Key Highlights From the United Nations Climate Change Conference (COP27) - Finance Day

Key Highlights From the United Nations Climate Change Conference (COP27) – Finance Day

Background

The United Nations Climate Change Conference 2022 (COP27) closed on 20th November 2022 with various key breakthroughs that are expected to impact climate change significantly. Of particular note are deliberations and resolutions passed on the ‘Finance Day’. Finance plays a key role in implementing climate actions and scaling up ambition and hence was at the heart of COP27’s discussions.

COP27’s Finance Day featured discussions on innovative financial instruments, blended finance, tools and policies to scale up and enhance access to climate finance for instance, debt for environment swaps and reducing the cost of green borrowing. Finance Day also saw the launch of the “Sharm El-Sheikh Guidebook for Just Financing”, a guidebook that captures opportunities to leverage and catalyse the needed finance and investment to support climate action. Some key areas discussed on Finance Day at COP27 include:

1.   Reducing the Cost of Green Borrowing

Climate risks can have a material impact on the sustainability of public finances. Climate-vulnerable countries particularly, African countries are experiencing liquidity constraints which have ultimately impeding the ability of African countries to borrow at affordable rates, the attraction of private capital and green funding. As a result, various measures should be recommended to lower the cost of green borrowing. These include:

Liquidity and Sustainability Facilities

Liquidity and Sustainability Facilities (LSFs) seek to lower the cost of borrowing and increase the demand of sovereign bonds offered by countries. The reduced cost of borrowing is expected to free up resources for development and to stimulate investment and demand in an economy. This would pave the way for private investors to exchange African bonds for liquid cash from various institutions as they are anticipated to be more secure due to their increased liquidity and to attract the private sector to participate with the reduced borrowing costs and consequently increased private capital to close the funding gap.

LSFs are also intended to occasion the channelling of investor funds that are not only risk-adjusted and designed to deliver attractive returns, which are environmentally friendly and sustainable, and serving as vehicles for debt management and fiscal sustainability.

Sustainability Sovereign Debt Hubs

Sustainability Sovereign Debt Hubs are hubs established with the aim of providing facilitation for sovereign debt issuances which have been aligned with key green finance policies and publications. These hubs assist to scale performance-linked sovereign debt by reducing the cost of capital, supporting ambitious action on climate resilience, and making sovereign debt responsive to climate change, sustainable development, and nature restoration.

Harmonization of ESG Standards

This entails the establishment of adequate green finance architecture such as policy, standards, and regulation. The International Sustainability Standard Board (ISSB) is working to introduce a global baseline of sustainability disclosures to meet needs of capital markets such as transparency, accountability, efficiency and comparability across the markets. The harmonization of ESG Framework could facilitate access to performance-based green, blue and sustainable financial instruments and the development of innovative financing mechanisms.

Development of Capacity in Green, Social and Sustainability Bonds

Green Social and Sustainability (GSS) bonds are bonds that are issued and listed on national stock exchanges that create the opportunity for public and private sector issuers to access lower-cost capital to finance sustainable projects. The limited information and capacity on GSS bonds are a major hinderance with respect to their access and issuance. As such, capacity should be built to ensure the growth and development of climate finance in the private sector.

Guarantees from Multilateral Development Bonds

Multilateral Development Bonds (MDBs) play a key role in mobilization of external finance. As such, MDBs can guarantee debt instruments to allow for an improvement of the issuer’s debt profile thereby occasioning higher credit rating and lowering the cost of borrowing. These guarantees are instrumental in lowering the cost of green borrowing and climate finance in general.

2.    Introduction of Climate Resilient Debt Instruments

During COP27’s Finance Day session, the United Kingdom announced the publication of key design principles which will underpin Climate Resilient Debt Clauses (CRDCs) for use in private sector lending, other bilateral lenders and the international financial institutions. Additionally, there was the development and publication of a ‘model term sheet’ which will include CRDCs.

Some key clauses that have been introduced in for climate resilient debt instruments include: the deferral of capital and interest repayments; the length of deferral of capital and/or interest repayment; repayment modalities for deferred debt; number of deferrals subject to negations between the parties and the length of the debt instrument; trigger mechanisms for debt deferral; seniority of instruments including CRDCs; taxation and pricing.

