Month: July 2025

After over a decade of assisting clients across Africa through our independent offices in Ghana, Zambia, Zimbabwe, Uganda, Kenya and a network of relationship firms in over 30 African countries, we are pleased to announce that on Wednesday, 23rd July, 2025, we received authorisation to expand our footprints into Singapore beginning with an Africa-market focused consultancy. The Singapore market entry is in line with ABDA’s broader strategy to deepen service offerings to clients in Asia, using Singapore as the initial hub. It positions the firm to better support investors from Asia seeking opportunities in Africa, as well as African entities engaged in transactions with counterparts in Asia.
The ability to support clients seamlessly across Africa has become even more relevant as the continent continues to receive multi-country investments from Asia and other parts of the world.
“This is another significant landmark in ABDA’s journey, and we look forward to the formal launch at the end of August in Singapore” said David Ofosu-Dorte, Senior Partner at ABDA.

About Us:
AB & David Africa is an Africa-focused global business law firm that supports clients and projects to succeed in Africa.

For inquiries/ more, please contact:
Email : info@abdavid.com
WhatsApp : ‪+233 59 403 7507‬
Website : www.abdavid.com

According to the Blacks’ Law Dictionary, finance is the business aspect that is concerned with the management of money, credit, banking, and investments. Financial inclusion by extrapolation thus means making all the aspects of finance available to every legal person. In ordinary parlance, financial inclusion refers to the ability of individuals and businesses to access useful and affordable financial products and services that meet their needs in facilitating transactions, payments, savings, credit, and insurance that are delivered in a responsible and sustainable way. When addressing refugee financial inclusion, one refers to the ability of refugees to access transaction accounts with a financial institution, micro-finance institution or a digital or electronic instrument for purposes of storing, keeping, sending, and receiving money.

Financial inclusion encompasses various aspects, such as making financial products and services affordable and accessible to low-income earners, expanding financial institutions and service providers to marginalised or rural areas, providing relevant or legal identity documentation to the banking population, creating a data source, and improving literary or financial skills to combat lack of trust in the financial service providers. With that in mind, this article seeks to address the problems impacting refugees’ financial inclusion in Kenya.

Background to Kenya’s Financial Inclusion Policy

Kenya is on the verge of creating an all-inclusive, knowledge-based economy and has been hailed as one of Africa’s leading countries on financial inclusion with a robust policy to combat poverty and increase opportunities for investments for the disaggregated populations. The Kenya National Payments System Vision and Strategy 2025 makes inclusiveness one of its top priorities. The aim is to boost shared prosperity for the Kenyan people. According to the Central Bank of Kenya (CBK) 2021 FinAccess Report, Kenya’s household financial inclusion rate stood at approximately eighty three percent (83%).

Despite such a robust national financial inclusion policy and strategy, it can be argued that refugees in Kenya have been deliberately excluded from the benefits of the policy due to a discriminatory regulatory framework.

Exclusion of Refugees from Financial Access

Consumers are classified as financially excluded if they lack access to any formal or informal financial products or services. Generally, the universal factors that influence financial inclusion or exclusion include education, wealth, access to livelihoods, urban proximity, and cultural dynamics, such as gender biases or prejudices. All these factors contribute to the overall financial exclusion of refugees in one way or the other. Nonetheless, they are not the biggest threats to refugee financial inclusion in Kenya.

The financial service sector is the most important part of any economy, as it facilitates investments, provides access to capital, and helps manage financial risks, which drive economic growth. In this regard, the sector is heavily regulated to ensure consumer protection as well as a smooth, efficient and inclusive financial service ecosystem. Unfortunately, Kenya’s financial regulatory system excludes refugees from accessing financial services and products. For instance, the requirement under section 45 of the Proceeds of Crime and Anti-Money Laundering Act, 2009 (POCAMLA) which obligates providers of financial products and services to verify the identity of their customers does not include a Refugee Identification Document (Refugee ID) as a transactional document for banking purposes.

Further, the Proceeds of Crime and Anti-Money Laundering Regulations, 2013 (the Regulations), explicitly state at regulation 13, that for purposes of section 45 (1) of POCAMLA, a financial or reporting institution shall not enter a business relationship with a customer unless such a customer has a personal identification number (PIN) issued by Kenya Revenue Authority (KRA). However, a KRA PIN is not ordinarily issued to refugees unless they demonstrate exceptional circumstances that would warrant them to be issued with a KRA PIN. This difficulty effectively bars refugees from operating personal bank accounts.

Second, regulation 7 of the CBK E-Money Regulations, 2013 (the CBK E-Money Regulations) stipulates that all e-money issuers shall ensure that they and their agents comply with the applicable provisions of the POCAMLA and the Regulations. Although opening a mobile money account does not require the production of a KRA PIN, the mobile money operators such as Safaricom and Airtel are reporting institutions for the purposes of POCAMLA. In compliance with the CBK E-Money Regulations, Safaricom promulgated the M-Pesa Customer Terms and Conditions which do not include a Refugee ID as part of the required identity documentation for purposes of Account Opening and Maintenance. By implication, Safaricom does not open M-Pesa accounts for refugees.

