Coffee brokers have moved to court over alleged regulatory failures and opaque operations at the Nairobi Coffee Exchange (NCE), accusing authorities of allowing unlawful practices in the country’s coffee trading system.

In a petition filed at the High Court in Milimani, Nairobi, the Coffee Brokerage Association of Kenya (CBAK) claims that the NCE is operating without lawful licensing, transparent governance or a valid statutory framework. They allege that the Capital Markets Authority (CMA), which is listed as an interested party in the suit, has failed to enforce compliance and regulate the NCE’s activities.

The brokers want the court to declare the exchange’s operations unconstitutional and illegal, compel the CMA to enforce the law and stop the NCE from operating until it complies with statutory requirements.

They are also seeking to halt the NCE’s operations in its current form until it is lawfully licensed, regulated and compliant. The petition is pending hearing and determination. The NCE and CMA are yet to file responses to the petition.

At the centre of the dispute is the legal status of the NCE, the country’s main auction platform for coffee sales.

Inaugurated in September 1935, NCE is Kenya’s central auction platform where licensed brokers sell coffee on behalf of farmers and cooperatives to local and international buyers, playing a critical role in price discovery and market access.

The petition argues that changes in the law, including the repeal of the Coffee Act, 2001, and the enactment of the Coffee Act, 2023, stripped the NCE of its previous legal footing.

CBAK states that the repeal of the Coffee Act, 2001, and the introduction of the Coffee Act, 2023, fundamentally altered the legal and regulatory framework governing coffee trading in Kenya.

The petition places significant blame on the CMA, accusing it of failing to act despite having a statutory mandate to regulate exchanges and protect market integrity.

They add that, as a result, the Nairobi Coffee Exchange lost its previous statutory underpinning and was turned into a company incorporated under the Companies Act and licenced by CMA.

It is their position that NCE must now comply with capital markets laws, including licensing, governance, and transparency requirements, which it has allegedly failed to meet.

However, CBAK says the NCE has continued to operate despite failing to align with the new legal and regulatory regime governing capital markets and commodity trading. It claims the exchange has not demonstrated compliance with licensing, governance, and transparency requirements.

“The respondent purports to operate as a coffee trading platform without demonstrating compliance with applicable constitutional, statutory, and regulatory requirements,” the petition states.

The case further raises concerns about how the exchange conducts its operations. Brokers accuse the NCE of issuing invoices and imposing financial obligations without lawful authority, exposing market participants to arbitrary costs.

In one instance cited in court documents, the exchange allegedly raised a Sh1.4 million invoice against a broker for travel expenses for individuals not disclosed to the member. The petition describes this as evidence of unregulated and opaque conduct.

CBAK also claims the exchange has failed to provide audited financial statements and has not established transparent trading, clearing, and settlement systems as required under capital markets laws.

It argues that this undermines accountability and exposes stakeholders to financial risk.

“The respondent continues to operate in a manner that is opaque, unregulated, and prejudicial to stakeholders,” the petition says.

The association further questions the exchange’s legal identity, pointing to inconsistencies in its registration status.

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According to the petition, official records variously describe the NCE as a business name, a company limited by shares, and a company limited by guarantee.

This lack of clarity, the brokers argue, raises doubts about accountability and whether the entity can lawfully operate a national trading platform.

“The interested party (CMA) has failed, neglected, and/or refused to enforce the law and regulate the first respondent (NCE) as required,” the petition states.

Under the law, exchanges must be licensed, demutualised, and operate transparent systems to ensure fair trading and investor protection. The petition claims the NCE has not met these requirements and continues to operate outside the regulatory framework.

In a supporting affidavit sworn by the brokers’ chairperson, Rosemary Kithiira, the petitioners warn that continued operations without oversight risk causing financial harm to farmers, exporters, and other stakeholders, while eroding confidence in Kenya’s coffee market.

They argue that the current situation has created a system where participants are subject to decisions and costs imposed without clear legal backing or accountability.

“Despite the clear statutory requirement under regulation 4 of the Capital Markets (Coffee Exchange) Regulations, 2020, for demutualization, the respondent continues to operate as a purported exchange without having undergone lawful demutualization,” says Ms Kithiira.

The case also invokes constitutional principles, including the right to fair administrative action, access to information, and transparent governance. The brokers claim these rights have been violated by both the NCE and the CMA.

→ jwangui@ke.nationmedia.com

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