3.     The Sharm El-Sheikh Guidebook for Just Financing

The Sharm El-Sheikh Guidebook for Just Financing (the Guidebook) provides a unique actionable framework for enabling access to equitable and inclusive financing for climate action and providing policy recommendations to support Just Financing decision-making. The Guidebook also spells out the various types of climate finance and climate-related finance such as low carbon finance, climate finance, green finance, and sustainable finance and their use in the private sector. The Guidebook also offers insight on a governance structure for just climate finance including principles relevant to climate finance governance, information/reporting systems and domestic and international governance.

Conclusion

The just concluded COP27 discussions sees countries and players in the private sector make key considerations with respect to sustainable financial instruments and modes of sustainable finance. We are keen to see the implementation of some of these recommendations within the private sector and the growth of sustainable finance in general.

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This alert is for informational purposes only and should not be taken to be or construed as a legal opinion. If you have any queries or need clarifications, please do not hesitate to contact Pamella Ager, Managing Partner, (pamella@oraro.co.ke), and Anna Kandu, Associate, (anna@oraro.co.ke) or your usual contact at our firm, for legal advice.

Partnering With the National Council for Law Reporting (Kenya Law) to Support Justice Defenders

Justice Defenders (“JD”), (formerly known as the African Prisons Project), is a charitable movement and organization which was founded by Alexander McLean in 2007 after a visit to Uganda in which he encountered deplorable prison conditions and the indignity that prisoners were subjected to. The African Prisons Project was initially geared at improving the conditions of prisons in Africa. However, in 2017 the focus shifted to providing access to justice. The Organization realized that no matter what they did to improve the welfare of people in prison, if they did not have justice, they would not have peace. Therefore in 2020, they rebranded and relaunched as Justice Defenders.

Justice Defenders was therefore, now geared towards equipping the defenceless communities with legal training to defend themselves and others. JD aims at bridging the justice gap by bringing dignity to those behind bars by equipping its members with the necessary skills to facilitate a just legal process, offering a quality legal education to men and women within the prison system and providing free, high-quality legal clinics and services to those without access to critical legal services within their community.

In 2021, Oraro and Company Advocates and National Council for Law Reporting (Kenya Law) entered into a partnership with Justice Defenders to organize prison visits to various prisons that Justice Defenders has a presence in, with the aim of enhancing access to justice through the training and sensitization of inmates on resources available to them in their pursuit of justice.

Through this partnership, we were able to visit the Langata Women’s Prison, the Thika Main Prison and Thika Women’s Prison. Our team imparted key skills with respect to court etiquette, legal research, and legal procedure, which are necessary for the inmates to represent themselves in instances where they have no legal representation. This is because the paralegals play a key role in case planning, legal research, drafting pleadings, fact checking, information retrieval and providing legal assistance and sensitizing the inmates.

By partnering with JD and Kenya Law, we seek to leave an impact on those who lack legal representation and ensure the access to justice by all citizens in Kenya.

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High Court strikes down parts of the Law of Succession Act as unconstitutional

Background

In the case of Ripples International v The Attorney General & Others (Constitutional Petition No. E017 of 2021), the High Court sitting in Meru vide Judgment dated 29th September 2022, declared certain sections of the Law of Succession Act (Cap. 81) Laws of Kenya (“the Act”) unconstitutional, on the grounds that the said provisions contravened the Constitution of Kenya 2010 (“the Constitution”) and infringed on Kenyan women’s right to marry and enjoy equal treatment under the law.

Ripples International initiated the public interest petition to protect women who they contended are discriminated against and denied the right to property by dint of sections 35 (1) (b), 36 (1), and 39 (1) (b) of the Act. These provisions denied a widow the right to enjoy a life interest in her deceased husband’s estate should she remarry and gave priority to fathers over mothers in the line of succession where a child died intestate.

The issues raised in the petition had previously been raised and recently, had been proposed in the Law of Succession (Amendment) Bill 2021 (“the Amendment Bill”) which was assented to on 17th November 2021. However, the Amendment Bill only amended the definition of spouse but failed to remedy other apparent discriminatory provisions in the Act.

