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The taxation of income earned by insurance tied-up agents has been a contentious subject over the years. At the heart of the dispute lies a fundamental question touching on the nature of the relationship between insurers and their tied-up agents. Are these agents employees or independent contractors?

The Appeal

Our very own Tax team successfully represented CIC Life Insurance Limited (“the Company”) in HCCOMMITA E218 of 2023 Kenya Revenue Authority v. CIC Life Insurance Limited. Being an appeal against a Judgment of the Tax Appeals Tribunal (the “Tribunal”) the Kenya Revenue Authority (“KRA”) challenged the Tribunal’s decision that tied-up agents licensed under the Insurance Act (Cap 487, Laws of Kenya) (the “Insurance Act”) are not employees and consequently, the income they earn from this relationship is not chargeable to Pay As You Earn (“PAYE”).

KRA argued that the relationship between the tied-up agents and the Company amounted to an employer-employee relationship. In support of this position, they relied on the control test i.e., that the tied-up agents are subject to the Company’s control; and that the benefits stipulated in the sample contracts were enjoyed by those in employment relationships.

In response, we demonstrated that a holistic reading of the Employment Act (Cap 226, Laws of Kenya) (the “Employment Act”), the Income Tax Act (Cap 470, Laws of Kenya) (the “Income Tax Act”), and the Insurance Act, together with the relevant regulations, confirmed that in the insurance industry, tied-up agents are independent contractors and not employees. Therefore, KRA’s argument on the benefits offered to tied-up agents held no weight as these benefits are provided for under the Insurance Act and as such these benefits would not convert the relationship to that of an employer and employee.

The High Court’s Decision

At the outset, the Court considered the definitions of the terms “agent” and “employee” in line with the objectives of the Income Tax Act. More particularly, this definitional clarity was pivotal to the broader analysis of whether an agent’s remuneration constituted income arising from employment, thereby subject to PAYE or whether it was income derived from an independent contractual relationship which would instead fall under the scope of Withholding Tax (“WHT”).

Having ascertained these definitions, the Court proceeded to determine the nature of the contractual relationship between the Company and the tied-up agents. In doing so, it referred to the uncontested agreements between the parties as read alongside the definition of an agent under the Insurance Act. The Court subsequently concluded that the agents operating within the insurer’s business cannot, by definition, be employees.

In arriving at this conclusion, the Court affirmed the position in UAP Life Assurance Company Limited v. Commissioner of Domestic Taxes [2019] KEHC 412 (KLR) where the High Court placed emphasis on the harmonious reading of the Insurance Act, Income Tax Act and the Employment Act in order to arrive at the conclusion that tied-up agents do not qualify as employees.​

Similarly, this position was upheld in Commissioner of Domestic Taxes v. Liberty Life Assurance Limited (Income Tax Appeal E108 of 2021) [2023] KEHC 1359 (KLR) (Commercial and Tax) (24 February 2023) (Judgment), where the High Court held that the agents in question were not salaried employees but were instead remunerated through commissions for services rendered. As such, they could not be classified as employees for the purposes of PAYE.

The Significance of this Judgment

The High Court in this decision having concurred with two (2) previous High Court determinations suggests that this matter is now settled, unless overturned by the Court of Appeal. As the question of employment status continues to gain relevance in today’s evolving economy, this Judgment reaffirms that insurance agents, being remunerated through commissions and lacking the hallmarks of employment, are independent contractors. As such, the income they earn is not subject to PAYE.

On 13^th February 2025, the KRA issued a Public Notice on the implementation of the Income tax (Charitable Organizations and Donation Exemption) Rules, 2024 (the “Rules”) in which among many other things, all Charitable Organizations will now be required to comply with the Rules to enjoy tax exemptions.  These Rules will also determine whether such organizations will get tax exemption certificates upon application or renewal.

One of the main concerns of charitable organizations is determining where and how to seek refuge in case their application for tax exemption is declined. The Tribunal in Tax Appeal No. 1545 of 2022 held that it did not have Jurisdiction to entertain appeals arising from rejection of exemption application as the same were neither tax decisions nor appealable decisions.

The Issues in Contention

Our team appealed against the decision wherein we submitted that the rejection decision on the application for exemption was an appealable decision and did not require the Appellant to first lodge a Notice of Objection with the Commissioner. We further submitted that rejection decision was not a tax decision as misconstrued by the Commissioner but an appealable decision and urged the court to apply the plain meaning of “under any other decision made under a tax law” which applied to the rejection decision.

The Commissioner’s team on the other hand argued that the rejection decision did not constitute an appealable decision as defined under section 3(1) of the Tax Procedures Act, Cap 469 A as it was not an objection decision. They further argued that the appropriate forum to challenge the decision was through a judicial review court and that the court should apply the ejusdem generis interpretation rule when interpreting “any other decision made under a tax law”.

The Decision

The High Court, in a Judgement delivered by Lady Justice Rhoda Rutto on 14^th February 2025, in Saleh Mohammed Trust v Commissioner of Domestic Taxes (Income Tax Appeal E221 of 2023) [2025] KEHC 17214 (KLR) (Commercial and Tax) (14 February 2025) (Judgment) – Kenya Law affirmed our argument that any decision made under tax law that is not a tax decision is an appealable decision.

The Court held that the decision to reject the application for exemption is an appealable decision as it falls under “any other decision made under a tax law other- than (a) a tax decision or (b) a decision made in the course of making a tax decision” as defined under Section 3(1) of the Tax Procedures Act, Cap 469 A.

In the appeal to the High Court, the Commissioner argued that the Appellant ought to have challenged the Commissioner’s action by way of Judicial Review. Whereas recognizing this as an available option, the Court in its determination affirmed that pursuant to the provisions of Section 9(2)(1) of the Fair Administrative Action Act,  the High Court or subordinate court, shall not review an administrative action or decision under the Act unless the mechanisms, including internal mechanisms for appeal or review and all remedies available under any other written law  have been exhausted. The Appellant was therefore required to exhaust all available mechanisms, that is, appeal to the Tribunal that is vested with the requisite jurisdiction to hear an appealable decision.

This same position was affirmed in, in the case of Krystalline Salt Limited v Kenya Revenue Authority [2019] KEHC 6939 (KLR) – Kenya Law, see para 69  thereto.

The Court further determined that the appeal be heard on merit by the Tribunal and referred the matter back to the Tribunal for hearing of the substantive appeal as the issue of jurisdiction was now settled.

Significance of the Judgement

It is now settled, (unless the same is overturned by the Court of Appeal) that when a Charitable Organization’s Application for tax exemption is declined, such a decision can be appealed directly to the Tribunal without requiring the applicant to first lodge a Notice of Objection to the rejection decision as it is an appealable decision. This decision clarifies the dilemma that such entities face when contemplating their next action after receiving a rejection of their tax exemption application.

That the digital age has ushered in unprecedented concerns over the right to privacy and the use of personal data is now old news. Virtually all states have set up legal frameworks to safeguard the right to privacy and to govern the use of personal data, including putting into place appropriate compliance and enforcement mechanisms. In Kenya, the right to privacy is entrenched under Article 31 of the Constitution. The Data Protection Act of 2019 (the DPA) establishes the Office of the Data Protection Commissioner (the ODPC) as the institutional mechanism to protect personal data from misuse, as well as to oversee the implementation of and be responsible for the enforcement of the DPA. The ODPC is empowered to investigate any complaints relating to the misuse of personal data and to undertake the necessary enforcement measures through the various regulations made under the DPA, such as the Data Protection (Complaints Handling and Enforcement Procedures) Regulations, 2021 (the Complaints and Enforcement Regulations).

Notwithstanding the ODPC’s clear mandate set out in the DPA, its jurisdiction was recently challenged through a Constitutional Petition filed in the High Court in which it was contended that the ODPC had exceeded its authority by using powers reserved for the High Court. In addition, the Petition argued that the mandate of the ODPC overlapped with that of the Kenya National Human Rights and Equality Commission (the KNHREC), which is the body empowered to investigate and deal with any violations of the Bill of Rights, including the right to privacy.

In dismissing the Petition, the High Court (Mwamuye J) affirmed the authority and mandate of the ODPC in the enforcement of data protection law in Kenya.

