05.01.2025

A brief note from the lawyer: Why is Kenyan court precedent relevant to transparency, public involvement, and accountability of PPPs in Kazakhstan?

“They called the wrong country Honduras” is a phraseology that any Russian-speaking person uses whenever he/she wants to berate his/her government.

This phrase came to my mind today when I read this interesting article[1] about the recent court case in Kenya, in which Kenya’s High Court has suspended a $736 million public-private partnership (PPP) deal between a state-owned utility and a foreign investor. What's important to know about this court case, if in brief:

The suspension came as a response to a petition by the Law Society of Kenya (LSK), which argued that the PPP agreement lacked transparency and public participation.
LSK representatives have labeled the PPP contract a “constitutional sham,” questioning whether it offers long-term benefits or primarily serves the interests of the private sector partner.
This rising opposition reflects a broader apprehension about large infrastructure projects driven by foreign companies and funded through PPP arrangements. Critics of such deals argue that they often place the interests of private corporations above those of local citizens and that the economic burden of long-term commitments to foreign companies may outweigh the promised benefits.

I can only admire the integrity of lawyers and judges in Kenya. Kazakhstan, evidently, has the same problems as Kenya with meeting “transparency” and “value for people” requirements in almost all cases of implementation of large infrastructure projects. At the same time, state authorities in Kazakhstan continue to “get creative” and come up with new “schemes” for the implementation of infrastructure projects without open tenders and without any consideration of the interests of the local population.

It is enough to read the Kazakh news to see a lot of such interesting “schemes”.

For instance, I would be very interested to read the confidential management agreement over the International Airport in Astana executed with a foreign investor in 2023, that the government of Kazakhstan now wants to extend.[2] This project is being implemented under the legal framework of the State Property Law and, most likely, without any open tender. It is very strange because the subject of the contract[3] suggests that it should have been implemented through the open tender and under the legal framework of the PPP Law.

Another interesting case is the 630 Bed Kokshetau Hospital Project. The fact that the project, for some reason, was granted to a foreign investor through the so-called “direct negotiations”, i.e. without any open tender, is strange in itself and should be alarming, because it is largely due to the mechanism of direct negotiations that PPPs in Kazakhstan have acquired a bad reputation (the so-called problem of fake PPPs).[4] At the same time, the operational stage of this PPP project is only five years.[5] It seems that 5 years of operation in a PPP contract, that is the minimum allowed period of operation under current PPP law, for such a large and technically complex project is just a legal way for all parties involved to pretend they do PPP, whereas one may argue it is a fake PPP.[6] Especially if the issues of transparency of investor selection and reasonableness of the amount of payments from the state budget to the investor under this PPP project were raised in the media before.[7] What is interesting is that despite all the above “red flags”, this project has attracted funding from international financial institutions.[8]

I have already raised before[9] the problem of “stretching” the legislation in Kazakhstan by the “creative” Kazakh state bodies so that at least on its face the schemes of realisation of infrastructure projects in Kazakhstan are legal. But legislation and Law, as we know, are different things and, accordingly, it is possible to argue that while the above-mentioned various schemes of project implementation formally comply with the legislation of Kazakhstan, at the same time they still violate the legal principles and rules of the so-called international commercial law (i.e., New Lex Mercatoria). Moreover, such projects surely do not meet the criteria of the so-called “PPPs for SDG” project.

I wonder, therefore, whether we should expect anything similar in Kazakhstan to the above-mentioned court case in Kenya.

As they say, let's wait and see.

With respect,

Shaimerden Chikanayev

*Shaimerden Chikanayev is currently on a study sabbatical until 2026, not an employee of GRATA.

[1] See at: https://techstory.in/kenyan-high-court-suspends-736-million-adani-power-line-deal-amid-public-outcry/

[2] See the news at: https://kz.kursiv.media/en/2024-11-08/engk-tank-kazakhstan-wants-uae-holding-to-continue-managing-astana-airport/

[3] According to public information, investor already completed the modernisation of the airport runway.

[4] For more information of “fake PPPs” see at: https://gratanet.com/laravel-filemanager/files/3/v16i17%2018.pdf

[5] https://www.kokshetauppphospital.com/en/47029/PROJECT

[6] For more information on 5-year operation period in PPP contracts nonsense, see the post of Arman Bigazin: https://www.linkedin.com/pulse/another-look-public-private-partnerships-kazakhstan-arman-bigazin-qpkmf/?trackingId=qkJ%2FhOwEyWLcJDKAkNR9Aw%3D%3D

[7] See, for instance: