Mudavadi asks Joho to withdraw new maritime regulations

Prime Cabinet Secretary Musalia Mudavadi has called for the withdrawal of recently issued shipping regulations, saying they pose a threat to Kenya's maritime industry and foreign investment climate.

In a letter to Mining, Blue Economy and Maritime Affairs Cabinet Secretary Hassan Joho, Mudavadi highlights several concerns with the Merchant Shipping (Maritime Transport Operators) Regulations, 2024.

These include stringent requirements for foreign maritime operators intending to hold minority shares in joint ventures with Kenyans, which he says is unfair and violates Kenya's foreign investment policy.

The new draft rules also propose employee quotas for foreign firms.

They place a 10 per cent quota on foreign employees within maritime operators is deemed discriminatory and contradicts constitutional rights. Mudavadi argues that existing labour laws adequately address national interest in employment.

Mudavadi said the regulations conflict with Kenya's Constitution and its commitment to promoting foreign investment and fair trade. He has urged Joho to reconsider the regulations and prioritise the sustainable development of the maritime industry and the Kenyan economy as a whole.

He said the new rules have introduced requirements that have far-reaching implications for maritime transport operators, with detrimental effects on the business and investment environment in Kenya. 

According to Mudavadi, unless they are reversed, the regulations are likely to negatively impact the Kenya Ports Modernisation Project, noting that the Kenya Ports Authority is currently at the stage of finalising the request for qualifications (RFQ). 

“Kenya is a free-market economy and a hub for international investment. Kenya has pursued a foreign investment policy anchored on four basic tenets (regarding) foreign investments in Kenya. The first is to ensure fair and equitable treatment of investors. The second is to protect such investments from arbitrary measures. The third is to admit, encourage, and promote such investments within the country. The fourth is investors’ access to arbitration. These tenets are embedded in the  legal framework for the protection of foreign investments in our country,” he said in a letter to Joho dated November 6, 2024. 

According to Mudavadi, the Foreign Investment Protection Act was designed and enacted as a core policy tool for promoting and protecting foreign investments in Kenya.

“This law has been further buttressed by the provisions of Article 40 of the Constitution of Kenya 2010. The Constitution states in mandatory terms in Article 40(1), that every person has a right to acquire and own property in any part of Kenya. Article 40(2) in particular, states that Parliament shall not enact a law that permits the state or any person to ‘…arbitrarily deprive a person of property, or any interest in or right over any property…’ he says in his letter to Joho. 

The letter was also copied to Chief of Staff and Head of the Public Service Felix Koskei, Roads and Css for Transport Davis Chirchir, National Treasury and Economic Planning John Mbadi, Agriculture and Livestock Development Dr Andrew Karanja and Investments, Trade and Industry Salim Mvurya. 

Mudavadi said the regulations will significantly affect the maritime industry with far-reaching consequences on the Kenyan economy. 

To buttress his opposition to the new regulations, he cited the requirement that foreigners will be required to enter into joint ventures with Kenyan nationals, with foreigners as minority shareholders. 

“The regulations, under the Ship Agent (Conditions Under a Licence), provide that foreign shipping agents and cargo consolidators in joint ventures with Kenyan nationals must have minority shares. This regulation violates the first core tenant of Kenya’s foreign investment policy of ensuring fair and equitable treatment of investors,” he said.

“For the existing foreign shipping agents and cargo consolidators, the effect of this regulation is that they have to relinquish their current shareholding in the existing business to below 50 per cent. In the absence of how the reduction in shareholding will be done, the implementation of this regulation will be at total variance with the provisions of Article 40(2) of the Constitution,” the PCS added. 

Mudavadi also took issue with the imposition of a 10 per cent quota on foreign employees or managers within all maritime operators in Kenya (save for shipping lines).

“This means that 90 per cent of the employees and managers need to be Kenyan nationals. This requirement violates the principles of freedom from discrimination and right to association enshrined in Articles 27 and 36 of the Constitution, respectively. The Kenya Citizenship and Immigration Act, Cap. 170, sets out the requirements for the provision of work permits in Kenya This law is sufficient to protect the national interest in the matter,” he said. 

"It should be noted that for every container that is transported on ocean vessels, there are significant landside transport and logistics operations that must be involved with each and every container. Through subcontracting where customers themselves appoint their own service providers for their landside transport and logistics needs, this itself generates significant employment opportunities – which are overwhelmingly performed by Kenyan nationals. This in itself is already a massive win.”

Mudavadi told Joho: "If the maritime operators lose their licenses to operate in 2025 because of failure to comply with these Regulations, the business of their importers and exporters will have their supply chains effectively obliterated. This provision offends the second tenet of our investment policy of protecting foreign investments from arbitrary measures.”

He is also opposed to regulation of rates and mandatory approval by Kenya Maritime Authority (KMA), noting that the new rules require that charges levied by all maritime operators shall be subjected to stakeholder participation and approval by KMA within 9 days of notification, after which the maritime operators would be required to issue 30 days’ notice to its customers prior to implementation. 

“This, in essence, would create a 120-day period before the implementation of new charges. The net effect of the regulation is to prevent maritime operators from being able to amend their charges to effectively adapt to market forces. This requirement contradicts the World Trade Organisation (WTO) principles of non-discrimination and impartiality required to ensure fair and transparent international trade. Kenya as a member of WTO is, by treaty obligation, bound by these principles,” he said.