DLA PIPER AND IKM ADVOCATES SECURE VICTORY FOR THE REPUBLIC OF KENYA DEFEATING A USD 2 BILLION ICSID CLAIM

In a decisive victory for the Republic of Kenya, DLA Piper and DLA Piper Africa member firm, IKM Advocates, have successfully defeated the claim estimated to be worth USD 2 billion in arbitration proceedings brought by a mining investor, Cortec Mining Kenya Limited. The claim was brought under the bilateral investment treaty ("BIT") between the UK and Kenya dated 13 September 1999. The arbitration took place under the auspices of the World Bank's International Centre for Settlement of Investment Disputes (ICSID), with the hearing taking place in Dubai in January 2018.  The Tribunal issued its award on 22 October 2018.

The claims in the case related to the alleged expropriation of a mining licence purportedly granted to the claimants in respect of niobium and rare earth deposits at Mrima Hill, a heavily protected area in Kwale County, Kenya. The claimants alleged that the State unlawfully revoked a mining licence relating to Mrima Hill which had purportedly been granted to them in early 2013. According to the claimants, this revocation was a direct expropriation contrary to the terms of the BIT. Throughout the proceedings, the Republic of Kenya maintained that the claimants had failed to comply with the applicable legal and regulatory provisions relating to the grant of mining licences under Kenyan law, such that the alleged licence was void ab initio for illegality and did not exist as a matter of Kenyan law. This was the finding that had already been made by the Kenyan courts both at first instance and on appeal.

The Tribunal agreed with the State's position, finding that "the BIT protects only lawful investments, and that the Claimants have failed to establish any compensable investment that was lawfully issued in accordance with the laws of Kenya".[1]  In addition, the Tribunal noted that, on the claimants' own evidence, the alleged mining licence was procured by the claimants' lobbying of government officials.  Whilst the claimants "were clearly effective at the political level […] this case ultimately turns on their success (or lack of it) in respect of compliance with the law"[2].  The Tribunal found that the claimants' attempts to by-pass statutory requirements "showed serious disrespect for the fundamental public policies of the host country in relation to the environment and resource development."[3] In determining that the investors had failed to comply with Kenyan law, the Tribunal's findings are consistent with the prior rulings made by the Kenyan courts.

The Tribunal dismissed all of the claimants' claims and ordered the claimants to pay the Republic of Kenya costs and ICSID fees in excess of USD 3.5 million.

The Republic of Kenya was represented by the Attorney General's office working in conjunction with DLA Piper in London and DLA Piper Africa member firm IKM Advocates in Nairobi.

Kamau Karori the lead partner in this matter for the IKM team noted that the decision demonstrated "the respect that international tribunals accord domestic laws and regulations. It gives Kenya and other host nations the comfort of knowing that international law will not protect investments that are procured contrary to the laws of the host countries. The concurrence by the tribunal with the decision by the Kenyan Courts that the licence was not issued in accordance with Kenyan laws will also come as a welcome endorsement for the work of the Kenya Judiciary."

James Kamau, Chairman of DLA Piper Africa and Managing Partner of IKM, commented: "The success of this case is testament to efforts of the Attorney General's office, and the unique working relationship between DLA Piper and IKM, combining international law expertise with deep local law knowledge. This case was of significant importance to Kenya not only in terms of the potential value of the claim but also crucially in terms of investor perceptions."

Kate Cervantes-Knox, lead partner at DLA Piper commented: "This welcome decision is significant in that it vindicates Kenya's position in relation to this very substantial claim, and demonstrates that only legal investments will be protected even in the absence of 'in accordance with law' language in the applicable treaty."

Kenya's Attorney General Justice Paul Kariuki stated: "We are delighted with this result. Kenya is proud to welcome foreign investors, and we are pleased that this Tribunal has recognised that protection under international law is only available where investors agree to comply with Kenyan law."

Michael Ostrove, Global Head of International Arbitration at DLA Piper, noted: "This is a superb victory for the Republic of Kenya and my congratulations go to all the team, both in Nairobi and in London."

The Attorney General was represented in the arbitration by a team led by the Deputy Solicitor-General, Njeri Wachira. The DLA Piper Group team was led by Kate Cervantes-Knox (Partner, London), Kamau Karori (Partner, Nairobi) and Ben Sanderson (Of Counsel, London). Guglielmo Verdirame (20 Essex Street Chambers) joined the team shortly before the hearing. Other members of the team include T. Alexander Brabant (Partner, Paris), Milly Jalega (Partner, Nairobi), Ken Melly (senior associate, Nairobi), Elinor Thomas (legal director, London) and Maria Scott (associate, London).

[1]          Award, para. 9.

[2]          Award, para. 61.

[3]          Award, para 349.