The immediate former Governor of the CBK, Dr. Patrick Njoroge is on record that an ID is the most important tool and the first step toward financial inclusion. Thus, lacking one effectively prevents individuals from financial access. In the case of refugees, excluding a Refugee ID as a transactional document appears to discriminate against them. Equally, Refugee IDs expire every five (5) years, and it takes up to three (3) years to renew them. This bureaucratic hindrance also contributes to refugee financial exclusion.

Aside from exclusionary regulatory policies, refugees are highly affected by universal factors that limit financial inclusion. For instance, Kenya’s refugee encampment policy places refugee camps at the periphery of the country. These places are very remote and do not have on-site providers of financial services and products. In the same vein, the refugee camps are plagued with lack of or limited education opportunities. It is also difficult for refugees to access the labour market and scarce business activities contributes to poor or lack of livelihoods leading to low wealth indices amongst refugees. All these factors contribute to low levels of financial access for refugees.

The Refugees Act, 2021

Article 27 (1) of the Constitution of Kenya, 2010 (the Constitution) provides that everyone is equal before the law and has the right to equal protection and equal benefit of the law, which extends to the full enjoyment of all rights and fundamental freedoms. In essence, the supreme law of the land guarantees that both refugees and citizens alike enjoy equal protection and benefit of the law. While the financial regulatory laws arguably disadvantage refugees by excluding them from financial access, Article 27 (4) of the Constitution prohibits the State from enacting laws that are unjust or discriminatory on any grounds, including social origin or status, as it is the case for refugees.

It is in this context that the Refugees Act, 2021 (the Act) was passed into law with the intention of setting up a legal, social, and economic ecosystem where refugees could become self-reliant and contribute to the economic development of Kenya. To this end, section 28 (4) of the Act provides that refugees shall be enabled to contribute to the economic and social development of Kenya by facilitating access to, and issuance of, the required documentation at both levels of Government. Equally, section 28(5) of the Act grants refugees the right to engage individually or in a group in gainful employment or enterprise or to practice a trade or profession where they are duly qualified.

In addition, section 28 (7) of the Act elevates the status of a Refugee ID by granting it, at the very least, a status similar to that of the Foreign Certificate issued under section 56 (2) of the Citizenship and Immigration Act, 2011 for purposes of meeting legal obligations, receiving or rendering services countrywide. This means that refugees are entitled to access banking services, KRA PINs, mobile money registration, and e-Citizen services using their Refugee IDs, without the need to provide further supporting documentation.

By Legal Notice No. 143 of 2023, pursuant to section 28 (7) of the Act as read together with section 56 (2) of the Kenya Citizenship and Immigration Act, the Cabinet Secretary for Interior and National Administration declared the Refugee ID alongside other refugee identification documents as valid and proper documents for purposes of acquiring services provided by the Government of Kenya. Similarly, Regulation 29 (1) of The Refugees (General) Regulations 2024 converts the Refugee ID into a Refugee Certificate, specifying a format that aligns with Kenya’s system of issuing Identification Documents. The foregoing notwithstanding, the effectiveness of the Act may be undermined unless its provisions are equally integrated into the existing laws that govern the financial ecosystems.

Recommendations

The following recommendations ought to be taken into consideration to harmonise the financial laws with the Refugees Act, 2021 to enhance greater refugee financial inclusion:

The phrase “subject to special considerations and circumstances of the refugees” under section 28 (7) of the Act should be interpreted to mean that refugees, unlike foreign nationals who must first obtain either work permits, student permits, or residential permits to be issued Foreign Certificates and KRA PINs, can directly access services without the requirement to first obtain a Class M Work Permit.

• There should be elaborate redress procedures and timelines for issuance of identification documents to avoid delays in the system which has been the major bottleneck in the refugee access to services.
• For greater inclusivity and mobility within the East African region pursuant to section 28 (8) of the Act, refugees from the East African member states should be allowed to travel across borders within the region using their Refugee IDs. This stems from the fact that a Refugee ID usually shows the nationality of the holder.
• Section 45 of the POCAMLA should be amended, along with the accompanying Regulations, to allow banks and financial institutions to accept a Refugee ID as a transactional document with respect to banking and financial services for refugees.

• The CBK E-Money Regulations should be amended to allow Financial Digital Service Providers to accept a Refugee ID as a transactional document in registering mobile money services.

According to the Blacks’ Law Dictionary, finance is the business aspect that is concerned with the management of money, credit, banking, and investments. Financial inclusion by extrapolation thus means making all the aspects of finance available to every legal person. In ordinary parlance, financial inclusion refers to the ability of individuals and businesses to access useful and affordable financial products and services that meet their needs in facilitating transactions, payments, savings, credit, and insurance that are delivered in a responsible and sustainable way. When addressing refugee financial inclusion, one refers to the ability of refugees to access transaction accounts with a financial institution, micro-finance institution or a digital or electronic instrument for purposes of storing, keeping, sending, and receiving money.

Financial inclusion encompasses various aspects, such as making financial products and services affordable and accessible to low-income earners, expanding financial institutions and service providers to marginalised or rural areas, providing relevant or legal identity documentation to the banking population, creating a data source, and improving literary or financial skills to combat lack of trust in the financial service providers. With that in mind, this article seeks to address the problems impacting refugees’ financial inclusion in Kenya.