Restriction on Widows’ Inheritance in Intestate Succession

Section 35 (1) (b) of the Act provided that:

“(1) Subject to the provisions of section 40, where an intestate has left one surviving spouse and a child or children, the surviving spouse shall be entitled to—

(a)  the personal and household effects of the deceased absolutely; and

(b)  a life interest in the whole residue of the net intestate estate:

Provided that if the surviving spouse is a widow, that interest shall determine upon her re-marriage to any person.”

A plain reading of this provision is that a widower can remarry without losing the enjoyment of a life interest whereas a widow’s right to enjoy a life interest would immediately stand extinguished upon her remarriage.

Similarly, section 36 (1) of the Act provided that:

1) Where the intestate has left one surviving spouse but no child or children, the surviving spouse shall be entitled out of the net intestate estate to—

(a)  the personal and household effects of the deceased absolutely; and

(b)  the first ten thousand shillings out of the residue of the net intestate estate, or twenty per centum thereof, whichever is the greater; and

(c)  a life interest in the whole of the remainder:

Provided that if the surviving spouse is a widow, such life interest shall be determined upon her re-marriage to any person.

These provisions restricted a widow’s life interest in the property of her deceased spouse when she remarried but did not place a similar restriction on a widower. The Petitioner argued that this inequality in the law was brought about by regressive customary laws which prevented women from enjoying the rights and freedoms guaranteed by the Constitution.

Previously, in the Court of Appeal case of Douglas Njuguna Muigai v John Bosco Maina & another (2014) eKLR, stated that section 35 (1) of the Act was discriminatory to the female gender and specifically, the widow of the deceased and urged the legislature to consider the section for amendment.

In line with the reasoning of the Court of Appeal, Hon. Mr. Justice Muriithi found this differential treatment of women as against their male counterparts indefensible and declared the same unconstitutional on the grounds that it contravened Article 27 of the Constitution which protects the rights of women and men to have equal treatment and provides that the State shall not discriminate directly or indirectly on the basis of sex or marital status. The provisions violate Article 27 of the Constitution by directly discriminating against widows.

Justice Muriithi declared the sections unconstitutional and directed that in light of the transitional and consequential provisions of the Constitution set out under Article 262, the impugned sections should be interpreted in a manner that gives effect to the equality of women and men with regard to the protections and benefits accruing under the said provisions.

Priority of Fathers where a Child dies Intestate  

In the same vein, the Court declared Section 39 (1) (a) and (b) of the Act unconstitutional. This provision gave priority to a father over a mother in succession where a child dies intestate.

Section 39 (1) (a) and (b) of the Act provided that:

“(1) Where an intestate has left no surviving spouse or children, the net intestate estate shall devolve upon the kindred of the intestate in the following order of priority

(a)  father; or if dead

(b)  mother; or if dead

On this issue the Court found that the discrimination of women is clear and in terms of Article 27(1) of the Constitution of Kenya, this provision is unconstitutional for failing to provide equal protection and benefit under the law to women as it does for men.

Conclusion

The decision of the Court is laudable as it strikes a blow for equality of women in the context of Succession law in Kenya, who for generations have suffered the ignominy of discrimination. In this day and age, there is no plausible reason why certain provisions of the law should favour one gender over the other.  All persons, regardless of their gender, are entitled to equal protection and benefit of the law, as per the dictates of Article 27 of the Constitution.

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This alert is for informational purposes only and should not be taken to be or construed as a legal opinion. If you have any queries or need clarifications, please do not hesitate to contact John Mbaluto FCIArb, Deputy Managing Partner, (john@oraro.co.ke), and Claire Mwangi, Senior Associate, (claire@oraro.co.ke) or your usual contact at our firm, for legal advice.

High Court affirms decision by Tax Appeals Tribunal that apple concentrate is not a beverage for tariff purposes: Commissioner of Customs and Border Control v Kenya Breweries Limited

Background

In a Judgment delivered by Hon. Mr. Justice D. S. Majanja on 31st October 2022, the High Court in Income Tax Appeal E157 of 2021 Commissioner of Customs and Border Control v Kenya Breweries Limited upheld the decision by the Tax Appeals Tribunal (“the Tribunal”) that apple concentrate, an ingredient used in the manufacture of cider, is a raw material and not a beverage hence classifiable under Heading 2106.90.20 for tariff purposes. Our previous alert on the Tribunal’s decision can be found here. 

