Public-Private Partnership deals face more checks after court ruling

A section of the Sh192 billion Nairobi-Nakuru Mau Summit Highway under construction. [File, Standard]

Government plans to finance major projects through public-private partnerships face tighter parliamentary scrutiny following a landmark High Court ruling.

Justice Patricia Nyaundi on Thursday declared key provisions of the Public Private Partnerships Act unconstitutional to the extent that they exclude Parliament from approving projects involving public expenditure, borrowing, guarantees, public debt or other forms of public liability.

“Accordingly, the court finds that sections 59, 60 and 72(1) of the PPP Act are unconstitutional to the extent that they exclude Parliament from approving expenditure where a PPP creates expenditure, borrowing, guarantees, public debt or other forms of public liability for the national government,” Justice Nyaundi ruled.

In the judgement, Justice Nyaundi, however, suspended the declaration of invalidity for six months to give Parliament time to amend the law.

The decision strikes at the heart of the Government’s strategy of using private capital to finance infrastructure at a time when it is seeking billions of shillings from investors to deliver roads, power, water, housing, health and other projects

“The Executive cannot avoid parliamentary scrutiny by structuring public financial commitments as PPPs or by relying on private capital,” she said.

“The decisive inquiry is whether the State assumes obligations involving expenditure, borrowing, guarantees or public liability. Where such obligations arise, parliamentary authorisation is constitutionally mandatory.”

The judge said a PPP cannot be placed outside constitutional safeguards governing public finances merely because a private investor provides the initial capital.

The decision comes as Kenya’s PPP programme has expanded, with the latest PPP Directorate status report showing 54 projects as at June 30, 2026.

Ten are under implementation while 44 are at various stages of the project cycle.

Among projects under construction is the Sh192.6 billion Nairobi-Nakuru-Mau Summit Highway, comprising the Rironi-Mau Summit and Rironi-Naivasha sections. The project is structured as a PPP and has a long-term contract arrangement.

Six projects are already operational, including the Nairobi Expressway, three road-annuity projects, the 35MW Sosian Menengai geothermal plant and the Galana-Kulalu food security project.

The wider pipeline extends beyond roads into water, energy, housing, healthcare and education, including the Sabaki Water Carrier, Lamu Water Desalination Plant, Eldoret Solar Power Plant, Stoni Athi Affordable Housing Units, Moi Teaching and Referral Hospital Training Complex, University of Nairobi student hostels and Pwani Teaching and Referral Hospital.

Katiba Institute challenged the PPP framework, arguing that it allowed the Executive and PPP Committee to approve long-term commitments without Parliament exercising its constitutional role over public finances.

The petitioner argued that PPPs could bind the State to financial obligations through annuity and availability payments, government guarantees, termination payments, viability-gap funding and other contingent liabilities.

The Government and PPP Committee opposed the petition, arguing that the law provides safeguards through feasibility studies, value-for-money assessments, public participation and parliamentary reporting.

They maintained that PPPs were necessary to address Kenya’s infrastructure financing needs and attract private capital amid limited public resources.

Justice Nyaundi, however, found that reporting to Parliament after commitments have been made does not amount to the constitutional approval required where public liabilities arise.

“Section 88’s reporting obligation does not satisfy the constitutional requirement of oversight,” she ruled.

The court ruling does not outlaw PPPs but requires constitutional safeguards governing public money and liabilities to apply where the State assumes financial obligations.

Justice Nyaundi also declined to invalidate provisions governing privately initiated proposals, but warned that Government agencies cannot use them to sidestep competition.

“Section 40(3)(j) cannot be read as permission to bypass competition based on administrative convenience, preference or the mere attractiveness of a proposal,” she ruled.

She said a privately initiated proposal does not give its proponent an automatic right to exclusive negotiations or the project.

The judge also rejected the state's arguments that the petition had become moot following cancellation of the JKIA and KETRACO projects that triggered the litigation.

“The termination may have halted the physical progression of the projects, but it did not extinguish the constitutional and statutory questions that continue to animate the Petition,” Justice Nyaundi ruled.

The declaration of invalidity was suspended for six months to allow Parliament to amend the law and avoid disruption.

The case will be mentioned on May 11, 2027, to confirm compliance and for further directions.