The Health Ministry, which is currently facing a bill of Sh41.6 billion in pending legal claims, wants Parliament to enact a law to cap interest and penalties payable on pending payments.
The ministry wants MPs to amend various laws to provide for a statutory cap on interest rates to between four to eight percent as the maximum rate that the State can pay on judgments and accrued claims.
Health Principal Secretary Susan Mochache said the cap would avoid unfair economic burden on the taxpayer through judicial awards.
Currently, courts slap State agencies with huge awards, with interest computed at commercial rates.
A report by the National Assembly’s Budget and Appropriations Committee (BAC) revealed that taxpayers risk paying up to Sh1.2 trillion as compensation for contract breaches, unlawful dismissals, human rights violations and other court disputes, highlighting the heavy price of unlawful decisions by government officials.
Ms Mochache specifically wants the National Assembly’s Public Accounts Committee (PAC) to initiate amendments to section 26 of the Civil Procedure Act which gives court discretion to award interest on judgments.
The ministry wants Parliament to introduce a new clause in section 26 of the Civil Procedure Act to cap the award costs.
“Where any interest is awarded to or against the government, interest shall be payable unless the court otherwise orders and any interest so payable shall be at the same rate as that at which interest is payable upon judgment debts due from or to the government under the Government Proceedings Act,” the ministry’s proposals read.
The proposals, she said, will amend various laws including sections of the Public Procurement and Disposal Act, the Civil Procedure Act and the Government proceedings Act, to save taxpayers from huge interest payments.
She told MPs that the Sh41 billion worth of pending bills relate to court awards and legal fees, some ruled in court for which funding was not provided in the budget.
She tabled a proposed amendment from the ministry’s legal department asking Parliament to enforce the enactment of regulations, laws and policy guidelines that can be used to consistently ensure timely settlement of judgments and arbitral awards against the government.
The ministry also wants Parliament to fast track enactment of the Prompt Payment Bill, 2020 which seeks to put in place a legal framework to facilitate quick payment for supply of goods, works and services procured by government entities both at the national and county level.