Legal abroad: Doing business in Kenya

With a growing economy and a commitment to infrastructure development, the Republic of Kenya continues to evolve. Home to one of the tallest skyscrapers in Africa and situated as the business and logistics hub of Central and East Africa, Kenya’s construction market was valued at over $17.3bn in 2023 and is expected to achieve an average annual growth rate of more than 5% between 2024 and 2026.

With a population of over 55 million and with English as one of its two official languages, alongside Swahili, Kenya offers excellent opportunities for foreign construction companies and investors in transport, electricity, housing and manufacturing projects.

Major projects

Notable recent and upcoming mega-projects in Kenya include:

• Lapsset  Arguably Kenya’s most ambitious venture, the £10bn Lamu Port-South Sudan-Ethiopia-Transport Corridor project’s main components include Lamu Port, the Lamu-Ethiopia-South Sudan highway, the Lamu-Juba-Addis Ababa railway, an oil refinery and a 2,240km pipeline linking oil fields in South Sudan to the refinery at Lamu Port. It also includes construction of three resort cities and airports at Lamu, Isiolo and Lokichoggio, as well as the development of a 1,100MW power line and a 185km water supply line.
• Tatu City  Promoted as Kenya’s first privately managed city, this £1bn project launched in 2010 involves the construction of a 2,500-acre mixed-use development in Ruiru. The 5,000-acre city will have homes, schools, offices, a shopping district, medical clinics, nature areas, a sport and entertainment complex and a manufacturing area to cater for over 250,000 residents and tens of thousands of visitors. The city is Kenya’s first operational special economic zone, providing reduced corporate taxes, zero-rated VAT and import duty exemptions, among other benefits.
• Nuclear power plant  As it diversifies its energy generation amid rising demand and a zero-carbon push, Kenya plans to start construction of its first nuclear power plant in 2027 and aims to have it running by 2035, at a projected cost of around £4bn. According to the Nuclear Regulatory Authority director for partnerships and public awareness, Edward Mayaka, the country is fully prepared to safely harness nuclear power in the critical fields of energy, health, research and security.

Law

Kenya’s legal system has its roots in English common law and is based on a combination of statute law, common law principles and customary law. The 2010 constitution is the supreme law, but English case law is still of persuasive value in the Kenyan courts.

Kenya’s legal framework is business-friendly, and the familiarity of being based largely on English law is a further attraction to many investors. The rule of law is enshrined in the Kenyan legal system, and its doctrines include separation of powers of the executive, legislature and judiciary, regular elections, an independent judiciary, free and independent media institutions and equality before the law.

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Dispute resolution

Arbitration is widely used to resolve commercial disputes in Kenya, and article 159(2)(c) of the constitution specifically promotes arbitration as a dispute resolution mechanism. It is governed by the Arbitration Act 1995 (as amended in 2010), which is modelled on the UNCITRAL model law.

In addition, there are other sector-specific laws in Kenya that promote arbitration as a way to resolve disputes, including the Intergovernmental Relations Act 2012, the Kenya Ports Authority Act and the Mining Act 2016.

Its arbitration rules incorporate best practice in international commercial arbitration

Kenya is a party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards as well as to the International Centre for Settlement of Investment Disputes (ICSID) Convention, and the Arbitration Act stipulates that an international award shall be recognised as binding and enforced in line with the provisions of the New York Convention or any other convention to which Kenya is signatory.

Kenyan courts are therefore required to enforce foreign arbitral awards irrespective of the state in which the award was made, subject to limited exceptions under the New York Convention and the Arbitration Act, for instance where the recognition or enforcement of the arbitral award would be contrary to public policy in Kenya.

Kenya’s capital, Nairobi, has a Centre for International Arbitration and its arbitration rules, issued in 2015, incorporate best practice in international commercial arbitration and provide a flexible institute-administered procedure.

In addition, the Kenya branch of the Chartered Institute of Arbitrators has a growing membership and published its own revised arbitration rules in 2020.

The thriving Kenyan construction market, the mega-projects in the pipeline and the country’s positioning as a dominant economy in East Africa, along with its strong growth prospects, present significant opportunities for foreign construction companies.

Kwadwo Sarkodie is a partner and Tamsin Travers is counsel at Mayer Brown