Why State is obligated to disclose details of contracts

What you need to know:

  • Disclosure will aid informed discussions of the issues of interest among stakeholders as citizens become more aware of the contents of the contracts and their impact on their lives.

  • Citizens who are knowledgeable in the areas of interest can improve participation of both the people and the government.

The President recently offered to make available to journalists a copy of the contract entered into with the government of China for the construction of the standard gauge railway (SGR).

That followed an interviewer’s question as to whether the sea port of Mombasa had been offered as security for payment of the construction loan, to which the President gave an unequivocal answer in the negative. Had the contents of the contract been publicly available in the first place, the quality and depth of the interview on the subject would have been improved.

DISCLOSURE

It is not only the SGR contract but also those of minerals, like oil and gas, that are routinely kept out of view.

There are reasons, some legitimate, for maintaining confidentiality in certain agreements. It may contain proprietary information of the sometimes private entity. Some amount to little more than cover-ups for corruption and incompetence. Yet others are relics yet to be questioned.

The reasons for disclosure, nevertheless, outweigh any reason that may be advanced for secrecy. Genuine concerns, such as regarding disclosure of proprietary information like geological data, can be addressed by redaction.

If it is accepted that ownership of minerals lies with the people — in that the government is a steward of natural resources — then the citizens are entitled to not only know the terms of contracts but also approve of the terms.

Disclosure will aid informed discussions of the issues of interest among stakeholders as citizens become more aware of the contents of the contracts and their impact on their lives. Citizens who are knowledgeable in the areas of interest can improve participation of both the people and the government.

Stabilisation clauses — devices inserted in agreements to ensure the host government does not alter the law to change the terms of the agreement to the disadvantage of the contractor without the latter's consent — are found in many production sharing contracts (PSCs) and have the effect of creating new law, freezing, modifying or altering existing laws, sometimes for decades.

ASYMMETRY

This has implications that range from taxation to population displacement and environmental impact. People have a right to know these laws since they directly affect them.

An essential characteristic of law is that it should be available to all; hence the presumption that all men know the law. It, then, follows that the laws that govern PSCs should be public.

Disclosure would help to remove information asymmetry between the contractor and the government, which will improve the quality of negotiations.

Without transparency, fears of the worst flourish, and mistrust and conflict are magnified among stakeholders. Even where there might be nothing to hide, secrecy leads to suspicion and leaked documents can become fodder for opportunistic individuals to further political ambitions. This can lead to increased conflict among communities. Kenya continues to experience this with the unrest and disquiet in Turkana.

Incompetence, unlike corruption, does not necessarily show bad faith on the part of the actor. Government, especially in frontiers such as Kenya, does not usually have as much knowledge and expertise as the contractor.

Given this imperfection of the market, it seems inevitable that contracts skewed in favour of the contractor will be made. Disclosure is necessary to help correct this imbalance.

Ms Kibicho is an advocate of the High Court of Kenya and an expert in oil and gas law. [email protected]