‘Phoney War’: Tackling the Counterfeits’ Problem In Kenya 

Posted on February 3rd, 2020

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A consumer purchasing goods and services in the market, is often concerned about whether the goods that he is placing in his basket are genuine. One is oft en left in shock upon learning that the establishment where one purchased his supplies from, appeared in the local dailies accused of dealing in counterfeit goods. Th is fear is not restricted to goods alone, but also covers the services market.

The infiltration of counterfeit products in the market infringes on the intellectual property rights of the rightful owners of the products, since counterfeiters pass off phoney goods as the products of legitimate manufacturers, when in actual fact, they are not. This passing off denies the genuine manufacturers revenue, as they find it diffi cult for their products to compete with the invariably cheaper non-genuine products. Inability to compete with counterfeiters often comes with a dip in profi tability which, in turn, leads to loss of employment due to downsizing or worse still, closing down of the business altogether. The government also loses out on taxes as counterfeiters are prone to evade tax while the genuine manufacturer simultaneously experiences a slump in sales and therefore decrease taxable income.

According to the Kenya Association of Manufacturers, local manufacturers lose an estimated sum of KES 30 billion (USD 300 million) in revenue while the national government is deprived of KES 6 billion (USD 60 million) in taxes, due to counterfeit products, annually.

Counterfeit products also pose a health risk to consumers, as such products may at times contain excessive amounts of hazardous substances as compared to genuine products. Similarly, counterfeit farm inputs such as seeds or fertilizers, pose a serious threat to a nation’s food security as their use may result in poor yields or crop failures.

All in all, counterfeit goods seem to have pervaded all sectors of our country’s economy, noting the estimation by the Anti-Counterfeit Authority (the Authority) that one in every fi ve (5) products sold in the Kenyan market is counterfeit. It is therefore very much in the public interest that the war against counterfeit is swiftly and decisively won.

Legal Framework

To address the concerns posed by counterfeit goods, the Anti-Counterfeit Act, 2008 (the Act) was enacted to provide the legal and institutional framework for tackling the vice. The Authority (formerly known as the Anti-Counterfeit Agency) is established under section 3 of the Act. The Authority’s responsibilities are centred on curbing counterfeit products in the market through enlightening and informing the public on matters relating to counterfeiting, combating counterfeiting trade and other dealings in counterfeit goods through devising and promoting training programmes on fi ghting counterfeiting and advising the government on policies and measures concerning the protection of intellectual property rights as well as the extent of counterfeiting. The Authority’s Board (the Board) is established under section 6 of the Act and draws representation from other stakeholders, including the Att orney General’s offi ce, the Kenya Revenue Authority, the Kenya Bureau of Standards and the Kenya Association of Manufacturers amongst others.

The Board is authorised under section 22 of the Act to appoint inspectors who are tasked with enforcing the provisions of the Act. Board members, police offi cers, customs offi cials, trade mark and patent examiners, seed and plant inspectors and public health inspectors are also designated as inspectors under the Act. The idea is to ensure as much representation or coverage as possible from other public institutions, so that the Act can be widely enforced. However, the Authority’s powers appear to have been somewhat clipped as section 30 (1) of the Act empowers the Director of Public Prosecutions (DPP) to appoint prosecutors for counterfeiting cases.

Under section 23 of the Act, an inspector has the power to enter suspected premises and to search and ascertain whether the goods are genuine and to take steps reasonably necessary to terminate the manufacturing, production or making of counterfeit goods. Section 23 (3) of the Act specifically empowers an inspector to arrest with or without a warrant, any person whom he suspects on reasonable grounds of having committed any offence under the Act and an inspector may search and detain such a person. The discharge of an inspector’s functions is not to be taken lightly, as the obstruction of an Inspector from undertaking his duties amounts to a criminal offence under section 24 of the Act and shall be liable, upon conviction, to imprisonment for a term not exceeding three (3) years or a fine not exceeding KES 2 million (USD 20,000) or both. Section 25 of the Act provides details on what the inspector is to do upon seizing the suspected counterfeit goods. The inspector is required to seal, sort and take an inventory of the seized goods, furnish the complainant and the owner of the goods with the inventory, secure the goods by relocating them to a safe place and notify the concerned parties of the new location of goods. An aggrieved party may petition Court for a declaration that the goods are not counterfeit and an order for the return of the seized goods to him or her.

