This archive report was first published on 20 June 2020.
On June 20, 2020, the Court of Appeal delivered a landmark ruling that the Standard Gauge Railway (SGR) contract is illegal. The ruling came after Kenya Railways (KR) failed to adhere to the set procurement laws.
The Court found that the procurement process for the SGR contract did not follow proper procedures, with the feasibility study conducted by China Road and Bridge Corporation (CRBC) being a major point of contention.
According to the Court, the financing agreement did not dictate the tender award to CRBC, as argued by the defense team. Instead, Kenya Railways awarded the tender before the financing agreement was in place.
The Court further noted that the procurement process informed the terms of financing, thereby violating the Procurement Act. This ruling effectively nullifies the argument presented by the defense team.
As reported by the Kenyan Wall Street, the loan repayments to China for the SGR project are set to double to KSh71 billion as Kenya starts repaying the loan.
“We conclude, therefore, that the engagement of CRBC was not an obligation arising from the “negotiated grant or loan” agreement for the purposes of Section 6 of the Act,” read the Court ruling.
The Court also highlighted the conflict of interest in carrying out the feasibility study, with CRBC undertaking the study for the SGR project. The Court noted that this conflict of interest exacerbated the situation, as CRBC was also responsible for executing the project.
Earlier, the Law Society of Kenya had questioned the single-sourcing practiced in tendering for the SGR. However, the Court upheld that environmental considerations for the project held merit.
