Court stops sale of 11 State Corporations over legal, public interest concerns

The government’s push to privatise 11 key state-owned corporations has suffered a major setback after the Court of Appeal refused to suspend a High Court ruling that declared the Privatisation Act 2023 unconstitutional.

The ruling means the government cannot proceed with the planned sale of critical public entities such as the Kenyatta International Convention Centre (KICC) and the Kenya Pipeline Company (KPC), pending the outcome of an appeal.

In a decision delivered by Justices Fred Ochieng, Weldon Korir, and Joel Ngugi, the three-judge bench said the government had not shown how its appeal would be affected without suspending the High Court’s ruling.

"The Court cannot make a finding that an appeal would be rendered nugatory based solely on conjecture or speculative reasoning," the judges ruled.

The court held that the public interest favoured maintaining the status quo until the appeal is determined.

The judges warned that allowing the government to go ahead with privatising the targeted entities could result in irreversible consequences.

"Public interest considerations run in the opposite direction since, in the intervening period, should the judgment be suspended, the government may proceed to sell parastatals that are either ‘natural’ or inherent monopolies or are of strategic importance or national interest," the ruling stated.

"Should this happen, both the transfer of functions and costs are likely to be irreversible. Therefore, it is our view that public interest lies in awaiting the determination of the appeal."

The court’s ruling supports the decision made in September 2023 by High Court judge Chacha Mwita, who found the Privatisation Act to be unconstitutional.

Justice Mwita said the law was passed without proper public involvement, and the proposed sale of the KICC violated the Constitution and existing heritage laws.

"The decision to privatise the iconic KICC, a national monument, contravenes Article 11(2) of the Constitution and is therefore unconstitutional, unlawful, null and void," he ruled.

The Privatisation Act, which was meant to provide a framework for the sale and management of public enterprises, has been challenged for bypassing key constitutional steps, including engaging the public meaningfully before passing laws that affect national assets.

In its request to suspend the High Court ruling, the government claimed that without the law, it would be forced to continue financing underperforming parastatals, which was putting pressure on limited public resources.

"The main and urgent benefit of the Privatisation Act was to provide for a mechanism through which publicly-owned enterprises are to be managed and commercialised in an economically sound way for the benefit of the public," the government argued.

The National Assembly also opposed the High Court judgment, saying the court had misunderstood the concept of public participation.

It claimed the judge went too far by requiring that laws be published in Kiswahili and suggested that Parliament had been unfairly restricted in how it should carry out its work.

"The court misinterpreted the doctrine of public participation, ignored existing mechanisms available to the National Assembly, and undermined its discretion in choosing the appropriate method," the National Assembly submitted.

It also faulted the court for appearing to introduce new rules that had not been established by the Supreme Court, including the demand that laws be translated.