President Kibaki was elected an an anti-corruption ticket
The United Kingdom's Serious Fraud Office (SFO) has terminated its probe into the "Anglo Leasing affair", one of Kenya's biggest corruption cases.
The SFO said it halted the probe into $100m contracts with the phantom Anglo Leasing Finance firm after Kenya failed to produce evidence to try suspects.
Correspondents say the move casts doubt on Kenya's pledge to fight corruption.
But the Kenyan justice minister has told the BBC that British laws favour those who are involved in corruption.
"Its unfortunate but I also know that the laws in their country actually favour those who have stashed their money away. But I'm not excusing our ineptitude as a nation," Martha Karua said.
The SFO began its probe in July 2007, and was investigating offshore accounts in the British tax havens of Jersey and Guernsey, which were used to transfer more than $30m to a company called Apex Finance between April 2002 and February 2004.
The contracts were for sophisticated passport equipment, navy ships and forensic science laboratories for the police force, which have never been supplied.
"This case depended on mutual legal assistance from the Government of Kenya. The director of the SFO has exercised his discretion to terminate the investigation as there is currently no reasonable prospect of conviction without the evidence from Kenya," a press statement from the SFO said.
The statement however said that if evidence was received from Kenya in the future, the SFO would consider reopening the investigation.
Mwalimu Mati, the head of anti-corruption watchdog Mars Group Kenya, said that the decision was a serious setback.
"What we are dealing with is a system of impunity where, depending on how much you steal or how close you are to the political powers that be, you are insulated from the application of the law," he told the BBC's Network Africa programme.
He accused the government of dragging its feet and conducting a cover-up.
No-one has been charged over the Anglo Leasing affair
"The government has now declared that it truly is not interested in fighting corruption and indeed is engaging now on a daily basis in corruption scandals which ultimately may dwarf Anglo Leasing," he said.
President Mwai Kibaki was elected on an anti-corruption platform but his government has failed to prosecute those responsible for some of the most notorious scandals, including Anglo Leasing.
A former presidential advisor on corruption, John Githongo, alleged that cabinet ministers had been involved in dodgy deals that cost the government millions of dollars.
Mr Githongo, who later fled to Britain after claiming to have received death threats, also accused the president of doing nothing over the scam.
Former Finance Minister David Mwiraria resigned in 2006 to pave way for investigations, but no-one has been charged over the scandal.
The SFO has conducted several investigations into international corruption cases, including allegations that a British arms company, BAE Systems, had paid bribes to secure deals in Saudi Arabia and Tanzania.
It was criticised for dropping its Saudi investigations, saying these could jeopardise national security.