Kenya’s Constitutional challenge reshapes the PPP approval landscape

Sections 59, 60 and 72(1) of the PPP Act were declared unconstitutional to the extent that they exclude parliamentary approval for PPPs that create public expenditure, guarantees, public debt or other forms of public liability for the national government.

By Correspondent On Sep 22, 2026

The High Court of Kenya in a decision dated 17 September 2026 has declared parts of the Public Private Partnerships Act, 2021 ( PPP Act) unconstitutional.

The effect of the decision is however suspended for six months to allow the Parliament of Kenya (Parliament) to amend the PPP Act.

What the court decided

Parliamentary approval. The Court held that sections 59 (Approval of project and financial risk assessment reports by the PPP Committee), 60 (Attorney General of Kenya (Attorney General) approval of the project agreement before execution) and 72(1) (Approval of amendments and variations by the Attorney General and the PPP Committee) of the PPP Act are unconstitutional to the extent that they exclude Parliament from approving expenditure, borrowing, guarantees, public debt or other public liabilities created by a PPP.

The court declined the argument by Government that the annual reporting obligations already in the PPP Act under section 88 are adequate and ruled that it is only post facto notification that does not satisfy that constitutional requirement. It also ruled that the section 63 ratification process which addresses natural-resource agreements, does not cure the gap for other PPPs.

Privately initiated proposals. The Court however declined to strike down privately initiated proposals as a procurement method instead clarifying that all PPP procurements remain subject to the Article 227 and that any departure from open competition must be objectively justified and exercised consistently with the constitutional standards of fairness, equity, transparency, competitiveness and cost-effectiveness under Article 227 of the Constitution of Kenya 2020 ( Constitution).

Which projects are caught: The scope of the ruling.

The Court framed the trigger for parliamentary approval as a PPP creating public expenditure, guarantees, public debt or other forms of public liability and identified three broad categories of PPP projects based on their fiscal exposure:

Category 1: Purely privately financed PPPs. These projects have no direct government financial commitment and likely do not require parliamentary approval at inception. The Court cautioned that support letters, minimum-revenue guarantees or termination payments may create contingent liabilities.
Category 2: PPPs involving government expenditure or appropriation. Availability payments, annuity payments, viability-gap funding and government-funded termination payments create expenditure requiring parliamentary approval.
Category 3: PPPs involving government support and contingent liabilities. Guarantees, letters of support, political risk insurance and similar commitments create potential public liabilities requiring parliamentary approval.

One challenge in determining what category a project falls in is the fact that only the term ‘public debt’ is defined by statute.

The remaining terms used by the Court (public expenditure, guarantees or other forms of public liability) are undefined, which creates scope for broad interpretation and may make it harder for projects to demonstrate that they fall clearly within Category 1.

Government support measures on sub-sovereign PPPs

A common project finance structure involves a contracting authority that is not the national government directly (for example, a state corporation such as Kenya Electricity Transmission Company Ltd (KETRACO) or a county government) entering into the project agreement, with the Government of Kenya providing a letter of support, comfort letter, keepwell undertaking or similar government support measure under section 28 of the PPP Act as a condition precedent to financial close.

The judgment does not address this scenario expressly. However, its reasoning is broad enough to capture it: the Court held that the decisive question is whether the state assumes obligations involving expenditure, borrowing, guarantees or public liability, not the identity of the contracting authority.

Section 28 empowers the Cabinet Secretary to issue support measures including binding undertakings, letters of support, credit guarantees and political risk insurance, subject to public finance management law. Where such an instrument creates an actual or contingent liability on the national government’s balance sheet, it is likely to fall within Category 3 and attract the parliamentary approval requirement, regardless of whether the project agreement itself is with a state corporation or county government.

The boundary question is where the instrument falls on the spectrum between a legally binding guarantee (clearly caught) and a non-binding expression of policy support (arguably not).

The judgment does not resolve this. Sponsors and lenders requiring government support should assess the legal character of the instrument and its potential to create a call on public finances, and should engage with us on the specific structure.

County government PPPs

The PPP Act contains a separate regime for county government PPPs under Part VI (sections 64 to 67).

County PPPs already require county assembly approval under section 65, and where a government support measure is needed, Cabinet Secretary approval under section 64(5). Importantly, the Court’s declaration of unconstitutionality is framed as applying to PPPs that create public expenditure, guarantees, public debt or other forms of public liability ‘for the national government’.

County PPPs funded entirely from county resources may therefore fall outside its scope. However, where a county PPP requires a national government support measure under section 28 or creates contingent liabilities for the national government, the parliamentary approval requirement will apply to those national-level fiscal commitments.

What this means for existing projects depending on their status in the project life cycle?

Projects with signed project agreements already in operation

The decision notes that while Parliament need not approve the project, it must approve the expenditure, public debt or other forms of public liability for the national government that the project creates.

Therefore, depending on the categorisation of the project, government will need to amend the PPP Act and provide for a mechanism for approval of the fiscal commitments to be provided by the Government to PPP projects.

These projects may also require parliamentary approval for future amendments, variations or waivers affecting fiscal exposure and therefore sponsors should audit pending and anticipated amendments and build any required parliamentary approval into the timeline.

Projects in the approval pipeline (Pre-PPP committee project and financial risk assessment report)

Signing without parliamentary approval for fiscal commitments carries material litigation risk during the suspension window especially for projects under Category 2 or 3.

