Kenya: Court of Appeal Declares the Entire Finance Act, 2023, Unconstitutional

On 31 July 2024, the Court of Appeal, in the case of National Assembly & Another v Okiya Omtatah Okoiti & 55 Others, declared the entire Finance Act, 2023 unconstitutional. This article is a brief summary of the matter and the implications of the judgment.

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The Matter

The case originated from 11 constitutional petitions filed at the High Court challenging the constitutionality of the provisions of the Finance Act and enactment of the Finance Act.

Determination by the High Court

On 28 November 2023, the High Court issued its judgment finding that:

• the provisions of the Finance Act introducing the affordable housing levy were unconstitutional. This was on the basis that the affordable housing levy did not have a comprehensive legal framework and was discriminatory against persons in formal employment since it excluded non-formal income earners; and
• the Statutory Instruments Act, the Kenya Roads Board Act and Unclaimed Assets Act were unconstitutional since they contained matters that do not fall within the purview of a money bill.

However, the High Court dismissed the petitions challenging the legislative process leading to the passing of the Finance Act on the basis that (a) there was sufficient public participation on the Finance Bill 2023 (Finance Bill), (b) estimates of revenue were included in the Appropriations Bill, 2023 and Appropriations Act, 2024, and (c) that the concurrence of the Senate was not required in passing of the Finance Bill.

Issues for Determination at the Court of Appeal

10 appeals (including cross-appeals) were filed by the petitioners and the government at the Court challenging the High Court decision. The Court condensed the appeals before it and determined the issues for determination were as follows:

Constitutionality of the Entire Finance Act

The Court held that the entire Finance Act was unconstitutional since:

• the National Assembly did not give reasons for rejecting or adopting the proposals received from the public during the public participation process; and
• since estimates of revenue were not included in the Appropriation Bill, 2023 and the Appropriation Act, 2023, the process leading to the enactment of the Appropriation Act, 2023 and the Finance Act did not comply with the constitutional requirements. The Constitution of Kenya, 2010 (the Constitution) expressly provides that the estimates of revenue and expenditure should be submitted to the National Assembly two (2) months before the end of each financial year

Constitutionality of New Provisions That Had Not Been Submitted for Public Participation

The Court held that 18 new provisions introduced by the National Assembly to the Finance Bill after public participation were unconstitutional since they did not go through the entire legislative stages of first reading, second reading, and public participation.

Constitutionality of Introduction of the Affordable Housing Levy Through the Finance Act

The Court held that the issue of the constitutionality of the provisions on the affordable housing levy contained in the Finance Act were moot. The Court noted that following the High Court judgment that the provisions of the Finance Act introducing the affordable housing levy were unconstitutional, the Affordable Housing Act, 2024 had been enacted repealing the provisions of the affordable housing levy in the Finance Act. Accordingly, the government had on its own motion complied with the High Court decision by establishing a legislative framework in accordance with the High Court judgment.

Constitutionality of Amendments to the Statutory Instruments Act Through the Finance Act

The Court similarly held that the constitutionality of provisions of the Finance Act amending the Statutory Instruments Act were moot. The government had introduced a Statutory Instruments (Amendments) Bill, 2024 that seeks to address all the issues raised in the High Court’s determination. Accordingly, the government had on its own motion addressed the issues identified in the High Court’s determination.

Other Issues Determined by the Court of Appeal

The Court of Appeal further determined the following issues:

• amendments to the Unclaimed Assets Act, 2011 and Kenya Roads Board Act, 1999 introduced vide the Finance Act were unconstitutional since the changes contained matters that did not relate to a money bill;
• a finance bill, is a money bill, whose dominant feature is taxes which falls within the exclusive competence of the National Assembly and concurrence of the Senate is not required;
• the High Court erred in making a blanket statement that courts out not to intervene in all policy matters. In this regard, the Court confirmed that the High Court has jurisdiction to intervene in policy matters to test their constitutionality; and
• the prayer seeking refund of taxes collected under the unconstitutional sections of the Finance Act was denied since it was not pleaded in the constitutional petition and legislative provisions enjoy a presumption of constitutionality unless held by a court to be unconstitutional. 

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