Liberalisation kicks off in Kenya

 Kenya could be the next big target for international firms wanting to grow in Africa.

A common complaint of law firms wishing to grow their international presence is that local regulations prevent them from doing so. Equally, a common refrain from some independent firms in developing markets is that a cohort of their peers are actively preventing their market from opening up, usually by arguing that increased competition is a bad thing.

Both arguments have some basis in fact, and both are likely to be tested in the coming months in one of Africa’s key jurisdictions – Kenya.

With its long colonial history and close ties to the UK, and an infrastructure and legal system which are among Africa’s most-developed, Kenya is a logical jumping-off point for those wishing to do business in East Africa. Some corporates are even using it as their hub for sub-Saharan Africa more widely, although generally Kenya forms a kind of triangle with Nigeria and South Africa as the other two points. If you want to be working in Africa, these are good places to start.

However while the South African legal market has seen an influx of foreign law firms in the past few years, Kenya has not. This is for the simple reason that foreign firms currently cannot launch an office there.

Those few international firms with a footprint in Kenya have done so via a local association. South African firm Bowman Gilfillan is linked up with Coulson Harney, Dentons with Hamilton Harrison & Matthews, and DLA Piper with Iseme Kamau & Maema Advocates.

Meanwhile Kenyan firms Anjarwalla & Khanna and Kaplan & Stratton are both members of African networks – the former is a founding member of the Africa Legal Network, and the latter a member of Lex Africa.

So there is a growing international presence in Kenya, and Kenya firms are more than used to working cross-border both within their region and further afield. But to date, they have been working under fairly stringent rules governing their (in)ability to advertise, branding, and partnerships with foreigners.

Earlier this month (11 June 2014) there were the first signs of change. After comments by the attorney-general Githu Muigai indicating a willingness to begin the liberalisation of the market, the Kenya Law Reform Commission has established a committee to review the Advocates Act. 

The review process is likely to see some resistance. Not all of Kenya’s legal community supports foreigners coming in – an attitude which is replicated in other markets such as Mozambique – although most of those working in corporate firms are supportive of some sort of liberalisation.

As James Kamau, managing partner of Iseme Kamau says: “Business has gone global and legal practice is no exception. Foreign investors who are setting up businesses in Kenya and in the greater East African region would naturally prefer to be guided by their own lawyers in the new markets. However, such investors are also aware that their foreign lawyers lack expertise in matters of local law, culture and business trends.

“This combination of factors calls for structured and regulated collaboration between foreign and local lawyers. Therefore, in my opinion, the best form is one of regulated collaboration between foreign and local lawyers. This will ensure the best service delivery to clients as well as immediate financial and capacity building benefits to local lawyers.”

The prospect of liberalisation also comes at a tricky time for Kenya. Like its counterpart on the other side of the continent, Nigeria (16 June 2014), Kenya has suffered several terrorist attacks in the past year which have undoubtedly had a negative effect on the tourism industry. For now, lawyers believe the business world is less affected with most large corporates willing to take the short-term risk for the long-term benefits of investing in Kenya.

The country does still have a lot going for it, particularly in the energy sector with oil and gas exploration now yielding significant results. If Kenya’s move into the energy sector pays off then it is likely to see accelerated development in other sectors, such as related infrastructure projects or fast-moving consumer goods (a market which is already growing as Kenya’s middle class grows). A debut Eurobond issuance, which closes on Tuesday 24 June, has received overwhelming interest with $2bn (£1.2bn) raised.

Any changes to the Advocates Act are likely to take some time to be enacted, so in the meantime foreign firms will have to keep looking for Kenyan best friends to advise their clients working there. With firms like Eversheds (31 March 2014), Norton Rose Fulbright (7 June 2013) and Stephenson Harwood (6 February 2014) all exploring ways to deepen their ties in the jurisdiction, the competition is set to be fierce even before true liberalisation kicks off.

For more on East Africa, read this week’s special report and the Africa Elite.