A. Background

In the Petition, namely,  Arunda v Office of the Data Protection Commissioner & another; Data Privacy and Governance Society of Kenya (Interested Party) (2025) KEHC 12262, the constitutionality of Section 56 of the DPA and Regulation 14 (5) of the Complaints and Enforcement Regulations was disputed, with the Petitioner contending that these provisions granted judicial powers to the ODPC, consequently infringing upon the exclusive jurisdiction conferred upon the High Court under Articles 23 (1) and 165 (3) (b) of the Constitution. The Petitioner further contended that the mandate of the ODPC overlapped with that of the KNHREC, resulting in confusion as to constitutional and institutional oversight.

B. Issues

The key issues considered in the Petition included the following:

i. Whether the ODPC usurps the jurisdiction of the High Court?

The Petitioner argued that the ODPC’s powers to investigate and issue binding decisions, including compensation, amounted to the usurpation of judicial authority vested in the High Court. The Court disagreed and found that the ODPC’s power to investigate and make administrative findings does not amount to a judicial function, but rather that the ODPC plays more of a complementary role within the wider legal framework relating to the right to privacy. The Court found that the ODPC played an important and constitutionally permissible function for the realisation of the right to privacy under Article 31 of the Constitution, subject to the supervisory jurisdiction of the High Court as preserved under Section 64 of the DPA.

ii. Whether Section 56 of the DPA and Regulation 14(5) of the Complaints and Enforcement Regulations are unconstitutional?

Closely related to the first issue highlighted above, the Petition also raised the issue of constitutionality of Section 56 of the DPA and Regulation 14 (5) of the Complaints and Enforcement Regulations, asserting that these provisions granted judicial powers to the ODPC. Similarly dissuaded by this argument, the Court found that these provisions do not confer judicial powers upon the ODPC but rather authorise administrative and regulatory functions which were necessary to safeguard the rights under Article 31 of the Constitution. The Court returned the finding that these provisions merely provide the necessary enforcement capacity to a specialized agency, while retaining the existing judicial oversight through the appellate mandate granted to the High Court.

iii.  Whether the doctrines of exhaustion and constitutional avoidance applied to bar first instance access to the High Court?

The Court upheld that the doctrines of exhaustion and constitutional avoidance remain applicable. Consequently, the Petitioner was deemed to have improperly bypassed the ODPC’s complaint mechanism, which ought to have been followed in the first instance. The Court reaffirmed the doctrine of exhaustion, which requires persons to first utilise available statutory remedies before approaching the Courts, unless exceptional circumstances are shown to exist, which was not done in this case.

The Court also echoed the doctrine of constitutional avoidance, which discourages premature constitutional litigation when statutory remedies are adequate and available.

iv. Whether there was an overlap between the roles of the ODPC and the KNHREC?

The Petitioner argued that the mandate of the ODPC overlapped with that of the KNHREC, which the Petitioner contended was the body empowered to investigate and deal with any human right violations, including the right to privacy. The Court however took the view that the mandate of the ODPC does not conflict or overlap with that of the KNHREC, but rather the two institutions are designed to complement each other within Kenya’s constitutional and statutory human rights’ enforcement architecture.

C. Conclusion

Overall, the High Court’s decision affirms the power and jurisdiction of the ODPC in the enforcement of data protection and safeguarding of the right to privacy. The decision upholds that the legal architecture provided by the DPA is functional, constitutional and necessary for the effective enforcement of the law relating to data protection.

This case highlights and emphasises the significance of establishing a framework that includes specialised oversight over the increasingly complex issues surrounding data governance, including the collection, storage and use of personal information for addressing privacy-related concerns within a rapidly evolving digital world.

In the 20th Issue of Legal & Kenyan, we featured an article titled “Advancing Green Governance: Standards, Finance and Sustainability in Africa’s Corporate Sector 2.0”, in which we discussed the manner that adoption of the International Financial Reporting Standards Disclosure of Sustainability-related Financial Information (IFRS S1) and Climate-related Disclosures Standards (IFRS S2) collectively (the Standards) that were issued by the International Sustainability Standards Board (ISSB) were being adopted by corporations in Africa in the absence of clear frameworks and/or guidelines. In the abovementioned article, we discussed green financing as an effective tool for uptake of the Standards reportable under IFRS S1 and made a case for streamlining of internal operational procedures in an environmental friendly manner as a good metric reportable under IFRS S2.

It is against this backdrop of the absence of clear frameworks and guidelines that Kenyan corporations (especially those in the banking sector) undertook to ensure compliance with the Standards in the best manner they could mirroring international best practice standards. However, from April 2025, with the issuance of Kenya’s Green Finance Taxonomy (KGFT) and the Climate Risk Disclosure Framework for the Banking Sector (the Framework)by the Central Bank of Kenya (CBK), our jurisdiction now has a clear way forward in respect of compliance with the Standards.

KGFT has been developed initially for the banking sector. However, it is intended to serve as an entry point to the larger financial sector in Kenya. KGFT a standardised classification system that identifies and categorises the investment options which are environmentally sustainable and, by extension, those that are not. KGFT defines a minimum set of assets, projects and activities that are eligible to be defined as “green” in line with international best practices and Kenya’s national priorities. The users of the KGFT may utilise it to track, monitor and demonstrate their credentials of their green activities (popularly termed as ESG) in a more confident and efficient manner.

The framework was issued in furtherance of the CBK’s Guidance on Climate–Related Risk Management, which it issued in 2021, and the issuance of IFRS S2 by the ISSB in 2023. Section 33(4) of the Banking Act, (Cap. 488)Laws of Kenya, empowers the CBK to guide institutions to maintain a stable and efficient banking and financial system. As such, CBK, in exercise of its statutory power, has formulated the framework to act as the guide through which the banking sector in Kenya shall identify, classify and disclose relevant, decision useful climate–related information consistently and comparably. The framework is fully aligned with the Institute of Certified Public Accountants of Kenya (ICPAK) recommendations on the IFRS S2, which it did designate as the official standard for climate risk reporting in November 2024.

Kenya’s Green Finance Taxonomy

KGFT has adopted the green European Union Taxonomy for Sustainable Activities as a reference framework, specifically in assessing the substantial contribution criteria for climate change mitigation and adaptation. KGFT seeks to align with Kenya’s National Policy on Climate Finance with regards to climate investment. KGFT is comprised of five (5) parts being: introductory breakdown about the KGFT, User Guidance, Catalogue of Sectors and Activities, Technical Screening and concludes with appendices. At the heart of its formulation is its alignment with international best practice in respect of green finance. This guarantees the users of the taxonomy of its adaptability and alignment with international standards.

Indeed, KGFT’s objective is to first serve as a reference for sustainable progress of the Kenyan economy without social or environmental trade-offs in a bid to increase the consistency of green finance flows and foreign investments. Second, KGFT users can be confident that taxonomically aligned economic activities meet a high threshold of commitment to climate change mitigation and the Kenyan trajectory towards a sustainable economy. Finally, the taxonomy establishes a uniform and transparent performance tracking and reporting mechanism.

There is process for determining taxonomy alignment under KGFT which offer guidance that will help users determine the alignment of their economic activity with KGFT. The expected result is a binary one either taxonomy–aligned or not. Once alignment is assessed based on the details of this screening criteria, taxonomy-aligned financial flows can be calculated and determined. Under KGFT, this determination of taxonomy alignment can be done at an economic activity level. However, taxonomy–aligned finance can only be disclosed at an asset/activity, project, entity, and/or portfolio level.

Ultimately, at the heart of KGFT is its role in contributing to multifaceted sustainable development within the financial sector in Kenya. It is anticipated to provide useful information for measuring, monitoring and reporting on ESG performance and impact of taxonomy– aligned activities.

Kenya’s Climate Risk Disclosure Framework for the Banking

Sector

The Framework issued by CBK was issued against the backdrop of its earlier issued Guidance on Climate–Related Risk Management, and it is complementary to the Green Finance Taxonomy. With this issuance, banks can improve risk management, leading to more informed lending decisions and increased resilience. Transparent disclosures also attract investors seeking sustainable investments, while strategic planning that considers climate risks fosters long-term sustainability.

For investors, the Framework provides the information needed to assess the financial implications of climate change on potential investments. Through the issuance of the Framework, the banking sector in Kenya is well poised to play a pivotal role in fostering a more resilient and sustainable future. The Framework has adopted sophisticated methodologies for risk assessment and management, and has broader reporting requirements such as those set out in the Taskforce on Climate Disclosures (TCFD).

