News & Analysis
Challenges to Resources Mobilization for Sustainable Development in Kenya
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 Publisher of the Year 2021 and CIArb (Kenya) Lifetime Achievement Award 2021*
The need for mobilization of domestic resources (both human and material) especially in developing countries has been made more important by the increasing difficulty in accessing foreign resources due to the global financial crisis. Indeed, SDG 17.1 captures the common agreement that domestic resource mobilization is essential to steering the economy toward those goals and to generating the necessary resources to meet them. However, there are still challenges to domestic resources mobilization for SDGs both globally and locally. In Kenya, the challenges to domestic resource mobilization for sustainable development goals include huge public wage bill, ethnic and divisive politics, illicit financial flows, over-reliance on financial debts and corruptions (discussed separately).
Huge Public Wage Bill in Kenya
While the devolved system of governance in Kenya came with its advantages, it also came with a lot of disadvantages as far as public wage bill is concerned, due to the expanded workforce for both the national and the county governments. For instance, while the county-level development projects, including roads and clinics, are increasingly visible and have spurred economic growth across sectors within Kenya’s counties, criticism continues to grow regarding the localization of ethnic politics, inefficiency, the size of the country’s wage bill and the “devolution” of corruption.36 Governors have been accused of spending huge amounts of allocated funds on salaries as opposed to development leading to slowed growth in the devolved units.
The ballooning wage bill affects allocation to the key sectors of the economy which would go directly towards ensuring that Kenya makes positive steps towards achieving the sustainable development goals. Salaries and Remuneration Commission has in the past pointed out that a wage bill that does not match economic and revenue growth puts pressure on development and investment share of fiscal budget meaning that there is less money to devote to development projects and provision of social services such as medical care and education. While the wage bill has reduced from 57.33% of revenue in 2013/2014 to 48.1% in 2018/2019 as a result of revenue growth and initiatives by the Salaries and Remuneration Commission in collaboration with stakeholders, the same remains a problem in the country especially in light of the ever increasing external public borrowing by the government to meet the budgetary deficits.39 It has also been documented in an economic survey 2020 indicating that there was an overall growth in public sector employment of about 2.6% in 2019 compared to 1.2% in 2018, where counties are the thirdlargest employer in the public sector after the Teachers Service Commission, and Ministries and other extra-budgetary institutions. Counties’ employment level rose from 131.9 thousand jobs in 2013 to 190 thousand jobs in 2019 translating to the highest employment rate of 7.63%. The effect of this is reduced socio-economic development despite the massive financial allocations to county governments. This ultimately affects the country’s ability to achieve sustainable development goals by the projected year 2030.
Ethnic and Divisive Politics in Kenya
While before 2007-2008, Kenya was among the few African countries that for a long period of time had enjoyed significant stability and peace, this changed after the elections and there has been some efforts meant to secure this stability again. Sustainable development goals seek to, among other things, build peaceful societies for all, hence making peace an important ingredient of development. It has rightly been observed that the perception that access to power by ethnic groups in Africa comes with perceived privileges that go hand in hand with political power provides an incentive for individuals and ethnic groups to seek control of the state, resulting in ethnic and divisive politics. Ethnic politics also makes it difficult or impossible to bring to book those suspected of corrupt practices as they always hide behind the phrase that ‘it is their tribe that is being targeted’. County governments have also been accused of ethnicity and nepotism in awarding job opportunities as well as tenders. This is despite the fact that the Constitution of 2010 was supposed to mark the end of a dark past and open up a new chapter of Kenya‘s social, economic and political history. Notably, the instrumentalization of ethnicity as the primary means of political mobilization has become an inescapable fact of political life in Kenya, negatively affecting peace and development.
Illicit Financial Flows
The United Nations General Assembly resolution 71/213 on Promotion of international cooperation to combat illicit financial flows in order to foster sustainable development48 reiterated State Parties’ concern about the impact of Illicit Financial Flows (IFFs), in particular those caused by tax evasion and corruption, on the economic, social and political stability and development of societies. The United Nations rightly observes that the socio-economic cost of corruption and illicit financial flows are massive and continues to stunt the development of all affected countries where besides draining foreign exchange reserves, reducing domestic resource mobilisation, preventing the flow of foreign direct investment, exacerbating insecurity and worsening poverty and economic inequality, IFFs also undermine the rule of law, stifle trade and worsen macro-economic conditions in the affected countries.
