Policies Towards Foreign Direct Investment

Kenya has enjoyed a steadily improving environment for foreign direct investment (FDI). Foreign investors seeking to establish a presence in Kenya generally receive the same treatment as local investors, and multinational companies make up a large percentage of Kenya’s industrial sector. The government’s export promotion programs do not distinguish between goods produced by local or foreign-owned firms. The major regulations governing FDI are found in the Investment Promotion Act (2004). Other important documents that provide the legal framework for FDI include the 2010 Constitution of Kenya, the Companies Ordinance, the Private Public Partnership Act (2013), the Foreign Investment Protection Act (1990), and the Companies Act (2015). GOK membership in the World Bank’s Multilateral Investment Guarantee Agency (MIGA) provides an opportunity to insure FDI against non-commercial risk. In November 2019, KenInvest launched the Kenya Investment Policy (KIP) and the County Investment Handbook (CIH) (http://www.invest.go.ke/publications/) which aim to increase foreign direct investment in the country. The investment policy intends to guide laws being drafted to promote and facilitate investments in Kenya.

The Central Bank has successfully maintained macroeconomic stability with relatively low inflation and stable exchange rates. The National Treasury is increasingly focused on efforts to ensure prudent debt management. Kenya puts significant effort into assuring the health and growth of its tourism industry. To strengthen Kenya’s manufacturing capacity, the government offers incentives to produce goods for export.

Investment Promotion Agency

Kenya Investment Authority (KenInvest), the country’s official investment promotion agency, is viewed favorably by international investors (http://www.invest.go.ke/). KenInvest’s mandate is to promote and facilitate investment by assisting investors in obtaining the licenses necessary to invest and by providing other assistance and incentives to facilitate smoother operations. To help investors navigate local regulations, KenInvest has developed an online database known as eRegulations, designed to provide investors and entrepreneurs with full transparency on Kenya’s investment-related regulations and procedures (https://eregulations.invest.go.ke/?l=en ).

KenInvest is part of the National Business and Economic Response of the GOK and has been instrumental in assessing and relaying information about the private sector effects of Covid-19 to inform policy measures during the pandemic. The agency is also tracking post-Covid-19 investment sectors.

The GOK prioritizes investment retention and maintains an ongoing dialogue with investors. All proposed legislation must pass through a period of public consultation in which investors have an opportunity to offer feedback. Private sector representatives can serve as board members on Kenya’s state-owned enterprises. Since 2013, the Kenya Private Sector Alliance (KEPSA), the apex private sector business association, has had bi-annual round table meetings with President Kenyatta and his cabinet. Investors’ concerns are considered by a Cabinet committee on the ease of doing business, chaired by President Kenyatta. The American Chamber of Commerce has also taken an increasingly active role in engaging the GOK on Kenya’s business environment, often providing a forum for dialogue.

Limits on Foreign Control and Right to Private Ownership and Establishment

The government provides the right for foreign and domestic private entities to establish and own business enterprises and engage in all forms of remunerative activity. In an effort to encourage foreign investment, the GOK in 2015 repealed regulations that imposed a 75 percent foreign ownership limitation for firms listed on the Nairobi Securities Exchange, allowing such firms to be 100 percent foreign-owned. Also in 2015, the government established regulations requiring Kenyans own at least 15 percent of the share capital of derivatives exchanges, through which derivatives such as options and futures can be traded.

Kenya considered imposing “local content” requirements on foreign investments under the Companies Act (2015), which initially contained language requiring all foreign companies to demonstrate at least 30 percent of shareholding by Kenyan citizens by birth. United States business associations, however, raised concerns over the bill, pointing to its lack of clarity and the possibility such measures could run afoul of Kenya’s commitments under the WTO. After the U.S. government also raised the issue with the Kenyan government, the clause was repealed.

Kenya’s National Information and Communications Technology (ICT) policy guidelines, published in August 2020, increase the requirement for Kenyan ownership in foreign companies providing ICT services from 20% to 30%, and broadens its applicability within the telecommunications, postal, courier, and broadcasting industries. The foreign entities will have 3 years to comply with the increased local equity participation rule. The Mining Act (2016) restricts foreign participation in the mining sector and reserves the acquisition of mineral rights to Kenyan companies, requiring 60 percent Kenyan ownership of mineral dealerships and artisanal mining companies. The Private Security Regulations Act (2016) restricts foreign participation in the private security sector by requiring that at least 25 percent of shares in private security firms be held by Kenyans. The National Construction Authority Act (2011) imposes local content restrictions on “foreign contractors,” defined as companies incorporated outside Kenya or with more than 50 percent ownership by non-Kenyan citizens. The act requires foreign contractors to enter into subcontracts or joint ventures assuring that at least 30 percent of the contract work is done by local firms. Regulations implementing these requirements remain in process. The Kenya Insurance Act (2010) restricts foreign capital investment to two-thirds, with no single person controlling more than 25 percent of an insurers’ capital.

Other Investment Policy Reviews

In 2019, the World Trade Organization conducted a trade policy review for the East Africa Community (EAC), of which Kenya is a member (https://www.wto.org/english/tratop_e/tpr_e/tp484_e.htm).

Business Facilitation

In 2011, the GOK established a state agency called KenTrade to address trading partners’ concerns regarding the complexity of trading regulations and procedures. KenTrade is mandated to facilitate cross-border trade and to implement the National Electronic Single Window System. In 2017, KenTrade launched InfoTrade Kenya, located at infotrade.gov.ke, which provides a host of investment products and services to prospective investors in Kenya. The site documents the process of exporting and importing by product, by steps, by paperwork, and by individuals, including contact information for officials’ responsible relevant permits or approvals.

In February 2019, Kenya implemented a new Integrated Customs Management System (iCMS) which includes automated valuation benchmarking, automated release of green-channel cargo, importer validation and declaration, and linkage with iTax. The iCMS features enable Customs to efficiently manage revenue and security related risks for imports, exports and goods on transit and transshipment.

The Movable Property Security Rights Bill (2017) enhanced the ability of individuals to secure financing through movable assets, including using intellectual property rights as collateral. The Nairobi International Financial Centre Act (2017) seeks to provide a legal framework to facilitate and support the development of an efficient and competitive financial services sector in Kenya. The act created the Nairobi Financial Centre Authority to establish and maintain an efficient operating framework to attract and retain firms. The Kenya Trade Remedies Act (2017) provides the legal and institutional framework for Kenya’s application of trade remedies consistent with World Trade Organization (WTO) law, which requires a domestic institution to both receive complaints and undertake investigations in line with the WTO Agreements. To date, however, Kenya has implemented only 7.5 percent of its commitments under the WTO Trade Facilitation Agreement, which it ratified in 2015. In 2020, Kenya launched the Kenya Trade Remedies Agency for the investigation and imposition of anti-dumping, countervailing duty, and trade safeguards, to protect domestic industries from unfair trade practices.

The Companies Amendment Act (2017) amended the prior Companies Act clarifying ambiguities in the act and conforms to global trends and best practices. The act amends provisions on the extent of directors’ liabilities, on the extent of directors’ disclosures, and on shareholder remedies to better protect investors, including minority investors. The amended act eliminates the requirement for small enterprises to have lawyers register their firms, the requirement for company secretaries for small businesses, and the need for small businesses to hold annual general meetings, saving regulatory compliance and operational costs.

The Business Registration Services (BRS) Act (2015) established a state corporation known as the Business Registration Service to ensure effective administration of the laws relating to the incorporation, registration, operation and management of companies, partnerships, and firms. The BRS also devolves to the counties business registration services such as registration of business names and promoting local business ideas/legal entities, thus reducing costs of registration. The Companies Act (2015) covers the registration and management of both public and private corporations.

In 2014, the GOK established a Business Environment Delivery Unit to address challenges facing investors in the country. The unit focuses on reducing the bureaucratic steps related to setting up and doing business in the country. Separately, the Business Regulatory Reform Unit operates a website (http://www.businesslicense.or.ke/ ) offering online business registration and providing information on how to access detailed information on additional relevant business licenses and permits, including requirements, costs, application forms, and contact details for the relevant regulatory agency. In 2013, the GOK initiated the Access to Government Procurement Opportunities program, requiring all public procurement entities to set aside a minimum of 30 percent of their annual procurement spending facilitate the participation of youth, women, and persons with disabilities (https://agpo.go.ke/ ).

An investment guide to Kenya, also referred to as iGuide Kenya, can be found at http://www.theiguides.org/public-docs/guides/kenya/about# . iGuides designed by UNCTAD and the International Chamber of Commerce provide investors with up-to-date information on business costs, licensing requirements, opportunities, and conditions in developing countries. Kenya is a member of UNCTAD’s international network of transparent investment procedures.

Outward Investment

The GOK does not promote or incentivize outward investment. Despite this, Kenya is evolving into an outward investor in tourism, manufacturing, retail, finance, education, and media. Outward investment has been focused in the East Africa Community and select central African countries, taking advantage of the EAC preferential access between the EAC member countries. The EAC advocates for free movement of capital across the six member states – Burundi, Kenya, Rwanda, South Sudan, Tanzania, and Uganda.

Transparency of the Regulatory System

Kenya’s regulatory system is relatively transparent and continues to improve. Proposed laws and regulations pertaining to business and investment are published in draft form for public input and stakeholder deliberation before their passage into law (http://www.kenyalaw.org/  and http://www.parliament.go.ke/the-national-assembly/house-business/bills-tracker ). Kenya’s business registration and licensing systems are fully digitized and transparent while computerization of other government processes to increase transparency and close avenues for corrupt behavior is ongoing.

The 2010 Kenyan Constitution requires government to incorporate public participation before officials and agencies make certain decisions. The draft Public Participation Bill (2016) would provide the general framework for such public participation. The Ministry of Devolution has produced a guide for counties on how to carry out public participation; many counties have enacted their own laws on public participation. The Environmental Management and Coordination Act (1999) incorporates the principles of sustainable development, including public participation in environmental management. The Public Finance Management Act mandates public participation in the budget cycle. The Land Act, Water Act, and Fair Administrative Action Act (2015) also include provisions providing for public participation in agency actions.

Kenya has regulations to promote inclusion and fair competition when applying for tenders. Executive Order No. 2 of 2018 emphasizes publication of all procurement information including tender notices, contracts awarded, name of suppliers and their directors. The information is published on the Public Procurement Information Portal enhances transparency and accountability (https://www.tenders.go.ke/website). However, the directive is yet to be fully implemented.

Many GOK laws grant significant discretionary and approval powers to government agency administrators, which can create uncertainty among investors. While some government agencies have amended laws or published clear guidelines for decision-making criteria, others have lagged in making their transactions transparent. Work permit processing remains a problem, with overlapping and sometimes contradictory regulations. American companies have complained about delays and non-issuance of permits that appear compliant with known regulations.

International Regulatory Considerations

Kenya is a member state of the East African Community (EAC), and generally applies EAC policies to trade and investment. Kenya operates under the EAC Custom Union Act (2004) and decisions on the tariffs to levy on imports from countries outside the EAC zone are made at the EAC Secretariat level. The U.S. government engages with Kenya on trade and investment issues bilaterally and through the U.S.-EAC Trade and Investment Partnership. Kenya also is a member of COMESA and the Inter-Governmental Authority on Development (IGAD).

According to the Africa Regional Integration Index Report 2019, Kenya is the second best integrated country in Africa and a leader in regional integration policies within the EAC and COMESA regional blocs, with strong performance on regional infrastructure, productive integration, free movement of people, and financial and macro-economic integration. The GOK maintains a Department of East African Community Integration within the Ministry of East Africa and Regional Development. Kenya generally adheres to international regulatory standards. The country is a member of the WTO and provides notification of draft technical regulations to the Committee on Technical Barriers to Trade (TBT). Kenya maintains a TBT National Enquiry Point at http://notifyke.kebs.org . Additional information on Kenya’s WTO participation can be found at https://www.wto.org/english/thewto_e/countries_e/kenya_e.htm .

Accounting, legal, and regulatory procedures are transparent and consistent with international norms. Publicly listed companies adhere to International Financial Reporting Standards (IFRS) that have been developed and issued in the public interest by the International Accounting Standards Board. The board is an independent, private sector, not-for-profit organization that is the standard-setting body of the IFRS Foundation. Kenya is a member of UNCTAD’s international network of transparent investment procedures.

Legal System and Judicial Independence

The legal system is based on English Common Law, and the 2010 constitution establishes an independent judiciary with a Supreme Court, Court of Appeal, Constitutional Court, and High Court. Subordinate courts include: Magistrates, Khadis (Muslim succession and inheritance), Courts Martial, the Employment and Labor Relations Court (formerly the Industrial Court), and the Milimani Commercial Courts – the latter two of which both have jurisdiction over economic and commercial matters. In 2016, Kenya’s judiciary instituted specialized courts focused on corruption and economic crimes. There is no systematic executive or other interference in the court system that affects foreign investors, however, the courts face allegations of corruption, as well as political manipulation in the form of unjustified budget cuts which significantly impact the ability of the judiciary to deliver on its mandate and delayed confirmation of nominated Judges by the President resulting in an understaffed judiciary and long delays in rendering judgments.