Section 32 of the Act lists the general offences pertaining to counterfeiting such as possession, sale, distribution or importation of counterfeit goods. Equally, the possession of any labels, patches, wrapping, containers or documentation bearing a counterfeit mark is also an offence. The aiding or abetting of any of the foregoing is also outlawed. The penalty for contravention of this section of the Act is stiff, in the case of a first conviction, being imprisonment for a term not exceeding five (5) years, or to a fine, in respect of each article or item involved in the particular act of dealing in counterfeit goods to which the offence relates, not less than three (3) times the value of the prevailing retail price of the goods, or both. In the case of a second or any subsequent conviction, to imprisonment for a term not exceeding fifteen (15) years, or to a fine, not less than five (5) times the value of the prevailing retail price of the goods, or both.

A complaints mechanism is laid out in section 33 of the Act. It allows the holder of an intellectual property right to lodge a complaint under the Act with the Executive Director of the Agency. The complainant is also required, together with lodging the complaint, to furnish such information or particulars to demonstrate that on the face of it, the goods in question are counterfeit. If the Executive Director is duly satisfied with the information, he may order such necessary steps be taken under section 23 of the Act. However, an inspector is not precluded from taking the appropriate steps on his own motion in relation to any dealing in counterfeit goods.

The holders of trademarks, copyrights and other trade names of goods or works to be imported into Kenya, can record such interests with the Agency for protection as per section 25 of the Act. The application is in the prescribed form and the protection comes into force from the date on which such interests are recorded. The duration of protection is one (1) year from the date the interest was recorded by the Agency or the period of protection of the intellectual property right, whichever is shorter.

A person who has suffered damage following wrongful seizure of goods is entitled to claim for compensation under section 34 (7) of the Act.

Judicial Pronouncements

The Kenyan Courts have made various pronouncements and developed jurisprudence on counterfeiting matters. In Wilson Muriithi Kariuki t/a Wiskam Agencies v Surgipharm Limited (2012) eKLR, the Applicant was seeking an interlocutory injunctive order restraining the Respondent from distributing the alleged counterfeit products in the market. The High Court held that the party seeking an interlocutory injunction must demonstrate, as it the normin injunction cases, that it has a prima facie case with probability of success; that if the order sought is not granted, he risks suffering irreparable damage that cannot be compensated by way of damages; and if the Court is in doubt, then it is to determine the matter on a balance of convenience. Importantly, the Applicant must be a right holder.

In Republic v Anti Counterfeit Agency & 3 others Ex-parte Omega Chalk Industries (1993) Limited & another (2015) eKLR, the High Court emphasised that there is no need for the Authority to notify an individual of an impending seizure exercise as follows: “I agree with the interested party that a reading of the above provisions and taking into account the mischief that these provisions were meant to cure, it would defeat the purpose of the Act to require that the person in whose possession suspected counterfeit goods are to be heard before the power of seizure is exercised. Any wrongful seizure of the goods is to be dealt with under section 25 of the Act.

In Platinum Distillers Limited v Attorney General & 4 Others (2017) eKLR, the Court held that the power to commence and prosecute counterfeit cases falls within the purview of the DPP, and that the power should be exercised independently and there should also be no perception that the DPP is acting under the direction or instigation of anyone else. However, the Court has the inherent power to discontinue the prosecution if it is opined that allowing the prosecution to continue would be an abuse of the Court process or result in a breach of the accused’s fundamental rights. The Court further noted that the lack of a proper factual basis for the prosecution can be another ground for termination of proceedings.

In Anti-Counterfeit Agency v Barloworld Limited & another (2018) eKLR, the Court of Appeal held that public interest should be taken into account when issuing injunctive reliefs pending hearing and determination of the main appeal. In this matter, the Agency had applied for a stay of execution with the intention that counterfeit products should not be released to the market.

Executive Forum and Working Group

A point of concern has been a perceived lack of coordination or cooperation between complimentary government agencies in the war on counterfeits. However, this issue has been addressed by the formation of the Inter-Agency Anti-Illicit Trade Executive Forum (Executive Forum) and the Inter-Agency Anti-Illicit Trade TechnicalWorking Group (Working Group) established under Gazette Notice No. 7270 of 2018.

