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Making commercial laws in Kenya adaptable to deal with pandemic

Wednesday May 27 2020
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Acting within the confines of the law has become more and more challenging for businesses due to the disruptions caused by Covid-19. PHOTO | FILE | NATION MEDIA GROUP

By KARIM ANJARWALLA
By ANN KIUNUHE

The laws governing businesses in Kenya are numerous and broad and sometimes operate differently, which can often times give rise to inconsistencies and lack of clarity, to consternation of those subject to the myriad of laws. However, during this pandemic period, acting within the confines of the law has become more and more challenging for businesses due to the disruptions caused by Covid-19.

To provide some clarity in terms of the way forward for businesses, we believe that there are certain business laws which require amendments in light of Covid-19 to make them more adaptable to address the disruptions arising from the pandemic. We have in earlier articles in this series looked at various commercial and business laws and will therefore in this article confine ourselves to: (a) laws relating to data protection; (b) competition laws; and (c) electronic witnessing and attestation of documents.

DATA PROTECTION

The intersection between data protection issues and public and private health is now more apparent than ever during this period.

In November 2019, Kenya enacted the Data Protection Act, 2019 (the DPA) into law. The DPA has wide applicability and affects operations across all sectors of commerce where personal data is handled including banking and financial services, insurance, healthcare, transport, telecommunications, education, media, consumer goods and retail etc. It also imposes both civil and criminal sanctions for non-compliance with its provisions.

The DPA contains provisions relating to “data controllers” and “data processors”, which are persons or entities who control and process personal data. They may now.

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DATA CONTROLLERS

Organisations and businesses are considered data controllers and processors, given that they control and process large volumes of data such as employee data. Under the DPA, data controllers and processors may only control and process data for the performance of a task carried out in the public interest or in the exercise of their official authority.

However, in light of the current situation, it is likely that data controllers and processors may need to access health data relating to individuals. Under the current construct of the law, such data controllers and processors may require permission to lawfully process personal data touching on individuals’ health. We believe it would therefore be prudent to consider expanding the grounds on which personal data or sensitive personal information may be lawfully accessed or processed to include the grounds of “public health interest” in light of the Covid-19 pandemic.

We further propose that where public health interest is used to access or process personal or sensitive data, controllers and processors must prove that such access or processing is necessary for reasons of public interest in the area of public health or that the data subject has given explicit consent to the processing of their personal data. Furthermore, we believe that there should be a requirement in such instances to ensure that suitable and specific measures are put in place to safeguard the rights and freedoms of the data subject (the individual whose data is being processed).

COMPETITION LAWS

For the control of pandemics, it may be necessary to allow certain conduct that is ordinarily prohibited by business laws. For instance, under the Competition Act, there is a blanket prohibition against businesses or organisations engaging in certain conduct which is classified as restrictive trade practices (RTPs).

RTPs include price fixing, division of markets, collusive tendering, tying and bundling without obtaining an exemption from the Competition Authority of Kenya (CAK). AA

However, certain conduct within the prohibited RTPs may be useful in controlling the spread of Covid-19. For example:

a) Allocation of geographic regions among manufacturers and/or distributors to ensure that volumes of personal protective equipment, personal hygiene products and medical equipment are sufficiently availed in all affected geographic regions in the country, particularly in light of the current containment measures and restrictions on movement.

b) Bundling of certain products (for example face masks and hand sanitizers) to ensure consumers have the necessary tools to control COVID 19; and

c) Setting prices of personal protective equipment, personal hygiene products and medical equipment to ensure that consumers can afford the products; amongst other conduct.

Engaging in any of the above RTPs and other prohibited conduct without the specific approval of the CAK is prohibited and such conduct attracts strict penalties and sanctions. Obtaining approval is lengthy and costly and it is likely to be impracticable for parties to seek such exemptions in a timely and cost-efficient fashion during a pandemic.

To overcome this, we recommend that the Competition Act and Rules be amended to introduce an exemption excluding the prohibition of certain RTPs if they would be necessary to control a pandemic or manage a national disaster.

EASING MERGER AND INVESTMENTS REGULATION

In addition, mergers, take-overs, joint ventures and other investment transactions in Kenya resulting in a change of control require the prior approval of the CAK. Currently, filing fees payable to the CAK relation to proposed mergers and other investment transactions is up to Sh4 million. This applies to all sectors including the healthcare sector and to all transactions which result in a change of control, including transactions in insolvency or business-rescue situations.

The Covid-19 pandemic has revealed the weakness in the healthcare system and infrastructure not only in Kenya but also globally. The Covid-19 pandemic has crippled healthcare infrastructure in many countries giving rise to the call for the revamping of healthcare across the world and particularly the developing countries such as Kenya. In this regard, investments to the healthcare sector should not be delayed or prevented due to payment of significant merger filing fees which would have otherwise been invested in the healthcare infrastructure.

MERGERS

Similarly, based on the current and projected financial implications of Covid-19 on businesses, many parties are unlikely to be in a position to afford paying the higher merger filing fees, particularly in industries which have been most negatively affected by the Covid-19 pandemic (e.g. aviation, restaurant and entertainment businesses, horticulture sector, transport etc).

In addition, some businesses are likely to face insolvency and will require equity investment or consider business-rescue options that may involve disposals of parts of their business. The high merger and other transaction filing fees would not be appropriate in such transactions.

FILING FEES

We therefore recommend that filing fees relating to mergers or other transactions in the healthcare sector and other key sectors necessary to address pandemics be reduced significantly during the period of the Covid-19 pandemic and for a sufficient period thereafter until there has been reasonably sufficient investment in the sector to address the healthcare needs in the country.

Furthermore, we recommend a reduction or waiver on filing fees for proposed mergers or transactions that relate to industries that have been most negatively affected by the Covid-19 pandemic (such as aviation, restaurant and entertainment businesses, businesses in the horticulture sector, transport etc).

Similarly, we recommend a waiver on filing fees for transactions taking place in the context of insolvency or business-rescue.

ELECTRONIC WITNESSING

There are multiple laws which require certain documents to be executed in the presence of a witness. For instance, under the Oaths and Statutory Declaration Act, before administering an oath, a commissioner for oaths must satisfy himself that the person named as the deponent and the person before him are the same.

However, in light of the government directives in relation to social distancing and restriction of movement of persons because of the Covid-19 pandemic, witnessing of signatures in the physical presence of both the signatory and the person witnessing may neither be possible nor practical.

We recommend that amendments be made to allow for remote or virtual witnessing, attestation or commissioned documents. Documents witnessed in this manner will be admissible as if they had been witnessed, attested or commissioned in person. This is possible if parties are allowed to execute documents by way of a video conference, which can be recorded as evidence.

It goes without say that the law has a vital role to play in the economy – and it can be a double-edged sword that either works for businesses or it can be a deterrence to business. Now more than ever, when businesses are struggling under the numerous challenges that have been posed by the Covid-19 pandemic, do the requisite legislative interventions need to be put in place to ease doing business in Kenya.

Mr Anjarwalla & Ms Kiunuhe are Advocates of the High Court of Kenya and Partners at Anjarwalla & Khanna LLP

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