Laws and Regulations on Foreign Direct Investment

The Foreign Judgments (Reciprocal Enforcement) Act (2012) provides for the enforcement of judgments given in other countries that accord reciprocal treatment to judgments given in Kenya. Kenya has entered into reciprocal enforcement agreements with Australia, the United Kingdom, Malawi, Tanzania, Uganda, Zambia, and Seychelles. Outside of such an agreement, a foreign judgment is not enforceable in the Kenyan courts except by filing a suit on the judgment. Foreign advocates may practice as an advocate in Kenya for the purposes of a specified suit or matter if appointed to do so by the Attorney General. However, foreign advocates are not entitled to practice in Kenya unless they have paid to the Registrar of the High Court of Kenya the prescribed admission fee. Additionally, they are not entitled to practice unless a Kenyan advocate instructs and accompanies them to court. The regulations or enforcement actions are appealable and are adjudicated in the national court system.

Competition and Anti-Trust Laws

Kenya does not have a competition or Anti-Trust policy, however the Competition Act (2010) created the Competition Authority of Kenya (CAK) which covers restrictive trade practices, mergers and takeovers, unwarranted concentrations, and price control. All mergers and acquisitions require the CAK’s authorization before they are finalized, and the CAK regulates abuse of dominant position and other competition and consumer-welfare related issues in Kenya. In 2014, CAK imposed a filing fee for mergers and acquisitions set at one million Kenyan shillings (KSH) (approximately USD 10,000) for mergers involving turnover of between one and KSH 50 billion (up to approximately USD 500 million). KSH two million (approximately USD 20,000) will be charged for larger mergers. Company takeovers are possible if the share buy-out is more than 90 percent, although such takeovers are rarely seen in practice.

Expropriation and Compensation

The 2010 constitution guarantees protection from expropriation, except in cases of eminent domain or security concerns, and all cases are subject to the payment of prompt and fair compensation. The Land Acquisition Act (2010) governs due process and compensation in land acquisition, although land rights remain contentious and can cause significant project delays. However, there are cases where government measures could be deemed indirect expropriation that may impact foreign investment. Companies report an emerging trend in land lease renewal where foreign investors face uncertainty in lease renewals by county governments in instances where the county wants to confiscate some or all of the foreign investor’s project property.

Dispute Settlement

ICSID Convention and New York Convention

Kenya is a member of the International Centre for Settlement of Investment Disputes, also known as the ICSID Convention or the Washington Convention, and the 1958 New York Convention on the Enforcement of Foreign Arbitral Awards. International companies may opt to seek international well-established dispute resolution at the ICSID. Regarding the arbitration of property issues, the Foreign Investments Protection Act (2014) cites Article 75 of the Kenyan Constitution, which provides that “[e]very person having an interest or right in or over property which is compulsorily taken possession of or whose interest in or right over any property is compulsorily acquired shall have a right of direct access to the High Court.” Kenya in 2020 prevailed in an ICSID international arbitration case against WalAm Energy Inc, a U.S./Canadian geothermal company in a geothermal exploration license revocation dispute.

Investor-State Dispute Settlement

There have been very few investment disputes involving U.S. and international companies. Commercial disputes, including those involving government tenders, are more common. There are different bodies established to settle investment disputes. The National Land Commission (NLC) settles land related disputes; the Public Procurement Administrative Review Board settles procurement and tender related disputes, and the Tax Appeals Tribunal settles tax disputes. However, the private sector cites weak institutional capacity, inadequate transparency, and inordinate delays in dispute resolution in lower courts. The resources and time involved in settling a dispute through the Kenyan courts often render them ineffective as a form of dispute resolution.

International Commercial Arbitration and Foreign Courts

The government does accept binding international arbitration of investment disputes with foreign investors. The Kenyan Arbitration Act (1995) as amended in 2010 is anchored entirely on the United Nations Commission on International Trade Law (UNCITRAL) Model Law. Legislation introduced in 2013 established the Nairobi Centre for International Arbitration (NCIA), which seeks to serve as an independent, not-for-profit international organization for commercial arbitration, and may offer a quicker alternative to the court system. In 2014, the Kenya Revenue Authority launched an Alternative Dispute Resolution (ADR) mechanism aiming to provide taxpayers with an alternative, fast-track avenue for resolving tax disputes.

Transcription of Court Proceedings in the Commercial and Tax Division

The Kenyan Judiciary reported in its 2018-2019 State of the Judiciary and Administration Report that it had commenced its court recording and transcription project with the installation of recording equipment in six courtrooms in the Commercial and Tax Division in Nairobi. The project will significantly speed up the hearing of cases as judges will no longer be required to record proceedings by hand.

Court Annexed Mediation and Small Claims Courts

The National Council on the Administration of Justice spearheaded legislative reforms to accommodate mediation in the formal court process as well as introduce small claims courts to expedite resolution of commercial cases. The Judiciary reported in its State of the Judiciary Address (2018-2019), that the Mediation Accreditation Committee accredited 645 mediators that were handling a total of 411 commercial matters during the reporting period. Additionally, the Judiciary reported that disputes with a total value of over three billion Kenyan shillings (KSH) (approximately USD 30,000,000) had been resolved through Court Annexed Mediation during the reporting period. Court Annexed Mediation serves as an effective case resolution mechanism that will significantly reduce pressure on the justice system and eventually result in expeditious determination of commercial cases.

Bankruptcy Regulations

The Insolvency Act (2015) modernized the legal framework for bankruptcies. Its provisions generally correspond to those of the United Nations’ Model Law on Cross Border Insolvency. The act promotes fair and efficient administration of cross-border insolvencies to protect the interests of all creditors and other interested persons, including the debtor. The act repeals the Bankruptcy Act (2012) and updates the legal structure relating to insolvency of natural persons and incorporated and unincorporated bodies. Section 720 of the Insolvency Act (2015) grants the force of law to the UNCITRAL Model Law.

Creditors’ rights are comparable to those in other common law countries, and monetary judgments typically are made in Kenyan shillings. The Insolvency Act (2015) increased the rights of borrowers and prioritizes the revival of distressed firms. The law states that a debtor will automatically be discharged from debt after three years. Bankruptcy is not criminalized in Kenya. Kenya moved up 6 ranks in the World Bank Group’s Doing Business 2020 report, moving to 50 of 190 countries in the “resolving insolvency” category.

Investment Incentives

Kenya provides both fiscal and non-fiscal incentives to foreign investors (http://www.invest.go.ke/starting-a-business-in-kenya/investment-incentives/ ). The minimum foreign investment to qualify for GOK investment incentives is USD 100,000, a potential deterrent to foreign small and medium enterprise investment, especially in the services sector. Investment Certificate benefits, including entry permits for expatriates, are outlined in the Investment Promotion Act (2004).

The government allows all locally-financed materials and equipment for use in construction or refurbishment of tourist hotels to be zero-rated for purposes of VAT calculation – excluding motor vehicles and goods for regular repair and maintenance. The National Treasury principal secretary, however, must approve such purchases. In a measure to boost the tourism industry, one-week employee vacations paid by employers are a tax-deductible expense. The 2015 amendments to Kenya’s VAT rules clarified some items that are VAT exempt. In 2018, the Kenya Revenue Authority (KRA) exempted from VAT certain facilities and machinery used in the manufacturing of goods under Section 84 of the East African Community Common External Tariff Handbook. VAT refund claims must be submitted within 12 months of purchase.

The government’s Manufacturing Under Bond (MUB) program encourages manufacturing for export. The program provides a 100 percent tax deduction on plant machinery and equipment and raw materials imported for production of goods for export. The program is also open to Kenyan companies producing goods that can be imported duty-free or goods for supply to the armed forces or to an approved aid-funded project. Investors in metal manufacturing and products and the hospitality services sectors are able to deduct from their taxes a large portion of the cost of buildings and capital machinery.

The Finance Act (2014) amended the Income Tax Act (1974) to reintroduce capital gains tax on transfer of property located in Kenya. Under this provision, gains derived on the sale or transfer of property by an individual or company are subject to tax at rates of at least five percent. Sales and transfer of property related to the oil and gas industry are taxed up to 37.5 percent. The Finance Act (2014) also reintroduced the withholding VAT system by government ministries, departments, and agencies. The system excludes the Railway Development Levy (RDL) imports for persons, goods, and projects; the implementation of an official aid-funded project; diplomatic missions and institutions or organizations gazetted under the Privileges and Immunities Act (2014); and the United Nations or its agencies.

Foreign Trade Zones/Free Ports/Trade Facilitation

Kenya’s Export Processing Zones (EPZ) and Special Economic Zones (SEZ) offer special incentives for firms operating within their boundaries. By the end of 2019, Kenya had 74 designated EPZs, with 137 companies and 60,383 workers contributing KSH 77.1 billion (about USD 713 million) to the Kenyan economy. Companies operating within an EPZ benefit from the following tax benefits: a 10-year corporate-tax holiday and a 25 percent tax thereafter; a 10-year withholding tax holiday; stamp duty exemption; 100 percent tax deduction on initial investment applied over 20 years; and VAT exemption on industrial inputs.

About 54 percent of EPZ products are exported to the United States under AGOA. The majority of the exports are textiles – Kenya’s third largest export behind tea and horticulture – and more recently handicrafts. Eighty percent of Kenya’s textiles and apparel originate from EPZ-based firms. Approximately 50 percent of all firms in the zones are fully-owned by foreigners – mainly from India – while the rest are locally owned or joint ventures with foreigners.

While EPZs are focused on encouraging production for export, SEZs are designed to boost local economies by offering benefits for goods that are consumed both internally and externally. SEZs will allow for a wider range of commercial ventures, including primary activities such as farming, fishing, and forestry. The 2016 Special Economic Zones Regulations state that the Special Economic Zone Authority (SEZA) must maintain an open investment environment to facilitate and encourage business by the establishment of simple, flexible, and transparent procedures for investor registration. In 2019 Kenya developed the revised draft SEZ regulations with simplified and improved incentives structure. The 2019 draft regulations include customs duty exemptions to goods and services in the SEZ and no trade related restrictions including quantitative ones in import of goods and services into the SEZ. The rules also empower county governments to set aside public land for establishment of industrial zones.

Companies operating in the SEZs will receive the following benefits: all SEZ supplies of goods and services to companies and developers will be exempted from VAT; the corporate tax rate for enterprises, developers, and operators will be reduced from 30 percent to 10 percent for the first 10 years and 15 percent for the next 10 years; exemption from taxes and duties payable under the Customs and Excise Act (2014), the Income Tax Act (1974), the EAC Customs Management Act (2004), and stamp duty; and exemption from county-level advertisement and license fees. There are currently SEZs in Mombasa (2,000 sq. km), Lamu (700 sq. km), and Kisumu (700 sq. km), Naivasha, Machakos (100 acres) and private developments designated as SEZ include Tatu City in Kiambu. The Third Medium Term Plan of Kenya’s Vision 2030 economic development agenda calls for a study for an SEZ at Dongo Kundu, and an SEZ was also under consideration at a location near the Olkaria geothermal power plant.

Performance and Data Localization Requirements

The GOK mandates local employment in the category of unskilled labor. The Kenyan government regularly issues permits for key senior managers and personnel with special skills not available locally. For other skilled labor, any enterprise whether local or foreign may recruit from outside if the skills are not available in Kenya. Firms seeking to hire expatriates must demonstrate that the requisite skills are not available locally through an exhaustive search. The Ministry of EAC and Regional Development, however, has noted plans to replace this requirement with an official inventory of skills that are not available in Kenya. A work permit can cost up to KSH 400,000 (approximately USD 4,000).

The Public Procurement and Asset Disposal Act (2015) offers preferences to firms owned by Kenyan citizens and to products manufactured or mined in Kenya in a GOK strategy called “Buy Kenya Build Kenya” which mandates 40 percent of GOK procurement be locally produced goods and services. Tenders funded entirely by the government with a value of less than KSH 50 million (approximately USD 500,000), are reserved for Kenyan firms and goods. If the procuring entity seeks to contract with non-Kenyan firms or procure foreign goods, the act requires a report detailing evidence of an inability to procure locally. The act also calls for at least 30 percent of government procurement contracts to go to firms owned by women, youth, and persons with disabilities. The act further reserves 20 percent of county procurement tenders to residents of that county.

The Finance Act (2017) amends the Public Procurement and Asset Disposal Act (2015) to introduce Specially Permitted Procurement as an alternative method of acquiring public goods and services. The new method permits state agencies to bypass existing public procurement laws under certain circumstances. Procuring entities will be allowed to use this method where market conditions or behavior do not allow effective application of the 10 methods outlined in the Public Procurement and Disposal Act. The act gives the National Treasury Cabinet Secretary the authority to prescribe the procedure for carrying out specially permitted procurement.

Kenya passed the Data Protection Act (2019) which imposes restrictions on the transfer of data in and out of Kenya without consent of the Data Protection Commissioner and the subject, functionally requiring data localization. The Act is similar to the European General Data Protection Regulation requirements on data processing.

Real Property

The 2010 Constitution prohibits foreigners or foreign owned firms from owning freehold interest in land in Kenya. However, unless classified as agricultural, there are no restrictions on foreign-owned companies leasing land or real estate. The cumbersome and opaque process to acquire land raises concerns about security of title, particularly given past abuses relating to the distribution and redistribution of public land. The Land (Extension and Renewal of Leases) Rules (2017) stopped the automatic renewal of leases and tied renewals to the economic output of the land that must be beneficial to the economy. If property legally purchased remains unoccupied, the property ownership can revert to other occupiers, including squatters. Privately-owned land comprised six percent of the total land area in 1990; government land was about 20 percent of the total and included national parks, forest land and alienated and un-alienated land. Trust land is the most extensive type of tenure, comprising 64 percent of the total land area in 1990.