Background to Kenya’s Financial Inclusion Policy

Kenya is on the verge of creating an all-inclusive, knowledge-based economy and has been hailed as one of Africa’s leading countries on financial inclusion with a robust policy to combat poverty and increase opportunities for investments for the disaggregated populations. The Kenya National Payments System Vision and Strategy 2025 makes inclusiveness one of its top priorities. The aim is to boost shared prosperity for the Kenyan people. According to the Central Bank of Kenya (CBK) 2021 FinAccess Report, Kenya’s household financial inclusion rate stood at approximately eighty three percent (83%).

Despite such a robust national financial inclusion policy and strategy, it can be argued that refugees in Kenya have been deliberately excluded from the benefits of the policy due to a discriminatory regulatory framework.

Exclusion of Refugees from Financial Access

Consumers are classified as financially excluded if they lack access to any formal or informal financial products or services. Generally, the universal factors that influence financial inclusion or exclusion include education, wealth, access to livelihoods, urban proximity, and cultural dynamics, such as gender biases or prejudices. All these factors contribute to the overall financial exclusion of refugees in one way or the other. Nonetheless, they are not the biggest threats to refugee financial inclusion in Kenya.

The financial service sector is the most important part of any economy, as it facilitates investments, provides access to capital, and helps manage financial risks, which drive economic growth. In this regard, the sector is heavily regulated to ensure consumer protection as well as a smooth, efficient and inclusive financial service ecosystem. Unfortunately, Kenya’s financial regulatory system excludes refugees from accessing financial services and products. For instance, the requirement under section 45 of the Proceeds of Crime and Anti-Money Laundering Act, 2009 (POCAMLA) which obligates providers of financial products and services to verify the identity of their customers does not include a Refugee Identification Document (Refugee ID) as a transactional document for banking purposes.

Further, the Proceeds of Crime and Anti-Money Laundering Regulations, 2013 (the Regulations), explicitly state at regulation 13, that for purposes of section 45 (1) of POCAMLA, a financial or reporting institution shall not enter a business relationship with a customer unless such a customer has a personal identification number (PIN) issued by Kenya Revenue Authority (KRA). However, a KRA PIN is not ordinarily issued to refugees unless they demonstrate exceptional circumstances that would warrant them to be issued with a KRA PIN. This difficulty effectively bars refugees from operating personal bank accounts.

Second, regulation 7 of the CBK E-Money Regulations, 2013 (the CBK E-Money Regulations) stipulates that all e-money issuers shall ensure that they and their agents comply with the applicable provisions of the POCAMLA and the Regulations. Although opening a mobile money account does not require the production of a KRA PIN, the mobile money operators such as Safaricom and Airtel are reporting institutions for the purposes of POCAMLA. In compliance with the CBK E-Money Regulations, Safaricom promulgated the M-Pesa Customer Terms and Conditions which do not include a Refugee ID as part of the required identity documentation for purposes of Account Opening and Maintenance. By implication, Safaricom does not open M-Pesa accounts for refugees.

The immediate former Governor of the CBK, Dr. Patrick Njoroge is on record that an ID is the most important tool and the first step toward financial inclusion. Thus, lacking one effectively prevents individuals from financial access. In the case of refugees, excluding a Refugee ID as a transactional document appears to discriminate against them. Equally, Refugee IDs expire every five (5) years, and it takes up to three (3) years to renew them. This bureaucratic hindrance also contributes to refugee financial exclusion.

Aside from exclusionary regulatory policies, refugees are highly affected by universal factors that limit financial inclusion. For instance, Kenya’s refugee encampment policy places refugee camps at the periphery of the country. These places are very remote and do not have on-site providers of financial services and products. In the same vein, the refugee camps are plagued with lack of or limited education opportunities. It is also difficult for refugees to access the labour market and scarce business activities contributes to poor or lack of livelihoods leading to low wealth indices amongst refugees. All these factors contribute to low levels of financial access for refugees.

The Refugees Act, 2021

Article 27 (1) of the Constitution of Kenya, 2010 (the Constitution) provides that everyone is equal before the law and has the right to equal protection and equal benefit of the law, which extends to the full enjoyment of all rights and fundamental freedoms. In essence, the supreme law of the land guarantees that both refugees and citizens alike enjoy equal protection and benefit of the law. While the financial regulatory laws arguably disadvantage refugees by excluding them from financial access, Article 27 (4) of the Constitution prohibits the State from enacting laws that are unjust or discriminatory on any grounds, including social origin or status, as it is the case for refugees.

It is in this context that the Refugees Act, 2021 (the Act) was passed into law with the intention of setting up a legal, social, and economic ecosystem where refugees could become self-reliant and contribute to the economic development of Kenya. To this end, section 28 (4) of the Act provides that refugees shall be enabled to contribute to the economic and social development of Kenya by facilitating access to, and issuance of, the required documentation at both levels of Government. Equally, section 28(5) of the Act grants refugees the right to engage individually or in a group in gainful employment or enterprise or to practice a trade or profession where they are duly qualified.

