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Constitution and Alternative Dispute Resolution of Tax Disputes in Kenya

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By Dr. Kariuki Muigua, PhD (Leading Environmental Law Scholar, Policy Advisor, Natural Resources Lawyer and Dispute Resolution Expert from Kenya), Winner of Kenya’s ADR Practitioner of the Year 2021, ADR Publication of the Year 2021 and CIArb (Kenya) Lifetime Achievement Award 2021*

The phrase alternative dispute resolution refers to all dispute resolution mechanisms and processes other than litigation including but not limited to negotiation, enquiry, mediation, conciliation, expert determination, arbitration and others. It has, however, been argued that the term “alternative dispute resolution” is a misnomer as it may be understood to imply that these mechanisms are second-best to litigation which is not true. Article 33 of the Charter of the United Nations outlines these conflict management mechanisms and is considered the legal basis for the application of alternative dispute resolution mechanisms in disputes between parties whether States or individuals. It provides that the parties to any dispute shall, first of all seek a solution by negotiation, enquiry, mediation, conciliation, arbitration, judicial settlement, resort to regional agencies or arrangements, or other peaceful means of their own choice.  Alternative Dispute Resolution (ADR) is now recognized in the Kenyan legal framework including under the Constitution which has elevated status of ADR from being merely a convenient private arrangement for resolving disputes between parties to an access to justice mechanism with applicability to a wide array of disputes including tax dispute resolution.

Promotion of Alternative Dispute Resolution

Article 159(2) of the Constitution provides that in exercising judicial authority, the courts and tribunals shall be guided by the following principles (c) alternative forms of dispute resolution including reconciliation, mediation, arbitration and traditional dispute resolution mechanisms shall be promoted,…” In essence, article 159 of the Constitution makes promotion of ADR a key principle of exercise of judicial authority in Kenya. In turn, courts and tribunals are called upon to promote the use alternative forms of dispute resolution including reconciliation, mediation, arbitration and traditional dispute resolution mechanisms as long as they do not contravene the Bill of Rights and are not repugnant to justice or inconsistent with the Constitution or any written law.

Further, the scope for the application of ADR has also been extensively widened by the constitution with Article 189 (4) stating that national laws shall provide for the procedures to be followed in settling intergovernmental disputes by alternative dispute resolution mechanisms, including negotiation, mediation and arbitration. These are the key provisions that form the constitutional basis for the application of ADR in dispute resolution in Kenya. The import of these provisions is that ADR can apply to all disputes and enjoys broad applicability now more than ever. It is also a clear manifestation of the acceptance of ADR as a means of conflict resolution in all disputes.

Public Finance and No Taxation without Legislation

The principles of public finance under the constitution include “openness and accountability” and the need to “promote an equitable society, and in particular ensure “the burden of taxation shall be shared fairly.” In turn, the Constitution gives the National Government power to impose taxes and charges which include income tax, value-added tax, customs duties and other duties on import and export goods and excise tax. In addition, parliament may enact laws authorizing the national government to impose any other tax or duty. On its part, the county may impose property rates, entertainment taxes and any other tax that is authorize by an Act of Parliament.  Important for tax dispute resolution, Article 210(1) of the Constitution on imposition of tax provides that “no tax or licensing fee may be imposed, waived or varied except as provided by legislation.” This means that any resolution or settlement of tax disputes which has the effect of imposing, waiving or varying taxes must be pursuant to provision of legislation to be valid.

Fair Administrative Action and Access to Justice

In addition to the provisions of the Constitution on authority and principles of public finance, the right to fair administrative action and access to justice are also relevant to tax dispute resolution given that some aspects of it are administrative in nature such as objection decision and the decision by KRA officials to accept request to refer disputes to ADR or request for settlement out of court or tribunal. In that regard, taxpayers enjoy the right to administrative action that is expeditious, efficient, lawful, reasonable and procedurally fair. Given that most of tax administrative decisions affect the right or fundamental freedom of a person including right to property, taxpayers have the right to be given written reasons for the action.

Further, the provision for fair administrative action is the basis for review of KRA decisions by Court or impartial tribunal. The question that begs is, can the Court refer for settlement an application for review of administrative action of KRA referred to it by a taxpayer to an ADR Facilitator who is a KRA employee given the requirement of “independent and impartial tribunal”? Further, the State is enjoined to ensure access to justice for all persons and, if any fee is required, it shall be reasonable and shall not impede access to justice. This raises the question, whether requiring where taxpayer opts for an Independent ADR facilitator who is not an employee of KRA that they pay for them may be considered an impediment to access to justice. In any case, the Tax Procedures (Settlement Out of Court or Tribunal) Regulations, 2020 have to be considered from the perspective that they are offering an alternative to Court-Annexed Mediation which allows parties access to an Independent Mediator.