Projects at early stages (Feasibility, procurement or negotiation)

Procurement and negotiation may be challenged if fiscal approval is omitted or a privately initiated proposal (PIP) departs from open competition without documented justification that meets the safeguards of Article 227. Therefore, sponsors should build parliamentary approval into fiscal projects and document the rationale for any non-competitive PIP pathway.

New projects not yet commenced

Key risk: Ignoring parliamentary approval may cause delay or challenge after the PPP Act is amended.

Recommended action: Classify fiscal exposure and embed parliamentary approval and Article 227 compliance in project design.

Privately initiated proposals

The PIP pathway remains valid. The Court upheld sections 40(3)(j), 44(5) and 44(6), so remain a legitimate procurement route. The decision does not require every PIP to be subjected to an open tender, but it does require the contracting authority to exercise its discretion within Article 227.

A proponent however, has no proprietary right to exclusive negotiation, and the contracting authority cannot select a preferred proponent first and devise the procurement method afterwards.

Any decision not to compete a PIP should be supported by objective reasons and a record demonstrating fairness, transparency, competitiveness and cost-effectiveness. Sponsors should therefore review PIP procurement records for objective justification, equal treatment and value for money, because statutory compliance alone will not immunise an opaque process from challenge.

Amendments and variations to existing agreements

Future amendments will need closer fiscal scrutiny. Once (and if) the PPP Act is amended, changes that create, increase or modify government expenditure, guarantees, public debt or contingent liabilities are likely to require parliamentary approval. This is relevant to long-term PPPs that require changes for technology, scope, refinancing, changed circumstances or force majeure.

Managing dispute and enforcement risk

Mootness will not shield completed or ongoing projects from challenge. The decision declined to treat the petition as moot despite the cancellation of both the Jomo Kenyatta International Airport (JKIA) and KETRACO projects, holding that questions of procurement regularity, administrative accountability and fiscal prudence remained live and justiciable.

Clients should not assume that signing, completion or commissioning places the underlying approval process beyond judicial reach.

The judgment broadens the grounds for challenge. The Court’s emphasis that formal compliance with the PPP Act does not immunise a process from constitutional scrutiny, and that the Constitution is the final measure of legality, provides a roadmap for future challenges by public interest litigants, unsuccessful bidders and other third parties.

Enforceability risk during the suspension window. Although the Court declined to order retroactive invalidation, the six-month suspension does not resolve the issue of enforceability of government fiscal commitments in existing PPPs.

The question of whether those commitments are enforceable becomes a live dispute risk. Step-in rights, security packages and lender protections should be stress-tested against that scenario.

What developers and financiers should do now

While legal analysis and advice will be necessary on each project from a general perspective:

Developers should review their projects and map out all government commitments across the project agreement and related arrangements, including direct expenditure, guarantees, support measures and contingent liabilities to better understand how this decision affects them.
For projects which were initiated as PIPs, developers should audit the procurement record, including the justifications and reasons made and approved for departure from open competition. Categories 2 and 3 projects should be assessed for the risk of signing before the PPP Act is amended.

Financiers and lenders should revisit both conditions and bankability. Assess whether parliamentary approval is likely, whether conditions precedent, material adverse change provisions and covenants address the regulatory uncertainty, and whether uncommitted facilities should include express approval conditions. Step in rights and security packages should be tested against the decision and portfolio risk and credit approvals should be updated accordingly.

Categories 2 and 3 projects should be assessed for the risk of reaching financial close before the PPP Act is amended.

Lenders and sponsors should monitor the amendment bill and related guidance. This includes the bill’s text, debate and public participation, guidance or circulars from the National Treasury, PPP Directorate and PPP Committee, and the Court’s compliance hearing on 11 May 2027. Any appeal, further orders and related litigation concerning Article 227 standards as applied to PIPs should also be tracked.

Looking ahead: validating legislation and reform

Validating legislation is the immediate priority. The amending legislation should find a way of ensuring existing project agreements are not disrupted.

Without a transitional solution, projects approved and signed under the current framework may remain exposed even though the Court declined to invalidate them retroactively. The amending legislation should also clarify the treatment of government support measures issued under section 28 to sub-sovereign contracting authorities, and address whether county government PPPs involving national-level fiscal commitments require national parliamentary approval in addition to county assembly approval.

The broader reform should preserve commercial workability. Parliament will need an efficient approval mechanism for PPPs in category 2 and 3 placed between PPP Committee approval and execution and extended to fiscal amendments, variations and waivers.

Thresholds based on value, duration or risk, together with expedited procedures for lower-value or time-sensitive matters, would help avoid turning parliamentary oversight into a bottleneck.

Conclusion

The judgment does not dismantle Kenya’s PPP framework and it does not invalidate any existing project. What it does is expose a structural defect in the approval chain and give Parliament a short and fixed period in which to repair it. For the next six months the legal position is stable but it is not safe, and the risk that matters most is not what happens during the window but what happens if the window closes without an amendment.

The most useful thing the sector can do now is to press for amending legislation that validates what has already been done as well as fixing what comes next.

Written by Aleem Tharani, Head of Projects, Energy and Infrastructure; Cecil Kuyo and Edwin Baru, Partners; Radhika Arora, Senior Associate; and Beatrice Ngunyi, Associate – Bowmans Kenya