In addition, section 28 (7) of the Act elevates the status of a Refugee ID by granting it, at the very least, a status similar to that of the Foreign Certificate issued under section 56 (2) of the Citizenship and Immigration Act, 2011 for purposes of meeting legal obligations, receiving or rendering services countrywide. This means that refugees are entitled to access banking services, KRA PINs, mobile money registration, and e-Citizen services using their Refugee IDs, without the need to provide further supporting documentation.

By Legal Notice No. 143 of 2023, pursuant to section 28 (7) of the Act as read together with section 56 (2) of the Kenya Citizenship and Immigration Act, the Cabinet Secretary for Interior and National Administration declared the Refugee ID alongside other refugee identification documents as valid and proper documents for purposes of acquiring services provided by the Government of Kenya. Similarly, Regulation 29 (1) of The Refugees (General) Regulations 2024 converts the Refugee ID into a Refugee Certificate, specifying a format that aligns with Kenya’s system of issuing Identification Documents. The foregoing notwithstanding, the effectiveness of the Act may be undermined unless its provisions are equally integrated into the existing laws that govern the financial ecosystems.

Recommendations

The following recommendations ought to be taken into consideration to harmonise the financial laws with the Refugees Act, 2021 to enhance greater refugee financial inclusion:

The phrase “subject to special considerations and circumstances of the refugees” under section 28 (7) of the Act should be interpreted to mean that refugees, unlike foreign nationals who must first obtain either work permits, student permits, or residential permits to be issued Foreign Certificates and KRA PINs, can directly access services without the requirement to first obtain a Class M Work Permit.

• There should be elaborate redress procedures and timelines for issuance of identification documents to avoid delays in the system which has been the major bottleneck in the refugee access to services.
• For greater inclusivity and mobility within the East African region pursuant to section 28 (8) of the Act, refugees from the East African member states should be allowed to travel across borders within the region using their Refugee IDs. This stems from the fact that a Refugee ID usually shows the nationality of the holder.
• Section 45 of the POCAMLA should be amended, along with the accompanying Regulations, to allow banks and financial institutions to accept a Refugee ID as a transactional document with respect to banking and financial services for refugees.

• The CBK E-Money Regulations should be amended to allow Financial Digital Service Providers to accept a Refugee ID as a transactional document in registering mobile money services.

An allegation of judicial bias calls into question the concept of fair hearing, and the often-touted clarion call against perceptions of judicial bias is that “justice must not only be done but must also be seen to be done” – as per Lord Hewart, the then Chief Justice of England in Rex v Sussex Justices (1924) 1 KB 256.

Judicial recusal refers to the withdrawal of a judicial officer from ongoing proceedings, for reason of a conflict of interest, perceived bias or lack of impartiality. As an inherent rule, judicial officers are expected to be independent, impartial and beacons of integrity – with recusal offering a means of redress should questions arise as to the lack of the foregoing attributes in relation to a judicial officer.

The importance of recusal in fostering confidence and trust in the administration of justice was underscored by Warsame J (as he then was) in the case of Alliance Media Kenya Limited v Monier 2000 Limited & Njoroge Regeru (2007) KEHC 2518 (KLR) as follows: “In my understanding, the issue of disqualification is a very intricate and delicate one. It is intricate because the attack is made against a person who is supposed to be the pillar and fountain of justice…justice is deeply rooted in the public having confidence and trust in the determination of disputes before the Court. It is of paramount importance to ensure that the confidence of the public is not eroded by the refusal of Judges to disqualify themselves when an application has been made.”

When to Recuse Oneself?

A judicial officer should recuse himself in the event a conflict of interest arises in a matter in which he is acting. Under Regulation 20 (1) of the Judicial Service (Code of Conduct and Ethics) Regulations, 2020 (the Judicial Service Regulations) a Judge is obligated to use the best efforts to avoid being in situations where personal interests conflict or appear to conflict with his official duties.

Recusal is a matter of judicial discretion and judicial officers should recuse themselves whenever they feel they may not appear to be fair or where they feel their impartiality would be called into question. Regulation 21 of the Judicial Service Regulations, behoves a judicial officer to disqualify oneself in proceedings where his or her impartiality might reasonably be called into question, including but not limited to instances in which the judicial officer has a personal bias or prejudice concerning a party or his advocate or personal knowledge of facts in the proceedings before him. The Judicial Service Regulations are intended to ensure maintenance by judicial officers of integrity and independence of the judicial service.

A judicial officer may recuse himself or herself in any proceedings in which his or her impartiality might reasonably be questioned, including instances where the judicial officer:

1. i) is a party to the proceedings
2. ii) was, or is a material witness in the matter in controversy

iii) has personal knowledge of disputed evidentiary facts concerning the proceedings

1. iv) has actual bias or prejudice concerning a party
2. v) has a personal interest or is in a relationship with a person who has a personal interest in the outcome of the matter
3. vi) had previously acted as a counsel for a party in the same matter

vii) is precluded from hearing the matter on account of any other sufficient reason

viii)a member of the judicial officer’s family has economic or other interest in the outcome of the matter in question

The foregoing list is by no means exhaustive and the overriding principle is to ensure that the perception of fairness is at all times maintained as was stated by the Supreme Court in the case of Jasbir Singh Rai & 3 Others v Tarlochan Singh Rai & 4 Others (2013) eKLR as follows:

“…it is evident that the circumstances calling for recusal, for a Judge, are by no means cast in stone. Perception of fairness, of conviction, of moral authority to hear the matter, is the proper test of whether or not the non-participation of the judicial officer is called for. The object in view, in the recusal of a judicial officer, is that justice as between the parties be uncompromised; that the due process of law be realized, and be seen to have had its role; that the profile of the rule of law in the matter in question, be seen to have remained uncompromised.”

