What Kenya’s Bilateral Investment Treaties Actually Protect (and What They Don’t)

Foreign investors often reach for the term “investment treaty” as a general reassurance without knowing what it actually covers. It is worth being precise about this, because a bilateral investment treaty does real, specific work, and it does not do the one thing many investors assume it does.

The domestic legal basis

Kenya’s power to enter bilateral investment treaties comes from section 8B of the Foreign Investments Protection Act, Cap 518, which allows the government to declare, by notice, that a special arrangement for the reciprocal promotion and protection of investments between Kenya and another country has legal effect in Kenya. Each treaty is domesticated this way, through a Gazette notice declaring the specific arrangement, rather than automatically taking effect on signature. Kenya currently has bilateral investment treaties in force with, among others, Burundi, Finland, France, Germany, Japan, Kuwait, the Netherlands, South Korea, Switzerland, the United Arab Emirates, the United Kingdom, and, since 2023, Singapore.

What these treaties typically protect

A bilateral investment treaty generally covers a consistent set of protections: national treatment (treating the foreign investor no less favourably than a domestic one in like circumstances), most-favoured-nation treatment (no less favourably than investors from any other country), fair and equitable treatment, protection against expropriation without prompt and adequate compensation, and a guaranteed right to freely transfer investment returns, including profits, dividends, and capital, out of the host country. The Japan-Kenya treaty, signed in August 2016 and given domestic effect in Kenya, is a useful concrete example: it covers exactly this set of protections, and its free-transfer provision specifically guarantees a Japanese investor’s right to repatriate returns from a Kenyan investment.

What these treaties do not do

A bilateral investment treaty is not a tax instrument. It does not reduce withholding tax on dividends, interest, or royalties, and it does not create the kind of relief a double taxation agreement provides. These are two entirely different types of treaty, negotiated separately, serving different purposes, and a country can have one without the other. An investor whose home country has a bilateral investment treaty with Kenya but no double taxation agreement still pays Kenya’s standard non-resident withholding tax rate on dividends, currently 10%, in full. The treaty guarantees the right to move the money; it says nothing about how much tax is taken before it moves. Conflating the two is a common and costly assumption.

A bilateral investment treaty also does not override Kenya’s Constitution. Where a treaty’s protections might otherwise be read as extending some benefit inconsistent with constitutional provisions, such as the restrictions on non-citizen land ownership under Article 65, the Constitution prevails. A treaty operates alongside Kenyan constitutional and statutory law, not above it.

A protection that does not depend on a treaty at all

Investors from a country without a bilateral investment treaty with Kenya are not left with nothing. The Foreign Investments Protection Act itself, independent of any treaty, provides domestic guarantees for holders of a Certificate of Approved Enterprise, including protection against compulsory acquisition without compensation and a right to repatriate profits. A bilateral investment treaty adds an additional, internationally enforceable layer of protection on top of this domestic framework; it is not the only source of protection available.

Why this distinction matters in practice

When evaluating an investment into Kenya, it is worth checking two separate things rather than one: whether a bilateral investment treaty is in force with your home country, which affects investment protection and repatriation rights, and separately, whether a double taxation agreement is in force, which affects your actual tax cost. Assuming the presence of one implies the other is a mistake we see regularly, and it can materially misstate the real economics of a deal if left uncorrected until dividends are actually due.

Dispute resolution under these treaties

Beyond the substantive protections, bilateral investment treaties typically provide investors with a route to resolve disputes with the host state outside the host state’s own domestic courts, commonly through international arbitration under a framework such as the International Centre for Settlement of Investment Disputes. This matters because it gives a foreign investor an avenue that does not depend on litigating against the state in the state’s own court system, which can be a genuine concern where the dispute is with the government itself, for example over an expropriation or a regulatory action affecting the investment. This dispute-resolution avenue is itself part of what a bilateral investment treaty adds beyond ordinary domestic law protection under the Foreign Investments Protection Act, since domestic law protections are ultimately enforced through Kenyan courts and institutions rather than an independent international forum.