Skip to main content

Contract for Kenya’s China-funded railway ruled ‘illegal’



  • Court of Appeal finds against US$3.2 billion contract for belt and road project which started operating in 2017
  • Ruling throws question mark over future of this and other construction agreements

Published: 

Updated: 

When Chinese President Xi Jinping hosted African leaders at last week’s China-Africa Summit, he singled out Kenya’s Standard Gauge Railway, a multibillion-dollar Chinese-funded Belt and Road Initiative project, for helping to move cargo during the coronavirus pandemic.

 

Xi congratulated Kenya’s President Uhuru Kenyatta for ensuring the uninterrupted flow of cargo from the Port of Mombasa on the Kenyan coast into the East African hinterland via the Standard Gauge Railway (SGR), which first started operating in 2017. Kenya’s decision, he said, had helped keep trade flowing in the region despite freight restrictions required by Covid-19 containment measures.

 

But the rail project has faced one setback after another, and the latest could have major implications on its future and any other projects that may follow. On Friday, a Kenyan appellate court declared the rail contract between Kenya and the China Road and Bridge Corporation (CRBC) illegal.

 

The Court of Appeal, which handles cases arising from the decisions of the High Court in Kenya, ruled that state-owned Kenya Railways had failed to comply with – and violated – the nation’s laws “in the procurement of the SGR project”.

Kenyan activist Okiya Omtatah and the Law Society of Kenya, an association of practising advocates, brought the suit in 2014 in a bid to stop construction of the SGR. They argued the railway was a public project that should have been subject to a fair, competitive and transparent procurement process.

 

Instead, they said, the contract was single-sourced without being put up for tender, despite the burden of loan repayments falling on Kenyan taxpayers.

The High Court dismissed the case and ordered that documents used by the plaintiffs to support their case – including the contract and other negotiation documents, which the government said were classified – had been obtained illegally and were to be expunged from court records. Aggrieved by the decision, the plaintiffs appealed.

 

Kenya Railways and CRBC defended the contract, saying the Kenyan government had negotiated a financing agreement with Exim Bank of China for two loans, each for US$1.6 billion, to support the SGR project.

But the appeal court’s decision in favour of the plaintiffs comes after a large section of the project has been completed and is operational. While it is unclear what might happen next, it is possible either the Kenyan government or CRBC could take a challenge of the appeal court ruling, or seek its interpretation, in the Supreme Court.

 

However, legal experts said that Friday’s ruling may also have future implications as it gives leeway for both the government and the CRBC to avoid meeting contractual obligations.


Nelson Havi, president of the law society, suggested the Court of Appeal ruling may provide an excuse for the Kenyan government to dismiss its liability over the project if it wanted to. “It may be a preparatory process for GoK [Government of Kenya] to plead illegality at an international arbitration should China Road and Bridge Corporation sue for breach of contract,” Havi posted on Twitter.


Gad Ouma, a commercial lawyer and managing partner at Nairobi-based law firm G.M. Gamma Advocates, described the ruling as one which the government could use as grounds to find its way out of its obligations in the contract – but that it would not be easy.

 

For a completed project, Ouma said, if there was any dispute, the government would likely to be found liable to discharge its obligations under the contract. “It would be very hard at this point for the government to come out of the contract to say it is not liable.”

CRBC would have a case regarding the legality of the appellate court ruling, he pointed out. “Where a party is likely to steal a march through the back door, the courts or any international arbitration body is likely to protect the weak party,” Ouma said, adding that such contracts always have applicable laws or dispute resolution mechanisms.

 

CRBC was awarded the US$3.2 billion contract in 2014 to build the rail line running from the port of Mombasa to Kenya’s capital city, Nairobi. Its parent company, the China Communications Construction Company, later stepped in to build an extension from Nairobi to Naivasha, a town in the Central Rift Valley, for another US$1.5 billion.

 

Both projects have been completed, with passenger and cargo trains operating, and in 2017 the Africa Star Railway Operation Company, a CRBC subsidiary, was awarded the contract to manage the operations of both passenger and cargo trains on the SGR.

Kenya planned to extend the railway to Malaba, on its western border with Uganda, but China’s Exim Bank, which financed the first two phases, asked Kenya to redo a feasibility study for the Malaba extension to prove its commercial viability before funds were released.