The Framework highlights the exposures of the banking sector’s credit portfolios to “inherent” climate–related risks. These risks can materialize in the short–term, medium–term and/or in the long–term and are largely classified into either physical or transitional risks. With respect to climate governance, CBK has adopted an expectation that is “fit for purpose”. That is ensuring that proper governance structures are in place to properly assess climate–related risks and opportunities, take appropriate strategic decisions to manage them, and determine relevant goals and targets along with progress monitoring mechanisms.

Under the Framework, banks are required to have in place robust governance arrangements that enable them to effectively identify, manage, monitor, and report the risks they are, or might be, exposed to both on an individual and consolidated basis. Whereas this can take several forms depending on the relevant institution’s business model and other factors, there is a requirement on them to demonstrate how their governance body, which can be materialised in the form of a board, committee within the board structure or equivalent body charged with the responsibility of governance and oversight of climate–related risks and opportunities. In doing so, the nexus between the board involvement and management involvement set out in the Framework is achieved.

In formulating their business strategies, institutions are expected to understand the impact of climate–related risks on the business environment in which they operate. The rationale behind climate–related financial disclosures on strategy is to provide a comprehensive understanding of how an entity manages climate–related risks and opportunities.

Ultimately, the Framework presents various opportunities which may be beneficial to Kenya’s financial sector. It presents an opportunity for market discipline and the sustainable strengthening of financial stability of the markets; the broader reporting requirements help in proactive identification and management of risks which impacts decision- making, and the integration of sustainability–related considerations in operational structures.

Upshot

In our previous article on this topic, published in the 20th Issue of this publication, we made a case for the formation of an African sustainable investment alliance in a bid to chart an African way forward as regards the formulation of a harmonised standard on corporate reporting of sustainability within corporate institutions, green finance and climate–related disclosures. This was against the backdrop of the absence of a framework.

Now that KGFT and the Framework have been issued, their integration is important considering that it shall ensure the inflow of finances in the form of investments, and it shall strengthen the alignment with Kenya’s sustainable agenda, all in a bid to ensure Kenya’s financial system is more resilient.

Kenya now has leaped forward within Africa, joining ranks with South Africa and Nigeria; and has taken the bold step to formulate its own standards and frameworks which it shall rely on to guide its financial sector regarding this issue. The implementation of these Frameworks issued by CBK follow a phased approach which ensures institutions have adequate time to transition and adopt robust internal processes. It additionally aligns with ICPAK’s Roadmap for Adoption of Sustainability Disclosure Standards.

Beginning with a voluntary reporting period, which is currently done by the majority of the Tier–1 banking institutions in Kenya, the ultimate goal is to have mandatory reporting and disclosure beginning on or after January 2028. The successful implementation will require collaborative efforts from various stakeholders such as government, regulators, financial institutions and investors.

This is a major development in the sustainable corporate reporting space in Kenya. This now places Kenya on the forefront and trailblazer against fellow African countries in respect of corporate sustainability.

It is bad business for an Award Creditor (one in whose favour an award has been issued) to find itself faced with a pyrrhic victory i.e., an Award that cannot be satisfied on account of an absence of assets belonging to the Award Debtor (the party against whom the Award has been issued). No one wants to throw good money after bad money, not to mention the wasted time and resources that would be involved in what would be a futile exercise.

As such, prior to commencing arbitral proceedings, it is expected that a diligent litigant will have engaged an inquiry agent to establish the existence and adequacy of assets that can be realised to satisfy an arbitral Award obtained in its favour.

Where assets have been identified, monitored and/or preserved during the pendency of arbitral proceedings, enforcement is generally straightforward. Unless there is a setting aside application or other serious legal challenge to enforcement, the process simply involves applying for recognition and enforcement of the arbitral Award in the jurisdiction where the Award Debtor holds assets, followed by the realisation of those assets to satisfy the Award. In some cases, the Award Debtor has assets and realisation of those assets to satisfy the arbitral Award is not difficult. This is the ideal enforcement scenario. However, for a number of reasons, most arbitrations do not necessarily commence in that neat and tidy fashion.

In most cases, diversion of assets or insolvency of the Award Debtor will be discovered at the tail end of the arbitration when an Award has been issued. The reasons for the late discovery of diversion or the insolvency of an Award Debtor could be because there is some sort of urgency in commencing the arbitration and no time to undertake the preliminary steps discussed above; a looming limitations period or time bar; the cost of undertaking an asset inquiry may be prohibitive; or the diversion of assets and insolvency occurs in the course of the arbitration or after the issuance of an Award, amongst many other reasons.

In such a scenario, there are a number of options that may be available to the Award Creditor as discussed below:

  i. Insolvency Proceedings

Insolvency proceedings in Kenya include liquidation, administration, receiverships, Company Voluntary Arrangements (CVA) and Scheme of Arrangement (SOA). On the face of it, insolvency proceedings do not seem ideal as an Award enforcement tool in view of the ranking of creditors, given that the debt arising from an arbitral Award is always considered an unsecured debt and can only be settled after priority debts such as taxes, insolvency costs and secured creditor debts have been settled.

However, insolvency proceedings can prove to be a useful and effective enforcement tool for the disclosure and access to accurate information as to the Award Debtor’s assets and liabilities, including their location. It also allows for discovery of the existence of voidable transactions in the case of fraud or dissipation of assets by the directors of the Award Debtor, which may allow the insolvency practitioner (IP) to pursue the directors personally for the Award or unwind (or claw back) fraudulent or asset-diverting transactions.

However, when considering using insolvency proceedings as an enforcement tool, the following factors should be taken into account:

• The existence of priority or competing creditors vis-à-vis the availability of sufficient assets within the jurisdiction to settle the collective liability of all creditors.
• Whether the country that the award is to be enforced in is a signatory of the New York Convention or the United Nations Trade Commission on International Trade Model Law on Cross-Border Insolvency, which allows for the recognition of foreign insolvency practitioners.
• The type of insolvency proceedings is also a key consideration. For instance in Kenya, unsecured creditors have a better chance of recovery in an administration and CVA process rather than a liquidation or receivership. This is because in administrations, twenty percent (20%) of the assets of the Award Debtor have to be reserved for the unsecured creditors and in CVAs, the priority and ranking of creditors does not necessarily apply.
• The type or the nature of the asset available for realization in satisfaction of an arbitral Award is also an important consideration. If the assets are in the form of proceeds or receivables and unique assets that cannot be sold in whole but may need to be cannibalised, receivership or administration rather than liquidation may be the preferred enforcement mechanism.
• The amount of control that the Award Creditor has over the preferred insolvency process. The more control the Award Creditor has in the insolvency process the more likely it is to achieve its objective to enforce its arbitral award. There is less control over CVA proceedings in comparison to administrations, receiverships and liquidations, as this process is controlled entirely by the Award Debtor’s directors.
• There may be some benefit in first mover advantage i.e., where the Award Creditor is involved in the selection and appointment of the IP rather than relying on another creditor to appoint the IP. This will ensure that the appointed IP is experienced, professional and has a clear understanding of his or her role and obligations and the objectives of the Award Creditor.

One may also consider selecting IPs from the same firm across various jurisdictions to allow for a coordinated approach where the assets of the insolvent Award Debtor are scattered across various jurisdictions.

Other than the foregoing, some other important considerations include: the requirement for leave of the court to commence or continue enforcement proceedings against an insolvent Award Debtor; whether one can commence insolvency proceedings prior to recognition of the award i.e., will it be considered a proven unsecured debt for purposes of ranking; whether the settlement of an arbitral award by an insolvent Award Debtor can be considered an unfair preference; and whether shadow directorships have been created.

One of the ways in which one can attempt to enforce an arbitral award against the assets of a related third party, such as a subsidiary of the Award Debtor, is by placing the parent holding company in liquidation, administration or receivership, which allows the IP to take control of the board of the parent company, which in turn controls the board and assets of the asset or receivable-rich subsidiary.

  ii. Enforcement Against Related Third-Parties

Enforcement against a related third-party can be considered in circumstances where the Award Debtor is a holding company of an asset-rich or receivable-rich subsidiary. However, separate corporate personality is the biggest obstacle to an attempt to enforce an arbitral award against a third-party entity as opposed to an insolvent Award Debtor. Most Commonwealth jurisdictions still uphold the sanctity of the separate corporate personality of a company save in very limited exceptional scenarios.

