The new ratification requirements for natural resources transactions (The Natural Resources (Classes of Transactions Subject to Ratification) Act, 2016)

Posted on: October 12, 2016


The new ratification requirements for natural resources transactions (The Natural Resources (Classes of Transactions Subject to Ratification) Act, 2016)

Article 71 of the Kenyan Constitution provides that a transaction is subject to ratification by Parliament if it:

a) involves the grant of a right or concession by or on behalf of any person, including the national government, to another person for the exploitation of any natural resource in Kenya;

b) is entered into after the effective date (in accordance with Article 263 that is, 27th August 2010).

According to Article 93(1) of the Constitution, the Kenyan Parliament is comprised of both the National Assembly and the Senate. In accordance with Article 71(2) Parliament has enacted the Natural Resources (Classes of Transactions Subject to Ratification) Act 2016, which was assented to by the President on 13th September 2016 and came into force on 4th October 2016.

Under the said Act, the class of transactions set out in Section 4(1) and set out in the Schedule to the Act will require Parliament’s ratification in order to give effect to the transaction. The class of transactions which require ratification touch on: authorization  to extract crude oil and gas (excludes exploration permits), mineral agreements with a threshold of US$500 million; water resources (the extraction of sea water within the territorial sea for private commercial use), underground water resource ( the extraction of underground steam within a water conservation or other water resource protected are), wildlife (export and re-export of endangered wildlife species as well as the extraction of oil, gas and minerals within a wildlife protection area), forests ( long term concession of a gazetted forest resource as well as any excision or change of boundaries of gazetted public forests or nature reserves) and lastly any other transaction subject to ratification under an Act of Parliament.

Section 4(2) lists the transactions which have been exempted from the need to obtain any ratification by Parliament, namely: grant of a concession or right to exploit a natural resource through a permit, licence or other authorisation issued in accordance with the requirements of national or county government legislation (subject to the threshold set by the Cabinet Secretary under sub-paragraph (e), grant of a concession or right by a private person to exploit a natural resource through an agreement or a contract, the grant of a concession or right to exploit a natural resource for scientific purpose, educational or other non-commercial purposes unless the exploitation involves taking the natural resource or any portion of it outside Kenya; the exploitation of a natural resource by a Kenyan for subsistence purposes (in circumstances in which the law does not require that a permit, licence or other authorization be obtained; and lastly the exploitation of a natural resource in quantities falling below a threshold prescribed by the Cabinet Secretary by notice in the Gazette.

A beneficiary of a transaction (touching on a natural resource subject to ratification) has a duty to submit the agreement or other instrument evidencing the transaction within fourteen (14) days to the Cabinet Secretary responsible for the natural resource.

The Cabinet Secretary has seven (7) days to then submit the agreement for ratification to Parliament (which is supposed to be an open process, unless the Cabinet Secretary has acceded to a request for portions of the agreement to be treated as confidential in nature in which said case the ratification process will be conducted in camera).

An agreement subject to ratification shall only take effect once it is so ratified (although the transitional provisions provide that agreement which was entered into after the effective date but before the coming into force of this Act shall be deemed valid – which is a welcome relief for all beneficiaries of such agreements who were concerned about the legality of such agreements in light of Article 71 of the Constitution).

The timelines within which both houses of Parliament are to ratify those classes of transactions is sixty (60) days of receiving the agreement in accordance with the laid down procedures.

Lastly, the Act provides an interesting challenge to the Cabinet Secretary’s request for confidentiality of an agreement, as in line with Article 35(1) of the Constitution (as read with the Access to Information Act 2016). The Act does allow a person to challenge in the High Court the decision of the Cabinet Secretary on the request for confidentiality.

Practice Areas

  • Corporate and Commercial
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    Sectors

  • Natural Resources

  • Key Contacts

    Geoffrey Muchiri

    geoffrey@oraro.co.ke

    020 – 271 3 636/271 1 480