The dispute stemmed from Kenya Breweries Ltd (“KBL”) requesting the Commissioner of Customs and Border Control (“the Commissioner”) for a Tariff Ruling on apple concentrate wherein KBL provided details of the product’s composition, its intended use and KBL’s proposed tariff code 2106.90.20 (preparations of a kind used in the manufacture of beverages) based on the concentrate’s intended use, which attracted a duty rate of 10%. The Commissioner, in its Tariff Ruling classified the product under tariff 2206.00.90 (other fermented beverages) which attracted a duty rate of 25%. Dissatisfied with the Tariff Ruling, KBL lodged a Review Application, but the Commissioner maintained its classification in a Review Decision.

Aggrieved by the Review Decision, KBL appealed against the same to the Tribunal in Tax Appeal No. 282 of 2020: Kenya Breweries Limited v Commissioner of Customs & Border Control (2020) eKLR, wherein the Tribunal allowed KBL’s appeal and set aside the Tariff Ruling. In so doing, the Tribunal held that the apple concentrate that KBL intended to import for manufacturing Tusker Cider, an alcoholic beverage is classifiable under HS Code 2106.90.20 (food preparations) of the East African Community Common External Tariff, 2017 (CET), thus subject to a lower customs rate.

The Law on Classification of Commodities  

The East African Customs Management Act, 2004 (“EACCMA) governs customs administration in the East African Community and the CET governs the classification of imported goods for the purpose of duty calculation. The CET ought to be interpreted in accordance with the World Customs Organization’s (“WCO”) General Interpretation Rules for the Interpretation of the Harmonized System (“GIRs”) and the explanatory notes developed by the World Customs Organization.

GIR 1 provides that: “The titles of sections, chapters and sub-chapters are provided for ease of reference only; for legal purposes, classification shall be determined according to the terms of the headings and any relative section or chapter notes.” In essence, when classifying a commodity, one should first refer to the terms of the headings of that subject then the terms of the section then the relevant chapter notes.

Submissions by the Parties

The essence of the Commissioner’s eleven (11) grounds of appeal was its claim that the concentrate was classifiable under Heading 2206. Particularly, the Commissioner argued that the product was a juice that would ordinarily be classifiable under Chapter 20 (fruit and vegetable juices). The Commissioner then relied on the exclusionary note (d) to Chapter 20 (which provides that fruit juices with an alcoholic content exceeding 0.5% were classifiable under Heading 2206 to classify the product under Heading 2206.00.90 arguing that it was the only code that provided an apt description of the product.

KBL, on the other hand, maintained that the concentrate was not a beverage as claimed by the Commissioner, but a preparation used in the manufacture of a beverage.

The Decision

Having heard the parties, the Court noted that an appeal from a decision of the Tribunal to the High Court could only be on issues of law. The Court further noted that the East African Community had adopted the Harmonized Commodity Description and Coding System (“the Harmonized System”) during its establishment which is supported by Explanatory Notes that constitute its official interpretation.

In its determination, the Court noted that the Commissioner’s witness admitted that the concentrate was a raw material for use in the manufacture of cider and that Note 20(d) dealt only with juices and not concentrates.

The Court restated that KBL bore the burden of proving that the Commissioner’s classification and found that KBL had discharged this burden and proven that the concentrate was not a juice and thus could not be subject to Explanatory Note (d) to Chapter 20.  As a result, the Commissioner’s attempt to rely on Explanatory Note (d) to Chapter 20 which excludes vegetables or juices of an alcoholic strength by volume exceeding 0.5% vol to refer the product to Chapter 22 (beverages) could not stand.

The Court agreed with KBL that alcoholic content was not a factor for consideration in the determination of whether or not a product is classifiable under tariff code 2106.90.20

The Court found that KBL’s classification of the concentrate under 210.90.20 prima facie fell within the language of the Tariff Heading, Section and Chapter Notes and was within the interpretation rules of the GIR. The Court, therefore, found that the Tribunal’s decision was reflective of the evidence before it. Accordingly, the High Court dismissed the Commissioner’s Appeal for lack of merit.