The Executive Forum is chaired by the Principal Secretary, State Department for Trade with the Head of the Authority being the secretary. Its functions include advising the Cabinet Secretary for Trade on all matters concerning illicit trade as well as the appropriate policies, laws and regulations required to strengthen the war on illicit trade. One the other hand, the functions of the Working Group include developing a national strategy to combat illicit trade, coordination of surveillance and investigations on the source of illicit merchandise, coordination of the enforcement of laws, regulations and policies dealing with illicit trade and conducting public education on illicit trade.

The establishment of the Executive Forum and the Working Group is a step in the right direction, as the idea behind their formation is to infuse the much needed synchrony and coordination in the war on counterfeits.

Viewpoint: A Look at The New Land Conversion and Compensation Rules

Posted on May 31st, 2019

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The Constitution of Kenya 2010 (the Constitution), recognises the need to regulate the manner in which land may be converted from one regime to another. In this regard, Article 68 (c) (ii) of the Constitution provides that Parliament may enact legislation to regulate the manner in which land may be converted from one category to another. This stems from the need to govern the said process, noting the irreversibility of the exercise, once conducted.

Likewise, compensation for compulsory acquisition of land is a very pertinent issue, especially in this dispensation in which the government has sought to stimulate economic growth by, amongst other things, launching mega infrastructural projects such as the construction of the standard gauge railway. Here, Article 40 (3) of the Constitution protects the citizenry from deprivation of property unless the deprivation is for a public purpose or in the public interest and in such a case, the Constitution requires that the affected proprietor is promptly compensated in full and his or her right to seek legal redress is unfettered.

The Government has therefore taken cognisance of the need to address these vital issues by promulgating the following sets of regulations.

The Land (Conversion of Land) Rules, 2017
In exercise of the powers conferred under section 9 (5) of the Land Act, 2012 (the Act), the National Land Commission (the Commission) gazetted the Land (Conversion of Land) Rules, 2017 (the Land Conversion Rules) vide Legal Notice No. 282 of 2017. The Land Conversion Rules focus on the procedural aspects of the conversion of land from public land to either private or community land and seek to ensure the process is clear, efficient and conducted procedurally.

The National or County Government may on its own motion or upon request, identify land and notify the Commission of its intention to convert land under section 9 of the Act. The procedure is meant to be transparent.

Conversion of Public Land to Private Land
Upon receipt of the notification, the Commission should satisfy itself that:

  • The land is, at the time of the intended conversion, public land
  • The purpose of its intended use is compatible with land use planning for the respective area
  • The land is not part of an ecologically sensitive area
  • The conversion complies with provisions of the Act or any other law
  • The land is not controlled land i.e. land within a zone of twentyfive kilometres from Kenya’s inland boundary, within the first and second row from the high-water mark of the Indian Ocean and any other land declared controlled land by law

Where the Commission is satisfied that the land meets the set out criteria and the matter amounts to a substantial transaction, the Commission will then refer the matter to the National Assembly or County Assembly for approval. Upon approval, the land is allocated by the Commission and its particulars entered in the Land Register.

Where the proposed conversion does not amount to a substantial transaction as defined in the Act, the Commission is required to invite the public for consultation by publishing a notice in at least two (2) dailies of nationwide circulation, affixing the notice in prominent places in a County or Sub-County including the headquarters, announcing the notice in official and vernacular stations of nationwide coverage and announcing in public meetings and places of worship. The notice must contain details of the land, proposed mode of conversion, specify the date, venue and time for the consultations and allow for representations within fifteen (15) days.

Where the Commission approves the intended conversion of land after scrutiny of the public representation, it will then allocate the land and enter the particulars in the Land Register.

Conversion of Public Land to Community Land
Upon receipt of an application for conversion of public land to community land, the Commission is required to satisfy itself that the land is public land and it will be used for the benefit of the community, as provided for under Article 63 of the Constitution.

The Commission is also required to invite comments or objections on the intended conversion of public land to community land by placing a thirty (30) day notice in the same form and mediums, as the notice for conversion from public to private land.

Where there are objections, the Commission is required to notify the National or County Government of the same for determination. In case there are no objections, the Commission will proceed to publish a notice in the Kenya Gazette on the conversion of the public land to community land. The conversion is then entered in the Land Register.