The 2010 Constitution and subsequent land legislation created the National Land Commission, an independent government body mandated to review historical land injustices and provide oversight of government land policy and management. This had the unintended side effect of introducing coordination and jurisdictional confusion between the commission and the Ministry of Lands mainly fueled by land interests by the political class. In 2015, President Kenyatta commissioned the new National Titling Center with a promise to increase the 5.6 million title deeds issued since independence to 9 million. From 2013 to 2018, an additional 4.5 million title deeds have been issued, however 70 percent of land in Kenya remained untitled. Land grabbing resulting from double registration of titles remains prevalent. Property legally purchased but unoccupied can revert ownership to other parties.

Mortgages and liens exist in Kenya, but the recording system is not reliable – Kenya has only some 24,000 recorded mortgages in a country of 47.6 million people – and there are often complaints of property rights and interests not being enforced. The legal infrastructure around land ownership and registration has changed in recent years, and land issues have delayed several major infrastructure projects. Kenya’s 2010 Constitution required all land leases to convert from 999 years to 99 years, giving the state the power to review leasehold land at the expiry of the 99 years, deny lease renewal, and confiscate the land if it determines the land has not been used productively. The constitution also converted foreign-owned freehold interests into 99-year leases at a nominal “peppercorn rate” sufficient to satisfy the requirements for the creation of a legal contract. The GOK has not yet effectively implemented this provision. In July 2020, the Ministry of Lands and Physical planning released draft electronic land registration regulations (2020) to guide the e-transaction of land. The Ministry together with the National Land Commission agreed to commence the e-transaction on land matters pending resolution of outstanding issues.

Intellectual Property Rights

The major intellectual property enforcement issues in Kenya related to counterfeit products are corruption, lack of penalty enforcement, failure to impound imports of counterfeit goods at the ports of entry, and reluctance of brand owners to file a complaint with the Anti-Counterfeit Agency (ACA). The prevalence of “gray market” products – genuine products that enter the country illegally without paying import duties – also presents a challenge, especially in the mobile phone and computer sectors. Copyright piracy and the use of unlicensed software are also emerging challenges.

The Presidential Task Force on Parastatal Reforms (2013) proposed that the three intellectual property agencies, namely: the Kenya Industrial Property Institute (KIPI), the Kenya Copyright Board (KECOBO) and the Anti-Counterfeit Authority (ACA) be merged into one Government Owned Entity (GOE). A task force on the merger comprising staff from KIPI, ACA, KECOBO, the Ministry of Industrialization, Trade and Enterprise Development is drafting the instruments of the merger which has led to a draft GOE named Intellectual Property Office of Kenya (IPOK) and has also drafted Intellectual Property Office Bill, 2020 for establishing IPOK. In an attempt to combat the import of counterfeits, the Ministry of Industrialization and the Kenya Bureau of Standards (KEBS) decreed in 2009 that all locally-manufactured goods must have a KEBS standardization mark. Several categories of imported goods, specifically food products, electronics, and medicines, must have an import standardization mark (ISM). Under this program, U.S. consumer-ready products may enter the Kenyan market without altering the U.S. label but must also carry an ISM. Once the product qualifies for a Confirmation of Conformity, KEBS will issue the ISM free of charge. From time to time KEBS and the Anti-Counterfeit Agency conduct random seizures of counterfeit imports but there is no clear database of seizures kept.

Kenya is not included on the United States Trade Representative (USTR) Special 301 Report or the Notorious Markets List.

For additional information about treaty obligations and points of contact at local IP offices, please see the World Intellectual Property Organization’s country profiles at http://www.wipo.int/directory/en/ .

Capital Markets and Portfolio Investment

Kenya developed the draft Financial Markets Conduct bill (2018) to consolidate and harmonize the financial sector in the country. Among the proposals in the draft bill is the establishment of the financial markets conduct authority to be the sole body to regulate providers of financial products and services to retail financial customers and to curb irresponsible financial market practices, a move that will create a conflict with the current financial markets regulators. Though relatively small by Western standards, Kenya’s capital markets are the deepest and most sophisticated in East Africa. The Nairobi Securities Exchange (NSE) is the best ranked exchange in sub-Saharan Africa in terms of performance in the last decade. NSE operates under the jurisdiction of the Capital Markets Authority of Kenya. It is a full member of the World Federation of Exchange, a founder member of the African Securities Exchanges Association (ASEA) and the East African Securities Exchanges Association (EASEA). The NSE is a member of the Association of Futures Market and is a partner exchange in the United Nations-led SSE initiative. Foreign investor participation has always been high and a key determinant of the market performance in the NSE. The NSE in July 2019 launched the derivatives market that will facilitate trading in future contracts on the Kenyan market and will be regulated by the Capital Market Authority of Kenya. The bond market is underdeveloped and dominated by trading in government debt securities. The government domestic debt market, however, is deep and liquid. Long-term corporate bond issuances are uncommon, leading to a lack of long-term investment capital.

In November 2019, Kenya repealed the interest rate capping law passed in 2016 which had had the unintended consequence of slowing private sector credit growth. There are no restrictions for foreign investors to seek credit in the domestic financial market although it still struggles to fund big ticket projects. Legal, regulatory, and accounting systems are generally aligned with international norms. The Kenyan National Treasury has launched its mobile money platform government bond to retail investors locally dubbed M-Akiba purchased at USD 30 on their mobile phones. M-Akiba has generated over 500,000 accounts for the Central Depository and Settlement Corporation and The National Treasury has made initial pay-outs to bond holders. The GOK expects to issue USD 10 million over this platform in 2019 in an effort to deepen financial inclusion and financial literacy.

According to the African Private Equity and Venture Capital Association (AVCA) 2014-2019 report on venture capital performance in Africa, Kenya is assessed as having a well-developed venture capitalist ecosystem ranking second in sub-Saharan Africa and accounted for 18 percent of the deals between 2014-2019 in Africa. The report further states that over 20 percent of the deals in the period were for companies that were headquartered outside Africa which sought expansion into the region’s markets.

The Central Bank of Kenya (CBK) is working with regulators in EAC member states through the Capital Market Development Committee (CMDC) and East African Securities Regulatory Authorities (EASRA) on a regional integration initiative and has successfully introduced cross-listing of equity shares. The combined use of both the Central Depository and Settlement Corporation (CDSC) and an automated trading system has moved the Kenyan securities market to globally accepted standards. Kenya is a full (ordinary) member of the International Organization of Securities Commissions Money and Banking System.

Money and Banking System

The Kenyan banking sector in 2020 included 40 operating commercial banks, one mortgage finance company, 13 microfinance banks, nine representative offices of foreign banks, 70 foreign exchange bureaus, 15 money remittance providers, and three credit reference bureaus which are licensed and regulated by the Central Bank of Kenya. Kenya also has 12 deposit-taking microfinance institutions. There has been increased foreign interest in Kenya’s banking sector with foreign owned banks making up 15 of the 40 operating banks. Major international banks operating in Kenya include Citibank, Absa bank (formerly Barclays bank Africa), Bank of India, Standard Bank (South Africa), and Standard Chartered. Kenya’s banking sector has been affected by the COVID-19 pandemic. According to the CBK, 32 out of 39 commercial banks restructured their loans to accommodate those affected. Non-performing loans (NPLs) rose to 13.1 percent in April 2020 fueled by the pandemic, however previous NPLs have averaged above 10 percent. The Banking sector has 12 listed banks in the Nairobi Securities Exchange which owned 89 percent of the banking assets in 2019.

In March 2017, CBK lifted its moratorium on licensing new banks, issued in November 2015 following the collapse of Imperial Bank and Dubai Bank. The CBK’s decision to restart licensing signaled a return of stability in the Kenyan banking sector. In 2018, Societé Generale (France) also set up a representative office in Nairobi. Foreign banks can apply for license to set up operations in Kenya and are guided by the CBK’s prudential guidelines 2013.

In November 2019, the Government of Kenya (GOK) enacted the Banking Amendment Act 2019, which effectively repealed the section within the Banking (Amendment) Act (2016) that capped the maximum interest rate banks can charge on commercial loans at four percent above Central Bank of Kenya’s (CBK) benchmark lending rate. This repeal effectively provides financial institutions flexibility with regards to pricing the risk of lending.

In the ongoing land registry digitization process, the Kenyan Government is working on a database, known as the single source of truth (SSOT), to eliminate fake title deeds in the Ministry of Lands. The SSOT database development plan is premised on blockchain technology – distributed ledger technology – as the primary reference for all land transactions. The SSOT database would help the land transaction process to be efficient, open, and transparent. The blockchain taskforce presented its 2019 report to the Ministry of Information, Communication Technology, Innovations and Youth Affairs on the viability and opportunities of the blockchain technology which is yet to be implemented.

The percentage of Kenya’s total population with access to financial services through conventional or mobile banking platforms is approximately 80 percent. According to the World Bank, M-Pesa, Kenya’s largest mobile banking platform, processes more transactions within Kenya each year than Western Union does globally. Data from the Communication Authority of Kenya shows that in the 3 months to December 2019, 30 million Kenyans had active mobile money subscriptions. The 2017 National ICT Masterplan envisages the sector contributing at least 10 percent of GDP, up from 4.7 percent in 2015. Several mobile money platforms have achieved international interoperability, allowing the Kenyan diaspora to conduct financial transactions in Kenya from abroad.

Foreign Exchange and Remittances

Foreign Exchange Policies

Kenya has no restrictions on converting or transferring funds associated with investment. Kenyan law requires the declaration to customs of amounts greater than KSH 1,000,000 (approximately USD 10,000) or the equivalent in foreign currencies for non-residents as a formal check against money laundering. Kenya is an open economy with a liberalized capital account and a floating exchange rate. The CBK engages in volatility controls aimed exclusively at smoothing temporary market fluctuations. Between June 2015 and June 2016, the Kenyan shilling declined 3.5 percent after a sharp decline of 15 percent during the same period in 2014/2015. In 2018, foreign exchange reserves remained relatively steady. The average inflation rate was 5.2 percent in 2019 and the average rate on 91-day treasury bills had fallen to 7.2 percent in 2019. According to CBK figures, the average exchange rate was KSH 101.99to USD 1.00 in 2019.

Remittance Policies

Kenya’s Foreign Investment Protection Act (FIPA) guarantees capital repatriation and remittance of dividends and interest to foreign investors, who are free to convert and repatriate profits including un-capitalized retained profits (proceeds of an investment after payment of the relevant taxes and the principal and interest associated with any loan).

Foreign currency is readily available from commercial banks and foreign exchange bureaus and can be freely bought and sold by local and foreign investors. The Central Bank of Kenya Act (2014), however, states that all foreign exchange dealers are required to obtain and retain appropriate documents for all transactions above the equivalent of KSH 1,000,000 (approximately USD 10,000). Kenya has 15 money remittance providers as at 2020 following the operationalization of money remittance regulations in April 2013.

Kenya is listed as a country of primary concern for money laundering and financial crime by the State Department’s Bureau of International Narcotics and Law Enforcement. Kenya was removed from the inter-governmental Financial Action Task Force (FATF) Watchlist in 2014 following progress in creating the legal and institutional framework to combat money laundering and terrorism financing.

Sovereign Wealth Funds

In 2019, the National Treasury published the Kenya Sovereign Wealth Fund policy (2019) and the Kenya Sovereign Wealth Fund Bill (2019) for stakeholders’ comments as a constitutional procedure. The fund would receive income from any future privatization proceeds, dividends from state corporations, oil and gas, and minerals revenues due to the national government, revenue from other natural resources, and funds from any other source. The Kenya Information and Communications Act (2009) provides for the establishment of a Universal Service Fund (USF). The purpose of the USF is to fund national projects that have significant impact on the availability and accessibility of ICT services in rural, remote, and poor urban areas. During the COVID-19 pandemic, the USF committee has partnered with the Kenya Institute of Curriculum Development to digitize the education curriculum for online learning.

In 2013, the Presidential Task Force on Parastatal Reforms (PTFPR) published a list of all state-owned enterprises (SOEs) and recommended proposals to reduce the number of State Corporations from 262 to 187 to eliminate redundant functions between parastatals; close or dispose of non-performing organizations; consolidate functions wherever possible; and reduce the workforce — however, progress is slow. The taskforce’s report can be found at (https://drive.google.com/file/d/0BytnSZLruS3GQmxHc1VtZkhVVW8/edit ) SOEs’ boards are independently appointed and published in the Kenya Gazette notices by respective Cabinet Secretary. The State Corporations Advisory Committee is mandated by the State Corporations Act 2015 to advise on matters of SOEs. Financial operations of most SOEs are not readily available due to their opaque operating procedures despite being public entities, only those that are listed in the Nairobi Securities Exchange publish their financial positions as guided by the Capital Markets Authority guidelines. Corporate governance in SOEs is guided by the 2010 Constitution chapter 6 on integrity, Leadership and Integrity Act 2012 and the Public Officer Ethics Act 2003 which provide integrity and ethical requirements governing the conduct of State and public officers.

In general, competitive equality is the standard applied to private enterprises in competition with public enterprises. Certain parastatals, however, have enjoyed preferential access to markets. Examples include Kenya Reinsurance, which enjoys a guaranteed market share; Kenya Seed Company, which has fewer marketing barriers than its foreign competitors; and the National Oil Corporation of Kenya (NOCK), which benefits from retail market outlets developed with government funds. Some state corporations have also benefited from easier access to government guarantees, subsidies, or credit at favorable interest rates. In addition, “partial listings” on the Nairobi Securities Exchange offer parastatals the benefit of financing through equity and GOK loans (or guarantees) without being completely privatized.