 

“China Exim Bank is currently carrying out a feasibility study on the construction of the railway extending westwards,” the Chinese embassy in Nairobi said.

 

Under pressure to pay its debts amid the coronavirus pandemic, which has ravaged the economy, the Kenyan government has been forcing importers to use the train. But truckers and importers have resisted, saying it is more costly to use the rail than trucks.

 

Last year, SGR made US$136 million in revenues from cargo and passenger services. But this month, Kenya’s parliament disclosed that Kenya Railways had not paid US$380 million in management fees to Africa Star Railway. The Chinese embassy in Nairobi confirmed that Africa Star Railway had not been paid part of the fees but “appreciated the efforts that the Kenya government has made to clear the pending payments”.

https://amp-scmp-com.cdn.ampproject.org/wp/s/amp.scmp.com/news/china/diplomacy/article/3090225/contract-kenyas-china-funded-railway-ruled-illegal?usqp=mq331AQQKAGYAdm-_KaZ1cK9FLABIA%3D%3D


Comments

Popular posts from this blog

SSG Commando Muddassir Iqbal of Pakistan Army

“ Commando Muddassir Iqbal was part of the team who conducted Army Public School operation on 16 December 2014. In this video he reveals that he along with other commandos was ordered to kill the innocent children inside school, when asked why should they kill children after killing all the terrorist he was told that it would be a chance to defame Taliban and get nation on the side. He and all other commandos killed children and later Taliban was blamed.
Muddassir Iqbal has deserted the military and now he is  with mujahedeen somewhere in AF PAK border area”
For authenticity of  this tape journalists can easy reach to his home town to interview his family members or   ISPR as he reveals his army service number”
Asalam o Alaikum: My name is Muddassir Iqbal. My father’s name is Naimat Ali. I belong to Sialkot divison (Punjab province), my village is Shamsher Poor and district, tehsil and post office  Narowal. Unfortunately I was working in Pakistan army. I feel embarrassed to tell you …

CPEC Jobs in Pakistan, salary details

JOBS...نوکریاں چائنہ کمپنی میںPlease help the deserving persons...Salary:Salary package in China–Pakistan Economic Corridor (CPEC) in these 300,000 jobs shall be on daily wages. The details of the daily wages are as follows;Welder: Rs. 1,700 dailyHeavy Duty Driver: Rs. 1,700 dailyMason: Rs. 1,500 dailyHelper: Rs. 850 dailyElectrician: Rs. 1,700 dailySurveyor: Rs. 2,500 dailySecurity Guard: Rs. 1,600 dailyBulldozer operator: Rs. 2,200 dailyConcrete mixer machine operator: Rs. 2,000 dailyRoller operator: Rs. 2,000 dailySteel fixer: Rs. 2,200 dailyIron Shuttering fixer: Rs. 1,800 dailyAccount clerk: Rs. 2,200 dailyCarpenter: Rs. 1,700 dailyLight duty driver: Rs. 1,700 dailyLabour: Rs. 900 dailyPara Engine mechanic: Rs. 1,700 dailyPipe fitter: Rs. 1,700 dailyStorekeeper: Rs. 1,700 dailyOffice boy: Rs. 1,200 dailyExcavator operator: Rs. 2,200 dailyShovel operator: Rs. 2,200 dailyComputer operator: Rs. 2,200 dailySecurity Supervisor: Rs. 2,200 dailyCook for Chinese food: Rs. 2,000 dailyCook…

A ‘European Silk Road’

publication_iconPhilipp HeimbergerMario Holznerand Artem Kochnevwiiw Research Report No. 430, August 2018 
43 pages including 10 Tables and 17 FiguresFREE DOWNLOAD
The German version can be found here.In this study we argue for a ‘Big Push’ in infrastructure investments in greater Europe. We propose the building of a European Silk Road, which connects the industrial centres in the west with the populous, but less developed regions in the east of the continent and thereby is meant to generate more growth and employment in the short term as well as in the medium and long term.After its completion, the European Silk Road would extend overland around 11,000 kilometres on a northern route from Lisbon to Uralsk on the Russian-Kazakh border and on a southern route from Milan to Volgograd and Baku. Central parts are the route from Lyon to Moscow in the north and from Milan to Constanţa in the south. The southern route would link Central Europe with the Black Sea area and the Caspian Sea litto…