The High Court has declared key provisions of Kenya’s Public-Private Partnerships (PPP) Act unconstitutional for failing to provide for parliamentary approval where projects expose the government — and ultimately taxpayers — to financial obligations.
The court, however, suspended the declaration of invalidity for six months, giving Parliament an opportunity to amend the law and bring it into line with the Constitution. At the centre of the dispute were Sections 59, 60 and 72 of the PPP Act, which the petitioners argued gave the Executive and the PPP Committee powers to approve major projects without sufficient parliamentary oversight.
The case arose from a challenge involving privately initiated proposals relating to the JKIA and KETRACO projects. Although the two projects had already been cancelled by the time the case was heard, the government and other respondents argued that their cancellation meant there was no longer a live dispute for the court to determine.
The High Court rejected that argument, finding that cancellation of the projects did not resolve the broader constitutional questions raised in the petition. Those questions included how PPP projects are approved, how public funds and liabilities are protected and whether government agencies can enter into arrangements carrying significant financial consequences without adequate parliamentary scrutiny.
The court held that Parliament has a constitutional responsibility to oversee the collection, allocation and expenditure of public money. According to the court, the government cannot use a PPP arrangement to sidestep parliamentary oversight where a project commits the State to spending public money or assuming financial liabilities.
Such obligations may arise where the government is required to make payments to a private company, issue guarantees, contribute public funds, borrow money or assume debts and other liabilities.
The court said the fact that a project is labelled a PPP — or is initially financed by a private investor — does not remove it from parliamentary scrutiny. The critical question is whether the arrangement ultimately creates a financial obligation for the national government and taxpayers.
PPP projects are often long-term arrangements between public entities and private investors, meaning their financial consequences can extend over many years.
The court therefore declared Sections 59, 60 and 72 unconstitutional to the extent that they fail to provide for parliamentary approval where PPP projects create government expenditure, guarantees, public debt or other public liabilities.
Now, parliamentary approval becomes necessary where a project creates a financial obligation for the national government.
The petitioners had also challenged provisions governing privately initiated proposals, arguing that they could allow public entities to bypass competitive procurement and favour particular private companies.
However on that the court held that the law may permit different procurement methods where they are properly justified, but public entities remain bound by constitutional principles of transparency, fairness, competition and value for money.
A privately initiated proposal therefore cannot be used as a route to unfairly favour a particular company or avoid constitutional procurement requirements.
Despite finding portions of the PPP Act unconstitutional, the court declined to invalidate them immediately. Instead, the declaration has been suspended for six months to allow Parliament to amend the legislation and provide the necessary safeguards for PPP projects that expose the government to expenditure, guarantees, debt or other public liabilities.
The matter will return to court on May 11 for confirmation of compliance and further directions.