Objective Standard

Noting that bias may be easy to detect in others but difficult to detect in oneself – the standard to be applied when considering recusal is an objective rather than subjective one. As was stated by the Court in Sabatasso v Hogan 91 Conn. App. 808, 825 (2005): “The standard to be employed is an objective one, not the Judge’s subjective view as to whether he or she can be fair and impartial in hearing the case… Any conduct that would lead a reasonable person knowing all the circumstances to the conclusion that the Judge’s impartiality might reasonably be questioned is a basis for the Judge’s disqualification. Thus, an impropriety or the appearance of impropriety that would reasonably lead one to question the Judge’s impartiality in a given proceeding clearly falls within the scope of the general standard… The standard is not whether the Judge is impartial in fact. It is simply, whether another, not knowing whether or not the Judge is actually impartial, might reasonably question his impartiality, on the basis of all the circumstances.”

Doctrinal Exceptions

There may be circumstances in which judicial officers may be compelled to continue sitting, notwithstanding concerns on perceptions of bias or conflicts of interest. The “doctrine of necessity” has been used for a long time in common law jurisdictions to allow judges to sit in matters where the Court does not have an alternative competent person to adjudicate a matter before it, and thus quorum cannot be formed without him and no other competent Court can be constituted.

The “doctrine of the duty to sit” flows from the Constitution and common law. Since all judicial officers take an oath to serve and administer justice, it is implied that there is a duty to sit imposed upon them by the value and the principle of the rule of law. Judicial officers should thus resist the temptation to recuse themselves simply because it would be more convenient to do so. The doctrine requires judicial officers not to recuse themselves unless there are compelling reasons not to sit. The doctrine was discussed by the Supreme Court (Ibrahim, SCJ) in his Lordship’s concurring opinion in Gladys Boss Shollei v Judicial Service Commission (2018) eKLR stating that the doctrine safeguards a party’s right to be heard and determined before a Court of law: “Tied to the Constitutional argument above, is the doctrine of the duty of a Judge to sit. Though not profound in our jurisdiction, every Judge has a duty to sit, in a matter which he dushould sit. So that recusal should not be used to cripple a Judge from sitting to hear a matter. This duty to sit is buttressed by the fact that every Judge takes an oath of office “to serve impartially; and to protect, administer and defend the Constitution.” It is a doctrine that recognizes that having taken the oath of office, a Judge is capable of rising above any prejudices, save for those rare cases when has to recuse himself. The doctrine also safeguards the parties’ right to have their cases heard and determined before a Court of law.”

Judicial officers must therefore take into account the fact that they have a duty to sit in any case in which they are not obliged to recuse themselves. They should therefore not readily succumb to bullying or intimidation by a party to recuse themselves. In the case of Prayosha Ventures Limited vs NIC Bank Ltd & Others (2020) eKLR the Court (Omondi, J – as she then was) dismissed a recusal application and found thus:- “It is not lost to me that the issue of recusal was spontaneously announced once I declined to extend the orders, and there should be no pretence by Mr. Lagat that the Interested Party instructed him to apply for my recusal… I have no lien over the matter, and would be more than willing to have this matter taken over by another judicial officer, except that the manner in which the recusal is sought reeks of mala fides clothed with sharp practice, outright bullying and intimidation. That where a litigant does not call the tune and pay the piper, then the bias flag is waved all over. Indeed, for good measure, Dr Kiprono reminded this Court that his client would be considering presenting a complaint to the Judicial Service Commission over my conduct in this matter. If that was not intended to scare the daylights out of me, then I do not know why the name of my employer was being invoked at that point.”

Similarly, in Dobbs v Tridios Bank NV (2005) EWCA 468 the Court cautioned itself as follows with respect to the antics of a certain Mr. Dobbs: “… But it is important for a Judge to resist the temptation to recuse himself simply because it would be more comfortable to do so. The reason is this. If Judges were to recuse themselves whenever a litigant – whether it be a represented litigant or a litigant in person – criticised them (which sometimes happens not infrequently) we would soon reach the position in which litigants were able to select Judges to hear their cases simply by criticizing all the Judges that they did not want to hear their cases. It would be easy for a litigant to produce a situation in which a Judge felt obliged to recuse himself simply because he had been criticized – whether that criticism was justified or not. That would apply, not only to the individual Judge, but to all Judges in this court; if the criticism is indeed that there is no Judge of this court who can give Mr. Dobbs a fair hearing because he is criticizing the system generally. Mr. Dobbs’ appeal could never be heard.”