One of the ways in which one can attempt to enforce an arbitral Award against the assets of a related third-party, such as a subsidiary of the Award Debtor, is by placing the parent holding company in liquidation, administration or receivership, which allows the IP to take control of the board of the parent company, which in turn controls the board and assets of the asset or receivable rich subsidiary.

Courts may also issue tracing, preservation and vesting orders against the assets of subsidiaries or special purpose vehicles (SPVs) of an insolvent holding company that is an Award Debtor on grounds that the funds that were paid by creditors to the Award Debtor were fraudulently invested in the subsidiaries and SPVs and the Award Debtor was merely a shell.

Courts may also pierce the corporate veil of an Award Debtor and its subsidiaries in the case where it can be demonstrated that an Award Debtor fraudulently diverted or transferred its assets to related third party entities just before or in the course of the arbitral proceedings with a view to defeating or frustrating the enforcement of a valid arbitral Award against the Award Debtor.

  iii.  The Appointment of an Equitable Receiver

The Civil Procedure Rules of most Commonwealth countries al- low for the appointment of an equitable receiver over any property of the Award Debtor (assuming that recognition of the Award has been granted and it is now a Decree of the Court) where it is just and equitable to do so. In this case, one may apply for attachment or a charge and collection of dividends of the shares held by the Award Debtor in an asset or receivable rich subsidiary.

Upshot

Based on the foregoing, it is plausible for an Award Creditor to enforce an arbitral Award by instituting insolvency proceedings against the Award Debtor or its asset or receivable-rich related third-parties; and through the appointment of an equitable receiver.

Whatever means of enforcement are eventually resorted to, an Award Creditor is better placed when it has various viable options available to it, as it through the exercise of such options that the fruits of the Award might ultimately be realised.

The world observes World Intellectual Property Day on the 26th of April each year. This year’s theme, “Intellectual Property and Music: Feel the Beat of IP”, highlights the interrelation of legal protection and creativity. Strong and effective intellectual property (IP) laws are crucial as streaming platforms grow, and artificial intelligence joins human artists in music creation. These laws not only support a thriving creative economy but also preserve cultural heritage and ensure fair compensation for artists.

Copyright in Musical Works

Copyright finds its foundational protection in law under the Constitution of Kenya, 2010 as follows:

1. i) Article 260 – which includes IP in the definition of property.
2. ii) Article 40 (5) – where the State is obligated to support, promote and protect the intellectual property rights of the people of Kenya.

iii) Article 11 (2) (a) and (c) – where the State is called upon to promote all forms of national and cultural expression through inter alia, literature, the arts and promote the intellectual property rights of the people.

With constitutional underpinning as set out above, IP is further entrenched into Kenyan law under the Copyright Act, 2001 (the Copyright Act), under which any musical composition and its lyrics are protected automatically from the moment the lyrics are written down, recorded or otherwise reduced to material form. This protection comprises two sets of rights.

Firstly, economic rights allow creators to control the reproduction, distribution, public performance, and digital streaming of their work, ensuring they can earn from broadcasts, downloads, or live performances.

Secondly, moral rights guarantee that the creator’s name remains attached to the work and protects it from distortions or derogatory treatment.

Together, these rights acknowledge that music has both a commercial value and a deeply personal dimension. The Court’s award of KES 4 Million to the well-known artist Nonini for the unauthorized use of his song “We Kamu”, as reported in the Business Today on 6th September 2024, underscores that copyright infringement carries real financial consequences.

Related Rights

Beyond composers and lyricists, Kenyan law also protects the contributions of performers, producers, and broadcasters. Performers i.e., vocalists, instrumentalists, or dancers, can authorise or refuse recordings and broadcasts of their live acts, securing payment whenever those performances are captured. Producers of sound recordings own rights in the resulting phonograms, whether on compact discs or in digital file form. Broadcasters hold rights in their transmission signals, preventing unauthorised retransmission.

By way of example, in Beyoncé’s widely acclaimed 2018 Coachella performance, later streamed globally on Netflix in 2020, her related rights as a performer were fully engaged. She held the exclusive right to authorise the recording and communication of her stage act, so no lawful recording or streaming could occur without her consent and a royalty arrangement. Netflix, as producer and broadcaster, would have secured licences for both the phonogram rights in the audiovisual work and the rebroadcast rights in the transmission signal.

In the Kenyan context, such licences can be administered through Collective Management Organisations (CMOs) such as the Performers’ Rights Society of Kenya (PRISK), which is licenced by the Kenya Copyright Board (KECOBO) established under the Copyright Act, and similar organisations which would collect the agreed fees and disburse them to the artist and any accompanying musicians, dancers or supporting artists.

However, as was recently highlighted by the African Union’s Goodwill Ambassador Nikita Kering at the Africa Creative meeting held in Addis Ababa, performers often struggle with opaque payment systems from CMOs, highlighting the urgent need for greater transparency and accountability within these bodies.

Economic Rationale

IP law seeks to balance two goals: it incentivises artists by granting them exclusive rights for a limited term, typically the author’s life plus fifty (50) years as per section 23 (2) of the Copyright Act, while eventually enriching the public domain once those rights lapse. This approach rewards creativity and encourages further innovation and, at the proper time, makes cultural treasures freely accessible. International Agreements such as the Berne Convention for the Protection of Literary and Artistic Works (the Berne

Convention), to which Kenya is a signatory, and Article 40 (5) of the Kenyan Constitution embrace this balance, recognising IP protection as both a private right and a public benefit.

Creating Value

Owning copyright is just the first step; real value lies in how rights are commercialised. Artists must manage their works strategically by releasing recordings through official channels to prevent piracy, negotiating licences for royalties, and using cross-licensing to expand into new markets. These arrangements, including performance fees, mechanical royalties, and synchronisation licences, help turn musical ideas into sustainable income.

Forms of Exploitation

Musical IP is most commonly monetised through licensing or assignment. A licence allows a rights owner to authorise another party to use the work, such as for streaming, public performance or synchronisation, in exchange for royalties. Exclusive licences give rights to one licensee and exclude others. Sole licences give rights to the licensee while allowing the owner to use the work. Non-exclusive licences allow multiple users at the same time.

Key contractual elements of licenses include precise definitions, clear scope and territorial limits, sub-licensing terms, consideration structures (fixed fees, running royalties or hybrids), confidentiality, and provisions on term, termination, warranties, indemnities, and dispute resolution.

By contrast, an assignment transfers full ownership of IP rights, extinguishing the original owner’s title in return for upfront or ongoing compensation. Cross-licensing, where parties exchange reciprocal rights to each other’s catalogues, enables broader distribution and collaborative ventures.

In all cases, well-drafted agreements help creators and rights holders navigate digital markets, secure sustainable income, and adapt to new distribution models and regulations. CMOs negotiate licences with radio stations, venues, and digital platforms, and allocate royalties based on usage data. Streaming services increasingly use automated systems to track plays and make payments, often through CMOs or direct contracts with rights holders.

Case Law

Recent court decisions have clarified how Kenyan IP law applies in practice. In Music Copyright Society of Kenya v Kenya Copyright Board & Others [2024] KECA 1172 (KLR), the Court considered whether the Music Copyright Society of Kenya (MCSK) was a CMO. MCSK argued that it was not, while KECOBO maintained that licensing as a CMO was necessary for MCSK to administer its members’ rights. The Court ruled in favour of KECOBO, finding that MCSK fits the definition of a CMO under the Copyright Act.

It also held that the collective management framework is a reasonable limit to the freedom of association and the right to property.

The decision highlights the importance of CMOs for the effective management and licensing of copyright works, especially where individual enforcement is impractical. In contrast to rights relating to other creative areas like books and other literary works, musical works are used by many users at different times and places, making individual monitoring and remuneration collection unfeasible.

Direct enforcement of their rights would be beyond the individual right holders, as it would be a logistical horror. The collective management thus provides a practical solution by enabling rights holders to exercise their rights indirectly through CMOs.

In Kimani v Safaricom Ltd & Others [2023] KEHC 20085 (KLR) (the Bamboo Case), the plaintiff, a popular Kenyan artist known as Bamboo, sued over the unauthorised use of his songs “Mama Africa”, “Yes Indeed”, and “Move On”. The High Court held that digital platforms cannot rely on indemnity clauses to shield themselves when distributing unlicensed music. The Court found the defendants had infringed Bamboo’s copyright and awarded him KES 1.5 Million per song as general damages.

The case underscores the need for musicians to secure proper contracts before their works are used, and for distributors to conduct due diligence on licensing. It also affirms that artists whose rights are infringed are entitled to seek legal redress and compensation.