In August 2020, the executive reorganized the management of SOEs in the cargo transportation sector and mandated the Industrial and Commercial Development Corporation (ICDC) to oversee rail, pipeline and port operations through a holding company called Kenya Transport and Logistics Network (KTLN). ICDC assumes a coordinating role over the Kenya Ports Authority (KPA), Kenya Railways Corporation (KRC) and Kenya Pipeline Company (KPC). KTLN is aimed at lowering the cost of doing business in the country, which will be achieved through the provision of port, rail, and pipeline infrastructure in a cost effective and efficient manner.

SOE procurement from the private sector is guided by the Public Procurement and Asset Disposal Act 2015 and the published Public Procurement and Asset Disposal Regulations 2020 which introduced exemptions from the Act for procurement on bilateral/multilateral basis commonly referred to government to government procurement; introduced E-procurement procedures; and preferences and reservations which gives preferences to the “Buy Kenya Build Kenya” strategy (http://kenyalaw.org/kl/fileadmin/pdfdownloads/LegalNotices/2020/LN69_2020.pdf ). The amendment reserves 30 percent government supply contracts for youth, women, and small and medium enterprises. Kenya is neither party to the Government Procurement Agreement (GPA) within the framework of the World Trade Organization (WTO) nor an Observer Government.

Privatization Program

The Privatization Act 2003 establishes the Privatization Commission (PC) which is mandated to formulate, manage, and implement Kenya’s Privatization Program. GOK has been committed to implementing a comprehensive public enterprises reform program to increase private sector participation in the economy. The privatization commission ( https://www.pc.go.ke/  ) is fully constituted with a board which is responsible for the privatization program. The PC has 26 approved privatization programs (https://www.pc.go.ke/sites/default/files/2019-06/APPROVED%20PRIVATIZATION%20PROGRAMME.pdf  ). In 2020, GOK is implementing a sugar taskforce report that proposed privatization of some state-owned sugar firms to increase their efficiency and productivity. The process of privatization involves open bids by interested investors including foreign investors.

The Environmental Management and Coordination Act (1999) establishes a legal and institutional framework for the management of the environment while the Factories Act (1951) safeguards labor rights in industries. The Mining Act 2016 provides for holders of mineral rights to develop a comprehensive community development agreement that secures socially responsible investment and provides for employment preference for those living in communities around mining operations. The legal system, however, has remained slow to prosecute corporate malfeasance in both areas.

The GOK is not an adherent to the OECD Guidelines for Multinational Enterprises on Responsible Business Conduct, and it is not yet an Extractive Industry Transparency Initiative (EITI) implementing country or a Voluntary Principles Initiative signatory. Nonetheless, good examples of CSR abound as major foreign enterprises drive CSR efforts by applying international standards relating to human rights, business ethics, environmental policies, community development, and corporate governance.

Many businesses deem corruption to be pervasive and entrenched in Kenya. Transparency International’s (TI) 2019 Global Corruption Perception Index ranks Kenya 137 out of 198 countries, six places lower than in 2018 and Kenya’s score of 28 remains below the sub-Saharan Africa average of 32. Historical lack of political will, limited progress in prosecuting past corruption cases, and the slow pace of reform in key sectors were reasons cited for Kenya’s chronic low ranking. Corruption has been reported to be an impediment to FDI, with local media reporting allegations of high-level corruption related to health, energy, ICT, and infrastructure contracts. There are many reports that corruption often influences the outcomes of government tenders, and U.S. firms have had limited success bidding on public procurements. In 2018, President Kenyatta began a public campaign against corruption. The Anti-Corruption agencies mandated to fight corruption have been inconsistent in coordinating activities, especially in bringing cases against senior officials. However, there were cabinet level arrests in 2019 that signaled a commitment by the GOK to fight corruption. Despite these efforts, much still remains to be done in convicting high profile suspects.

In 2020, a high-level conviction was secured for a Member of Parliament setting a precedent for top officials’ convictions. Relevant legislation and regulations include the Anti-Corruption and Economic Crimes Act (2003), the Public Officers Ethics Act (2003), the Code of Ethics Act for Public Servants (2004), the Public Procurement and Disposal Act (2010), the Leadership and Integrity Act (2012), and the Bribery Act (2016). The Access to Information Act (2016) also provides mechanisms through which private citizens can obtain information on government activities; implementation of this act is ongoing. The Ethics and Anti-Corruption Commission (EACC) monitors and enforces compliance with the above legislation.

The Leadership and Integrity Act (2012) requires public officers to register potential conflicts of interest with the relevant commissions. The law identifies interests that public officials must register, including directorships in public or private companies, remunerated employment, securities holdings, and contracts for supply of goods or services, among others. The law requires candidates seeking appointment to non-elective public offices to declare their wealth, political affiliations, and relationships with other senior public officers. This requirement is in addition to background screening on education, tax compliance, leadership, and integrity.

The law requires that all public officers declare their income, assets, and liabilities every two years. Public officers must also include the income, assets, and liabilities of their spouses and dependent children under the age of 18. Information contained in these declarations is not publicly available, and requests to obtain and publish this information must be approved by the relevant commission. Any person who publishes or makes public information contained in public officer declarations without permission may be subject to fine or imprisonment.

On August 31, 2016, the president signed into law the Access to Information Act (2016) although the government has not yet issued regulations required to fully operationalize the act. The law allows citizens to request government information and requires government entities and private entities doing business with the government proactively to disclose certain information, such as government contracts. The act also provides a mechanism to request a review of the government’s failure to disclose requested information, along with penalties for failures to disclose. The act exempts certain information from disclosure on grounds of national security.

The private sector-supported Bribery Act (2016) stiffened penalties for corruption in public tendering and requires private firms participating in such tenders to sign a code of ethics and develop measures to prevent bribery. Both the Bill of Rights of the 2010 Constitution and the Access to Information Act (2016) provide protections to NGOs, investigative journalism, and individuals involved in investigating corruption. The Witness Protection Act (2006) calls for the protection of witnesses in criminal cases and created an independent Witness Protection Agency. A draft Whistleblowers Protection Bill (2016) is currently stalled in Parliament.

Kenya is a signatory to the UN Convention Against Corruption (UNCAC) and in 2016 published the results of a peer review process on UNCAC compliance: (https://www.unodc.org/documents/treaties/UNCAC/CountryVisitFinalReports/2015_09_28_Kenya_Final_Country_Report.pdf ). Kenya is also a signatory to the UN Anticorruption Convention and the OECD Convention on Combatting Bribery, and a member of the Open Government Partnership. Kenya is not a signatory to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. Kenya is also a signatory to the East African Community’s Protocol on Preventing and Combating Corruption.

Resources to Report Corruption

Contact at government agency or agencies are responsible for combating corruption:

Rev. Eliud Wabukala (Ret.)
Chairperson and Commissioner
Ethics and Anti-Corruption Commission
P.O. Box 61130 00200 Nairobi, Kenya
Phones: +254 (0)20-271-7318, (0)20-310-722, (0)729-888-881/2/3
Report corruption online: https://eacc.go.ke/default/report-corruption/ 

Contact at “watchdog” organization:

Sheila Masinde
Executive Director
Transparency International Kenya
Phone: +254 (0)722-296-589
Report corruption online: https://www.tikenya.org/ 

Political tensions over the protracted and contentious 2017 election cycle spilled well into 2018. In March 2018, however, President Kenyatta and opposition National Super Alliance (NASA) leader Raila Odinga publicly shook hands and pledged to work together to heal the political, social, and economic divides revealed by the election. The 2017 electoral period had been marred by violence that claimed the lives of nearly 100 Kenyans, a contentious political atmosphere pitting the ruling Jubilee Party against NASA, and political interference and attacks by both sides on key institutions. In November 2017, the Kenyan Supreme Court unanimously upheld the October 2017 repeat presidential election results and President Uhuru Kenyatta’s win in an election boycotted by NASA leader Raila Odinga. The court’s ruling brought a close to Kenya’s protracted 2017 election cycle, a period that included the Supreme Court’s historic September 2017 annulment of the August 2017 presidential election and the unprecedented repeat election. In November 2019, the Building Bridges Initiative Advisory Taskforce, established by President Kenyatta in May 2018 as part of his pledge to work with Odinga, issued a report recommending reforms to address nine areas: lack of a national ethos, responsibilities and rights of citizenship; ethnic antagonism and competition; divisive elections; inclusivity; shared prosperity; corruption; devolution; and safety and security.

The United States’ Travel Advisory for Kenya advises U.S. citizens to exercise increased caution due to the threat of crime and terrorism, and not to travel to counties bordering Somalia and to certain coastal areas due to terrorism. Instability in Somalia has heightened security concerns and led to increased security measures aimed at businesses and public institutions around the country. Tensions flare occasionally within and between ethnic communities. Regional conflict, most notably in Ethiopia, Somalia, and South Sudan, sometimes have spill-over effects in Kenya. There could be an increase in refugees escaping drought and instability in neighboring countries, adding to the large refugee population already in Kenya from several countries. Security expenditures represent a substantial operating expense for businesses in Kenya.

Kenya and its neighbors are working together to mitigate the threats of terrorism and insecurity through African-led initiatives such as the African Union Mission in Somalia (AMISOM) and the nascent Eastern African Standby Force (EASF). Despite attacks against Kenyan forces in Somalia, the GOK has maintained its commitment to promoting peace and stability in Somalia.

Kenya has one of the highest literacy rates in the region at 90 percent. Investors have access to a large pool of highly qualified professionals in diverse sectors from a working population of over 47.5 percent out of a population of 47.6 million people. Expatriates are allowed to work in Kenya provided they have a work (entry) permit issued under the Kenya Citizenship and Immigration Act 2011. In December 2018, the Cabinet Secretary for Interior and Coordination of National Government issued a directive that requires foreign nationals to apply for their work permits while in their country of origin and will have to prove that the skills they have are not available in the Kenya labor market. Work permits are usually granted to foreign enterprises approved to operate in Kenya as long as the applicants are key personnel. In 2015, the Directorate of Immigration Services made additions to the list of requirements for work permits and special pass applications. Issuance of a work permit now requires an assured income of at least USD 24,000 annually. Exemptions are available, however, for firms in agriculture, mining, manufacturing, or consulting sectors with a special permit. International companies have complained that the visa and work permit approval process is slow, and bribes are sometimes solicited to speed the process. A tightening of work permit issuances and enforcement begun in 2018 is now one of the largest complaints of multinational companies doing business in Kenya.

A company holding an investment certificate granted by registering with KenInvest and passing health, safety, and environmental inspections becomes automatically eligible for three class D work (entry) permits for management or technical staff and three class G, I, or J work permits for owners, shareholders, or partners. More information on permit classes can be found at https://kenya.eregulations.org/menu/61?l=en .

According to the Kenya National Bureau of Statistics (KNBS), in 2019 non-agricultural employment in the formal sector was at 18.1 million, with nominal average earnings of Ksh778,248 (USD 7,200) per person per annum. Kenya has the highest rate of youth joblessness in East Africa. According to the 2019 census data, 5,341,182 or 38.9 percent of the 13,777,600 youths eligible to work are jobless. Employment in Kenya’s formal sector was 2.9 million in 2019 up from 2.8million in 2018. The government is the largest employer in the formal sector, with an estimated 865,200 government workers in 2019. In the private sector, agriculture, forestry, and fishing employed 296,700 workers while manufacturing employed 329,000 workers. However, Kenya’s large informal sector – consisting of approximately 80 percent of the labor force – makes accurate labor reporting difficult.

The GOK has instituted different programs to link and create employment opportunities for the youth, which include a website (http://www.mygov.go.ke/category/jobs/ ). Other measures include the establishment of the National Employment Authority which hosts the National Employment Authority Integrated Management System website that provides public employment service by listing vacancies ( https://neaims.go.ke/  ). The Kenya Labour Market Information System (KLMIS) portal (https://www.labourmarket.go.ke/ ), run by the Ministry of Labour and Social Protection in collaboration with the labor stakeholders, is a one-stop shop for labor information in the country. The site seeks to help address the challenge of inadequate supply of crucial employment statistics in Kenya by providing an interactive platform for prospective employers and job seekers. Both local and foreign employers are required to register with National Industrial Training Authority (NITA) within 30 days of operating. There are no known material compliance gaps in either law or practice with international labor standards that would be expected to pose a reputational risk to investors. The International Labor Organization has not identified any material gaps in Kenya’s labor law or practice with international labor standards. Kenya’s labor laws comply, for the most part, with internationally recognized standards and conventions, and the Ministry of Labor and Social Protection is currently reviewing and ensuring that Kenya’s labor laws are consistent with the 2010 constitution. The Labor Relations Act (2007) provides that workers, including those in export processing zones, are free to form and join unions of their choice.

Collective bargaining is common in the formal sector but there is no data on the percentage of the economy covered by collective bargaining agreements (CBA). However, in 2019 263 CBAs were registered in the labor relations court with Wholesale and Retail trade sector recording the highest at 88. The law permits workers in collective bargaining disputes to strike but requires the exhaustion of formal conciliation procedures and seven days’ notice to both the government and the employer. Anti-union discrimination is prohibited, and the government does not have a history of retaliating against striking workers. The law provides for equal pay for equal work. Regulation of wages is part of the Labor Institutions Act (2014), and the government has established basic minimum wages by occupation and location.

