Court rejects bid to stop Anglo Leasing payments

The High Court Wednesday declined to issue a temporary order stopping the Treasury from paying Sh1.4 billion to two European firms linked to Anglo Leasing, Kenya’s biggest financial scam.

Justice David Majanja ruled that the petitioner, the Law Society of Kenya (LSK), had not offered sufficient evidence to show that the payment is imminent. He said that Parliament is seized of the matter and should be allowed to exercise its oversight role.

“It is the duty of Parliament to play an oversight role in the budgetary process and issuing interim orders would interfere with its role,” he ruled.

The decision temporarily removes one of the major hurdles on the path of the Treasury, which wants to settle the debt as agreed with the claimants.

The Treasury also sees settling the debt as critical to improving Kenya’s standing in international financial markets as it prepares to issue a $1.5 billion (Sh132 billion) sovereign bond.

READ: MPs set stage for Treasury to pay Anglo-Leasing debt

LSK had moved to court seeking to block the Treasury from paying First Mercantile Securities Corporation and Universal Satspace the money for contracts that were signed in 2004.

The State had, through the attorney- general, opposed the petition, arguing that it was premature and based on misinformation.

Justice Majanja’s ruling was in agreement with that of senior deputy solicitor-general Muthoni Kimani who had argued that temporary orders stopping the payment could only be issued if there was evidence of any approved payment.

Ms Kimani argued that the LSK’s prayers were based on ‘‘innuendos and misinformation being fuelled for a particular agenda.’’

She said that although there has been information in the public domain on the multi-billion-shilling project there has been no evidence of corruption.

“There is merely suspicion of irregularities that is not backed by evidence,” Ms Muthoni said, adding that the Executive was keen on protecting public interests as demonstrated by the involvement of Parliament.

She further argued that the court would have its turn to deal with the matter when an aggrieved party approaches it after the two arms of government have made a decision.

LSK had argued that it was in the interest of the justice that the intended payment is stopped. It told Justice Majanja that the State Law Office had presented a weak defence to the claim filed by First Mercantile Securities Corporation and Universal Satspace, which had led to the award in favour of the two firms.

READ: LSK warns govt against Sh125bn Anglo Leasing payout

LSK further argued that a judgment that forces the Kenyan public to pay for corrupt deals is against public policy and should be stopped.

Last week, a Motion seeking Parliament’s approval to pay the two companies was withdrawn after a large section of the ruling Jubilee Coalition MPs rejected it.

Two House committees had endorsed payment of the colossal amount arising from a judgment delivered by the Court of International Disputes Settlement.

Treasury secretary Henry Rotich had told a joint sitting of the National Assembly’s Budget and Appropriation, and Finance committees that failure to pay the debt would expose Kenya’s properties abroad to the risk of being auctioned by the claimants.

The Treasury said it had received notification for attachment of a number of properties in Europe over the debt.

The ­Treasury warned that refusal to pay the debt would also cost the economy Sh20 billion in the form of annual penalty accruals of Sh96.6 million and high cost of credit to Kenya in the international markets.

The Treasury has announced plans to issue a sovereign bond of between $1.5 billion (Sh132bn) and $2 billion (Sh176bn) by the end of the year.

Part of the proceeds of the bond is to be used in retiring a two-year Sh52 billion ($600 million) syndicated loan that the government borrowed from European commercial banks in mid-2012 while the rest of the money will go towards financing this year’s Budget.

Issuing the bond would enable the Treasury to keep off the domestic debt market with the expectation that domestic interest rates would start trending downwards. Mr Rotich therefore plans to use the Eurobond as one of the levers to drive down the cost of borrowing locally.

In December last year, a London Court made an $18 million (Sh1.5 billion) award against the government to Mercantile Finance Corporation.