Conclusion

Judicial recusal is a fundamental principle that upholds the integrity and impartiality of the justice system. It ensures that judicial officers presiding over cases have no conflicts of interest and can deliver fair and unbiased decisions. It is essential for judicial officers to exercise their discretion judiciously when considering recusal, balancing the principles of fairness, independence, and the efficient administration of justice. Ultimately, the goal is to maintain the integrity of the judicial system and safeguard the fundamental right to a fair and impartial trial for all parties involved.

A long-held legal position on performance bonds in Kenya is that the terms of an underlying construction contract are irrelevant to a Court when deciding interdict proceedings arising from payments under an on-demand guarantee. The position is anchored upon the principle that liability under an on-demand guarantee is primary and payment by the guarantor is to be made in response to a demand, irrespective of any default under the principal contract.

Performance Bonds Defined

A performance bond is defined as a financial guarantee to one party in a contract against the failure of another party to meet its obligations. It is ordinarily issued by a bank or other financier, to ensure that a contractor fulfills its contractual obligations under a contract.

Important to performance bonds are the parties involved. The principal is the party who requests the surety to issue the bond and whose obligations are guaranteed. The obligee is the party who requires the principal to obtain the bond and who receives the benefit of the guarantee. The surety is the party who issues the bond that guarantees the obligations of the principal, such as a banking institution.

A performance bond is ordinarily triggered by the principal’s default in the performance of the bonded contract. At times, the contract specifies certain events which would constitute a “default”. More often than not however, a default is determined simply by the principal’s failure to meet a contractual obligation.

In this article, we consider a recent decision by the High Court of Kenya (Mongare J) in HCCCOMM No. E359 of 2022: Civicon Limited v Fuji Electric Co. Limited & 2 Others (the Suit) in which the Court dismissed two (2) applications seeking to restrain Equity Bank (Kenya) Limited (the Bank) from paying Fuji Electric Co. Limited (Fuji) the proceeds of a USD 2.3 million performance bond issued in Fuji’s favour (the Performance Bond).

Background to the Case

Sometime in 2018, Kenya Electricity Generating Company PLC (KenGen) and Marubeni Corporation (Marubeni) entered into a contract for the construction of a Geothermal Power Plant Project. Marubeni subcontracted its scope of works to Civicon Limited (Civicon) and Fuji who formed a consortium and entered into various agreements detailing their respective scope of works. It was also agreed by the parties that Civicon would provide and maintain with Fuji, the Performance Bond to secure its due performance under the contracts. Accordingly, Equity Bank issued the Performance Bond to Fuji in the sum of USD 2.3 million on behalf of Civicon.

In 2022, a dispute between the parties arose from Fuji’s decision to call up the said Performance Bond which Civicon alleged, inter alia, to have been done in breach of the relevant agreements signed by the parties. Civicon therefore filed a suit accompanied by an application in which it sought and obtained an interim order restraining the Bank from effecting any payment to Fuji arising out of the Performance Bond (the Status Quo Order).

The Stay Application

By a Notice of Motion application dated 30th September 2022 (the Stay Application), Fuji applied to stay the Suit and the proceedings filed by Civicon. The Stay Application was based on grounds that, they concerned a dispute regarding Fuji’s right to call up the Performance Bond, which was subject to an arbitration clause under the various agreements entered into between the parties. Fuji submitted that the parties expressly ousted the jurisdiction of the High Court in electing to resolve any dispute arising between them by way of arbitration.

Civicon opposed the Stay Application on grounds that the issue of calling up or not of the Performance Bond is not an arbitrable matter within the framework of the arbitration clause contained under the various agreements. Further, Civicon argued that the dispute in the matter involves the Bank which is not privy to the agreements whose arbitral clause Fuji purported to invoke.

The High Court Decision

By way of a Ruling delivered on 12th June 2023 (the Ruling) Hon. Lady Justice Mongare (the Judge) allowed Fuji’s Stay Application on grounds, amongst others, that it was expressly intended that all disputes between the parties, including a dispute concerning the Performance Bond, be resolved by way of arbitration. The Judge considered the fact that Civicon’s Suit and its application was hinged upon whether or not Fuji had a right to call up the Performance Bond on account of the various claims it had against Civicon and found that the Performance Bond was a creation of the agreements from which the arbitral clause emanated.

For the said reasons, the Judge stayed the proceedings in the Suit pending reference of the matters raised therein to arbitration and also set aside the Status Quo Order restraining the Bank from effecting any payment to Fuji arising out of the Performance Bond.

The Section 7 Application

Notwithstanding the stay order and the Ruling, Civicon proceeded to file another application before the High Court under section 7 of the Arbitration Act, 1995 (the Arbitration Act) in which it sought and was granted, an interim measure of protection restraining the Bank from effecting any payments arising out of the Performance Bond to Fuji, pending conclusion of the arbitration proceedings (the Section 7 Application).

Civicon anchored the Section 7 Application on grounds amongst others, that if the Bank were to honour the Performance Bond, the substratum of the arbitral proceedings would be eroded.

In response thereto, Fuji raised a preliminary jurisdictional issue that the Court, having stayed the proceedings and directed the parties to submit their dispute to arbitration, was now functus officio and could not make any further orders in the matter.

