Kenya's Court of Appeal declares Finance Act, 2023 unconstitutional – Appeal pending Supreme Court determination

Summary

This alert brings to your attention the Court of Appeal’s ("Court") judgement dated 31 July 2024 in the case of National Assembly & Another v Okiya Omtatah Okoiti & 55 Others ("Judgement").

In summary, the Court declared the whole Finance Act 2023 unconstitutional due to non-adherence to prescribed legislative procedures. On 20 August 2024, the Supreme Court issued a stay of execution suspending the orders of the Court of Appeal pending the hearing and determination of the substantive appeal by the apex court. The Court of Appeal’s justification was that, among other reasons, the National Assembly:

• Did not provide reasons for either adopting or rejecting public proposals received during the public participation process for the Finance Bill, 2023.
• Omitted revenue estimates in both the Appropriation Bill, 2023, and the Appropriation Act, 2023; and
• Disregarded set procedures in the Public Finance Management Act, 2012 and the Constitution.

Background

The current appeal arose from the decision of the High Court delivered on 28 November 2023. The High Court, in its judgement, declared some sections of the Finance Act 2023 unconstitutional while dismissing the issues raised by the petitioners on lack of public participation and omissions in the budget making process. 

The specific omissions highlighted relate to failure to follow due process in approving the revenue estimates in the Appropriation Bill/Act, thus affecting the legality of the resultant Finance Act 2023. 

This decision prompted 7 appeals and 3 cross-appeals, each focusing on specific aspects of the judgment.

Appellants’ argument.

In this case there were several appellants, including the National Assembly, KRA and other state agencies. The Appellants’ raised various grounds of appeal including the argument that the Finance Bill, 2023, was correctly categorized as a money Bill, and therefore did not necessitate Senate involvement as per the Constitution. 

The Appellants further defended the adequacy of public participation, stating that the National Assembly had sufficiently conducted the participatory process. They argued that amendments made during the legislative debate did not require a separate public participation process, as this would curtail the legislative mandate of the National Assembly.

Our opinion on the Judgment

The Court of Appeal’s decision generated a lot of debate due to the uncertainty on its implications, especially on the government fiscal position and the measures that needed to be undertaken to unwind its impact.

The Government, concerned about the impact of the judgment on revenues coming so soon after the withdrawal of the Finance Bill, 2024 appealed to the Supreme Court for a stay order.

On 20 August 2024, the Supreme Court issued a stay of execution suspending the orders of the Court of Appeal pending the hearing and determination of the substantive appeal.

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