SP Kenyan court declares $3.2 billion railway contract with China illegal

A Kenyan appellate court called the USD 3.2 billion Standard Gauge Railway (SGR) project between Kenya and the China Road and Bridge Corporation (CRBC) illegal, as the Kenya Railways failed to comply with and violated the country’s law “in the procurement” of the concerned railway.
Kenyan activist Okiya Omtatah and the Law Society of Kenya, an association of practicing advocates, filed the suit in 2014 in a bid to halt the construction of SGR.
The petitioners said the railway was a public project that should have been subject to a fair and transparent procurement process. The petitioners said the project was not put up for tender and bidding process was not duly followed despite it being a government contract, the cost of which would be borne by the Kenyan taxpayers.
When the case was in the High Court, the judges had dismissed the case and ordered that the documents used by the complainants to support their case, which the government described as classified, was illegally obtained and were to be expunged from court records.
The complainants then made a fresh appeal at the appellate court.
The Court of Appeals observed that state-run Kenya Railways had failed to comply with and violated the country’s law “in the procurement” of the multibillion-dollar Chinese-funded project under the Belt and Road Initiative (BRI).
The Appellate court made the decision even after a large section of the project has been completed and is operational since 2017. While the next course of action is unclear, the Kenyan government or CRBC could challenge the ruling of the appeal court or seek its interpretation in the Supreme Court.
Both CRBC and Kenya Railways defended the agreement, saying that the Kenyan government had negotiated a financing deal with Exim Bank of China for two loans, each amounting to USD 1.6 billion, to support the SGR project.
In 2014, the CRBC was awarded the contract to build the railway line from Mombasa port to Nairobi. Its parent firm, the China Communications Construction Company, later stepped in to construct an extension from Nairobi to Naivasha, a town in the Central Rift Valley, for another USD 1.5 billion.
Both projects have been completed and passenger and cargo trains are operating. Kenya had planned to extend the rail line to Malaba, situated on the country’s western border with Uganda. However, Exim Bank of China, which financed the first two phases, asked the Kenyan government to redo a feasibility study for the Malaba extension for commercial viability before funds were released.
With Kenya facing the heat to pay its debt in the wake of Covid-19 pandemic that has put the African country’s economy in peril, the government has been forcing importers to use the train. However, truckers and importers have resisted, saying that it is more expensive to use railways instead of trucks.