In Omare v Safaricom Limited & another [2024] KEHC 875 (KLR) (the Omare Case), the High Court dismissed gospel musician Moffat Achoki Omare’s copyright infringement claim against Safaricom and Liberty Afrika Technologies. The claim concerned the alleged unauthorised distribution of his songs on the Skiza platform. The Court found that Omare had assigned his performing and mechanical rights to MCSK. MCSK then licensed Liberty Afrika, which licensed Safaricom. This chain of authorisation insulated both companies from liability.

Unlike in the Bamboo case, where the defendants were found liable for distributing works without proof of licence or assignment, the Court found no infringement because the entire authorization process chain of authorisation was properly documented. Omare did not challenge MCSK’s royalty distribution or prove any unauthorized by MCSK nor proved any unauthorised use of his works. The Court dismissed the suit with costs and reaffirmed the legal importance of formal intellectual property assignments.

Outro

Effective protection and strategic exploitation of musical IP underpin both creative vitality and economic success. Through structured licensing, assignments, collective management, and enforcement, rights holders can turn artistry into sustainable income.

Micro, Small and Medium Sized Enterprises (“MSMEs”) are touted as the foundational block of global economy. Indeed, MSMEs play a critical role in acceleration of sustainable growth and innovation in developed and developing economies around the world. To create awareness and highlight the crucial contribution of MSMEs in propelling economic growth, spurring technological innovation and expansion of the job economy globally, the United Nations General Assembly on April 2017 via resolution (A/RES/71/279) designated June 27^th as MSME day.

The MSME day is dedicated to the recognition and uplifting of businesses that form the backbone of global and local economies. This demonstrates the important role MSMEs play in enhancing technological innovation, expanding the economic empowerment space for women, youth and vulnerable groups, enhancing technological innovation, entrenching entrepreneurship culture and mitigation of job creation crisis especially in developing countries like Kenya.

With this perspective as our backdrop, then it is important to appreciate the thinking that informed the theme of this year’s MSME day – enhancing the role of Micro-Small and Medium-sized Enterprises (MSMEs) as drivers of Sustainable Growth and Innovation.

This year’s theme highlights the role of MSMEs as conduits of accelerating sustainable growth and innovation, the theme resonates with the imperative need to create an environment that supports MSMEs to effectively perform their roles, both those in the formal and informal economic sectors and demonstrates MSMEs potential, in pursuit of achieving the United Nations Sustainable Development Goals (SDGs). This, therefore, reinforces the need to create legislative and policy frameworks that are primarily tailored to empower MSMEs and accentuate their role is critical.

This begs the question, how has the role of MSMEs been enhanced in Kenya through legislative and policy frameworks?

Policy and Legislatives Interventions for MSMEs in Kenya

Policy Interventions Background

In Kenya, MSMEs are without any equivocation the bedrock of the economy. According to data from the Ministry of Co-operatives and Micro, Small and Medium Enterprises (MSMEs), MSMEs contribute to about 30% of Kenya’s Gross Domestic Product (GDP), and account for over 90% of business enterprises in the private sector and 93% of the total labour market. These statistics lends credence to the pivotal role MSMEs play in economic development in Kenya, it underscores the importance of pursuing legislative, policy and institutional initiatives that are specifically tailored to enhance the role of MSMEs in pursuit of achieving sustainable growth and innovation.

Kenya has been on trajectory of formulating policy interventions that were designed to enhance the role of MSMEs. A case in point is the Sessional Paper No. 10 of 1965 on African Socialism and its application to planning in Kenya, which was a conceptual framework that led to establishments of Kenya Industrial Estates (KIE). KIEs primary role was to afford promotion of indigenous enterprises through funding and capacity building of MSMEs. The upshot of this was mushrooming of MSMEs in Kenya.

Since then, Kenya has formulated various policies interventions which focus on entrenching recognition of the critical role of MSMEs in spurring economic development in Kenya. The country has had policy papers that assign priority in creation of an enabling business environment for MSMEs in Kenya, through expanding access to funding in the Jua Kali sector, policy interventions that are heavily inclined towards formulating initiatives that enhance inclusion of MSMEs in public procurement, with the objective of creating availability of markets for MSMEs products or services.

On innovation, Sessional Paper No. 2 of 2005 on Development of Micro and Small Enterprises for Wealth and Employment Creation for Poverty Reduction outlined a policy framework that encouraged research with the aim of entrenching uptake of innovation, to enable MSMEs in Kenya scale their share of export and domestic markets in the country. Additionally, on 27th June 2021, the government launched Sessional Paper No. 05 of 2020 on Kenya Micro and Small Enterprises Policy for Promoting Micro and Small Enterprises (MSEs) for Wealth and Employment Creation. This policy framework focuses on technological advancement in the MSEs sphere in Kenya, with the aim of facilitating growth and development of MSEs that can compete efficiently, with their peers in the region and across the world.

The current policy framework Micro, Small Enterprise (MSE) 2020 Policy was formulated with the foresight to address the following challenges that are afflicting MSMEs in Kenya: expanding MSMEs access to the domestic and global market, implementation of programs that are tailored to develop the MSME sector and improving the ease of access to affordable and decent infrastructures among other challenges. Addressing these challenges will have the twin objective of promoting sustainable growth and promoting innovation in line with this year’s theme.

Currently, the State Department for Micro, Small and Medium Enterprises (MSMEs) Development is embarking on consultative process and conducting public participation forums across the country for the draft MSME Policy 2025, which will review the MSME Policy 2020 and propose various amendments to the Medium and Small Enterprises Act, CAP 499C.

In summary, despite the bottlenecks that MSMEs face such as inhibited financial inclusion, poor work conditions, global funding issues, supply chain bottlenecks and political tensions that disrupt business, it is clear that there is an enabling legislative and policy framework in place, designed to enhance the role of MSMEs in sustainable growth and innovation.

Legislative Interventions

Legislative and regulatory support are critical in enhancing the performance of MSMEs to undertake their roles efficiently and effectively while being able to mitigate the various challenges they are faced with.

Kenya has created a legislative environment where MSMEs can sustainably operate with the necessary legal intervention required to assist them navigate the numerous legal and economic challenges at their various stages of their development.

The Impact of the Regulatory Landscape on MSMEsin Kenya

Regulatory compliance is a major challenge for various MSMEs. This process requires the registration and formalization of business entities including entity incorporation, registration of the relevant operational licenses at a governmental and sectoral level.

Excessive regulatory compliance requirements can be a hindrance to the growth and development of MSMEs in Kenya. The multi-layered compliance requirements have the effect of inhibiting the pace of development of enterprises and frustrating the achievement of sustainable growth and innovation. This buttresses the need for legislation and policy that are designed to ease of compliance for MSMEs.

For instance, if an MSME is required to comply with multiple licensing requirements during registration, their competitiveness in the domestic, regional or even global market are inhibited. The need to simplify compliance requirements for MSMEs, cannot be underscored adequately.

However, there have been concerted efforts to ease compliance requirements especially from the MSME perspective.

i)  The Effect of Unified Business Permit (UBP) in expanding the ese of compliance by MSMEs

County governments have implemented the uptake of a Unified Business Permit (UBP) as opposed to multiple business permits, to mitigate against the complexity of navigating compliance requirements by MSMEs.

The use of UBP is a marked departure and reprieve for MSMEs, as previously they had to seek multiple permits with respect to a single entity. The UBP eases compliance of registration of MSMEs by consolidating various permits into a single permit.

The attendant effect of this is that it simplifies business permits registration processes by MSMEs and affords convenience in application of permits. This boosts the functioning of MSMEs and their competitiveness and has the ripple effect of enhancing the role of MSMEs, in attaining sustainable growth and innovation.

ii) Various tax laws changes that afford MSMEs latitude to meet tax obligations

For many MSMEs, especially those operating in the informal or semi-formal sectors, navigating the tax landscape can be daunting and confusing.

However, Kenya has implemented tax changes with the objective of improving tax obligations compliance by MSMEs operating in Kenya, thereby creating a tax environment that is good for development of MSMEs.

In consideration of the fact that the bulk of MSMEs operate in the informal sector without access to formal accounting. For example, Turn Over Tax (TOT) was introduced to facilitate payment of taxes by small business, whose annual turnover is between KES1,000,000 – KES 25,000,000.