The Land (Assessment of Just Compensation) Rules, 2017
The Land (Assessment of Just Compensation) Rules, 2017 (the Land Compensation Rules) were developed by the Commission in exercise of the powers conferred under section 111 (2) of the Act, and gazetted vide Legal Notice No. 283 of 2017. The Land Compensation Rules focus on the assessment of compensation payable to persons who possess an interest in land, at the time which the Commission takes possession of such land.

The Land Compensation Rules provide that in assessing the appropriate compensation for compulsory acquisition of land, the Commission will consider the following factors:

  • The market value of the land
  • The damage sustained or likely to be sustained by persons interested at the time the Commission takes possession of the land
  • Reasonable expenses incidental to the relocation of any of the persons interested
  • Damage genuinely resulting from the diminution of the land between the date of the publication in the gazette of the notice
    of intention to acquire land and the date the commission takes possession of the land

With regard to market value of the land, the Commission is required to consider the stipulated user of the land and whether there has been any increase in the value of the land, either after publication of the notice of intention to acquire the land; or by reason of use of the land in an illegal manner or a manner detrimental to the user. Conversely, the Commission does not consider the following matters when assessing compensation:

  • The degree of the urgency which has led to the acquisition
  • Any disinclination of the person interested to part with the land
  • Damage sustained by the person interested which, if caused by a private person would not be a good cause of action
  • An increase in the actual value of the land as at the date of the publication in the gazette, of the notice of intention to acquire likely to accrue from the use to which land will be put when acquired
  • An outlay on additions or improvement to the land, incurred after the date of publication in the Gazette of the notice of intention to acquire land, unless the additions or improvements were necessary for the maintenance of any building in proper state of repair

The Commission will determine an award based on the market value of land which is taken as the value of the land at the date of publication in the Gazette of the notice of the intention to acquire the land. It should be noted that additional compensation is payable for disturbance over and above the compensation amount. Additional compensation is calculated at fifteen per cent (15%) of the market value of such land.

Conclusion
The efforts of the Commission to address the challenges affecting the land sector should be commended. It however remains to be seen to what extent the Rules will be implemented in order to determine their impact in addressing these challenges.

Still, strict implementation of the Rules is not enough. Corruption should also be tackled as it is a serious impediment in the Government’s efforts to address land issues. An example is the assessment and compensation of the compulsory acquisition exercise for one of the current flagship projects in the transport sector, which has been marred by allegations of corruption. This has resulted in the arraignment of senior officials in the Commission to answer to graft charges. We hope these efforts at curbing corruption will be sustained so that the contentious issues in the land sector will be addressed where possible, substantively
and with finality.

 

Unresolved: An Assessment of the National Land Commission

Posted on May 31st, 2019

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The land “problem” in Kenya dates back to the colonial times, with the alienation of land to European settlers stoking the fires of the struggle for independence. Subsequent allocation of the same land after independence to well positioned individuals and companies, did not solve the problem. Since independence, the legal and institutional framework relating to land has been fraught with tension, strife and copious litigation.

The Constitution of Kenya, 2010 provides for the formation of the National Land Commission (NLC) under Article 67 (1). Article 67 (2) stipulates the functions of the NLC. Further, Article 68 provides that the Parliament should revise and rationalise existing land laws and enact new ones. Pursuant to these provisions, the Land Act, 2012 (the Land Act), Land Registration Act, 2012 (the Land Registration Act) and the National Land Commission Act, 2012 (the NLC Act), were enacted. The NLC Act makes further provisions on the functions and powers of the NLC, including qualifications and procedures for appointment to the NLC. It also gives effect to the objects and principles of devolved government in land management and administration, and for connected purposes.

The establishment of the NLC was touted as a catalyst to Kenya’s land reforms that would have a domino effect of spurring economic growth. The key functions of the NLC include managing public land on behalf of the national and county governments, recommending a national land policy to the national government, advising the national government on a comprehensive program or the registration of title in land throughout Kenya and conducting research related to land and the use of natural resources, and make recommendations to appropriate authorities. The NLC also has the mandate to initiate investigations, on its own initiative or on a complaint, into present or historical land injustices and recommend appropriate redress, encourage the application of traditional dispute resolution mechanisms in land conflicts, assess tax on land and premiums on immovable property in any area designated by law and monitor and have oversight responsibilities over land use planning throughout the country.