*This article is part of an ongoing series on Specialized Alternative Dispute  Resolution in Kenya by Dr. Kariuki Muigua, PhD, Kenya’s ADR Practitioner of the Year 2021 (Nairobi Legal Awards), ADR Publisher of the Year 2021 and ADR Lifetime Achievement Award 2021 (CIArb Kenya). Dr. Kariuki Muigua is a foremost Environmental Law and Natural Resources Lawyer and Scholar, Sustainable Development Advocate and Conflict Management Expert in Kenya. Dr. Kariuki Muigua is a Senior Lecturer of Environmental Law and Dispute resolution at the University of Nairobi School of Law and The Center for Advanced Studies in Environmental Law and Policy (CASELAP). He has published numerous books and articles on Environmental Law, Environmental Justice Conflict Management, Alternative Dispute Resolution and Sustainable Development. Dr. Muigua is also a Chartered Arbitrator, an Accredited Mediator, the Africa Trustee of the Chartered Institute of Arbitrators and the Managing Partner of Kariuki Muigua & Co. Advocates. Dr. Muigua is recognized as one of the leading lawyers and dispute resolution experts by the Chambers Global Guide 2022. 

References

Constitution of Kenya, Laws of Kenya, Government Printer, 2010.

Fenn, P., “Introduction to Civil and Commercial Mediation”, in Chartered Institute of Arbitrators, Workbook on Mediation, (CIArb, London, 2002), pp. 50-52.

United Nations Charter, Chapter VI: Pacific Settlement of Disputes.

 

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Why is THE LAWYER AFRICA Listing Top Law Firms and Top Lawyers?

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The Litigation Hall of Fame | Kenya in 2023 (The Most Distinguished 50 Litigation Lawyers in Kenya).

We live in the age of information overload where too much information (TMI) is increasingly making it difficult to find actionable legal data about a good law firm or lawyer. At the same time, legal services are increasingly going digital and finding your next lawyer is a now a matter of a few clicks. Many existing, new and potential clients are interested to know more about the lawyer handling or likely to handle their next case or transaction as every HR Manager seeks to know how their In-house Lawyer or next hire compares to peers.

The biggest dilemma especially for commercial consumers of legal services  is where to begin the journey in finding the law firm or the lawyer to meet their immediate legal need created by their new venture,  business, transaction or dispute. In-house counsel are also called upon to justify opting for one lawyer or law firm or over the other.  Hence, the rise in the popularity of international law directories rankings as an attempt to fill the yawning gap by listing a few dozen lawyers and law firms in esoteric categories that often don’t align with the legal needs of the domestic legal market.

But ranking two dozen elite lawyers or big law firms in a big jurisdiction like Kenya there are over 20,000 lawyers is merely a drop in the ocean. The result is the same candidates are listed year after year and an In-house Legal Team looking to infuse new blood in their external counsel panel is left very little discretion. At best, International legal ranking only succeed to tilt the scales in favour of few big firms and their lawyers and to aid the choice of International Legal buyers who are constrained for time in picking their External Counsel in jurisdictions where they cannot find referrals.

The questions that beg are: What about the other top law firms and lawyers who are equally good if not better but don’t have the time to fill the technical paperwork that comes with International Legal Directories rankings? What about Domestic Legal Buyers who simply want to justify why they prefer a lawyer or law firm not listed in the International Directory? Can increasing the number of listed lawyers or law firms from less 0.1% of the profession (as captured by International Law Directories) to at least 1% of the profession or higher for those specializing in the practice area help in enhancing access to justice in Africa? Can ranking law firms by number of fee earners help in the quest for a more accurate bird’s eye view of a country’s legal landscape?

At THE LAWYER AFRICA, we have set out to list Top Law Firms and Top Lawyers in the various practice areas in a way that democratizes law rankings and listings and brings this essential value add within reach of most lawyers and every law firms doing top legal work. We don’t promise to list all the top lawyers or law firms, but we commit to make sure every lawyer or law firm we list is at the top of the game in the listed practice area. We aim to help both little known and already known law firms and lawyers doing top legal work in their area of specialization get discovered by discerning clients and possibly get more opportunities to do great work.

THE LAWYER AFRICA is looking to list up to Top 200 Law Firms in every African Jurisdiction based on their reputation and number of fee earners headcount with a goal of listing at least Africa’s Top 1,000 Law Firms which are leaders in their respective countries. We also seek to list up to Top 1,000 Lawyers in every country in Africa in at least five main practice areas, namely, Litigation, Commercial Law, Property law, In-house and Private Sector or more.

THE LAWYER AFRICA categorizes law firms in large jurisdictions as Top 5, Top 10, Top 20, Top 50 and Top 100 (and allow tying where number of counsel is equal). The Top Lawyers are listed in three categories, namely, Hall of Fame (the Distinguished Top 50 or 75 Practitioners in a Practice Area), Top 100 (the Leading Top 100 Practitioners in a Practice Area) and Up-and-Coming (the promising Top 50 or 75 Practitioners in a Practice Area).  The placing of a listings depends on a number of key factors including the number of key matters or transactions handled, years in practice and experience, size of team working under a counsel, reputation and opinion of peers (where available) as established by THE LAWYER AFRICA.

