Supreme Court suspends Court of Appeal orders declaring Finance Act, 2023 unconstitutional

The Supreme Court of Kenya has issued conservatory orders, temporarily suspending the Court of Appeal's decision which declared the Finance Act, 2023, unconstitutional.

The order follows appeals made by the Cabinet Secretary for National Treasury and Planning, the Attorney General, the National Assembly, the Speaker of the National Assembly and the Kenya Revenue Authority (KRA), who challenged the previous court's decision.

On July 31, 2024, the Court of Appeal ruled that the Finance Act, 2023 is unconstitutional, citing fundamental flaws in its enactment process.

However, the Supreme Court judges led by Chief Justice Martha Koome, issued orders that temporarily blocked the Court of Appeal's declarations, emphasising the importance of maintaining governmental stability and avoiding disruptions in public administration.

The orders allow the government to continue its operations while the legal proceedings are ongoing.

“A conservatory order is hereby issued suspending and staying the declarations in Orders iii, iv, vi, vii & ix(i) issued in the Court of Appeal judgment dated July 31, 2024 in Civil Appeals Nos. E003, E016, E021, E049, E064 & E080 of 2024 (Consolidated) pending the hearing and determination of the consolidated appeal before this Court,” the Supreme Court noted in its ruling.

“The conservatory orders are necessary to avoid potential operational disruptions in government activities.”

The consolidated appeals have been scheduled for hearing on September 10 and 11, 2024.

Virtual hearings

“The consolidated appeal be set down for mention before the Deputy Registrar of the Court for purposes of ensuring compliance with earlier directions on filings. The consolidated appeals shall be set for hearing- virtually- on 10th and 11th September 2024 at 9 am each day,” read the ruling.

The Court noted that each party shall bear its costs of the motions.

In the Court of Appeal, a three-judge bench led by Judge Kathurima M'Inoti, alongside Judges Agnes Kalekye Murgo and John Mativo, found that the enactment of the Finance Act, 2023 breached several constitutional provisions.

Specifically, the Court noted that the process violated Articles 220(1)(a) and 221 of the Constitution, as well as sections 37, 39A, and 40 of the Public Finance Management Act (PFMA), which outlines the budget-making process.

As a result, the judges ruled that the failure to comply with these constitutional and statutory requirements rendered the entire Act unconstitutional and void from the outset.

“We uphold the finding by the High Court that concurrence of both houses in the enactment of the Finance Act, 2023 was not a requirement under Article 114. Having found that the process leading to the enactment of the Finance Act, 2023 was fundamentally flawed and in violation of the Constitution, sections 30 to 38, 52 to 63 and 23 to 59 of the Finance Act, 2023 stand equally vitiated and therefore unconstitutional,” read the judgement.

This ruling created widespread uncertainty regarding the government's financial and operational systems, leading the appellants to turn to the Supreme Court for relief.

During its deliberations, the Supreme Court focused on issues related to the legislative process behind the Finance Act, especially concerns about public participation and compliance with Article 114 of the Constitution, which outlines the procedures for financial legislation.