Finance Act 2023 in Limbo Constitutional Ruling Creates Regulatory Uncertainty

The Finance Act of 2023, enacted on 26 June 2023, was declared unconstitutional by the Court of Appeal on 21 July 2024. This ruling comes on the heels of the High Court’s recent decision regarding the Social Health Insurance Act, 2024, casting a spotlight on an increasingly unpredictable regulatory environment and raising concerns about public participation in legislative processes.

Background
The Finance Act, which amended 12 different statutes, faced significant backlash, prompting 11 petitions challenging its constitutionality. On 28 November 2023, the High Court invalidated certain provisions, including amendments to the Kenya Roads Act and the Statutory Instruments Act, as well as the controversial housing levy included in the Employment Act.

The Court ruled that the Finance Bill can only propose changes related to taxes, or public money.
However, the High Court upheld the constitutionality of public participation in the Finance Act’s creation, noting that the National Assembly was not obligated to justify its acceptance or rejection of public comments or to seek concurrence from the Senate.

Appeal and Cross-Appeal
The High Court’s decision was met with seven appeals and three cross-appeals consolidated by the National Assembly and its Speaker against 56 parties. The key highlights of the Court of Appeal’s judgment, after determining the various arguments by the parties, were as follows:

• The constitutionality of the inclusion of the affordable housing levy in the Employment Act was moot as all concerns were addressed in the Affordable Housing Act, 2024.
• Parliament through the Statutory Instruments (Amendment) Bill was complying with the High Court’s decision, rendering further judgment on this point to be functionally redundant.
• Amendments to non-money bills, such as the Kenya Roads Act and Unclaimed Financial Assets, were unconstitutional.
• There is no obligation to seek concurrence from the Senate on money bills, and specifically the Finance Bill.
• The introduction of 18 new provisions post-public participation was ruled improper, as these provisions were not subjected to public input and did not follow full legislative processes.
• Parliament must give reasons or justification for rejecting views, insulating this renders public participation illusory.

Arising from the above, the Court declared the entire Finance Act unconstitutional for failing to meet the requirements of public participation.