The GOK has a growing trade relationship with the United States under the AGOA framework which requires labor standards to be upheld. The Ministry of Labor and Social Protection is reviewing its labor laws to align with international standards as labor is also a chapter in the Free Trade Agreement negotiations with the U.S. In 2019, the government continued efforts with dozens of partner agencies to implement a range of programs for the elimination of child and forced labor. However, low salaries, insufficient resources, and attrition from retirement of labor inspectors are significant challenges to effective enforcement. Employers in all sectors routinely bribe labor inspectors to prevent them from reporting infractions, especially in the area of child labor.

In 2016, the U.S. International Development Finance Corporation (formerly OPIC) established a regional office in Nairobi, but the office is not currently staffed. The agency is engaged in funding programs in Kenya with an active in-country portfolio of approximately USD 700 million, including projects in power generation, internet infrastructure, light manufacturing, and education infrastructure. 13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

Source: IMF Coordinated Direct Investment Survey (CDIS). Figures are from 2012 (latest available). IMF no longer publishes Kenya data as part of its CDIS.

Source: IMF Coordinated Portfolio Investment Survey (CPIS). Figures are from 2012 (latest available). IMF no longer publishes Kenya data as part of its CPIS. 14. Contact for More Information

U.S. Embassy Economic Section
U.N. Avenue, Nairobi, Kenya
+254 (0)20 363 6050

Policies Towards Foreign Direct Investment

The UK encourages foreign direct investment.  With a few exceptions, the government does not discriminate between nationals and foreign individuals in the formation and operation of private companies.  The Department for International Trade actively promotes direct foreign investment, and prepares market information for a variety of industries.  U.S. companies establishing British subsidiaries generally encounter no special nationality requirements on directors or shareholders. Once established in the UK, foreign-owned companies are treated no differently from UK firms.  The British Government is a strong defender of the rights of any British-registered company, irrespective of its nationality of ownership, reflected in the fact that the UK has never had to defend an investment dispute at the level of international arbitration.

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign ownership is limited in only a few strategic private sector companies, such as Rolls Royce (aerospace) and BAE Systems (aircraft and defense).  No individual foreign shareholder may own more than 15 percent of these companies.  Theoretically, the government can block the acquisition of manufacturing assets from abroad by invoking the Industry Act of 1975, but it has never done so.  Investments in energy and power generation require environmental approvals. Certain service activities (like radio and land-based television broadcasting) are subject to licensing.  The Enterprise Act of 2002 extends powers to the UK government to intervene in mergers which might give rise to national security implications and into which they would not otherwise be able to intervene.

The UK requires that at least one director of any company registered in the UK be ordinarily resident in the UK.  The UK, as a member of the Organization for Economic Cooperation and Development (OECD), subscribes to the OECD Codes of Liberalization and is committed to minimizing limits on foreign investment.

While the UK does not have a formalized investment review body to assess the suitability of foreign investments in national security sensitive areas, an ad hoc investment review process does exist and is led by the relevant government ministry with regulatory responsibility for the sector in question (e.g., the Department for Business, Energy, and Industrial Strategy would have responsibility for review of investments in the energy sector).  U.S. companies have not been the target of these ad hoc reviews.  The UK is currently considering ways to revise its rules related to foreign direct investment that may implicate UK national security interests. (https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/690623/Government_Response_final.pdf ).  The Government has proposed to amend the turnover threshold and share-of-supply tests within the Enterprise Act 2002, in orderto give the Government more leeway to examine and potentially intervene in high-risk mergers that currently fall outside the thresholds in two areas: (i) the dual use and military use sector and, (ii) parts of the advanced technology sector.  For these areas only, the Government proposes to lower the turnover threshold from £70 million ($92 million) to £1 million ($1.3 million) and remove the current requirement for the merger to increase the share of supply to or over 25 percent.

Other Investment Policy Reviews

The Economist’s “Intelligence Unit”, World Bank Group’s “Doing Business 2018”, and the OECD’s “Economic Forecast Summary (May 2019) have current investment policy reports for the United Kingdom:

http://country.eiu.com/united-kingdom 
http://www.doingbusiness.org/data/exploreeconomies/united-kingdom/ 
http://www.oecd.org/economy/united-kingdom-economic-forecast-summary.htm 

Business Facilitation

The UK government has promoted administrative efficiency  to facilitate business creation and operation.  The online business registration process is clearly defined, though some types of company cannot register as an overseas firm in the UK, including partnerships and unincorporated bodies.  Registration as an overseas company is only required when the company has some degree of physical presence in the UK.  After registering their business with the UK governmental body Companies House, overseas firms must separately register to pay corporation tax within three months.  On average, the process of setting up a business in the UK requires thirteen days, compared to the European average of 32 days, putting the UK in first place in Europe and sixth in the world.  As of April 2016, companies have to declare all “persons of significant control.”  This policy recognizes that individuals other than named directors can have significant influence on a company’s activity and that this information should be transparent.  More information is available at this link: https://www.gov.uk/government/publications/guidance-to-the-people-with-significant-control-requirements-for-companies-and-limited-liability-partnerships .  Companies House maintains a free, publicly searchable directory, available at this link: https://www.gov.uk/get-information-about-a-company .  

The UK offers a welcoming environment to foreign investors, with foreign equity ownership restrictions in only a limited number of sectors covered by the World Bank’s Investing Across Sectors indicators.  As in all other EU member countries, foreign equity ownership in the air transportation sector is limited to 49 percent for investors from outside of the European Economic Area (EEA).  It remains to be determined how this will change after the UK leaves the transition period with the EU on December 31, 2020.  https://invest.great.gov.uk/int/ 

https://www.gov.uk/government/organisations/department-for-international-trade 
https://www.gov.uk/set-up-business 
https://www.gov.uk/topic/company-registration-filing/starting-company 
http://www.doingbusiness.org/data/exploreeconomies/united-kingdom/starting-a-business 

Special Section on the British Overseas Territories and Crown Dependencies

The British Overseas Territories (BOTs) comprise Anguilla, British Antarctic Territory, Bermuda, British Indian Ocean Territory, British Virgin Islands, Cayman Islands, Falkland Islands, Gibraltar, Montserrat, Pitcairn Islands, St. Helena, Ascension and Tristan da Cunha, Turks and Caicos Islands, South Georgia and South Sandwich Islands, and Sovereign Base Areas on Cyprus.  The BOTs retain a substantial measure of responsibility for their own affairs.  Local self-government is usually provided by an Executive Council and elected legislature.  Governors or Commissioners are appointed by the Crown on the advice of the British Foreign Secretary, and retain responsibility for external affairs, defense, and internal security.  However, the UK imposed direct rule on the Turks and Caicos Islands in August 2009 after an inquiry found evidence of corruption and incompetence.  Its Premier was removed and its constitution was suspended.  The UK restored Home Rule following elections in November 2012.

Many of the territories are now broadly self-sufficient.  However, the UK’s Department for International Development (DFID) maintains development assistance programs in St. Helena, Montserrat, and Pitcairn.  This includes budgetary aid to meet the islands’ essential needs and development assistance to help encourage economic growth and social development in order to promote economic self-sustainability.  In addition, all other BOTs receive small levels of assistance through “cross-territory” programs for issues such as environmental protection, disaster prevention, HIV/AIDS and child protection.

Seven of the BOTs have financial centers:  Anguilla, Bermuda, British Virgin Islands, Cayman Islands, Gibraltar, Montserrat, and the Turks and Caicos Islands.  These Territories have committed to the OECD’s Common Reporting Standard (CRS) for the automatic exchange of taxpayer financial account information.  They are already exchanging information with the UK, and began exchanging information with other jurisdictions under the CRS from September 2017.

The OECD Global Forum on Transparency and Exchange of Information for Tax Purposes has rated Anguilla as “partially compliant” with the internationally agreed tax standard.  Although Anguilla sought to upgrade its rating in 2017, it still remains at “partially compliant” as of May 2020.  The Global Forum has rated the other six territories as “largely compliant.”  Anguilla, Bermuda, British Virgin Islands, Cayman Islands, Gibraltar and the Turks and Caicos Islands have also committed in reciprocal bilateral arrangements with the UK to hold beneficial ownership information in central registers or similarly effective systems, and to provide UK law enforcement authorities with near real-time access to this information.  These arrangements came into effect in June 2017.

Anguilla:  Anguilla is a neutral tax jurisdiction.  There are no income, capital gains, estate, profit or other forms of direct taxation on either individuals or corporations, for residents or non-residents of the jurisdiction.  The territory has no exchange rate controls.  Non-Anguillan nationals may purchase property, but the transfer of land to an alien includes an additional 12.5 percent surcharge.

British Virgin Islands:  The government of the British Virgin Islands welcomes foreign direct investment and offers a series of incentive packages aimed at reducing the cost of doing business on the islands.  This includes relief from corporation tax payments over specific periods but companies must pay an initial registration fee and an annual license fee to the BVI Financial Services Commission.  Crown land grants are not available to non-British Virgin Islanders, but private land can be leased or purchased following the approval of an Alien Land Holding License.  Stamp duty is imposed on transfer of real estate and the transfer of shares in a BVI company owning real estate in the BVI at a rate of 4 percent for belongers (i.e., residents who have proven they meet a legal standard of close ties to the territory) and 12 percent for non-belongers.  There is no corporate income tax, capital gains tax, branch tax, or withholding tax for companies incorporated under the BVI Business Companies Act.  Payroll tax is imposed on every employer and self-employed person who conducts business in BVI.  The tax is paid at a graduated rate depending upon the size of the employer.  The current rates are 10 percent for small employers (those which have a payroll of less than $150,000, a turnover of less than $300,000 and fewer than 7 employees) and 14 percent for larger employers.  Eight percent of the total remuneration is deducted from the employee, the remainder of the liability is met by the employer.  The first $10,000 of remuneration is free from payroll tax.

Cayman Islands:  There are no direct taxes in the Cayman Islands.  In most districts, the government charges stamp duty of 7.5 percent on the value of real estate at sale; however, certain districts, including Seven Mile Beach, are subject to a rate of nine percent.  There is a one percent fee payable on mortgages of less than KYD 300,000, and one and a half percent on mortgages of KYD 300,000 or higher.  There are no controls on the foreign ownership of property and land.  Investors can receive import duty waivers on equipment, building materials, machinery, manufacturing materials, and other tools.

Falkland Islands:  Companies located in the Falkland Islands are charged corporation tax at 21 percent on the first GBP one million and 26 percent for all amounts in excess of GBP one million.  The individual income tax rate is 21 percent for earnings below $15,694 (GBP 12,000) and 26 percent above this level.

Gibraltar:  The government of Gibraltar encourages foreign investment.  Gibraltar has a stable currency and few restrictions on moving capital or repatriating dividends.  The corporate income tax rate is 20 percent for utility, energy, and fuel supply companies, and 10 percent for all other companies.  There are no capital or sales taxes.  Gibraltar is unique among British Overseas Territories in having been a part of the European Union’s single market,    Gibraltar left the EU with the rest of the UK and its final status is currently subject to negotiations between the UK and Spain.

Montserrat:  The government of Montserrat welcomes new private foreign investment.  Foreign investors are permitted to acquire real estate, subject to the acquisition of an Alien Land Holding license which carries a fee of five percent of the purchase price.  The government also imposes stamp and transfer fees of 2.6 percent of the property value on all real estate transactions.  Foreign investment in Montserrat is subject to the same taxation rules as local investment, and is eligible for tax holidays and other incentives.  Montserrat has preferential trade agreements with the United States, Canada, and Australia.  The government allows 100 percent foreign ownership of businesses but the administration of public utilities remains wholly in the public sector.

St. Helena:  The island of St. Helena is open to foreign investment and welcomes expressions of interest from companies wanting to invest.  Its government is able to offer tax based incentives which will be considered on the merits of each project – particularly tourism projects.  All applications are processed by Enterprise St. Helena, the business development agency.

Pitcairn Islands:  The Pitcairn Islands have approximately 50 residents, with a workforce of approximately 29 employed in 10 full-time equivalent roles.  The territory does not have an airstrip or safe harbor.  Residents exist on fishing, subsistence farming, and handcrafts.

The Turks and Caicos Islands:  The islands operate an “open arms” investment policy.  Through the policy, the government commits to a streamlined business licensing system, a responsive immigration policy to give investment security, access to government-owned land under long-term leases, and a variety of duty concessions to qualified investors.  The islands have a “no tax” status, but property purchasers must pay a stamp duty on purchases over $25,000.  Depending on the island, the stamp duty rate may be up to 6.5 percent for purchases up to $250,000, eight percent for purchases $250,001 to $500,000, and 10 percent for purchases over $500,000.

The Crown Dependencies:

The Crown Dependencies are the Bailiwick of Jersey, the Bailiwick of Guernsey and the Isle of Man.  The Crown Dependencies are not part of the UK but are self-governing dependencies of the Crown.  This means they have their own directly elected legislative assemblies, administrative, fiscal and legal systems and their own courts of law.  The Crown Dependencies are not represented in the UK Parliament.

Jersey has a  zero percent standard rate of corporate tax .  The exceptions to this standard rate are financial service companies, which are taxed at 10 percent, utility companies, which are taxed at 20 percent, and income specifically derived from Jersey property rentals or Jersey property development, taxed at 20 percent.  VAT is not applicable in Jersey as it is not part of the EU VAT tax area.

Guernsey has a zero percent rate of corporate tax.  Exceptions include some specific banking activities, taxed at 10 percent, utility companies, which are taxed at 20 percent, Guernsey residents’ assessable income is taxed at 20 percent, and income derived from land and buildings is taxed at 20 percent.