TOT simplifies tax compliance for MSMEs, which has the attendant effect of encouraging compliance among MSMEs which previously struggled to navigate complex tax obligations.

Additionally, the Kenya Revenue Authority (KRA) in effort to enhance tax compliance by MSMEs, recently launched the Micro & Small Taxpayers (MST) department. This Department addresses challenges that MSMEs face in complying with their tax obligations, while pursuing the objective of leveraging digital tools in payment of taxes and simplifying tax compliance by MSMEs, while also providing customized tax assistance to MSMEs.

iii)Robust Intellectual Property (IP) laws afford MSMEs Global Competitive Edge

While MSMEs in Kenya continue to innovate and develop original brands, products and software, many do so without taking the necessary steps to secure their intellectual property rights for example, trademarks, patents, copyrights, or trade secret protection. This oversight can result in the loss of competitive advantage or exposure to intellectual property theft and infringement. Having robust intellectual property laws guarantee brand differentiation of products produced by MSMEs and which affords them a competitive edge in the global market.

iv)Data Protection

Regardless of their size of operation, MSMEs are required to comply with the Data Protection Act, CAP 411C, Laws of Kenya. This is particularly critical for businesses engaging in e-commerce or operating digital platforms that collect or process personal data online. Consequently, failure to comply with data privacy obligations can result in regulatory sanctions and erode consumer trust altogether.

v)Access to Finance

While Kenya has pioneered innovative funding platforms such as mobile-based microfinance and fintech innovation, many businesses are unable to fully benefit from them due to the lack of comprehensive legal documentation.

Financing agreements are often inadequately structured, with unclear repayment terms, limited collateral frameworks, or ambiguous shareholder arrangements in equity funding scenarios. Such gaps can potentially deter investors, and lead to contractual disputes.

Conclusion

The 2025 MSME Day reminds us that MSMEs are thriving and reshaping Kenya’s economic future. With supportive legal frameworks and collaborative partnerships, Kenyan MSMEs can continue to drive innovation, foster inclusion, and promote sustainable growth.

At Oraro & Company Advocates we celebrate the resilience and creativity of MSMEs and renew our commitment to providing the legal expertise they need to succeed. We continue to work with entrepreneurs to ensure that they have the opportunity and support to turn their concepts into thriving businesses that uplift families, communities, and the nation at large.

Some workplace policies may seem fair on the surface but can unintentionally disadvantage certain groups. For instance, requiring all employees to work late may disproportionately affect those with care-giving responsibilities, such as parents or those caring for elderly relatives. This is an example of indirect discrimination, where seemingly neutral rules create unequal impacts.

Definition of Indirect Discrimination
Indirect discrimination in the workplace arises when the application of neutral policies or rules unintentionally results in unequal treatment of particular groups. Often, employers may be unaware that such policies could disadvantage certain segments of their workforce. The discriminatory impact becomes apparent when these policies affect individuals disproportionately, based on shared characteristics.

Direct vs. Indirect Discrimination
The key distinction between direct discrimination and indirect discrimination lies in the evidence required to establish unfair treatment. Direct discrimination requires a clear causal link between the less favourable treatment and a protected characteristic, such as race or gender. Conversely, indirect discrimination exam- ines whether a policy, criterion, or practice (PCP) disadvantages a group and, by extension, an individual, regardless of the original intent. Understanding the nuances of indirect discrimination in the workplace requires a careful examination of legal frameworks and the core characteristics of discrimination.

Legal Framework on Discrimination in Kenya

Article 27 of the Constitution of Kenya, 2010 (the Constitution) guarantees every person equality before the law, including equal protection and equal benefit of the law. It affirms the right to fully enjoy all fundamental freedoms and ensures equal participation for both men and women in all aspects of life.

The provision also mandates the state to take legislative and policy measures, such as affirmative action, to address historical injustices and protect against all forms of discrimination.

The enactment of the Employment Act (Cap. 226) Laws of Kenya (the Act) fulfils the state’s constitutional mandate to protect employees against employment discrimination. Section 5 of the Act places upon the employer the responsibility to foster equal opportunities and eliminate discriminatory practices in their employment policies. In reiterating the constitutional grounds for prohibiting discrimination against employees or prospective employees, the Act covers all aspects of employment, including recruitment, training, promotion, and termination.

To address employment inequality, the Act specifies that certain actions by employers are not considered discriminatory. These include affirmative action measures, job requirements based on inherent needs, employment in accordance with national policies, and restrictions necessary for state security. In legal proceedings, employers must prove that alleged discrimination did not occur and was not based on prohibited grounds.Case Study

The key characteristics of indirect discrimination were articulated by the Supreme Court in the case of Simon Gitau Gichuru v Package Insurance Brokers Ltd [2021] KESC 12 (KLR) as follows:

“a.  In none of the various definitions of indirect discrimination was there any express requirement for an explanation of the reasons why a particular provision, criterion or practice put one group at a disadvantage when compared with others.

“b. The contrast between the definitions of direct and indirect discrimination. Direct discrimination expressly required a causal link between the less favourable treatment and the protected characteristic. Indirect discrimination did not. Instead, it required a causal link between the provision criterion or practice and the particular disadvantage suffered by the group and the individual.”

Consider, for instance, the earlier example of an organisation implementing a late-shift policy. While such a policy may appear neutral and non-discriminatory at first glance, a closer analysis reveals its potential for indirect discrimination. This is because the organisation may not have adequately considered the differing societal expectations and realities, particularly those affecting women or other individuals who may be uniquely impacted, as previously discussed.

One of the key issues is safety concerns. Women often face heightened safety risks when travelling at night, including an increased risk of harassment, assault, or general insecurity. This disparity creates an additional layer of vulnerability for female employees compared to their male colleagues.

In addition to safety, cultural norms and domestic responsibilities play a significant role. In many societies, particularly in Africa, women are traditionally expected to take on primary care-giving and household duties. A policy that mandates late-night shifts could, therefore potentially create a conflict between professional and domestic obligations.

Moreover, some cultures impose implicit curfews on women, with societal expectations dictating that they should be home by a certain time. A work policy that disregards these deeply ingrained norms could expose female employees to significant societal pressure or even direct familial conflict. This is not to say that these are the only societal expectations that should be considered, nor that they apply universally to all women. However, these factors illustrate how a seemingly neutral policy could potentially create unintended but significant disadvantages for a specific group, warranting deeper scrutiny.

The Supreme Court in Simon Gitau Gichuru v Package Insurance Brokers Ltd (supra) outlined key principles for identifying and addressing indirect discrimination as follows:

• No explanation requirement: It is enough to show that a PCP results in a disadvantage for a particular group without needing to explain the underlying reasons for this disadvantage.
• Type of discrimination: Direct discrimination involves explicit bias, while indirect discrimination arises from neutral PCPs that disproportionately affect certain groups.
• Diverse causes of disadvantage: Factors like culture, socio- economic status, physical abilities, or education can make it harder for some groups to comply with a PCP.
• Group impact: Not all group members need to be affected. It is sufficient if the PCP disadvantages a significant portion of the group.
• Statistical evidence: Discrimination can be shown through data, such as employment or education statistics.
• Justification: Employers can defend a PCP if it serves a legitimate aim and is proportionate.

Safeguards Against Indirect Discrimination

There are various ways of safeguarding against indirect discrimination as detailed below:

The key distinction between direct discrimination and indirect discrimination lies in the evidence required to establish unfair treatment. Direct discrimination requires a clear causal link between the less favourable treatment and a protected characteristic, such as race or gender. Conversely, indirect discrimination examines whether a policy, criterion, or practice (PCP) disadvantages a group and, by extension, an individual, regardless of the original intent.

1. Neutral and Fair Policies

As established, a policy’s apparent fairness on paper does not guarantee its equitable application to employees. Employers can ad- dress this by conducting impact assessments, or by offering training and gathering feedback from affected employees to ensure policies are applied equitably.

1. Reasonable Accommodation

If a policy is found to have discriminatory effects, employers should mitigate the impact by offering reasonable accommodations, such as providing transport for late shifts. However, these accommodations should not cause undue hardship or excessive burden to employers.

In the case of Simon Gitau Gichuru v Package Insurance Brokers (supra), the Court held that an employer must provide reasonable accommodation to a sick or incapacitated employee, or demonstrate that providing such accommodation would cause undue hardship.