The coming to an end of the tenure of the first commissioners of the NLC on 19th February 2019, invites the opportunity to assess and appraise the work of the NLC and to consider whether the NLC achieved its mandate as stipulated in the Constitution and the NLC Act. The establishment of the NLC brought with it rays of hope that the recurrent land issues in the country would be addressed with finality.

The recognition of the NLC as a constitutional commission exuded a new dawn in the arena of land management and administration policy, having been anchored in the supreme the law of the land. However, the following issues bedeviled the NLC no sooner had it commenced its operations.

Conflict over Roles

The jurisdictional conflict between the Ministry of Lands and Physical Planning (the Ministry) and the NLC erupted right from inception of the NLC. There was a vicious “turf war” between the Ministry and the NLC as to whose responsibility it was to undertake critical functions such as the extension and renewal of leases. This led the NLC to seek an advisory opinion from the Supreme Court concerning its roles vis-à-vis those of the Ministry.

By its advisory opinion In the Matter of the National Land Commission (2015) eKLR, the Supreme Court underscored the interdependence of the two institutions, in the sense that none was intended to work independently from the other. Rather, both were meant to work in consultation, to ensure that a system of checks and balances was enforced.

In analysing the NLC’s role under the Land Act, including functions such as the extension and renewal of leases over private land, conversion of land from public to private or vice versa, compulsory acquisition of land for a public purpose or undertaking land settlement programmes, the Supreme Court observed that “the foregoing provisions entrust the NLC with the responsibility of protecting and overseeing the public’s rights and interest, under the Constitution. However, the NLC’s mandate in that regard is not held exclusively and is not unqualified – provision is made for approval from the National Assembly and the consent of the National Government or relevant County Government. This provides a check-and-balance system, to ensure that the NLC operates within the prescribed limits.”

The Supreme Court noted that the NLC’s mandate entailed the processes leading to the issuance of title, whilst the Ministry’s role was the actual issuance of titles. On this point, the Court observed that “…The NLC has a mandate in respect of various processes leading to the registration of land, but neither the Constitution nor statute law confers upon it the power to register titles in land. The task of registering land title lies with the National Government, and the Ministry has the authority to issue land title on behalf of the said Government.” Notwithstanding the distinction of roles, the Court nevertheless reiterated the aspect of interdependence as follows:
“The Constitution’s mandate falls to the three State organs, in an operational context of check-and-balances: and the various Commissions act as oversight and watchdog mechanisms. Hence, each of the functions of the NLC and the Ministry stands to be checked by the one or the other, in order to avoid abuse of power in matters relating to land. The unchanging theme throughout the Constitution, is that the relationship between these two bodies is inter-dependent and based upon co-operation; it is not an agency relationship. As the Ministry conducts its functions, the NLC acts as a watchdog, to ensure compliance with the Constitution, and with legislation. Likewise, the NLC as an oversight body, maintains its functional, financial and operational independence, while still being overseen and checked by the public, by other independent offices, and by the three arms of Government.”

Revocation of Titles

The NLC had been holding periodic sittings concerning the legality of titles at the end of which, it would revoke titles for properties considered to have been acquired illegally or irregularly. It would then proceed to publish lists of revoked titles in the Kenya Gazette and in newspapers of nationwide circulation. These revocations were challenged in the Environment and Land Court and several cases have thus addressed the point.

In Robert Mutiso Lelli and Cabin Crew Investments Limited v National Land Commission & 3 Others (2017) eKLR, whilst considering whether the NLC had jurisdiction to revoke titles to land even where it finds, after inquiry, that such title was irregularly acquired, the Court noted that there was no legal provision for the NLC to revoke titles even if upon inquiry it establishes that such titles were unlawfully or irregularly acquired. The power to revoke title was vested in the Registrar and not the NLC which could only recommend revocation.

