means that any PPP project creating government expenditure, guarantees, public debt, or other public liabilities will now require parliamentary approval, a critical safeguard for public funds.

Lawyers advising on Kenyan PPPs must closely monitor the upcoming legislative amendments to the PPP Act within the next six months. The changes will directly impact how projects creating government financial obligations are structured and approved. Compliance officers, in particular, should review both existing and prospective PPPs to ensure future adherence to these enhanced oversight requirements and the constitutional public procurement principles reiterated by the court. The six-month suspension period offers a crucial window for the government to rectify the legislative deficiencies and establish a framework that provides robust parliamentary oversight for financially obligating projects, thereby strengthening accountability and protecting public resources.

Lawyers advising on Kenyan PPPs must closely monitor the upcoming legislative amendments to the PPP Act within the next six months, as projects creating government financial obligations will require parliamentary approval. Compliance officers should review existing and prospective PPPs to ensure future adherence to these enhanced oversight requirements and constitutional procurement principles.

Source: Original reporting via court documents