EAC business expansion means taking a Kenyan business into one or more of the other East African Community partner states, each of which keeps its own company, tax, employment and licensing laws. The community’s treaty and protocols reduce barriers to trade and movement, but they do not replace local law. This guide sets out what the EAC framework does provide, where local rules still decide the outcome, and how to approach structure, intellectual property, contracts and disputes before you commit capital.
What the EAC framework actually covers
The East African Community has eight partner states. The community’s own website lists Burundi, the Democratic Republic of the Congo, Kenya, Rwanda, Somalia, South Sudan, Tanzania and Uganda. The Democratic Republic of the Congo became a full member in 2022, and South Sudan in 2016.
Two instruments matter most for a trading business. The Customs Union has been in force since 2005 under Article 75 of the EAC Treaty. It provides for zero duty on goods traded among partner states, provided the goods meet the EAC Rules of Origin, and for a common external tariff on imports from outside the community. The Common Market Protocol, which entered into force in 2010, provides for the free movement of goods, persons, workers, services and capital, together with rights of establishment and residence.
These are community-level commitments. In practice, implementation differs between states and between sectors, so the existence of the Protocol does not mean you can ignore a national licensing or work permit rule. Confirm the position in each state before you plan.
Choosing a structure for EAC business expansion
The first decision is how to be present in the new market. The main options are:
- a locally incorporated subsidiary;
- a registered branch of the Kenyan company;
- a joint venture or partnership with a local party; and
- a distribution or franchise arrangement with a local operator.
A subsidiary ring-fences liability within the new market and is usually easier for local banks, regulators and customers to deal with. A branch is quicker but keeps the Kenyan company exposed. A joint venture helps where local knowledge or a licence holder is essential, but needs a carefully drafted agreement. A distribution model limits cost and commitment but gives you less control. Our corporate and commercial practice and our market entry guide explain the Kenyan side of these structures.
Whatever the structure, check three things in the target state: whether the sector you will operate in requires a licence, whether there are limits on foreign ownership, and how profits can be repatriated. Rules of this kind are national, change from time to time, and should be confirmed with local counsel from the outset rather than assumed from Kenyan practice.
Protecting your brand across borders
Trade mark rights are territorial. A Kenyan registration protects the mark in Kenya only, so a business that opens in Uganda or Tanzania should file there too, or use a regional or international filing route where one is available for the countries concerned. Check the current member list of the relevant system before you rely on it, because membership of regional and international trade mark systems changes. Our guide to Kenya trademark registration covers the home filing, and our intellectual property practice can coordinate filings in other states.
File before launch, not after. Brand owners who enter a market first and register later risk finding that someone else has registered the mark locally.
People and employment
Each partner state has its own employment statutes covering contracts, working hours, termination and social security. The Common Market Protocol’s free movement of workers does not displace those laws. A Kenyan employee posted to another state is generally subject to that state’s immigration and labour rules, and a locally hired employee is subject to local employment law whatever the contract says about governing law. Decide early whether staff will be hired locally, seconded or engaged as contractors, and take local advice on the permit position for each category.
Contracts and disputes in EAC business expansion
Cross-border commercial contracts should state the governing law and the forum for disputes clearly. Where the other party and its assets are in another partner state, the practical question is not only who will win but where the judgment or award can be enforced.
For significant deals, arbitration is often chosen because awards are enforced under the New York Convention rather than depending on the reciprocal treatment of court judgments. The United Nations’ status list shows 172 contracting states. Kenya, Uganda, Tanzania, Rwanda, Burundi and the Democratic Republic of the Congo appear on it as parties. South Sudan and Somalia do not appear on the list we reviewed, so an arbitration clause may not give you the same enforcement route there. Check the current status list before you rely on the Convention against a counterparty in either country.
Where you plan to enforce a court judgment in another state instead, take advice on that state’s rules for recognising foreign judgments, because they are not uniform. Our litigation and dispute resolution practice advises on enforcement strategy at the contract drafting stage.
Tax planning for EAC business expansion
The Customs Union removes internal duty on qualifying goods, but corporate tax, value added tax, withholding tax and transfer pricing remain national. The tax treatment of dividends, interest, royalties and management fees paid back to Kenya depends on each state’s law and on any double taxation treaty in force between the two countries. Because the cost of getting this wrong is paid every year, model the tax position of the structure you prefer before you incorporate, and ask local advisers to confirm current rates and treaty positions.
Entering the Democratic Republic of the Congo
The DRC joined the EAC in 2022 but is a civil law jurisdiction, unlike Kenya, and its company, investment and sector licensing rules are its own. Mining, telecommunications and agriculture each have their own regimes. Do not assume that a Kenyan concept or document will translate. Engage Congolese counsel from the start, and have your Kenyan documents reviewed for how they will work under that system.
A practical sequence
A workable order of work for EAC business expansion is as follows. First, decide the commercial model and test whether the sector is licensed. Second, choose the entity structure and model the tax. Third, file trade marks and secure any licences. Fourth, put in place employment, premises and supply contracts with clear governing law. Fifth, document the dispute resolution route and the enforcement plan. Taking these steps in order avoids the most common and most expensive mistakes, which usually come from signing local contracts before the structure is settled.
How We Can Help
Clay & Associates Advocates advises Kenyan businesses on cross-border growth. We can advise on structure and shareholder terms, prepare trade mark filing strategy, draft cross-border contracts and coordinate with local counsel in the target state. See our corporate and commercial practice, read about our fees or contact us to discuss your plans.
Sources: East African Community: Partner States; East African Community: Common Market; East African Community: Customs Union; UNCITRAL: Status of the New York Convention
Frequently asked questions
Which countries are in the EAC?
Burundi, the Democratic Republic of the Congo, Kenya, Rwanda, Somalia, South Sudan, Tanzania and Uganda, according to the community’s website.
Does a Kenyan trade mark protect my brand in Uganda or Tanzania?
No. Trade mark rights are territorial, so you need protection in each country where you trade.
Does the Common Market let my staff work anywhere in the EAC?
The Protocol provides for free movement of workers, but national immigration and employment rules still apply, so confirm the permit position in each state.
Is arbitration enforceable across the EAC?
Most partner states are parties to the New York Convention, but South Sudan and Somalia did not appear on the UNCITRAL list we reviewed. Check before you rely on it.
Need advice on your own matter?
Tell us what you are dealing with. You will know what it involves and what it costs before you commit.
This article is general information on Kenyan law as at its publication date, not legal advice. Reading it does not create an advocate and client relationship.