The Judge delivered a Ruling on the Section 7 Application on 15^th August 2023 (the Section 7 Ruling), the upshot of which was that the Court agreed with the arguments proffered by Fuji, specifically that the Court, having already rendered its decision in the matter, is now bereft of jurisdiction and could not make any further orders therein. Accordingly, the Judge dismissed the Section 7 Application and once again, vacated the interim Orders restraining the Bank from effecting any payment to Fuji arising out of the Performance Bond.

Upshot

The High Court’s decision sets an important precedent in two (2) respects. Firstly, where parties have expressly ousted the jurisdiction of the Court in deciding that any dispute arising between them be settled through arbitration, the Court is duty bound to uphold the arbitration agreement between them. This is notwithstanding the fact that the dispute arose from a decision to call up a performance bond in which the principal is not privy to. The fact that the Performance Bond was a creation of the agreement between the parties in which the arbitral clause emanated from is sufficient for the Court to hold parties to the terms of their agreement.

Secondly, a Court will be reluctant to grant interim measures of protection where it has already stayed the matter and referred the proceedings to arbitration. This principle is anchored upon the basis that the Court is functus officio i.e. it has already rendered its decision in the matter and therefore lacks the power or jurisdiction to make any further orders until the arbitration process is finalized.

The Sanctity of Performance Bonds

In rendering its decisions, the High Court has affirmed the sanctity and commercial importance of on-demand guarantees. The very nature of an on-demand-guarantee means that it is payable unconditionally upon demand. By agreeing to provide a bond which is payable on demand, a principal agrees that the bond may be called pending resolution of any dispute with the counterparty beneficiary. It therefore requires strict compliance and its enforcement is neither dependent nor affected by any underlying dispute between the parties.

As was aptly put by the High Court in Eli Holdings Ltd v Kenya Commercial Bank (2020) eKLR:

“A bank guarantee is an autonomous contract which requires strict compliance to its terms. The Bank has no obligation to question the performance or otherwise of the obligations of the parties in the underlying contract…As a general proposition, a demand guarantee is independent of the primary contract and will not be affected by a dispute between the parties to the underlying transaction.”

As Civicon has lodged an Appeal against the initial Ruling, it will be interesting to see what the Court of Appeal makes of the matter. For now, we align ourselves with Lord Denning in the case Edward Owen Engineering Ltd. v Barclays Bank International Ltd. and Another (1978) 1 All ER 976 where the learned Judge opined that:

“The performance bond given by the bank is a binding international obligation payable on demand. If an interim injunction were granted in a case of this sort it would affect the pattern of international trading. There is no reason why the bank should be involved in disputes between buyer and seller.”

Competition & Tariff Commission v. Ashram Investments (Private) Limited and Others (91 of 2024) 2024 ZWSC 91 (3 October 2024).

The recent Supreme Court judgment has sparked interest on the role and powers granted to the Competition Tariff Commission (CTC) under the Competition Act [Chapter 14:28] (the Act), particularly in merger approvals and penalty enforcement for non-compliance with notifiable merger rules. To prevent prejudicial monopolistic tendencies and promote public interest, courts have shown reluctance to interfere with CTC decisions, thereby discouraging disregard for the law and promoting competition.

BACKROUND

Innscor Africa Limited is a company that wholly owns Ashram Investments Limited. In 2013 Ashram wanted to acquire 59% shareholding in both Podutrade (Pvt) Limited and Profeeds (Pvt) Limited to which CTC did not approve. In 2015 the parties decided to go further with the merger under 49% shareholding and only notified the CTC about the merger (3 years 9 months later)  in February 2019 after their new legal practitioner had advised them to do so in December 2017. The biggest challenge with the merger being that Innscor has shares in National Foods. National Foods and Profeeds are the largest and second largest competitors in the stock feed market and Innscor also has shares in Irvine’s which is a major customer of both. The merger raised concerns over a monopoly being created in the stock feeds market and controversy as to what constitutes a merger contrary to public interest.

OBJECTIVE

This commentary highlights key points from the case law under review.

WHAT IS A MERGER IN ZIM LAW

Section 2 of the Act” defines a merger as the direct or indirect acquisition or establishment of a controlling interest by one or more persons in the whole or part of the business of a competitor, supplier, customer or other person whether that controlling interest is achieved as a result of the purchase or lease of the shares or assets, amalgamation or any other means, of a competitor, supplier, customer or other person;

DEGREE OF JUDICIAL OVERSIGHT

A reading of the Preamble and s5 of the Act show that the intention of the legislature was to create a specialised body that fosters competition, prevent restrictive practices, and regulate mergers and monopolies in Zimbabwe. The court recognised that CTC has all due responsibility to decide which practices are harmful or not to competition. This also means the decisions of CTC will not be lightly interfered with without fully taking into consideration the relevant laws which it has to comply with. The fear of the courts is that if every decision of the CTC can be lightly interfered with then it defeats reasons for its creation, encourage companies to disregard the law, form monopolies or indulge in unlawful conduct. Hence the role and decisions of the CTC are not only regulatory but penal and deterrent in nature thus encouraging lawful competition.