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This alert is for informational purposes only and should not be taken to be or construed as a legal opinion. If you have any queries or need clarifications, please do not hesitate to contact Renee Omondi, Partner, (renee@oraro.co.ke), and Nzioka Wang’ombe, Associate, (nzioka@oraro.co.ke) or your usual contact at our firm, for legal advice.

The Critical Role of Environmental, Social and Governance (ESG) in Lending Activities by Banks and Other Financial Institutions

Background

The practice of responsible investing is not a new concept. It can be traced back to the early 1960s where investors became conscious of the social responsibility of their investments and business activities. The investors wanted to ensure that their investments were directed towards socially conscious industries.

More recently, the United Nations through a joint initiative sought to incorporate principles of responsible investment into mainstream investment decision-making and ownership practices through Environmental, Social and Governance (“ESG”). ESG therefore refers to Environmental, Social and Governance factors against which socially conscious investors use to assess the behaviour of entities, that they are considering for investment. They are the set standards for a company’s operations that aim to foster greater environmental consciousness, social responsibility and accountability. Indeed, many banks and other financial institutions use these standards to evaluate the riskiness of potential investments.  Banks that adopt these best practices will be well-positioned to make sound investment decisions and foster sustainability, because they play a key role in the global economy and by integrating ESG into their business operations, they can help create a more sustainable future.

Please click here to download the alert.


This alert is for informational purposes only and should not be taken to be or construed as a legal opinion. If you have any queries or need clarifications, please do not hesitate to contact Pamella Ager, Managing Partner, (pamella@oraro.co.ke), Anna Kandu, Associate, (anna@oraro.co.ke), or your usual contact at our firm, for legal advice.

Background

On 19th September 2022, in Petition No. 38 of 2014 – Kenya Tea Growers Association & 8 others v. National Social Security Fund Board & Others a three-Judge bench of the Employment and Labour Relations Court (ELRC) declared the National Social Security Fund Act, 2013 (the NSSF Act) to be unconstitutional. In their Judgment, the learned Judges held that the NSSF Act fell short of the dictates espoused in the Constitution majorly on the grounds that the NSFF Act: (i) was inconsistent with the Competition Act; (ii) compelled mandatory contribution into the National Social Security Fund (the Fund) for both the employees and the employers despite one’s membership in alternative social security schemes; (iii) was improperly enacted for flouting the legislative procedures, among others. The decision comes at interesting times when the country’s leadership is pushing for a more robust social security framework for its citizens.

It is apposite, so as to put the matter into context, to briefly delve into the history of the Fund. The Fund was established under the National Social Security Fund Act (Cap. 258) Laws of Kenya (the old NSSF Act) in the year 1965. The old NSSF Act was established as a mandatory national social security scheme whose foremost objective was to provide basic financial security benefits to Kenyans. The Fund was designed to give upon retirement, a lump sum, with all Kenyans over the age of 18 obligated to register with the Fund whether or not employed in the formal or informal sectors of the Economy.

In an attempt to revitalize the Fund, a new statute, the NSSF Act was enacted in 2013 which made the participation for both employers and employees compulsory. Under the NSSF Act, employees were required to contribute six percent (6%) of their pensionable earnings while the employer contributed an equivalent amount for each employee. In the event, various petitions were filed challenging the constitutionality of the NSSF Act, with the question before the ELRC was whether the NSSF Act passed Constitutional muster.

Why the ELRC found the Act to be Unconstitutional

a. Mandatory Registration and Contribution to the Fund

The ELRC declared the NSSF Act to be null and void and ordered a prohibition of mandatory registration or contribution from employees or employers. The ELRC ordered NSSF to refrain from compelling or requiring mandatory listing of employers or employees whether or not registered as members of any alternative retirement benefit scheme.

The ELRC reasoned that it was contrary to freedom of association under Article 36 of the Constitution to compel employees and employers who have adequate and alternative pension or social security schemes to register and contribute to the Fund. The ELRC found that this amounted to the State shifting its obligation under Article 43 (3) of the Constitution to provide social security for the less fortunate.

b. Approval of Payment of Allowances and Fees by the Cabinet Secretary for Labour

The ELRC held that section 13 of the NSSF Act which mandated the Cabinet Secretary to approve payment of allowances, remuneration or fees to the members of the NSSF Board or its Committees rather than the Salaries and Remuneration Commission (SRC) pursuant to Article 230 (4) of the Constitution which provides for functions of the SRC was a nullity for being contrary to and inconsistent with the Constitution.

