KENYA: An Introduction

Dispute Resolution in Kenya 

Setting the Scene 

Kenya, a vibrant and largely democratic economy in East Africa, has gone through a lot in the last one year. As her economy was recovering from the adverse effects of the COVID19 pandemic, no one knew a war half a world away between Russia and Ukraine would affect the prices of oil and food and derail the economic revival. Most countries in the world faced the same issues, but Kenya was also going through something else. An election. In the past, elections in Kenya have affected the economy, the policies put in place by the Government and the laws enacted by its Parliament. 2022 was no different. All these factors, COVID19, the war in Russia and Ukraine, and the 2022 general elections have, in the last one year, affected the social, economic, and legal environment in Kenya.

For two years, almost everything was at a standstill. Before the pandemic, a range of innovative Government policies were in various stages of implementation. The Data Protection Act had been enacted in 2019 but was yet to be fully implemented. The Lands Registry had commenced an ambitious program to digitise land records and finally resolve recurring issues of missing records, fraudulent transactions, and crippling bureaucracy. These efforts were put on hold as the Country focused on more urgent needs such as health care and the economy.

Data Protection Commissioner 

After the pandemic, most of these policies have been reinitiated with mixed results. A Data Protection Commissioner was appointed, and corporations were warned that they need to have data protection policies in place. In December 2022, the Data Protection Commissioner issued its first fine of Kshs. 5,000,000 (around USD 41,000) against a Kenyan Company for not protecting personal data and not having a data protection policy in place. There has previously been a cavalier attitude towards the privacy of personal information in the Country. We believe the actions of the Data Protection Commissioner are positive. Businesses should put in place measures and policies which protect personal information which comes within their care. The Lands Registry has operationalised a new online registration platform called ‘Ardhi Sasa’. This platform has had teething problems and has at times completely paralysed land transactions in the capital city Nairobi where the pilot program was launched. If implemented successfully, Ardhi Sasa will improve efficiency in conducting transactions, reduce fraud and allow for easy authentication of title documents.

The Courts 

The Courts have fared better. Kenyan Courts have proved to be both flexible and resilient in dealing with the challenges they have faced in the last three years. During the pandemic, the Courts introduced an online registry called the ‘e-filing platform’. The platform has largely been a success and it has enabled advocates and litigants to file and view pleadings remotely through any internet enabled device. The only drawback being that the platform was only in use in Nairobi and was recently extended to Mombasa. The Court has mostly been using a virtual platform to handle mentions, hearings and deliver judicial decisions. Physical hearings have been reserved for cases where there are bulky documents or too many litigants. This virtual platform has enabled advocates to attend multiple Court sessions from the convenience of their chambers and witnesses to testify from around the world thereby reducing the cost of litigation. It is therefore no surprise that the judiciary’s e-filing platform and the virtual platform have been retained post-pandemic.

Despite the innovations introduced in the Judiciary, there is still a heavy backlog of cases in the High Court and Court of Appeal. To address this, the number of Judges in the High Court and the Court of Appeal has been increased. It will take time before this measure bears fruits. The Judiciary also introduced Court-annexed mediation. Data from the Court reveals that this measure has been more welcome in family disputes when compared to commercial disputes. For example, in 2022, 709 family related disputes were referred to mediation vis a’ vis 72 commercial disputes in Milimani Law Courts in Nairobi. A Small Claims Court was also recently introduced to help with the backlog of cases. This is a Court with a jurisdictional ceiling of Kshs. 1 million (about USD 7,500) and it has a statutory timeline of 60 days to hear and determine matters. The Court has thrived in its short lifespan. Out of 22,488 claims filed in the Court, 16,937 have been concluded within the statutory timeline. On a more impressive note, the average number of days it takes for matters to be concluded in the Small Claims Court stands at 37 days. For this Court to begin having an impact on the backlog, its jurisdictional ceiling may need to be raised or some of its procedures which have been successful should be adopted in other Courts.

The Supreme Court has delivered two seminal decisions on constitutional and commercial law in Kenya. In Attorney-General & 2 others v Ndii & 79 others; Prof. Rosalind Dixon & 7 others (Amicus Curiae) (Petition 12, 11 & 13 of 2021 (Consolidated) the apex Court held that although the basic structure doctrine does not apply to the Kenyan Constitution, a President does not have the capacity to propose or introduce constitutional amendments through a popular initiative. Such an initiative must originate from the people. In Bia Tosha Distributors Limited v Kenya Breweries Limited & 6 others (Petition 15 of 2020) [2023] KESC 14 (KLR), the Court held that an arbitration clause in an agreement does not prevent a Court from determining any constitutional grievances that arise from the contractual relationship.

The Economic Front 

On the economic front, Kenya is facing a shortage of dollars. Many countries have this same problem, and the solutions have varied from the practical, purchasing specific imports with your own currency, to the extreme, completely replacing the dollar in international transactions with a more available currency. The Kenyan Government has taken the practical approach. It struck a deal with the United Arab Emirates to the effect that the Government would, from April 2023, begin importing fuel on credit for a credit term of up to one year. Furthermore, the Government would import 30 percent of its monthly fuel requirements through the state-owned National Oil Corporation.

The Kenyan Government in its efforts to collect more revenue from taxes has sought to limit tax evasion, scrutinise tax refunds and expand into new frontiers of taxation. Capital Gains Tax (CGT), a tax which had been suspended in June 1985, was revived in 2014. To make it palatable, the CGT rate was set at 5%. However, an amendment made to the Income Tax Act in 2022 tripled the rate of CGT from 5 % to 15 % with effect from 1st January 2023. Digital services such as Netflix, Twitter and Amazon have been expanding in Kenya and it was only a matter of time before they caught the attention of the Government. Digital Service Tax was introduced through the Income Tax (Digital Service Tax), 2020. In the six months ending December 2022, the Kenya Revenue Authority collected Kshs. 174 million (about USD 1.3 million). In late March 2023, there was some reprieve as the President of Kenya announced that the Government was considering scraping Digital Service Tax.