NOTIFIABLE MERGER: LEVEL OF SHARE HOLDING VS THRESHOLD SET BY THE MINISTER.

One of the Arguments raised by the Respondents in this case was that the reason for the failure to timeously notify CTC was due to the fact that a 49% shareholding is a threshold below 50%. However in Zimbabwe, under SI 126 of 2020 section 5, merging companies whose combined annual turnover in or from Zimbabwe or whose combined assets in Zimbabwe are valued at or more than ZW$ 10 000 000.00 have the prerequisite responsibility of notifying CTC of the merger within 30 days of conclusion of the merger agreement (s34A (1) (a) of the Act).This means a company can have a shareholding of 5% and still be required to notify CTC. It is not about the level of shareholding but whether one meets the threshold set which is something companies should be wary of.

MONOPOLY

A monopoly is a situation in which a single person exercises, or two or more persons with a substantial economic connection exercise, substantial market control over any commodity or service (s2 of the Act). The future of competition in the stock feed market is high as it has also been joined by players such as the Korea Programme for Innovation on Agriculture (KOPIA) forging deeper agriculture and trade cooperation in Zimbabwe. However, with competition also comes the desire for major players to remain in control which is not bad as it is the aim of every corporate, however, monopoly means it gets to the point where one player controls the economy with the option of providing goods at exorbitant prices or substandard goods.

CTC MERGER EVALUATION CRITERIA: EFFECT ON PUBLIC INTEREST.

TEST- WHAT IS THE REASONABLE LIKELIHOOD OF A MONOPOLY OCCURING: LONG-TERM EFFECTS.

Before the CTC approves of a notifiable merger, one of its critical considerations is the broad test in s32 (4) of the Act, ‘the likelihood of events’. Is there a likelihood that the merger will lessen among other things competition or will likely result in a monopoly situation. The likelihood of a monopoly also means the merger is contrary to public interest.

National Foods and Profeeds being the largest and second largest stock feed competitors was already befitting of the likelihood of a monopoly being formed. With the Influence of Innscor as stated by the court, Profeeds stock feeds shops went from 19 to 40 and Innscor’s share in the market had risen to 57% with the next biggest competitor at 11%. The fact that there are 20 other players in the market or the fact that there has been an increase in employment is not enough to rule off the likelihood of the merger being against public interest.

‘The Commission should not only look into the current effects of the merger or those of the near future.  It should consider these and also look into the likely effects of the merger in the long-term.  It should not adopt a simplistic approach to the assessment of the long-term effects of a merger but should be guided by the reasonable likelihood of such events occurring.’

This means initially the monopoly might look favorable by creating employment and programs like the training of farmers. However, ‘in the long run’ means when there is potential of a concentration in power then what the future holds for the stock feeds market and for the livestock industry as a whole is the likelihood of:

• An increase in prices which the consumer would be forced to adhere to as the industry will scarcely have any competition.
• The likelihood of substandard goods being produced at high prices.
• Small businesses struggling to compete and forced to close.
• Barriers to entry into the market
• Elimination of effective competition

Thus in Zimbabwe the most crucial take for a merger to be approved is not more about its economic benefit to the merging parties but whether it is in line with competition law and policy and its outlook in the long run. It is the discretion of the CTC on whether there is an existence of a monopoly in the long-run and whether it is prejudicial to competition.

PENALTY CLAUSE: S34A (4) INTERPRETATION OF PRECEDING FINANCIAL YEAR

The failure to notify CTC of a notifiable merger gives the CTC discretion to impose a penalty that may not exceed ten per centum of either or both of the merging parties’ annual turnover in Zimbabwe as reflected in the accounts of any party concerned for the preceding financial year.

The issue was whether the preceding year for the calculation of a penalty is the year preceding the notification of a merger or the year preceding the merger.

The Court did not explicitly address the issue however, the appeal succeeded in favour of CTC in its entirety with the question imposed being one of the grounds for appeal. Thus preceding financial year means the year preceding the imposition of the penalty.

FACTORS CONSIDERED IN THE EVALUATION OF A PENALTY.

According to section 34A (5) of the Act When determining an appropriate penalty, the Commission shall consider the following factors—

(a)        the nature, duration, gravity and extent of the contravention; and

(b)        any loss or damage suffered a s a result of the contravention; and

(c)        the behaviour of the parties concerned; and

(d)        the market circumstances in which the contravention took place; and

(e)        the level of profit derived from the contravention; and

(f)        the degree to which the parties have co-operated with the Commission ; and

(g)        whether the parties have previously been found in contravention of this Act.

Whether you fail to give notice within the stipulated time or you continue with the merger without approval all factors above will be considered as a whole and it is on all of these factors that determines whether CTC can impose a penalty or not.

CONCLUSION

The recent Supreme Court Judgment sheds light on merger regulation and competition law in Zimbabwe. The CTC has the  responsibility and discretion to approve  mergers based on its relevant laws and policy to which the courts will not lightly interfere with. Further, there is a broad criteria for the evaluation of mergers. For this reason it is recommended to consult with knowledgeable counsel when undertaking a merger and where parties are not clear seek an advisory opinion from the CTC before undertaking a merger.