The ELRC noted that the SRC was the Constitutional institution mandated to determine the amount and the nature of remuneration, fees or allowances for the public servants and other employees of government agencies and institutions.

c. Monopoly in the Provision of Social Security Services

The Petitioners also raised issue as to whether the NSSF Act violated the provisions of the Competition Act. The Court’s pronouncements on this issue were that the NSSF Act went against the objectives of promoting effective and fair competition set out in section 3 of the Competition Act. The NSSF Act seemed to favour the Fund, thus making it monopolise pension services as other social security providers are compelled to register with the Fund, which stifles competition.

The ELRC opined that the national values and principles of governance encapsulated under Article 10 of the Constitution bind all State organs and the Fund was not an exception.

d. Making Membership with the Fund a Pre-condition for Access to Public Services

Section 19 (2) of the NSSF Act made access to public services conditional upon mandatory registration and membership of the Fund. This section sharply conflicted with various Articles in the Constitution including Article 47 (1) on fair administrative actions, Article 232 (1) on values and principles of public service, Article 21(1) on the State’s obligation to ensure the protection and fulfilment of the fundamental freedoms in the Bill of Rights and Article 27 (4) on non-discrimination.

e. Lack of Legislative Concurrence with the Senate on a Money Bill & Matters Concerning County Governments

The ELRC also cited violation of key provisions of the Constitution during the enactment of the law, including failure by the National Assembly to refer the legislation to the Senate for concurrence.

Under Articles 205 (1) and 110 of the Constitution, the National Assembly must consult the Senate on Money Bills and when considering Bills concerning County Governments. The concurrence of the bicameral Parliament is a precondition for the validity of any legislation concerning county governments. Hence, the unilateral passing of the NSSF Act by the National Assembly was an affront of the law.

Conclusion and Way Forward

With the NSSF Act having been declared null and void for unconstitutionality, it means that remittances to the Fund will for the time being, be governed by the old NSSF. However, we are aware that there is a pending application for stay of execution of the said Judgment pending Appeal filed by the Attorney General, which is likely to be determined in the coming weeks. We note to keep you updated on the progress of the application for stay pending Appeal as well as the intended Appeal.

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This alert is for informational purposes only and should not be taken or be construed as a legal opinion. If you have any queries or need any clarifications as to how any aspect of the judgment might affect you, please do not hesitate to contact John Mbaluto, Partner, FCIArb, Deputy Managing Partner (john@oraro.co.ke), Daniel Kiragu, Associate (dkiragu@oraro.co.ke) or Ajak Jok Ajak, Advocate (ajak@oraro.co.ke) your usual contact at our firm, for legal advice.

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At Oraro & Company Advocates, we’ve always been about going the extra mile and this year, we launched our flagship environmental sustainability initiative dubbed ‘Oraro & Co. for the Ozone Run’ in response to the rising threat of climate change.  

To play a part in safeguarding our future, we had the pleasure of partnering with Ngong Road Forest Sanctuary for this year’s edition of #OCOfortheozone run to promote the sustainable development of Ngong Road Forest for climate amelioration. Ngong Road Forest Sanctuary plays a crucial role in supporting reforestation and afforestation initiatives in Nairobi’s Ngong Road Forest. The sanctuary is also home to thousands of beautiful trees, birdlife, and wildlife. 

To mark the World Ozone Day, we started the #OCOfortheOzone run as the sun got up, with the 21km runners who were very keen to get going and stand a chance at winning the prize money. They followed a route that went through the larger part of the forest that the Karura Forest marshals/rangers, as well as some of our volunteers, helped mark the trails and guided the runners along the way. The 10km and 5km runners and walkers left a little later, a few with dogs in tow and some even more ambitious parents with children in tow (who went ahead to claim prizes for coming in first, second, and third in their respective races). 

As the runners started coming back to the end of the run, they were welcomed by the Oraro team with water and a few of our partners who offered a wide range of soft drinks, coffee, milkshakes, goodies bags, and of course the prize money that was to be won for the race winners in their respective categories. 

