Audit unearth Kenya Railways’ irregular Sh403million payment to unapproved law firm
The report highlights that KRC already had 20 prequalified law firms on record, all of which were earning legal fees during the 2023/24 financial year. However, SWISIDKEN was not among these firms, nor was there evidence of board approval to justify its engagement
An audit by the National Treasury has put Kenya Railways Corporation (KRC) under scrutiny over irregular payments amounting to Sh403.8 million made to a single-sourced law firm that was not on its list of prequalified legal service providers.
The findings, contained in the KRC Expenditure Management Audit Review Report 2025, reveal that the funds were paid to a firm identified as SWISIDKEN for legal representation in arbitration proceedings held in London.
The case involved disputes between Rift Valley Railways (RVR) and the governments of Kenya and Uganda, in which the Office of the Attorney-General was among the respondents.
According to the audit, KRC had cumulatively spent Sh900.33 million on arbitration-related expenses by the time of review, raising questions over procurement procedures and financial oversight within the corporation.
“The firm described as SWISIDKEN is not listed amongst the recognised legal service providers in the end-year books of accounts, nor did we find any record of approval by the board to engage its services,” the audit states.
Efforts to obtain a response from KRC management were unsuccessful. Managing Director Philip Mainga did not respond to queries by press time.
The audit followed a review of how KRC utilised public funds allocated through railway infrastructure development financing and exchequer support during the 2023/24 financial year.
As a state corporation operating as a commercial enterprise, KRC is mandated to oversee rail transport services across Kenya, including both passenger and freight operations.
The corporation manages the Meter Gauge Railway (MGR) network for domestic services, operates the Kisumu Marine School, and oversees vessels MV Uhuru I and II on Lake Victoria.
It is also responsible for passenger services on the Standard Gauge Railway (SGR) between Nairobi and Suswa.
The arbitration at the centre of the audit findings was initiated in 2020 by KU Railway Holdings Limited and RVR Investments (PTY) Limited.
The firms challenged the termination of a 25-year concession agreement signed in 2006, under which RVR had been contracted to operate and manage the 2,350-kilometre MGR network across Kenya and Uganda.
However, the arbitration tribunal ruled in favour of the Kenyan and Ugandan governments, finding that the termination of the concession in 2017 was lawful. The tribunal determined that RVR had failed to meet key contractual obligations, including investment, maintenance, and operational benchmarks.
As part of the ruling, RVR was ordered to pay approximately Sh950 million to the Kenyan government and at least $3.6 million to Uganda in legal and arbitration costs.
The tribunal also established that RVR had breached multiple concession agreements, including failure to remit concession fees to Kenya amounting to roughly Sh600 million at the time of termination.
Further, RVR was found to have fallen short of its pledged investment programme, which required rehabilitation of railway infrastructure, upgrading of locomotives, and restoration of the wagon fleet.
Despite the favourable outcome for the government, the audit raises concerns about how KRC procured legal services during the proceedings.
It notes that legal services are subject to strict procurement rules, requiring engagement of firms that are prequalified under specific categories.
“For purposes of a State Corporation, approval by the board is key for the agency to engage and hire legal services at whatever level required,” the audit emphasises.
The report highlights that KRC already had 20 prequalified law firms on record, all of which were earning legal fees during the 2023/24 financial year. However, SWISIDKEN was not among these firms, nor was there evidence of board approval to justify its engagement.
The audit underscores that public procurement must adhere to Article 227 of the Constitution, which mandates that acquisition of goods and services be conducted in a manner that is fair, equitable, transparent, economical, and efficient.
Additionally, the audit reiterates the constitutional role of the Attorney-General, established under Article 156.
The Attorney-General serves as the principal legal adviser to the national government and represents it in civil legal proceedings.
“The Attorney-General shall promote, protect and uphold the rule of law and defend the public interest,” the Constitution provides, adding that these powers may be exercised directly or through subordinate officers.
The fresh revelations have intensified scrutiny of Kenya Railways financial probity and alleged budgeted corruption as conduits to fleece taxpayers’ money.