The Isle of Man’s corporate standard tax is zero percent.  The exceptions to this standard rate are income received from banking business, which is taxed at 10 percent and income received from land and property in the Isle of Man which is taxed at 20 percent.  In addition, a 10 percent tax rate also applies to companies who carry on a retail business in the Isle of Man and have taxable income in excess of £500,000 from that business.  VAT is applicable in the Isle of Man as it is part of the EU customs territory.

The tax data above are current as of April 2020.

Outward Investment

The UK remains one of the world’s largest foreign direct investors, currently ranked fourth.  The UK’s international investment position abroad (outward investment) increased from GBP 1,713.3 billion in 2018 to GBP 1,857.7 in 2019, dropping to .   GBP 1,805 billion by the end of 2019.  The main destination for UK outward FDI is the United States, which accounted for approximately 21 percent of UK outward FDI  at the end of 2018.  Other key destinations include the Netherlands, Luxembourg, France, and Spain which, together with the United States, account for a little under half of the UK’s outward FDI stock.

The UK’s international investment position within the Americas was GBP 419.7 billion in 2018.  This is the largest recorded value in the time series since 2009 for the Americas.

Transparency of the Regulatory System

U.S. exporters and investors generally will find little difference between the United States and UK in the conduct of business.  The regulatory system provides clear and transparent guidelines for commercial engagement.  Common law prevails in the UK as the basis for commercial transactions, and the International Commercial Terms (INCOTERMS) of the International Chambers of Commerce are accepted definitions of trading terms.  In terms of accounting standards and audit provisions firms in the UK must use the International Financial Reporting Standards (IFRS) set by the International Accounting Standards Board (IASB) and approved by the European Commission, at least currently.  The UK’s Accounting Standards Board provides guidance to firms on accounting standards and works with the IASB on international standards.

Statutory authority over prices and competition in various industries is given to independent regulators, for example the Competition and Markets Authority (CMA), Office of Communications (Ofcom), the Water Services Regulation Authority (Ofwat), the Office of Gas and Electricity Markets (Ofgem), the Rail Regulator, and the Prudential Regulatory Authority (PRA).  The PRA was created out of the dissolution of the Financial Services Authority (FSA) in 2013.  The PRA reports to the Financial Policy Committee (FPC) in the Bank of England.  The PRA is responsible for supervising the safety and soundness of individual financial firms, while the FPC takes a systemic view of the financial system and provides macro-prudential regulation and policy actions.  The CMA acts as a single integrated regulator focused on enforcement of the UK’s competition laws.  The Financial Conduct Authority (FCA) is a regulator that addresses financial and market misconduct through legally reviewable processes.  These regulators work to protect the interests of consumers while ensuring that the markets they regulate are functioning efficiently.  Most laws and regulations are published in draft for public comment prior to implementation.  The FCA maintains a free, publicly searchable register of their filings on regulated corporations and individuals here: https://register.fca.org.uk/ . 

The UK government publishes regulatory actions, including draft text and executive summaries, on the Department for Business, Energy & Industrial Strategy webpage listed below.  The current policy requires the repeal of two regulations for any new one in order to make the business environment more efficient.

Unlike the United States, the UK currently lacks independent authority in setting its regulatory regime.  As long as the UK remains in the transition period with the European Union, it must comply with and enforce EU regulations and directives.  Any U.S. government concerns about the degree of transparency and accountability in the EU regulatory process therefore also apply to the UK as an EU member state.  The extent to which the UK will maintain the EU regulatory regime after the UK withdraws from the EU is unknown at this time.  The UK is expected to leave the EU’s economic relationships on December 31, 2020.

https://www.gov.uk/government/policies/business-regulation 
https://www.gov.uk/government/organisations/regulatory-delivery 

International Regulatory Considerations

The UK’s withdrawal from the EU may result in a period in which the future regulatory direction of the UK is uncertain as the UK determines the extent to which it will either maintain and enforce the current EU regulatory regime or deviate towards new regulations in any particular sector.  The UK is an independent member of the WTO, and actively seeks to comply with all WTO obligations.

Legal System and Judicial Independence

The UK is a common-law country.  UK business contracts are legally enforceable in the UK, but not in the United States or other foreign jurisdictions.  International disputes are resolved through litigation in the UK Courts or by arbitration, mediation, or some other alternative dispute resolution (ADR) method.  The UK has a long history of applying the rule of law to business disputes; judicial proceedings have a reputation for being competent, fair, and reliable, which helps position London as an international hub for dispute resolution with over 10,000 cases filed per annum.

Laws and Regulations on Foreign Direct Investment

There are few statutes governing or restricting foreign investment in the UK.  The procedure for establishing a company in the UK is identical for British and foreign investors.  No approval mechanisms exist for foreign investment, apart from the ad hoc process outlined in Section 1.  Foreigners may freely establish or purchase enterprises in the UK, with a few limited exceptions, and acquire land or buildings.  As noted above, the UK is currently reviewing its procedures and has proposed new rules for restricting foreign investment in those sectors of the economy with higher risk for affecting national security.

Alleged tax avoidance by multinational companies, including several major U.S. firms, has been a controversial political issue and subject of investigations by the UK Parliament and EU authorities.  Foreign and UK firms are subject to the same tax laws, however, and several UK firms have also been criticized for tax avoidance.  Foreign investors may have access to certain EU and UK regional grants and incentives designed to attract industry to areas of high unemployment, but these do not include tax concessions.  Access to EU grants will end after December 31, 2020.

In 2015, the UK flattened its structure of corporate tax rates.  The UK currently taxes corporations at a flat rate of 19 percent, with certain exceptions,, with marginal tax relief granted for companies with profits falling between $391,000 (GBP 300,000) and $1.96 million (GBP 1.5 million).  Tax deductions are allowed for expenditure and depreciation of assets used for trade purposes.  These include machinery, plant, industrial buildings, and assets used for research and development.  A special rate of 20 percent is given to unit trusts and open-ended investment companies.  Companies that make profits from oil extraction or oil rights in the UK, including its continental shelf, are known as “ring fence” companies.  Small ”ring fence” companies are taxed at a rate of 19 percent for profits up to $391,000 (GBP 300,000), and 30 percent for profits over $391,000 (GBP 300,000).

The UK has a simple system of personal income tax.  The marginal tax rates for 2019-2020 are as follows: up to GBP 12,500, zero percent; GBP 12,501 to GBP 50,000, 20 percent; GBP 50,001 to GBP 150,000, 40 percent; and over GBP 150,000, 45 percent.

UK citizens also make mandatory payments of about 12 percent of income into the National Insurance system, which funds social security and retirement benefits.  The UK requires non-domiciled residents of the UK to either pay tax on their worldwide income or the tax on the relevant part of their remitted foreign income being brought into the UK.  If they have been resident in the UK for seven tax years of the previous nine, and they choose to pay tax only on their remitted earnings, they may be subject to an additional charge of $39,141 (GBP 30,000).  If they have been resident in the UK for 12 of the last 14 tax years, they may be subject to an additional charge of $78,282 (GBP 60,000).

The Scottish Parliament has the legal power to increase or decrease the basic income tax rate in Scotland, currently 20 percent, by a maximum of three percentage points.

For guidance on laws and procedures relevant to foreign investment in the UK, follow the link below:

https://www.gov.uk/government/collections/investment-in-the-uk-guidance-for-overseas-businesses 

Competition and Anti-Trust Laws

UK competition law prohibits anti-competitive behavior within the UK through Chapters I and II of the Competition Act of 1998 and the Enterprise Act of 2002.  The UK’s Competition and Markets Authority (CMA) is responsible for implementing these laws by investigating potentially anti-competitive behaviors, including cases involving state aid, cartel activity, or mergers that threaten to reduce the competitive market environment.  While merger notification in the UK is voluntary, the CMA may impose substantial fines or suspense orders on potentially non-compliant transactions.  The CMA prosecutes cartel activity both as a civil and criminal offense.  The criminal offense carries a penalty of up to five years imprisonment; CMA shares concurrent jurisdiction with the Serious Fraud Office over criminal cartel matters.  The CMA is also responsible for ensuring consumer protection, conducting market research, and overseeing sectoral regulators, such as those involved in the regulation of the UK’s energy, water, and communications markets.

Until December 31, 2020, EU competition policy will continue to apply in the UK.  The UK will continue to refer cross-border cases with an EU-nexus to the European Commission, pursuant to Articles 101 and 102 of the Treaty on the Functioning of the European Union (TFEU).  After December 31, 2020, the UK will begin reviewing cross-border activities with a UK-EU nexus in parallel to the European Commission.  The UK government has indicated there are no plans for any immediate, fundamental changes to its competition law regime following its withdrawal from the EU.

UK competition law requires:

1) the prohibition of agreements or practices that restrict free trading and competition between business entities (this includes in particular the repression of cartels);

2) the banning of abusive behavior by a firm dominating a market, or anti-competitive practices that tend to lead to such a dominant position (practices controlled in this way may include predatory pricing, tying, price gouging, refusal to deal and many others); and,

3) the supervision of mergers and acquisitions of large corporations, including some joint ventures.

Any transactions which could threaten competition also fall into scope of the UK’s regulators.  UK law provides for remedies to problematic transactions,  such as an obligation to divest part of the merged business or to offer licenses or access to facilities to enable other businesses to continue competing.

Expropriation and Compensation

The UK is a member of the OECD and adheres to the OECD principle that when a government expropriates property, compensation should be timely, adequate, and effective.  In the UK, the right to fair compensation and due process is uncontested and is reflected in the fact that there are no public instances of the government needing to defend an international arbitration dispute with an investor.  Expropriation of corporate assets or the nationalization of industry requires a special act of Parliament.  A number of key UK banks became subject to full or partial nationalization as a response to the 2007-2009 financial crisis.  However, these were privatized once the banks returned to financial viability.

Dispute Settlement

As a member of the World Bank-based International Center for Settlement of Investment Disputes (ICSID), the UK accepts binding international arbitration between foreign investors and the State.  As a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, the UK provides local enforcement of arbitration judgments decided in other signatory countries.

London is a thriving center for the resolution of international disputes through arbitration under a variety of procedural rules such as those of the London Court of International Arbitration, the International Chamber of Commerce, the Stockholm Chamber of Commerce, the American Arbitration Association International Centre for Dispute Resolution, and others.  Many of these arbitrations involve parties with no connection to the jurisdiction, but who are drawn to the jurisdiction because they perceive it to be a fair, neutral venue with an arbitration law and experienced courts that support efficient resolution of disputes.  They also choose London-based arbitration because of the general prevalence of the English language and Common Law in international commerce.  A wide range of contractual and non-contractual claims can be referred to arbitration in this jurisdiction including disputes involving intellectual property rights, competition, and statutory claims.  There are no restrictions on foreign nationals acting as arbitration counsel or arbitrators in this jurisdiction.  There are few restrictions on foreign lawyers practicing in the jurisdiction as evidenced by the fact that over 200 foreign law firms have offices in London.

ICSID Convention and New York Convention

In addition to its membership in ICSID, the UK is a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.  The latter convention has territorial application to Gibraltar (September 24, 1975), Hong Kong (January 21, 1977), Isle of Man (February 22, 1979), Bermuda (November 14, 1979), Belize and Cayman Islands (November 26, 1980), Guernsey (April 19, 1985), Bailiwick of Jersey (May 28, 2002), and British Virgin Islands (February 24, 2014).

The United Kingdom has consciously elected not to follow the UNCITRAL Model Law on International Commercial Arbitration.  Enforcement of an arbitral award in the UK is dependent upon where the award was granted.  The process for enforcement in any particular case is dependent upon the seat of arbitration and applicable arbitration rules .  Arbitral awards in the UK can be enforced under a number of different regimes, namely:  The Arbitration Act 1996, The New York Convention, The Geneva Convention 1927, The Administration of Justice Act 1920 and the Foreign Judgments (Reciprocal Enforcement) Act 1933, and Common Law.

The Arbitration Act 1996 governs all arbitrations seated in England, Wales and Northern Ireland, both domestic and international.  The full text of the Arbitration Act can be found here: http://www.legislation.gov.uk/ukpga/1996/23/data.pdf .

The Arbitration Act is heavily influenced by the UNCITRAL Model Law, but it has some important differences.  For example, the Arbitration Act covers both domestic and international arbitration; the document containing the parties’ arbitration agreement need not be signed; an English court is only able to stay its own proceedings and cannot refer a matter to arbitration; the default provisions in the Arbitration Act require the appointment of a sole arbitrator as opposed to three arbitrators; a party retains the power to treat its party-nominated arbitrator as the sole arbitrator in the event that the other party fails to make an appointment (where the parties’ agreement provides that each party is required to appoint an arbitrator); there is no time limit on a party’s opposition to the appointment of an arbitrator; parties must expressly opt out of most of the provisions of the Arbitration Act which confer default procedural powers on the arbitrators; and there are no strict rules governing the exchange of pleadings.  Section 66 of the Arbitration Act applies to all domestic and foreign arbitral awards.  Sections 100 to 103 of the Arbitration Act provide for enforcement of arbitral awards under the New York Convention 1958.  Section 99 of the Arbitration Act provides for the enforcement of arbitral awards made in certain countries under the Geneva Convention 1927.

Under Section 66 of the Arbitration Act, the court’s permission is required for an international arbitral award to be enforced in the UK.  Once the court has given permission, judgment may be entered in terms of the arbitral award and enforced in the same manner as a court judgment or order.  Permission will not be granted by the court if the party against whom enforcement is sought can show that (a) the tribunal lacked substantive jurisdiction and (b) the right to raise such an objection has not been lost.