In the end, all proceeds go towards reforestation within the beautiful Ngong Road Forest Sanctuary. We are committed to addressing environmental issues and reducing our environmental impact and hope to be a great example of how country-based corporate social responsibility and individual philanthropy can serve to secure and protect a country’s natural resources.  

Please join us next year as we attempt to triple our contribution!!! 

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About Oraro & Company Advocates 

Oraro & Company Advocates is a full-service, market-leading African law firm established in 1977 with a strong focus on dispute resolution and corporate & commercial law. With a dedicated team of 10 partners, 16 associates and 40 support staff, the firm and its lawyers have been consistently ranked by leading legal directories such as Chambers Global, IFLR1000 and Legal 500 as a top-tier firm in Kenya in areas such as Dispute Resolution, Employment & Labour, Corporate & Commercial, Banking & Finance, Real Estate and Project Development. 

Oraro & Company Advocates prides itself in its deeply rooted client relationships by providing quality legal services through its partner-led approach, drawing from local knowledge and global perspectives. 

Additionally, Oraro & Company Advocates is a full Affiliate Member of AB & David Africa, a Pan-African business law network committed to ensuring that businesses and projects succeed in Africa by helping clients minimize the risks associated with doing business on the continent. This enables us to offer cross-jurisdictional legal advice in a seamless manner while maintaining the highest professional standards. 

Harvey Ogombe

Head of Business Development

T: +254 709 250 000/734

E: harvey@oraro.co.ke

On 17th August 2022, in Omwanza Ombati v. The Hon. Chief Justice, The President of the Supreme Court & 4 Others (2022) eKLR, the High Court (Thande, J) quashed the Supreme Court (Presidential Election Petition) (Amendment) Rules, 2022 (“the Rules”) on the basis that the Rules were unconstitutional for firstly, usurping the legislative power, a prerogative of Parliament and secondly, for want of public participation. The Rules, which were published on 20th May 2022, in Legal Notice Number 79 of 2022 of the Kenya Gazette introduced sub-rules 4 and 5 to Rule 18 on the following terms:

  1. Upon the commencement of the hearing of the petition by the Court, litigants, their advocates, and advocates’ agents shall refrain from expressing their opinion on merit, demerit, or predict the outcome of the petition in any manner that would prejudice or impede court proceedings, until judgment is delivered.
  2. A breach of sub-rule (4) shall amount to contempt of Court under the Act and the Rules made thereunder.

The intention of the Supreme Court was to curb the rampant diatribes often witnessed especially on social media whereby advocates invariably trade insults, launch scurrilous attacks and spew vitriol, all in the name of exercise of the freedom of expression. Indeed, it was recently quipped that “advocates were a rarity some years back, but now, they are everywhere, and so social media knows no peace”. Such conduct has the resultant effect of eroding the dignity and public confidence in the Courts and undermines the administration of justice. The Court thus sought to codify the longstanding sub-judice rule in order to protect the integrity of judicial proceedings by holding advocates in contempt of Court for non-compliance with the said rule.

Origin of the Sub Judice Rule

The sub judice rule can be traced back to 1742, when Lord Chancellor Hardwicke in holding the St. James Evening Post in contempt of Court stated that, “it was not only libellous to publish that a witness who testified in active proceedings committed perjury, but a case for contempt of Court by publications”. Essentially, the sub judice rule was meant to punish those who misrepresent facts relating to active proceedings for contempt of Court given that such conduct would unfairly prejudice ongoing legal proceedings.

As far as the Lord Chancellor Hardwicke was concerned, any act done or writing published, calculated to bring a Court or a judge of the Court into ridicule, or to lower his or her authority, amounts to contempt of Court. However, that class of contempt is qualified such that fair comments on judicial proceedings or reasonable expostulation against judicial acts contrary to law or public good is not treated as contempt of Court. This therefore gives some leeway to the freedom of expression and freedom of the media within the aforesaid confines.

Application of the Sub Judice Rule in Kenya

Kenya imported the sub judice rule through the Judicature Act, (Cap. 8) Laws of Kenya under section 5(1) which provides that the High Court of Kenya and the Court of Appeal shall have the same power to punish for contempt of Court as is for the time being possessed by the High Court Justice in England, and that power shall extend to upholding the authority and dignity of the subordinate courts. Ever since the enactment of the Judicature Act in 1967, the practice has been legally adopted and applied in the circumstances of Kenya to protect active judicial proceedings and the sanctity of Court.