In addition, illicit financial flows also negatively impact lives as they reduce financial resources available for investment in health, education, housing, infrastructure and other critical sectors that would improve the well-being of peoples and societies; and encourage illegal activities around the world since offshore havens provide storage and access to ill-gotten wealth at short notice, thereby contributing to the erosion of trust in democratic institutions, and hampering free enterprise and fair competition. According to the UNCTAD’s Report titled “Economic Development in Africa Report 2020: Tackling Illicit Financial Flows for Sustainable Development in Africa”, curbing illicit financial flows is part of achieving SDG target 16.4 in support of peace, justice and strong institutions.
UNCTAD estimates that every year, an estimated $88.6 billion, equivalent to 3.7% of Africa’s GDP, leaves the continent as illicit capital flight. UNCTAD observes that these outflows are nearly as much as the combined total annual inflows of official development assistance, valued at $48 billion, and yearly Foreign Direct Investment, pegged at $54 billion, received by African countries – the average for 2013 to 2015. It is estimated that while between 1980 and 2018, Sub-Saharan Africa received nearly $2 trillion in Foreign Direct Investment (FDI) and Official Development Assistance (ODA), it emitted over $1 trillion in illicit financial flows, continually posing a development challenge to the region, as they remove domestic resources that are crucial for the continent’s development. IFFs thus drain capital and revenues from Africa, undermining productive capacity and Africa’s prospects for achieving the Sustainable Development Goals (SDGs). Notably, Kenya is also not immune to illicit financial flows just like the rest of the African Continent. Illicit financial flows from Kenya have been attributed to, inter alia, an increase in arbitrary executive powers as well as debt fueled illicit capital outflows, and government spending fueled illicit capital outflows, where part of Kenya’s debt was used to finance illicit financial outflows by the ruling elites.
Over-Reliance on Foreign Debts
While it has been argued that a dramatic change in the global landscape of development finance has occurred since the turn of the century, with domestic public revenues rising rapidly to about $5.5 trillion to become the largest source of finance, while domestic private resources have quadrupled to reach about $4 trillion, for most African countries, there seems to a growing overreliance on foreign development loans from China and elsewhere, also called Official Development Assistance(ODA) as aid given by governments and development agencies to support the social, economic, environmental and political development of developing countries. Kenya has not been left behind and indeed it is rated among African countries with the highest recorded foreign debts to China and other countries. As at November 2020, Kenya’s domestic debt stood at Kshs. 3,482,653.56 Million while the external debt stood at Kshs. 3,771,808.47 Million, both totaling to Kshs. 7,254,462.03 Million. There is a need to review the government policies on foreign debts as these are likely to be counterproductive as far as the long-term development goals of the country are concerned.
*This article is an extract from the Article “Resource Mobilization for Sustainable Development 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 among the top 5 leading lawyers and dispute resolution experts in Kenya by the Chambers Global Guide 2022.
Muigua, K., “Resource Mobilization for Sustainable Development in Kenya,” (KMCO, 2021), Available at: http://kmco.co.ke/wp-content/uploads/2021/03/Resource-Mobilization-for-Sustainable-Development-in-Kenya-Kariuki-Muigua-24th-March-2021.pdf (accessed on 10/04/2022).
News & Analysis
Brief History of the Permanent Court of Arbitration (PCA)
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”.
PCA Website: https://pca-cpa.org/en/about/introduction/history/ (accessed on 25th May 2023).
News & Analysis
Former KCB Company Secretary Sues Over Unlawful Dismissal
Former KCB Group Company Secretary Joseph Kamau Kania has sued the lender seeking reinstatement or be compensated for illegal sacking almost three years ago. Lawyer Kania was the KCB Group company secretary until restructuring of the lender in 2021 that saw some senior executives dropped.
Through the firm of Senior Counsel Wilfred Nderitu, Kamau wants the court to order KCB Group to unconditionally reinstate him to employment without altering any of the contractual terms until his retirement in December 2025.
In his court documents filed before Employment and Labour Relations Court, the career law banker seeks the court to declare the reorganization of the company structure a nullity and amounted to a violation of his fundamental right to fair labour practices as guaranteed in Article 41(1) of the Constitution. He further wants the court to declare that the position of Group Company Secretary did not at any time cease to exist within the KCB Group structure.
He further urged the Employment Court to declare that the recruitment and appointment of Bonnie Okumu, his former assistant, as the Group Company Secretary, in relation to the contemporaneous termination of his employment, was unprocedural, insufficient and inappropriate to infer a lawful termination of his employment.
