CS Henry Rotich hints at policy for resolving rows between Kenya and investors

Comoros Vice President Djaffar Ahmed (left) leaves KICC yesterday after attending the ongoing United Nations Conference on Trade and Development. [PHOTO: BONIFACE OKENDO/STANDARD]

NAIROBI: Kenya is developing an investment policy that will allow the use of local courts to arbitrate disputes with international investors.

Under the proposed National Investment Policy (NIP), the guidelines are anticipated to define the relations between the State and international investors.

Disputes by investors are often dragged to international courts of arbitration, which often rule against the State as the original agreements are drafted by the investor.

"The current regime is lopsided and is becoming a major challenge to many developing countries who find themselves liable to huge payouts that will undermine their efforts to attract Foreign Direct Investment and promote sustainable development goals," National Treasury Cabinet Secretary Henry Rotich has said.

He told delegates attending the World Investment Forum – a side meeting of the United Nations Conference on Trade and Development – of the frustrations shared by Kenya and other poor nations.

"There are no provision to use host country's courts. International investment agreements give investors from both parties the right to submit an investment dispute with the treaty partners' government to international arbitration," Rotich added.

In cases where the investors have had their way in the courts of arbitration, host governments are often slapped with huge compensation settlement. In one of the most recent cases in Kenya, a firm that proposed to set up a major wind farm has taken the country to a foreign court after it failed to agree with the landowners on leasing the project site.

Kinangop Wind Power claims that the Government of Kenya had committed to protecting it from losses arising from political risks. The State has since argued that rejection of the project by the residents of Kinangop does not qualify as political risk, even though the matter is yet to be determined.

Rotich said the NIP will be used to guide private investment promotion and facilitation in the country to support the attraction and retention of high levels of foreign and domestic investment in the economy.

"Notwithstanding the dispute settlement concern, it is crucial for a country to ensure that they provide an investor with the necessary protection due," he said.