For instance, in Republic v. Tony Gachoka & Another (1999) eKLR, the Court of Appeal, which was the apex Court at the time, found the Respondents in breach of sub judice rule hence guilty for contempt of Court and sentenced the 1st Respondent, to imprisonment for six (6) months and fined the 2nd Respondent Ksh. 1,000,000 and to cease any further publication until the full amount was paid.

In the present case, the issues that were before Justice Thande centred on legality of the Supreme Court (Presidential Election Petition) (Amendment) Rules, 2022 and not the legality of the sub judice rule as a judicial principle to protect active judicial proceedings. In quashing the Rules, Justice Thande stated that the Supreme Court does not have the power to make rules having the force of law under Kenyan Constitutional dispensation notwithstanding the provisions of Article 163 (8) of the Constitution which empowers the Supreme Court to make rules for the exercise of its jurisdiction. The Court, further, stated that the Supreme Court in making of such Rules must ensure it conducts adequate public participation pursuant to Article 10 (2) of the Constitution and the failure to do so rendered the Rules improper.

The justification offered for the holding is that the Constitution divides powers among various organs of government and only Parliament is exclusively mandated to make laws or rules that have the force of law. On the second issue, it was determined that no public institution or organ of government was beyond the reach of National values and principles of good governance, hence the Supreme Court was bound to conduct public participation before promulgating the Rules.

Conclusion

The decision does not do away with the sub judice rule in Kenya. Whereas the Supreme Court might have exceeded its limits by attempting to augment the law on sub judice, the annulment of the Rules does not derogate the subsisting provisions of the law as regards the Court’s power to punish a party for contempt of Court.  As such, any commentary or publication relating to active judicial proceedings that would bring the Court into disrepute or substantively prejudice or undermine the administration of justice would still be in breach of the sub judice rule and punishable for contempt of Court.

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This alert is for informational purposes only and should not be taken or be construed as a legal opinion. If you have any queries or need any clarifications as to how any aspect of the judgment might affect you, please do not hesitate to contact John Mbaluto, Partner, FCIArb (john@oraro.co.ke) or Ajak Jok Ajak, Associate (ajak@oraro.co.ke) or your usual contact at our firm.

30th August 2022  

Oraro & Company Advocates has once again been recognised for its expertise and market-leading strength in IFLR1000’s 32nd edition of the financial and corporate law rankings.

The firm earned the prestigious rankings for providing legal advisory services in the areas of Project Development: Infrastructure, Mining, Power, M&A and Banking and Finance.

In addition to this, both our Founding Partner, George Oraro SC, and Managing Partner, Pamella Ager, retained their ‘Highly Regarded’ rankings for their expertise in M&A and Project Development and M&A and Banking, respectively. The Highly Regarded ranking follows consistent positive client feedback and high recommendation by peers within the legal industry, as well as a strong transactional track record owing to their long-standing careers.

Published by IFLR1000, the guide to the world’s leading financial and corporate law firms and lawyers, these rankings are based on three key criteria: transactional evidence, client, and peer feedback.

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About Oraro & Company Advocates

Oraro & Company Advocates is a full-service, market-leading African law firm established in 1977 with a strong focus in dispute resolution and corporate & commercial law. With a dedicated team of partners, associates and support staff, the firm and its lawyers have been consistently ranked by leading legal directories such as Chambers Global, IFLR1000 and Legal 500 as a top-tier firm in Kenya in areas such as Dispute Resolution, Employment & Labour, Corporate & Commercial, Banking & Finance, Capital Markets, Real Estate, and Project Development.

Oraro & Company Advocates prides itself in its deeply rooted client relationships by providing quality legal services through its partner-led approach, drawing from local knowledge and global perspectives.

Additionally, Oraro & Company Advocates is a full Affiliate Member of AB & David Africa, a Pan-African business law network committed to ensuring that businesses and projects succeed in Africa by helping clients minimize the risks associated with doing business on the continent. This enables us to offer cross-jurisdictional legal advice in a seamless manner while maintaining the highest professional standards.

Harvey Ogombe

Head of Business Development

T: +254 709 250 000/734

E: harvey@oraro.co.ke