The length of arbitral proceedings can vary greatly.  If the parties have a relatively straightforward dispute, cooperate, and adopt a fast track procedure, arbitration can be concluded within months or even weeks.  In a substantial international arbitration involving complex facts, many witnesses and experts and post-hearing briefs, the arbitration could take many years.  A reasonably substantial international arbitration will likely take between one and two years.

There are two alternative procedures that can be followed in order to enforce an award.  The first is to seek leave of the court for permission to enforce.  The second is to begin an action on the award, seeking the same relief from the court as set out in the tribunal’s award.  Enforcement of an award made in the jurisdiction may be opposed by challenging the award.  However, the court also may refuse to enforce an award that is unclear, does not specify an amount, or offends public policy.  Enforcement of a foreign award may be opposed on any of the limited grounds set out in the New York Convention.  A stay may be granted for a limited time pending a challenge to the order for enforcement.  The court will consider the likelihood of success and whether enforcement of the award will be made more or less difficult as a result of the stay.  Conditions that might be imposed on granting the stay include such matters as paying a sum into court.  Where multiple awards are to be rendered, the court may give permission for the tribunal to continue hearing other matters, especially where there may be a long delay between awards.  UK courts have a good record of enforcing arbitral awards.  The courts will enforce an arbitral award in the same way that they will enforce an order or judgment of a court.  At the time of writing, there are no examples of the English courts enforcing awards which were set aside by the courts at the place of arbitration.

Most awards are complied with voluntarily.  If the party against whom the award was made fails to comply, the party seeking enforcement can apply to the court.  The length of time it takes to enforce an award which complies with the requirements of the New York Convention will depend on whether there are complex objections to enforcement which require the court to investigate the facts of the case.  If a case raises complex issues of public importance the case could be appealed to the Court of Appeal and then to the Supreme Court.  This process could take around two years.  If no complex objections are raised, the party seeking enforcement can apply to the court using a summary procedure that is fast and efficient.  There are time limits relating to the enforcement of the award.  Failure to comply with an award is treated as a breach of the arbitration agreement.  An action on the award must be brought within six years of the failure to comply with the award or 12 years if the arbitration agreement was made under seal.  If the award does not specify a time for compliance, a court will imply a term of reasonableness.

Bankruptcy Regulations

The UK has strong bankruptcy protections going back to the Bankruptcy Act of 1542.  Today, both individual bankruptcy and corporate insolvency are regulated in the UK primarily by the Insolvency Act 1986 and the Insolvency Rules 1986, regulated through determinations in UK courts.  The World Bank’s Doing Business IndexRanks the UK 14/190 for ease of resolving insolvency.

Regarding individual bankruptcy law, the court will oblige a bankrupt individual to sell assets to pay dividends to creditors.  A bankrupt person must inform future creditors about the bankrupt status and may not act as the director of a company during the period of bankruptcy.  Bankruptcy is not criminalized in the UK, and the Enterprise Act of 2002 dictates that for England and Wales, bankruptcy will not normally last longer than 12 months.  At the end of the bankrupt period, the individual is normally no longer held liable for bankruptcy debts unless the individual is determined to be culpable for his or her own insolvency, in which case the bankruptcy period can last up to fifteen years.

For corporations declaring insolvency, UK insolvency law seeks to distribute losses equitably between creditors, employees, the community, and other stakeholders in an effort to rescue the company.  Liability is limited to the amount of the investment.  If a company cannot be rescued, it is liquidated and assets are sold to pay debts to creditors, including foreign investors.  In March 2020, the UK government announced it would introduce legislation to change existing insolvency laws in response to COVID-19.  The new measures seek to enable companies undergoing a rescue or restructuring process to continue trading and help them avoid insolvency.

Investment Incentives

The UK offers a range of incentives for companies of any nationality locating in economically depressed regions of the country, as long as the investment generates employment.  DIT works with its partner organizations in the devolved administrations – Scottish Development International, the Welsh Government and Invest Northern Ireland – and with London and Partners and Local Enterprise Partnerships (LEPs) throughout England, to promote each region’s particular strengths and expertise to overseas investors.

Local authorities in England and Wales also have power under the Local Government and Housing Act of 1989 to promote the economic development of their areas through a variety of assistance schemes, including the provision of grants, loan capital, property, or other financial benefit.  Separate legislation, granting similar powers to local authorities, applies to Scotland and Northern Ireland.  Where available, both domestic and overseas investors may also be eligible for loans from the European Investment Bank.

Foreign Trade Zones/Free Ports/Trade Facilitation

The cargo ports and freight transportation ports at Liverpool, Prestwick, Sheerness, Southampton, and Tilbury used for cargo storage and consolidation are designated as Free Trade Zones.  No activities that add value to commodities are permitted within the Free Trade Zones, which are reserved for bonded storage, cargo consolidation, and reconfiguration of non-EU goods.  The Free Trade Zones offer little benefit to U.S. exporters or investors, or any other non-EU exporters or investors.  Questions remain as to whether the UK will continue to employ Free Trade Zones and Free Ports in a post-Brexit environment.

Performance and Data Localization Requirements

The UK does not mandate “forced localization” of data and does not require foreign IT firms to turn over source code.  The Investigatory Powers Act became law in November 2016 addressing encryption and government surveillance.  It permitted the broadening of capabilities for data retention and the investigatory powers of the state related to data.

As of May 2018, companies operating in the UK comply with the EU General Data Protection Regulation.  The UK presently intends to transpose the requirements of the GDPR into UK domestic law after the UK withdraws from the EU.  The impact of the UK leaving the EU on the free flow of data between the EU and the UK, and the UK and United States, is unknown at this time.  The UK Government does not mandate local employment, though at least one director of any company registered in the UK must be ordinarily resident in the UK.

Immigration rules (HC1888) that came into effect on April 6, 2012 have wide-ranging implications for foreign employees, primarily affecting businesses looking to sponsor migrants under Tier 2 as well as migrants looking to apply for settlement in the UK.  In particular, the UK Government has introduced a 12-month cooling off period for Tier 2 (General) applications similar to the one that is currently in place for Tier 2 (Intra-company transfer).  The effect of this is that, while those who enter the UK under Tier 2 (General) to work for one company will be able to apply in-country under Tier 2 (General) to work for another company, if they leave the UK, they will not be able to apply to re-enter the UK under a fresh Tier 2 (General) permission until twelve months after their previous Tier 2 (General) permission has expired.

In addition, those who enter the UK under Tier 2 (Intra-company transfer)  will not be able to change their status in-country to Tier 2 (General) under any circumstances.  If they leave the UK, they will also not be able to apply to enter the UK under Tier 2 (General) until 12 months after their previous Tier 2 (Intra-company transfer) permission has expired.

Where an individual is sent to the UK on assignment under Tier 2 (Intracompany transfer), and the sponsoring company subsequently wishes to hire them permanently in the UK, they will not be able to apply either to remain in the UK under Tier 2 (General) or leave the UK and submit a Tier 2 (General) application overseas.

This  means that employers must carefully consider the long-term plans for all assignees that they send to the UK and whether Tier 2 (Intracompany transfer) is the most appropriate category.  This is because, if the assignee is subsequently required in the UK on a long-term basis, it will not be possible for them to make a new application under Tier 2 (General) until at least twelve months after their Tier 2 (Intra-company transfer) permission has expired.

In 2016, the British government updated requirements for Tier 2 visas by increasing the Tier 2 minimum salary threshold to GBP 30,000 for experienced workers.  This change was phased in, with the minimum threshold increased to GBP 25,000 in fall 2016 and to GBP 30,000 in April 2017.  Employers will continue to be able to recruit non-EEA graduates of UK universities without first testing the resident labor market and without being subject to the annual limit on Tier 2 (General) places, which will remain at 20,700 places per year.  From April 2017, extra weighting was added within the Tier 2 (General) limit where the allocation of places is associated with the relocation of a high-value business to the UK or, potentially, supports an inward investment.  It also waived the resident labor market test for these applications.

Real Property

The UK has robust real property laws stemming from legislation including the Law of Property Act 1925, the Settled Land Act 1925, the Land Charges Act 1972, the Trusts of Land and Appointment of Trustees Act 1996, and the Land Registration Act 2002.

Interests in property are well enforced, and mortgages and liens have been recorded reliably since the Land Registry Act of 1862.  The Land Registry is the government database where all land ownership and transaction data are held for England and Wales, and it is reliably accessible online, here: https://www.gov.uk/search-property-information-land-registry .  Scotland has its own Registers of Scotland, while Northern Ireland operates land registration through the Land and Property Services.

Long-term physical presence on non-residential property without permission is not typically considered a crime in the UK.  Police take action if squatters commit other crimes when entering or staying in a property.

Intellectual Property Rights

The UK legal system provides a high level of intellectual property rights (IPR) protection, and enforcement mechanisms are comparable to those available in the United States.  The UK is a member of the World Intellectual Property Organization (WIPO).  The UK is also a member of the major IP agreements: the Berne Convention for the Protection of Literary and Artistic Works, the Paris Convention for the Protection of Industrial Property, the Universal Copyright Convention, the Geneva Phonograms Convention, and the Patent Cooperation Treaty.  By implementing various EU directives,  UK law encompasses the WIPO Copyright Treaty and WIPO Performance and Phonograms Treaty, known together as the internet treaties.  Since its departure from the EU, it should be noted that the UK will not be implementing the 2019 Directive (2019/790) on Copyright in the Digital Single Market and has formally withdrawn from the Unified Patent Court.

The Intellectual Property Office (IPO) is the official UK government body responsible for intellectual property rights including patents, designs, trademarks and copyright.  The IPO web site contains comprehensive information on UK law and practice in these areas:  https://www.gov.uk/government/organisations/intellectual-property-office  

The British government tracks and reports seizures of counterfeit goods and regards the production and subsequent sale as a criminal act.  The Intellectual Property Crime Report for 2018/19 highlights the incidence of IPR infringement and the harm caused to the UK economy, showing that almost 4 percent of all UK imports in 2018 were counterfeit, worth £9.3 billion ($12 billion).  This translates to around 60,000 jobs lost and almost £4 billion ($5.2 billion) in lost tax revenue.

The UK is not included in USTR’s 2020 Special 301 Report.  USTR’s 2019 Notorious Markets report includes amazon.co.uk, based in the UK, due to high levels of counterfeit goods on the platform, but the report also notes the UK has blocking orders in place for a number of torrent and infringing websites.  The 2019 report further details the “innovative approaches to disrupting ad-backed funding of pirate sites” taken by the London Police Intellectual Property Crime Unit (PIPCU) and IPO.

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ .

Capital Markets and Portfolio Investment

The City of London houses one of the largest and most comprehensive financial centers globally.  London offers all forms of financial services:  commercial banking, investment banking, insurance, venture capital, private equity, stock and currency brokers, fund managers, commodity dealers, accounting and legal services, as well as electronic clearing and settlement systems and bank payments systems.  London is highly regarded by investors because of its solid regulatory, legal, and tax environments, a supportive market infrastructure, and a dynamic, highly skilled workforce.

The UK government is generally hospitable to foreign portfolio investment.  Government policies are intended to facilitate the free flow of capital and to support the flow of resources in product and services markets.  Foreign investors are able to obtain credit in local markets at normal market terms, and a wide range of credit instruments are available.  The principles underlying legal, regulatory, and accounting systems are transparent, and they are consistent with international standards.  In all cases, regulations have been published and are applied on a non-discriminatory basis by the Bank of England’s Prudential Regulation Authority (PRA).

The London Stock Exchange is one of the most active equity markets in the world.  London’s markets have the advantage of bridging the gap between the day’s trading in the Asian markets and the opening of the U.S. market.  This bridge effect is also evidenced by the fact that many Russian and Central European companies have used London stock exchanges to tap global capital markets.  The Alternative Investment Market (AIM), established in 1995 as a sub-market of the London Stock Exchange, is specifically designed for smaller, rapidly expanding companies.  The AIM has a more flexible regulatory system than the main market and has no minimum market capitalization requirements.  Since its launch, the AIM has raised more than $85 billion (GBP 68 billion) for more than 3,000 companies.

Money and Banking System

The UK banking sector is the largest in Europe and represents the continent’s deepest capital pool.  More than 150 financial services firms from the EU are based in the UK.  The financial and related professional services industry contributed approximately 10 percent of UK Economic Output in 2019, employed approximately 2.3 million people, and contributed the most to UK tax receipts of any sector.  The long-term impact of Brexit on the financial services industry is uncertain at this time.  Some firms have already moved limited numbers of jobs outside the UK in order to service EU-based clients, but anticipate the UK will remain a top financial hub.

The Bank of England (BoE) serves as the central bank of the UK.  According to BoE guidelines, foreign banking institutions are legally permitted to establish operations in the UK as subsidiaries or branches.  Responsibilities for the prudential supervision of a non-European Economic Area (EEA) branch are split between the parent’s home state supervisors and the PRA.  However, the Prudential Regulation Authority (PRA) expects the whole firm to meet the PRA’s threshold conditions.  The PRA expects new non-EEA branches to focus on wholesale and corporate banking and to do so at a level that is not critical to the UK economy.  The FCA is the conduct regulator for all banks operating in the United Kingdom.  For non-EEA branches the FCA’s Threshold Conditions and conduct of business rules apply, including areas such as anti-money laundering.  Eligible deposits placed in non-EEA branches may be covered by the UK deposit guarantee program and therefore non-EEA branches may be subject to regulations concerning UK depositor protection.

