Regional lender, East African Development Bank (EADB) has been dealt a blow after the High Court nullified changes to the law which had granted it a raft of preferential treatment including immunity from prosecution.
High Court Judge Francis Rayola Olel said that the amendments to the EADB Act which guides dealing with the bank were unconstitutional.
The judge pointed out that Section 2(1) and 92) of the AEDB Act unilaterally bestowed upon the National Treasury Cabinet Secretary (CS) the sole responsibility to charge on and issue public funds out of the consolidated fund without parliamentary oversight or accountability.
The judge said the lack of parliamentary oversight offends the principles of public finance and the values and principles of governance, espoused under Articles 10 and 232 of the Constitution.
Justice Olel said to the extent that there are no checks and balance mechanisms placed under Section 2(1) and (2) of the EADB Act as to how the Treasury CS accesses the consolidated fund to undertake his obligations to EADB, the same violates the constitution as the process of funding the bank lacks transparency, good governance, and accountability.
“The upshot is that all amendments introduced to the EADB Act by Section 30 of the Finance Act 2013, were illegal, null and void,” ruled the judge.
The judge noted that the immunity provisions in Articles 44-48 of the EADB Act contravene Articles 48 and 50 of the constitution on the right to fair hearing and access to justice.
The sections grant the bank immunity from any form of legal process except in any case where it has expressly waived the immunity in writing.
The case was brought by Mr Paul Lihanda Nusu, a public interest litigant who argued that the changes in in EADB Act were passed by Parliament in an omnibus manner without reviewing the constitutionality of each provision of the amended Act.
Mr Lihanda further submitted that there was no public participation before the amendments were made.
He said the effect of the complained section gave CS Treasury the sole responsibility without parliamentary oversight and accountability, to charge on issues public debt out of the consolidated fund, in breach of clear principles of public finance.
Mr Lihanda submitted that the CS could withdraw money unilaterally from the consolidated fund without Parliament’s approval.
Parliament in an affidavit of Mr Samuel Njoroge, the clerk of the National Assembly defended the amendments arguing that MPs engaged stakeholders including Kenya Bankers Association, PricewaterhouseCoopers (PwC), and Institute of Certified Public Accountants of Kenya (ICPAK).
Mr Njoroge added that in the amendment, the EADB was accorded creditor status no less than those accorded to IMF, the African Development Bank, and the International Development Bank, within member states.
Parliament further said the amendments were meant to align the EADB Act with the charter establishing the bank.
He said Section 2(1) and (2) of the EADB Act did not violate the constitution as it was enacted by Parliament and authorised the withdrawal of funds from the Consolidated Fund in accordance with Article 206(2) of the constitution.
Law Society of Kenya (LSK) supported the case arguing that the enactment was fraught with blatant procedural and substantive illegalities and made a mockery of the process of public participation.
The society said the fact that the CS Treasury was given carte blanche to withdraw and expend funds from the consolidated fund in favour of EADB, without corresponding accountability mechanisms in place to account for the use of the said funds, made the provisions of the EADB statute unconstitutional.
Justice Olel said there are no statutory regulations within the EADB Act, which places checks and balances on the actions of the CS Treasury, which guides the expending of public funds from the consolidated fund or permits the bank to table its audited accounts before the Parliament of East African Legislative Assembly, for verification.
The court further directed the CS Treasury to produce a record of all payments made from the Consolidated Fund to EADB from 2014 to date and the same be taken to Parliament within 60 days from the date of the judgment.
The judge said it would be in the greater interest of justice, accountability, and transparency for the Treasury to provide detailed financial information to Parliament, showing all the financial payments made out of the exchequer in favour of EADB from 2014.