“A declaration that the factual and legal circumstances of the Petitioner’s termination of employment were insufficient and inappropriate to infer a redundancy against him, and that any redundancy declared by the KCB Group in relation to him was therefore null, void and of no legal effect and amounted to a violation of his fundamental right to fair labour practices as guaranteed in Article 41(1) of the Constitution,” seeks lawyer Kamau.
Kamau says he was subjected to discriminatory practices by the KCB Bank Group in violation of his fundamental right to equality and freedom from discrimination as guaranteed in Article 27 of the Constitution and the termination of his employment was unfair, unjustified, illegal, null and void.
Lawyer Kamau further seeks the court to declare that the Non-Compete Clause in the 2016 Contract is unenforceable by the KCB Group as against him and is voidable by him as against the Bank ab initio, byreason of the termination of the Petitioner’s employment having been a violation of Articles 41(1) and 47(1) and (2) of the Constitution, and of the Employment Act.
He also wants the Employment Court to find that finding that KCB’s group legal representation by Messrs of Mohammed Muigai LLP Advocates law firm in respect of his claim for unlawful termination of employment resulted in a clear conflict of interest by reason of the fact that a Founding and Senior Partner at the said firm lawyer Mohammed Nyaoga is also the Chairman of the CBK’s Board of Directors.
“A Declaration that the circumstances of KCB’s legal representation by Messrs. Mohammed Muigai LLP Advocates resulted in a violation of the Petitioner’s fundamental right to have the employment dispute decided independently and impartially, as guaranteed in Article 50(1) of the Constitution,” seeks lawyer Kamau.
Kamau is seeking damages against both KCB Group and Central Bank of Kenya jointly and severally for the violation of his constitutional and fundamental right to fair labour practices.
He wants further wants court to declare that CBK is liable to petitioner on account of its breach of statutory duty to effectively regulate KCB Group to ensure that KCB complied with the Central Bank of Kenya Prudential Guidelines and all other Laws, Rules, Codes and Standards, and that, as an issuer of securities, it complied with capital markets legislation.
Kamau through his lawyer Nderitu told the court that he was involved in Shareholder engagement in introducing the Group aide-mémoire that significantly improved the management of the Annual General Meetings, including obtaining approval without voting through the Memorandum and Articles of Association of Kenya Commercial Bank Limited among others.
He said that during his employment at KCB Bank Kenya and with the KCB Group, he initially worked well with former KCB CEO Joseph Oigara until 2016 when the CEO allegedly started sidelining him by removing the legal function from his reporting line.
He further claims he was transferred from the Group’s offices at Kencom House to its offices Upper Hill under the guise that the Petitioner was merely to support the KCB Group Board.
He adds that at that point his roles were given to Okumu for reasons that were not related to work demands. He stated that Oigara at one time proposed that he should leave his role in the KCB Group and go and serve as the Company Secretary of the National Bank of Kenya Limited, a subsidiary of the Group, a suggestion which he disagreed with to Oigara’s utter annoyance.
Kamau stated that his work was thenceforth unfairly discredited, leading to his being taken through a disciplinary process whose intended outcome failed miserably, and the Petitioner was vindicated.
“More specifically, the Petitioner contends that the purported creation of a new organizational structure towards the end of 2020 was in fact Oigara’s orchestration targeted to remove certain individuals by requiring them to undergo interviews in the pretext that new roles were created, and amounted to a further violation of the Petitioner’s fundamental right to fair labour practices under Article 41(1) of the Constitution,” said in his court documents.
He further adds that this sham reorganization demonstrates how the role of the KCB Group Company Secretary purportedly ceased to be and was then very briefly replaced with a new role of the KCB Group General Counsel. The role of KCB Group Company Secretary then ‘resurfaced’ immediately thereafter, in total violation of legal and regulatory requirements.
News & Analysis
Court of Appeal Upholds Eviction of Radcliffes from Karen Land
The Court of Appeal has stayed the decision of the Environment and Land Court purporting to reinstate Adrian Radcliffe into possession of the 5.7 Acre Karen Land by Kena Properties Ltd after eviction by the lawful owners in February 2022. Adrian Radcliffe who was evicted by Kena Properties Ltd, the innocent purchaser of the Land for value.