There are no legal restrictions that prohibit non-UK residents from opening a business bank account; setting up a business bank account as a non-resident is in principle straightforward.   However, in practice most banks will not accept applications from overseas due to fraud concerns and the additional administration costs.  To open a personal bank account, an individual must at minimum present an internationally recognized proof of identification and prove residency in the UK.  This is a problem for incoming FDI and American expatriates.  Unless the business or the individual can prove UK residency, they will have limited banking options.

Foreign Exchange and Remittances

Foreign Exchange

The British pound sterling is a free-floating currency with no restrictions on its transfer or conversion.  Exchange controls restricting the transfer of funds associated with an investment into or out of the UK are not exercised.

Remittance Policies

Not applicable.

Sovereign Wealth Funds

The United Kingdom does not maintain a national wealth fund.  Although there have at time been calls to turn The Crown Estate – created in 1760 by Parliament as a means of funding the British monarchy – into a wealth fund, there are no current plans in motion.  Moreover, with assets of just under $12 billion, The Crown Estate would be small in relation to other national funds.

There are 20 partially or fully state-owned enterprises in the UK.  These enterprises range from large, well-known companies to small trading funds.  Since privatizing the oil and gas industry, the UK has not established any new energy-related state-owned enterprises or resource funds.

Privatization Program

The privatization of state-owned utilities in the UK is now essentially complete.  With regard to future investment opportunities, the few remaining government-owned enterprises or government shares in other utilities are likely to be sold off to the private sector when market conditions improve.

Businesses in the UK are accountable for a due-diligence approach to responsible business conduct (RBC), or corporate social responsibility (CSR), in areas such as human resources, environment, sustainable development, and health and safety practices – through a wide variety of existing guidelines at national, EU and global levels.  There is a strong awareness of  CSR principles among UK businesses, promoted by UK business associations such as the Confederation of British Industry and the UK government.

The British government fairly and uniformly enforces laws related to human rights, labor rights, consumer protection, environmental protection, and other statutes intended to protect individuals from adverse business impacts.  HMG adheres to the OECD Guidelines for Multinational Enterprises.  It is committed to the promotion and implementation of these Guidelines and encourages UK multinational enterprises to adopt high corporate standards involving all aspects of the Guidelines.  The UK has established a National Contact Point (NCP) to promote the Guidelines and to facilitate the resolution of disputes that may arise within that context.  The UK NCP is housed in BEIS and is partially funded by DFID.  A Steering Board monitors the work of the UK NCP and provides strategic guidance.  It is composed of representatives of relevant government departments and four external members nominated by the Trades Union Congress, the Confederation of British Industry, the All Party Parliamentary Group on the Great Lakes Region of Africa, and the NGO community.

The results of a UK government consultation on CSR can be found here: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/300265/bis-14-651-good-for-business-and-society-government-response-to-call-for-views-on-corporate-responsibility.pdf .

Information on UK and EU regulations and policies relating to the procurement of supplies, services and works for the public sector, and the relevance of promoting RBC, are found here: https://www.gov.uk/guidance/public-sector-procurement-policy . 

Although isolated instances of bribery and corruption have occurred in the UK, U.S. investors have not identified corruption of public officials as a factor in doing business in the UK.

The Bribery Act 2010 came into force on July 1, 2011.  It amends and reforms the UK criminal law and provides a modern legal framework to combat bribery in the UK and internationally.  The scope of the law is extra-territorial.  Under the Bribery Act, a relevant person or company can be prosecuted for bribery if the crime is committed abroad.  The Act applies to UK citizens, residents and companies established under UK law.  In addition, non-UK companies can be held liable for a failure to prevent bribery if they do business in the UK.

Section 9 of the Act requires the UK Government to publish guidance on procedures that commercial organizations can put in place to prevent bribery on their behalf.  It creates the following offenses: active bribery, described as promising or giving a financial or other advantage, passive bribery, described as agreeing to receive or accepting a financial or other advantage; bribery of foreign public officials; and the failure of commercial organizations to prevent bribery by an associated person (corporate offense).  This corporate criminal offense places a burden of proof on companies to show they have adequate procedures  in place to prevent bribery (http://www.transparency.org.uk/our-work/business-integrity/bribery-act/adequate-procedures-guidance/ ).  To avoid corporate liability for bribery, companies must make sure that they have strong, up-to-date and effective anti-bribery policies and systems.  The Bribery Act creates a corporate criminal offense making illegal the failure to prevent bribery by an associated person.  The briber must be “associated” with the commercial organization, a term which will apply to, amongst others, the organization’s agents, employees, and subsidiaries.  A foreign corporation which “carries on a business, or part of a business” in the UK may therefore be guilty of the UK offense even if, for example, the relevant acts were performed by the corporation’s agent outside the UK.  The Act does not extend to political parties and it is unclear whether it extends to family members of public officials.

UN Anticorruption Convention, OECD Convention on Combatting Bribery 

The UK formally ratified the OECD Convention on Combating Bribery in December 1998.  The UK also signed the UN Convention Against Corruption in December 2003 and ratified it in 2006.  The UK has launched a number of initiatives to reduce corruption overseas.  The OECD Working Group on Bribery (WGB) criticized the UK’s implementation of the Anti-Bribery convention.  The OECD and other international organizations promoting global anti-corruption initiatives pressured the UK to update its anti-bribery legislation which was last amended in 1916.  In 2007, the UK Law Commission began a consultation process to draft a Bribery Bill that met OECD standards.  A report was published in October 2008 and consultations with experts from the OECD were held in early 2009.  The new Bill was published in draft in March 2009 and adopted by Parliament with cross-party support as the 2010 Bribery Act in April 2010.

Resources to Report Corruption 

UK law provides criminal penalties for corruption by officials, and the government routinely implements these laws effectively.  The Serious Fraud Office (SFO) is an independent government department, operating under the superintendence of the Attorney General with jurisdiction in England, Wales, and Northern Ireland.  It investigates and prosecutes those who commit serious or complex fraud, bribery, and corruption, and pursues them and others for the proceeds of their crime.

All allegations of bribery of foreign public officials by British nationals or companies incorporated in the United Kingdom—even in relation to conduct that occurred overseas—should be reported to the SFO for possible investigation.  When the SFO receives a report of possible corruption, its intelligence team makes an assessment and decides if the matter is best dealt with by the SFO itself or passed to a law enforcement partner organization, such as the Overseas Anti-Corruption Unit of the City of London Police (OACU) or the International Corruption Unit of the National Crime Agency.  Allegations can be reported in confidence using the SFO’s secure online reporting form: https://www.sfo.gov.uk/contact-us/reporting-serious-fraud-bribery-corruption/ . 

Details can also be sent to the SFO in writing:

SFO Confidential
Serious Fraud Office
2-4 Cockspur Street
London, SW1Y 5BS
United Kingdom

The UK is politically stable but continues to be a target for both domestic and global terrorist groups.  Terrorist incidents in the UK have significantly decreased in frequency and severity since 2017, which saw five terrorist attacks that caused 36 deaths.  In 2019, the UK suffered one terrorist attack resulting in three deaths (including the attacker), and another two attacks in early 2020 caused serious injuries and resulted in the death of one attacker.  In November 2019, the UK lowered the terrorism threat level to substantial, meaning the risk of an attack was reduced from “highly likely” to “likely.”  UK officials categorize Islamist terrorism as the greatest threat to national security, though officials identify a rising threat from racially or ethnically motivated extremists, which they refer to as “extreme right-wing” terrorism.  Since March 2017, police and security services have disrupted 15 Islamist and seven extreme right-wing plots.

Environmental advocacy groups in the UK have been involved with numerous protests against a variety of business activities, including: airport expansion, bypass roads, offshore structures, wind farms, civilian nuclear power plants, and petrochemical facilities.  These protests tend not to be violent but can be disruptive, with the aim of obtaining maximum media exposure.

Brexit has waned as a source of political instability.  Nonetheless, the June 2016 EU referendum campaign was characterized by significant polarization and widely varying perspectives across the country.  Differing views about what should be the terms of the future UK-EU relationship continue to polarize political opinion across the UK.  The people of Scotland voted to remain in the EU and Scottish political leaders have indicated that the UK leaving the EU may provide justification to pursue another Referendum on Scotland leaving the UK.  A failure to fully implement the Withdrawal Agreement could contribute to political and sectarian tensions in Northern Ireland.

The process of Brexit itself has been politically fraught.  The UK was originally due to leave the EU on March 29, 2019, but then-Prime Minister (PM) Theresa May and her successor Boris Johnson had to ask for four delays in total as they both were unable to bring together a majority in the House of Commons to ratify the Withdrawal Agreement setting out the terms of the UK’s departure from the bloc.  The prolonged political paralysis resulted in an early General Election on December 12, 2019, which gave PM Johnson a solid 80-seat majority in the House of Commons and a clear mandate to press ahead with the UK’s withdrawal from the EU.  The UK formally departed the bloc on January 31, 2020, following the ratification of the Withdrawal Agreement, and entered a transition period during which the country is effectively still a member of the EU without voting rights, while continuing talks on its long-term future economic and security arrangements with the bloc.  The transition is currently scheduled to end on December 31, 2020, and HMG has categorically ruled out any extension.  The challenging timeline for negotiating an agreement of such breadth and complexity makes the prospect of no deal at the end of the transition period a real possibility at the time of writing.

Both main political parties have recently tacked in a less business-friendly direction.  The Conservative Party, traditionally the UK’s pro-business party, was, until the COVID-19 pandemic, focused on implementing Brexit, a process many international businesses oppose because they expect it to make trade in goods, services, workers, and capital with the UK’s largest trading partners more problematic and costly, at least in the short term.  In addition, the Conservative Party has implemented a Digital Services Tax (DST), a 2% tax on the revenues of predominantly American search engines, social media services and online marketplaces which derive value from UK users.  The DST has delayed a reduction in the Corporation Tax rate from 19 percent to 17 percent.  The Conservative Party also intends to limit and reduce international immigration, an issue that was a main driver of the UK’s vote to leave the EU.  The opposition Labour Party, until a resounding electoral loss in December 2019, was led by Jeremy Corbyn MP and Chancellor John McDonnell MP, who promoted policies opposed by business groups including laws that would give employees and shareholders the right to a binding vote on executive remuneration, make trade union rights stronger and more expansive, increase corporation tax, and nationalize utility companies.  The Labour Party’s new leader, former Brexit Shadow Secretary, Sir Keir Starmer MP, although widely acknowledged to be more economically centrist, has proposed few policies as the UK’s political system contends with the COVID-19 crisis.

The UK’s labor force is just over 41 million people. For the period between December 2019 and February 2020, the employment rate was 76.6 percent, with 33 million workers employed – the highest employment rate since 1971. Unemployment also hit a 43-year low with 1.36 million unemployed workers, or just 4 percent (no change from a year earlier).

The most serious issue facing British employers is a skills gap derived from a high-skill, high-tech economy outpacing the educational system’s ability to deliver work-ready graduates.  The government has improved the British educational system in terms of greater emphasis on science, research and development, and entrepreneurial skills, but any positive reforms will necessarily deliver benefits with a lag.

As of 2018, approximately 23.5 percent of UK employees belonged to a union.  Public-sector workers have a much higher share of union members, at 52.5 percent, while the private sector is 13.2 percent.  Manufacturing, transport, and distribution trades are highly unionized. Unionization of the workforce in the UK is prohibited only in the armed forces, public-sector security services, and police forces.  Union membership has been relatively stable in the past few years, although the trend has been downward over the past decade.

Once-common militant unionism is less frequent, but occasional bouts of industrial action, or threatened industrial action, can still be expected.  Recent strike action was motivated in part by the Coalition Government’s deficit reduction program impacts on highly unionized sectors.  In the 2018, there were 273,000 working days lost from 81 official labor disputes.  The Trades Union Congress (TUC), the British nation-wide labor federation, encourages union-management cooperation as do most of the unions likely to be encountered by a U.S. investor.

On April 1, 2020, the UK raised the minimum wage to GBP 8.72 ($10.86) an hour for workers ages 25 and over.  The increased wage impacts about 2 million workers across Britain.

The UK decision to leave the EU has also introduced uncertainty into the labor market, with questions surrounding the rights of workers from other EU countries currently in the UK, the future rights of employers to hire workers from EU countries, and the extent to which the UK will maintain EU rules on workers’ rights.

The 2006 Employment Equality (Age) Regulations make it unlawful to discriminate against workers, employees, job seekers, and trainees because of age, whether young or old.  The regulations cover recruitment, terms and conditions, promotions, transfers, dismissals, and training.  They do not cover the provision of goods and services.  The regulations also removed the upper age limits on unfair dismissal and redundancy.  It sets a national default retirement age of 65, making compulsory retirement below that age unlawful unless objectively justified.  Employees have the right to request to work beyond retirement age and the employer has a duty to consider such requests.

DFC does not operate in the UK.  Export-Import Bank (Ex-Im Bank) financing is available to support major investment projects in the UK.  A Memorandum of Understanding (MOU) signed by Ex-Im Bank and its UK equivalent, the Export Credits Guarantee Department (ECGD), enables bilateral U.S.-UK consortia intending to invest in third countries to seek investment funding support from the country of the larger partner.  This removes the need for each of the two parties to seek financing from their respective credit guarantee organizations.

U.S. Embassy London
Economic Section
33 Nine Elms Ln
London SW11 7US
United Kingdom
+44 (0)20-7499-9000
LondonEconomic@state.gov