The Natural Resources (Classes of Transaction Subject to Ratification by Parliament) Act, 2016

The Purpose of the Act and Application

The purpose of the Natural Resources (Classes of Transaction Subject to Ratification by Parliament) Act 2016 is to give effect to the provisions in the Constitution relating to transactions relating to natural resources provided for under Article 71 of the Constitution of Kenya, 2010. The Act applies to national, county governments, state organs and all county government entities and came into force on 4th October 2016.

The law specifically provides for the procedure in which agreements relating to transactions on natural resources are to be ratified by Parliament. The transactions include, the Grant of a right or concession by or on behalf of any person, including the national government and private persons to another person for the exploitation of any natural resource of Kenya and falls within the class of transactions designated as subject to ratification.

Classes of Transactions Subject to Ratification

The following are transactions relating to natural resources, which are subject to the Act:

Resource Transaction Requiring Parliament Ratification
Crude Oil and Natural Gas

 

Authorization to extract crude oil or natural gas.
Minerals Mineral agreements with a threshold of US $ 500 million.
Water resources The extraction of seawater within the territorial sea for private commercial use.
Underground water resources

 

The extraction of underground steam within a water conservation or other water resource protected area.
Wildlife Extraction of oil, gas, and minerals within a wildlife conservation area or other wildlife protected area.
Wildlife Export and re-export of endangered wildlife species.
Wildlife Excision or change of boundaries of gazetted national park or wildlife protection area
Forests Longterm concession of a gazetted forest resource.
Forests Excision or change of boundaries of gazetted public forests or nature reserves
Any other transaction subject to ratification under an Act of Parliament.

 

Classes of Transactions not Subject to Ratification by Parliament

The following are classes of transactions not subject to the Act;

  1. The grant of a concession or right to exploit a natural resource through a permit, licence or other authorization issued in accordance with the requirements of national or county government legislation and which quantities fall below a threshold prescribed.
  2. The grant of a concession or right by a private person to exploit a natural resource through an agreement or a contract;
  3. The grant of a concession or right to exploit a natural resource for scientific research, educational or other non-commercial purposes unless the exploitation involves taking the natural resource or an portion of it outside of the jurisdiction of Kenya;
  4. The exploitation of a natural resource by a Kenyan national for subsistence purposes in circumstances in which the law does not require that a permit, licence or other authorization be obtained; and
  5. The exploitation of a natural resource in quantities falling below a threshold prescribed by the Cabinet Secretary relating to Environment of by notice in the Gazette or below a threshold specified in a Schedule to the Act.

Submission of Agreements to the Cabinet Secretary of Environment

The law provides that not more than fourteen (14) days after entering into a transaction, the beneficiary of the transaction should submit the agreement or any other document evidencing the transaction to the Cabinet Secretary responsible for Environment that is subject to ratification. A prescribed memorandum should accompany this agreement.

The Cabinet Secretary will upon receiving the agreement and memorandum submit to parliament for ratification within seven (7) days.

Procedure in Parliament for Ratification

A transaction that is subject to the Act will only be effective upon parliament ratification. Where Parliament has declined to ratify any transaction, then the agreement is deemed to be null and void.

Parliament is required to deal with agreements presented to it for ratification within sixty (60) days upon receiving the agreements. When ratifying any agreement, Parliament will consider the following:

  1. The applicable Government policy;
  2. Recommendations of the relevant regulatory agency;
  3. Comments received from the county government within whose area of jurisdiction the natural resource that is the subject of the transaction is located;
  4. Adequacy of stakeholder consultation;
  5. The extent to which the agreement has struck a fair balance between the interests of the beneficiary and the benefits to the country arising from the agreement;
  6. The benefits which the local community is likely to enjoy from the transaction; and
  7. Whether, in granting the concession or right the applicable law has been complied with.

The process of approval of an agreement shall commence in the National Assembly. The Assembly is required to consider an agreement thirty (30) days after it is submitted to the National Assembly and it should forward its resolution to the Senate house of Parliament for consideration. If the National Assembly does not forward the agreement to the Senate within the agreed time, then Senate is supposed to commence its consideration of the agreement and forward its resolution to National Assembly.

The Speaker of the National Assembly is required to notify the Cabinet Secretary within seven (7) days, whether both Houses have approved ratification of the agreement or have not approved ratification of the agreement. In a situation where both House do not agree on the ratification, the matter would be dealt with by a Mediation Committee established by Parliament.

Registration of Transactions – Central Register

The Cabinet Secretary is required to establish a Central Register which contain all agreements relating to natural resources and other transactions that have been ratified under the Act.

The Register shall be maintained in electronic format and any member of the public may inspect it without the payment of any fee. In addition, any member of the public may obtain an authenticated printout of an agreement from the Cabinet Secretary upon request and payment of a reasonable fee.

The Cabinet Secretary shall, on an annual basis, publish a report on the summary of the transactions submitted under this Act and the status of ratification of transactions.

Confidentiality

The Cabinet Secretary is allowed to grant a request that the agreement or portions of it ought not to be publicly disclosed on account of commercial confidentiality, national security or other public interest considerations. Where a request for confidentiality is granted, the Cabinet Secretary, shall submit the agreement to Parliament which shall conduct the process of ratification in camera without disclosing any confidential material, but a summary of the agreement shall be made available to the public the must present the agreement to Parliament who will conduct the process of ratification in camera without disclosing confidential material, however a summary will be available to the public.

Any person may challenge the request for confidentiality, through lodging the appropriate proceedings in the High Court. Such proceedings shall be conducted in camera.

Transactions before Commencement of the Act

The Act, provides that any transaction that is subject to ratification and that was lawfully entered into on or after the effective date but before the commencement date, should continue in effect and be deemed valid and lawful in spite of the fact that there was no ratification by parliament.

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