THE LAWYER AFRICA prefers to list a counsel in only one listing, as far as possible. The Team tries (as far as possible) not to contact listed law firms or lawyers before the listing is finalized in the first. However, a listed law firm or lawyer may be contacted at the pre-launch stage of a list for purposes of selling merchandise relating to the launch but such engagement will not affect the listing. In case of future listings, it is expected that interested lawyers or law firms who feel they were previously left out of the list may to provide information for consideration to determine if they qualify for the next listing but that will not guarantee any listing.

THE LAWYER AFRICA undertakes not to charge for listing any lawyer or law firm. However, upon publication of a listing, as part of recovering the sunk costs we incur in the research and publication of the listings, we shall charge a token for printing and shipping of Quality A3 Certificate for listed Law Firms and/or A4 Certificate for listed Lawyers who wish to have or display the branded souvenirs or to use our proprietary digital materials in their business  branding. We may also charge listed and unlisted law firms and lawyers an affordable fee for limited banner advertising or publishing of enhanced profiles next to the listings.

For any question or feedback on any list or listing, feel free to contact THE LAWYER AFRICA PUBLISHER at info[at]thelawyer[dot]africa.

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The Roles of the Three Parts of the Permanent Court of Arbitration

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H.E. Amb. Marcin Czepelak, the Fourteenth Secretary-General of the Permanent Court of Arbitration (PCA)

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Brief History of the Permanent Court of Arbitration (PCA)

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By Dr. Kariuki Muigua, PhD, C.Arb, Current Member of Permanent Court of Arbitration (PCA) Representing the Republic of Kenya.

The Permanent Court of Arbitration (PCA) is a 124 Years Old Intergovernmental Organization currently with 122 contracting states. It was established at the turn of 20th Century during the first Hague Peace Conference held between 18th May and 29th July 1899. The conference was an initiative of then Russian Czar Nicholas II to discuss peace and disarmament and specifically with the object of “seeking the most effective means of ensuring to all peoples the benefits of a real and lasting peace, and, above all, of limiting the progressive development of existing armaments.” The culmination of the conference was the adoption of a Convention on the Pacific Settlement of International Disputes, which dealt not only with arbitration but also with other methods of pacific settlement, such as good offices and mediation.

The aim of the conference was to “strengthen systems of international dispute resolution” especially international arbitration which in the last century had proven effective for the purpose with number of successful international arbitrations being concluded among Nations. The Alabama arbitration of 1871-1872 between the United Kingdom (UK) and the United States (US) under the Treaty of Washington of 1871 culminating in the arbitral tribunal’s award that the UK pay the US compensation for breach of neutrality during American Civil War which it did had demonstrated the effectiveness of arbitration in settling of international disputes and piqued interest of many practitioners in it as a mode of dispute resolution during the latter years of the nineteenth century.

The Institut de Droit International adopted a code of procedure for arbitration in 1875 to answer the need for a general law of arbitration governing for countries and parties wishing to have recourse to international arbitration. The growth of arbitration as a mode of international dispute resolution formed the background of the 1899 conference and informed its most enduring achievement, namely, the establishment of the PCA as the first global mechanism for the settlement of disputes between states. Article 16 of the 1899 Convention recognized that “in questions of a legal nature, and especially in the interpretation or application of International Conventions” arbitration is the “most effective, and at the same time the most equitable, means of settling disputes which diplomacy has failed to settle.”

In turn, the 1899 Convention provided for the creation of permanent machinery to enable the setting up of arbitral tribunals as necessary and to facilitate their work under the auspices of the institution it named as the Permanent Court of Arbitration (PCA). In particular, Article 20 of the 1899 Convention stated that “[w]ith the object of facilitating an immediate recourse to arbitration for international differences which it has not been possible to settle by diplomacy, the signatory Powers undertake to organize a Permanent Court of Arbitration, accessible at all times and operating, unless otherwise stipulated by the parties, in accordance with the rules of procedure inserted in the present Convention.” In effect, the Convention set up a permanent system of international arbitration and institutionalized the law and practice of arbitration in a definite and acceptable way.

As a result, the Permanent Court of Arbitration (PCA) was established in 1900 and began operating in 1902. The PCA as established consisted of a panel of jurists designated by each country acceding to the Convention with each country being entitled to designate up to four from among whom the members of each arbitral tribunal might be chosen. In addition, the Convention created a permanent Bureau, located in The Hague, with functions similar to those of a court registry or secretariat. The 1899 Convention also laid down a set of rules of procedure to govern the conduct of arbitrations under the PCA framework.

The second Hague Peace Conference in 1907 saw a revision of the 1899 Convention and improvement of the rules governing arbitral proceedings. Today, the PCA has developed into a modern, multi-faceted arbitral institution perfectly situated to meet the evolving dispute resolution needs of the international community. The Permanent Court of Arbitration has also diversified its service offering alongside those contemplated by the Conventions. For instance, today the International Bureau of the Permanent Court of Arbitration serves as a registry in important international arbitrations. In 1993, the Permanent Court of Arbitration adopted new “Optional Rules for Arbitrating Disputes between Two Parties of Which Only One Is a State” and, in 2001, “Optional Rules for Arbitration of Disputes Relating to Natural Resources and/or the Environment”.

Reference

PCA Website: https://pca-cpa.org/en/about/introduction/history/ (accessed on 25th May 2023).

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