Historical Land Injustices

Article 67 (2) (e) of the Constitution empowers the NLC to investigate historical land injustice and recommend the appropriate redress. The NLC Act replicates the same functions in section 5. Section 15 of the NLC Act defines historical land injustice as a grievance which meets the following criteria:

  • Was occasioned by a violation of right in land on the basis of any law, policy, declaration, administrative practice, treaty or agreement
  • Resulted in the displacement of persons from their habitual place of residence
  • Occurred between 15th June, 1895 when Kenya became a protectorate under the British East African Protectorate and 27th August, 2010 when the Constitution was promulgated
  • Has not been sufficiently resolved and subsists up to the period specified above
  • The act which the claim is based on should be verifiable as having resulted in the displacement of the claimant or another form of historical injustice
  • The claim cannot be addressed through the ordinary court system on the basis that it was illegal at the time the injustice occurred or is time barred
  • The claimant was either the proprietor or occupant of the land upon which the claim is based
  • The claimant did not at any time surrender or renounce his right to the land in question
  • The claim is brought within five (5) years from the commencement of the NLC Act i.e. 2nd May, 2012

Going by the last requirement, it is clear that the window period for lodging claims for historical injustices, expired on 1st May, 2017. This means that the NLC’s role as far as historical injustices are concerned has lapsed and it cannot receive new complaints after 1st May, 2017, but can only dispense with matters that were lodged before then. It is noteworthy that there was an opportune moment for extending the said deadline when the Land laws were revised in 2016. However, this provision was not addressed, meaning the deadline of 1st May, 2017 remains effective.

It is also interesting to note that The National Land Commission (Investigation of Historical Land Injustices) Regulations, which were meant to operationalise section 15 of the NLC Act, were gazetted on 6th October, 2017, some five (5) months after the deadline lapsed. Equally interesting is the fact that time is fast running out for the claims the NLC admitted before the deadline and is currently handling. Section 15 (11) of the NLC Act provides that the provisions of the entire section 15 will be repealed within ten (10) years. The NLC Act as previously noted, came into force on 2nd May, 2012. Therefore, the statutory timeframe on addressing historical land injustices will lapse on 1st May, 2022. This means that all the cases the NLC is handling should be concluded within the next three (3) or so years.

The Way Forward

The importance of the interdependent relationship between the NLC and the Ministry, as advised by the Supreme Court, cannot be overemphasised. If the spirit of the Constitution is to be upheld, the two (2) institutions should work in harmony and consult each other. As their roles and functions are interdependent, none can fully discharge its mandate in isolation of the other. Consultations will also be invaluable as a check and balance mechanism to ensure that the NLC does not exceed its mandate in future, as it did with the revocation of titles.

There is also need to revise the timelines on the investigation of land injustices, as the ten (10) year deadline may not be realistic, especially for sensitive matters that may have been protracted due to the plurality of claims. In the interest of substantive justice, there may be need to extend the NLC’s mandate in this regard, to ensure it has adequate time to determine such important matters. Perhaps it may also be necessary to extend the five (5) year window on the admission of claims, as there may be genuine cases where persons were prevented from lodging their claims before 1st May 2017.

James Kituku

Posted on April 11th, 2018

James Kituku

Partner

 

T: +254 709 250 000/709 250 712

E: james@oraro.co.ke

 

 

James is a Partner at Oraro & Company Advocates in the commercial, conveyancing & real estate practice areas. With over 8 years of experience, James has advised local and international clients from the financial services and construction sectors. 

James is well regarded for his conveyancing and banking expertise. He has advised on corporate lending transactions, drafting lending and security documentation, drafting of leases for both commercial & residential and transferring of land.

James recently advised a leading telecommunications company in a corporate lending transaction worth USD 10 million.

James holds a Bachelor of Laws (LLB) from the University of Nairobi and a post-graduate diploma in Law from the Kenya School of Law.

“James is well regarded for his conveyancing & real estate expertise.”
Experience
  • Part of the team that undertook a comprehensive securities audit on behalf of a Pan African Bank which aimed to review the bank's loan portfolio to mitigate the risk of the bank.
  • Part of a team advising a real estate developer in a housing development project within Nairobi, worth USD 40 million.
  • Part of the team that advised a corporate lending worth USD 10 million to a leading telecommunications company in Kenya.
  • Part of the team advising a major international NGO with offices globally in the acquisition of a property for USD 15 million.
  • Part of a team that advised a leading trailer manufacturer in greater Africa in a corporate lending and securities transaction with a cumulative value of USD 14 million.
  • Part of the team advising a Pan-African financial institution with offices in several African countries, in the acquisition of a property.

About Us

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