Additionally, in Kenya Plantation and Agricultural Workers Union v Rea Vipingo Plantations Limited & Another [2015] eKLR, the court clarified that reasonable accommodation goes beyond the grant and exhaustion of sick leave. It may entail temporarily modifying the job to suit the employee’s medical restrictions, limiting working hours, physical modifications and reassignment of an employee to a different job within the same enterprise. The Court further affirmed that the duty to provide reasonable accommodation to employees is predicated on the right to equal opportunity.

iii.  Anti-Discrimination Training and Awareness

Indirect discrimination can manifest in various forms in the workplace, even among employees, which could spell trouble for the employer. As such, imparting the knowledge of such discriminatory instances in the employees is a great first step to mitigating the frequency of complaints for discrimination purposes.

For instance, the line between casual workplace banter and indirect discrimination can be subtle. Employers must evaluate the context and history of interactions to determine whether a comment is discriminatory or simply a friendly exchange among colleagues.

1. Clear Complaint and Redress Mechanisms

Employers should implement a clear anti-discrimination policy that outlines reporting procedures and how complaints will be handled.

Additionally, regular audits are necessary to ensure these policies are effectively applied and positively impact the workplace.

Conclusion

Employers have a critical duty to protect staff from all forms of discrimination. This involves creating comprehensive policies that define and address various forms of discrimination. While the article outlines how indirect discrimination can occur and suggests safeguards, it emphasises the need for broader awareness among both employers and employees to fully understand its impact in everyday workplace interaction.

The fashion and textile industry are subject to various environmental, social and governance (ESG) considerations. In recognition of this year’s International Day of Zero Waste, we highlight the environmental challenges posed by fast fashion.

With each season, new fashion trends emerge in stores worldwide, enticing consumers eager to purchase the latest designs as fresh collections and sales become available. This growing demand drives manufacturers to accelerate production, particularly in the age of social media, where news of emerging trends spreads rapidly among users.

While this cycle fuels economic growth, it also exacerbates textile waste, one of the fashion industry’s most pressing environmental concerns. The rapid turnover of clothing – often referred to as “fast fashion” – results in massive amounts of discarded textiles, overwhelming landfills and polluting ecosystems.

Recognising the urgency of addressing textile waste, the United Nations General Assembly at its seventy seventh session held on 14^th December 2022 adopted resolution 77/161 titled ‘Promoting zero-waste initiatives to advance the 2030 Agenda for Sustainable Development’ which proclaimed 30^th March as the International Day of Zero Waste.

This year’s Zero Waste Day focuses on the fashion and textile industry, a sector notorious for its environmental footprint. The initiative highlights scalable solutions that promote circular economies, responsible production and waste reduction.

Like many other nations, Kenya grapples with the environmental and economic consequences related to textile waste. This article examines Kenya’s efforts towards sustainability in the fashion and textile industry.

The Legal and Regulatory Framework governing Kenya’s Fashion and Textile Industry

Kenya has implemented various laws and policies to promote sustainable practices in the textile industry. Additionally, the Ministry of Investments, Trade and Industry oversees the regulation and development of Kenya’s fashion and textile industry, with its key functions including the promotion of industrial growth and enforcement of trade policies.

Kenya’s regulatory framework aims to protect the environment while fostering economic growth in the sector. Some of these laws and policies include:

(a) The Constitution of Kenya, 2010

While the Constitution does not directly regulate the fashion and textile industry, it lays the foundation for sustainability and environmental protection through its provisions. For instance, Article 42 guarantees every person the right to a clean and healthy environment which directly applies to the textile industry by addressing pollution and waste management. Additionally, Article 69(1) mandates the State to ensure sustainable exploitation, utilization, management and conservation of the environment, which includes regulating textile waste and enforcing sustainable practices in textile sourcing, processing and subsequent distribution.

Article 69(2) also obliges every person to cooperate with State organs and other stakeholders to protect and conserve the environment and ensure ecologically sustainable development, reinforcing the need for ethical fashion practices and responsible consumption.

(b) Environmental Management and Co-ordination Act (Chapter 387, Laws of Kenya) (the “EMCA”)

The EMCA was enacted to establish an appropriate legal and institutional framework for the management of the environment and has paved the way for the necessary legal and administrative co-ordination of intersectoral initiatives that are geared at appropriate environmental management. Furthermore, it is guided by principles that ensure that every person is entitled to a clean and healthy environment.

Additionally, the EMCA outlines pollution prevention, waste management, and the protection of natural resources, including biodiversity conservation. It also mandates sustainable development practices and encourages public awareness and local community involvement in environmental decision-making.

Furthermore, the EMCA establishes the National Environmental Management Authority (“NEMA”), under section 7(1), whose primary responsibility is to oversee and coordinate all matters relating to the environment and implement all polices developed with respect to the environment.

Finally, it has also provided for the various enforcement mechanisms, including penalties for non-compliance, and ensures liability for environmental damage.

Overall, the EMCA ensures that waste, including textile waste, is managed responsibly, with an emphasis on minimising harm, promoting recycling and ensuring the sustainability of natural resources.

(c) Sustainable Waste Management Act (Chapter 387C, Laws of Kenya) (the “Act”)

The Act establishes the legal and institutional framework for sustainable waste management, ensuring the realization of the right to a clean and healthy environment.

Pursuant to section 2, the Act defines waste as any substance, material or object intended for disposal, whether or not it can be reused, recycled or recovered. This includes industrial waste, which is particularly relevant to the fashion and textile industry due to the significant waste generated in textile production, distribution and disposal.

Among the objectives of the Act under section 3 is to promote sustainable waste management, which involves efficient resource use to minimize waste generation and maximize recovery, recycling and reuse.

Additionally, section 4 outlines the general principles underlying the Act such as the zero waste principle. According to the Act, this principle mandates that products and processes be designed to: reduce the volume and toxicity of waste and materials; conserve and recover all resources; prevent land-filling and incineration, instead treat waste as a resource that can be harnessed for wealth creation, employment and reduction of pollution.

(d) The Sustainable Waste Management (Extended Producer Responsibility) Regulations, 2024 and the Sustainable Waste Management (Extended Producer Responsibility) (Amendment) Regulations, 2025 (the “EPR Regulations”)

These regulations came into force on 4^th November 2024, pursuant to section 13(3) of the Act, which oblige the Cabinet Secretary for Environment, Climate Change and Forestry to make regulations on extended producer responsibility (“EPR”).

Under section 2 of the Act, EPR is defined as an environmental management approach in which a producer’s responsibility extends beyond manufacturing to the post-consumer stage of a product’s life cycle.

A producer is also defined as an entity that introduces goods, products and packaging into Kenya using authorized means by manufacturing, importing, converting, repackaging or rebranding.

The EPR Regulations are particularly significant for the fashion and textile industry, which faces challenges related to the dumping of second-hand clothes – popularly known as ‘mitumba’ from developed countries. Many of these discarded textiles are often of low quality and end up as waste, burdening Kenya’s waste management systems.

Regulation 3 outlines the object and purpose of the regulations, which include operationalizing the polluter pays principle – ensuring that producers bear the financial and operational responsibility for managing waste associated with their products.

The EPR Regulations apply to producers, EPR compliance schemes and products such as textiles, that negatively impact on the environment, human and animal health due to challenges in reuse, recyclability and recoverability as well as high management costs and associated risks.

Some of the EPR obligations placed upon producers by regulation 5(1) include: registration with NEMA and designing products and packaging materials that minimize waste and are environmentally friendly at the end of their life.

Under Regulation 6, importers of finished products listed in the First Schedule, such as textiles, are required to pay the prescribed fees to NEMA at the point of importation. For instance, the prescribed fee for textiles is KES. 150 per item. Additionally, importers are required to apply for an EPR certificate from NEMA at the time of import. This certificate is a mandatory requirement for clearance and inspection of any products covered under the First Schedule.

The Hidden Costs of Textile Waste

Textile waste in Kenya imposes significant but often overlooked economic, environmental and social burdens. The high volumes of discarded textiles overwhelm waste management systems, leading to increased disposal costs. Additionally, the dominance of second-hand clothing has weakened local textile production, resulting in job losses and missed opportunities in recycling and up-cycling industries.

From an environmental perspective, textile waste contributes to air, land and water pollution. The manufacturing process emits harmful pollutants at various stages from fibre production and dyeing to transportation and disposal. Synthetic fibres release greenhouse gases when processed, while chemical treatments introduce toxic substances into the air and water. Additionally, the burning of textile waste – a common practice due to poor waste management – worsens air quality and poses health risks to communities.