Before his eviction, Mr. Radcliffe had been living on the land as a squatter expatriate for 33 years without paying any rent. Since he moved into the property as a tenant, he only paid deposit for the land in August 1989 despite corresponding severally with the owner of the land. His attempt to acquire the land by adverse possession claim filed in 2005 was dismissed by Court in 2011 on the basis that he has engaged with the owner of the land July 1997 and agreed to buy the land which he failed to do. The High Court [Justice Kalpana Rawal as she then was] concluded that:
“His [Mr. Adrian Radcliffe] averments that he did not have any idea of the whereabouts of the Defendant and that he could possibly be not alive, were not only very sad but mala fide in view of the correspondence on record addressed by him to the Defendant’s wife. I would thus find that the averments made by him to the contrary are untrue looking to the facts of this case.”
On 10th March 2022, Mr. Adrian Radcliffe and Family purported to obtain court orders for reinstatement into the land. However, the Court of Appeal issued an interim stay of execution of the said orders. The Court of Appeal has now granted the application of Kena Properties Ltd and stayed the execution of the Environment and Land Court Order pending the hearing and determination of the Appeal.
The Court also stayed the proceedings at the Environment and Land Court on the matter during the pendency of the Appeal. In effect, the eviction orders issued by the Chief Magistrate Court for eviction of Mr. Adrian Radcliffe in favour of Kena Properties as the purchaser of the property for value were upheld and the company now enjoys unfettered ownership and possession of the suit property until the conclusion of the Appeal.
The Court of Appeal in granting the orders sought by Kena Properties Ltd concurred with Kena Properties Ltd that as the property owner it had an arguable appeal with a high probability of success which would be rendered nugatory if Adrian Radcliffe a trespasser was to resume his unlawful possession of the suit property, erect structures thereon, recklessly use or abuse the said suit property as he deems fit. In any case, that is bound to fundamentally alter the state of the suit property and render it unusable by Kena Properties Ltd as the property owner.
At the same time, the Appellate Court rubbished the argument of Adrian Radcliffe in opposition to the application for stay that he has been in occupation of the suit property for more than 30 years and that he and his family were unlawfully evicted from the suit property on 4th February, 2022. The Court also rejected Radcliffe’s claim that Kena Properties Ltd has no valid title to the suit property and held that as the purchaser, the company was entitled to enjoy ownership and possession of their property during the pendency of the appeal.
The Court dismissed claims of Mr. Adrian Radcliffe that Kena Properties Ltd as the property owner acquired title to the suit property illegally and unprocedurally finding to the contrary. Further, it rejected Adrian Radcliffe’s claim that Kena Properties as the purchaser cannot evict a legal occupier of a property putting paid to the claim that he was a legal occupier at the time of eviction.
As a matter of fact, Mr. Adrian Radcliffe cannot claim to be the legal occupier of the property having attempted to acquire it by adverse possession before the High Court thwarted his fraudulent scheme on 28th February 2011. Mr. Radcliffe did not appeal the 2011 High Court decision meaning it is still the law that he is not the owner of the land nor the legal occupier of the land having attempted to adversely acquire against the interests of the lawful owner who sold it to Kena Properties.
Mr. Adrian Radcliffe is a well-to-do Water, Sanitation and Hygiene (WaSH) UNICEF consultant and former UN employee (who has been earning hefty House Allowance). Many have wondered why he has been defaulting in paying rent for 33 years on the prime plot of land in Karen while living large and taking his kids to most expensive schools in Kenya. No question, a local Kenyan could never have gotten away with such selfish impunity.
Brief History of the Permanent Court of Arbitration (PCA)
Kenya Nominates Dr. Kariuki Muigua Member of World’s Premier Arbitral Court
Legal 500 Recognizes Dominic Indokhomi as Leading Individual in Banking and Finance
Chambers Global 2023 Ranks Dr. Kariuki Muigua Among Band 1 Arbitrators Again
Former KCB Company Secretary Sues Over Unlawful Dismissal
CR Advocates LLP is the Kenyan Law Firm to Watch in 2023 after Epic 2022
News & Analysis1 year ago
The Role of NEMA in Pollution Control in Kenya
News & Analysis11 months ago
THE TOP 200 ARBITRATORS IN KENYA 2022
News & Analysis1 year ago
The Definition and Scope of Biodiversity
News & Analysis1 year ago
The Definition, Aspects and Theories of Development
Law Firms2 years ago
Nyaanga & Mugisha Advocates: A Full-Service Boutique Law Firm on the Rise
Law Firms1 year ago
TEMPLARS Advised Lagos Free Zone Company (LFZC) on Development of Integrated Gas Network
Uncategorized1 year ago
Integrating ESG reporting with the Sustainable Development Goals (SDGs)
News & Analysis11 months ago
The List of the Top 30 Practicing Arbitrators in Kenya