Socially, informal waste handling exposes vulnerable groups to hazardous working conditions and exploitation. Many individuals, particularly in low-income areas, rely on sorting and reselling textile waste under unsafe and unregulated conditions, leading to long-term health complications, with synthetic fibres and chemicals contaminating soil, rivers and groundwater.

Conclusion

The fashion and textile industry play a vital role in Kenya’s economy, but its environmental and social costs cannot be ignored. The rapid rise of fast fashion and second-hand clothing imports has led to a surge in textile waste, straining waste management systems, polluting the environment and undermining local textile production. The hidden costs of textile waste – from air, water and land pollution to economic losses and health risks – underscore the urgent need for sustainable solutions.

Kenya has made strides in addressing these challenges through legal and policy frameworks including the Sustainable Waste Management Act and the EPR Regulations. These regulations aim to promote responsible production, encourage recycling or up-cycling and hold producers accountable for waste management. However, the success of this framework will depend on effective enforcement, industry compliance and public awareness.

At the same time, the global shift towards sustainable fashion presents an opportunity for Kenya and other developing nations. Governments, businesses and consumers are increasingly adopting circular economy models, ethical production and responsible consumption. Initiatives such as the European Union’s Strategy for Sustainable and Circular Textiles 2022 which seek to make textiles more durable, recyclable and free from hazardous substances and stricter regulations in developed markets are shaping the global textile trade. Kenya’s waste management policies align with this trend, but greater enforcement, investment and innovation will be key to ensuring that sustainability becomes the standard rather than the exception.

According to Lord Hailsham in Chief Constable of the North Wales Police v Evans [1982] 1 WLR 1155, judicial review is not intended to deprive or deny relevant authorities of the powers and discretions properly vested in them by law and to substitute the courts as the bodies making the decisions. It is meant to ensure that the relevant authorities use their powers properly. Nowhere is this principle more crucial than in the realm of tax administration. In Kenya, the interface between the Kenya Revenue Authority’s (KRA) duty to collect and administer revenue and the taxpayer’s right to fair administrative action is a delicate one. Judicial review stands as a critical safeguard which ensures that KRA exercises its powers within the bounds of expeditious, efficient, lawful, reasonable and procedurally fairness.

However, the accessibility and practical efficacy of judicial review in the context of tax disputes remain highly contested. With recent Court decisions interpreting section 3 of the Tax Procedures Act (Cap. 469B) Laws of Kenya (TPA), as granting the Tax Appeals Tribunal (the Tribunal) the jurisdiction to resolve disputes arising from any other decision made under a tax law, there is now a narrow window for tax disputes to find their way to the judicial review Courts. As a result, this article therefore cautions taxpayers of the tendency to institute judicial review cases against KRA unless it is in the exceptional circumstances.

The State of Play

In Kenya, Courts approach judicial review in tax disputes with a nuanced, case-by-case analysis. The current jurisprudence from the judicial review Courts indicates that Courts are reluctant to hear tax disputes unless all statutorily available avenues for resolving such disputes have been exhausted or are inapplicable (see section 9(2) of the Fair Administrative Action Act, 2015 (FAAA)). Tax disputes will only be heard and determined by a judicial review Court in exceptional circumstances, where an applicant seeks and is granted an exemption from the obligation to exhaust available remedies, if the Court considers such an exemption to be in the interest of justice (see Section 9(4) of the FAAA). Put simply, current jurisprudence from judicial review Courts shows that disputes will only be heard and decided in those Courts if:

• There is no redress avenue available in the tax statutes and where there is, the applicant has exhausted those available avenues.
• The applicant has made a case for exemption from the doctrine of exhaustion.

The Court at paragraphs 89 of the decision in Republic v Insurance Regulatory Authority; Old Mutual General Insurance Kenya Limited (Exparte Applicant) and in Tropic Air Limited [2025] KEHC 4570 (KLR) determined that judicial review can only be considered if the party has complied with the above set parameters.

A critical question is what factors do Courts consider when determining whether a tax dispute can be heard and determined in judicial review Courts?

Key Considerations for Judicial Review

1. Jurisdiction

The first and most fundamental consideration is jurisdiction. Without it, the Court has no choice but to down its tools. Accordingly, a Court faced with an application for judicial review in tax disputes must first determine whether the applicant has exhausted the statutory avenues for redress before assuming jurisdiction.

The resolution of disputes is provided for in the TPA as read together with the Tax Appeals Tribunal Act (Cap. 469A) Laws of Kenya (TATA). More specifically, sections 51 to 54 of the TPA provide a comprehensive procedure that ought to be followed by a taxpayer in the resolution of tax disputes. It begins with an assessment and ends with an appeal to the Court of Appeal with a provision for out-of- Court settlement.

Section 3 of the TPA also defines an appealable decision to include an objection decision and any other decision made under a tax law other than— (a) a tax decision; or (b) a decision made in the course of making a tax decision. The phrase any other decision under tax law has been used by courts to clothe the Tax Appeals Tribunal with jurisdiction to hear a taxpayer aggrieved by any decision of the KRA, including those relating to exemption certificates, issuance of KRA PIN, and various other administrative action. A recent example of the interpretation of section 3 of the TPA is in Saleh Mohammed Trust v Commissioner of Domestic Taxes [2025] KEHC 2169 (KLR) where declining an application for renewal of a tax exemption certificate was considered an appealable decision.

Exception to the general rule

The doctrine of exhaustion is subject to several exceptions. Courts have developed guiding principles for determining when an applicant may be permitted to institute judicial review proceedings without exhausting the available remedies. In such circumstances, the applicant must seek the Court’s exemption from pursuing other available remedies. To succeed in this request, the applicant must establish two (2) fundamental elements, as set out in Havi v Kenya Revenue Authority [2024] KEHC 3006 (KLR). The exemption may be granted if the following conditions are met:

• An applicant’s case presents what, in the eyes of the law, constitutes exceptional circumstances.
• It is in the interest of justice that the applicant need not exhaust the available alternative remedies.

What are the exceptional circumstances?

The Court in Krystalline Salt Limited v Kenya Revenue Authority [2019] KEHC 6939 (KLR), stated that what constitutes exceptional circumstances depends on the facts of each case and it is not possible to have a closed list.

The requirement for the circumstances to be exceptional means they must go well beyond the normal run of circumstances typically found in most cases. The circumstances do not have to be unique or very rare, but they must genuinely be the exception rather than the rule. Judicial review Courts have interpreted exceptional circumstances to mean situations that are out of the ordinary and render it inappropriate for the Court to require an applicant to first pursue the available internal remedies. The circumstances must in other words be such as to require the immediate intervention of the Court rather than to resort to the applicable internal remedy.

1. Cause of Action and Remedies

In addition to the issue of jurisdiction and exemption, parties must also carefully consider the nature of the cause of action and whether the issue for review is a merit based or a procedural review issue. This determination is central as it not only shapes the pleadings and the procedural route a party should take but also governs the scope of reliefs that may be granted.

The Supreme Court in Dande & 3 others v Inspector General, National Police Service & 5 others [2023] KESC 40 (KLR) affirmed that while judicial review may be pursued through a dual approach being the merit review and procedural review, the applicable approach must be ascertained from the pleadings and procedure made at the outset of the proceedings.

Another instance of this principle at play was observed in Mutiso v Commissioner of Domestic Taxes [2023] KEHC 22421 (KLR) where the High Court distinguished the taxpayer’s claim as one alleging a violation of constitutional rights, rather than a request to review a tax refund decision. It is therefore apparent that some of the prayers sought can only be granted by the High Court. Redress such as the declaration of unconstitutionality of a provision in law and remedies towards violation of human rights cannot be obtained at the Tribunal. Therefore, the taxpayer has the option to directly address such disputes in the High Court.

Conclusion

Judicial review remains a critical tool for upholding legality and procedural fairness in tax administration. Its applicability in tax disputes is influenced by the courts’ discretion in deciding whether or not to intervene. For it to serve its intended purpose, Courts must strike a careful balance of protecting taxpayers’ rights without undermining the integrity of the tax system.

As such, a case-by-case analysis, taking into consideration the factors discussed above, is essential in determining whether judicial review remains an effective remedy or an exceptional recourse. Ultimately, the onus lies with the courts to exercise their discretion judiciously, ensuring that taxpayers have access to justice in an expeditious and efficient manner.