Why creditors cannot auction state assets to recover debts

Government creditors are between a rock and hard place. The government seems unfazed as its suppliers sink into depression, others taking their lives or being auctioned. The suppliers who have dared to go to court and obtained orders to auction government properties to recover the debts are in for a rude shock as the orders are unenforceable. This is according to the recent Supreme Court and Court of Appeal opinion that the 2010 Constitution insulates government properties from being auctioned by debtors. The courts ruled that state organs, being part of the government, are protected from execution proceedings, attachment of their assets and garnishee of their accounts in satisfaction of decrees. In its verdict dated March 25, 2025, the Apex Court confirmed that nothing authorises the arrest, detention or sale of any government ship or aircraft or any cargo or other property or gives any person any lien on any such ship, aircraft, cargo or other properties. The judgement stems from a Court of Appeal verdict dated April 12, 2024, that determined the National Lands Commission (NLC) is a government entity insulated from having its assets attached. NLC sought an advisory opinion to insulate it from having its account and assets attached by Five Star Agency Limited over the compulsory acquisition of land worth sh413,192,500. NLC told the court that its trust compensation account held at the National Bank has, over time, been under sustained attack in the nature of garnishee proceedings to satisfy pending court decrees. The lands commission said a barrage of cases and applications for garnishee orders of its accounts continue to be filed for the numerous decrees pending settlement. Supreme Court Judges Martha Koome, Philomena Mwilu, Mohamed Ibrahim, Smokin Wanjala, Njoki Ndungu, Issac Lenaola and William Ouko said that to be able to manoeuvre such hindrance, a party is expected to obtain an order from a trial court, a certificate of order against the government to execute an order of mandamus compelling payment. "That government under the Government Proceedings Act, Cap 40 Laws of Kenya includes constitutional commissions, such as the applicant (NLC), and it is therefore insulated from execution proceedings, attachment of its assets and/or garnishee of its accounts in satisfaction of a decree under Section 21 and 25 of the Government Proceedings Act," said Justice Koome. The Supreme Court said the garnishee proceedings instituted by Five Star through the notice of motion dated January 20, 2023, and brought under the provisions of Order 23 Rules 1, 2, and 3 of the Civil Procedure Rules, 2010, were incompetent, bad in law and unsustainable. "In our view, the trial court could only issue an order of mandamus after satisfying itself that the said Certificate of Order was issued and served," said Justice Koome. The Apex court overruled Justice Nixon Sifuna's decision dated March 15, 2024, that termed section 21 unconstitutional and discriminatory in the government's favour. While issuing his verdict in Absa Bank Kenya PLC vs Kenya Deposit Insurance Corporation, Justice Sifuna noted that section 22 allows the government to attach and execute against a party who loses a civil claim against it. On April 27, 2023, Justice John Chigiti said that when a judgement has been entered against the government and a monetary decree is issued against it, the state does not enjoy any special privileges with regard to its liability to pay except when it comes to the mode of execution of the decree. Justice Chigiti ruled in a case filed by Omar Ibrahim against the Secretary of the Public Service Commission, Principal Secretary, Ministry for Interior and Coordination of National Government, and the Attorney General for payment of sh.225,854. However, the Appellate Court, in its verdict dated April 12, 2024, held that the procedure to enforce a judgement debt against the government is through judicial review proceedings seeking an order of mandamus that compels the accounting officer of the relevant government agency or department to make the payment. Justices D. Musinga, Mumbi Ngugi, and Ngenye Macharia presided over the case. The judges said that before seeking an order of mandamus, a litigant must obtain a Certificate of Costs 21 days after the order is made and served upon the Attorney General (AG) under section 21(3). According to Justices Alnashir Visram and Mohammed Ibrahim's decision dated January 24, 2005, satisfaction of decrees or judgements is deemed to be an expenditure by Parliament that must be justified in law and provided for in the government's expenditure. "It is for this reason that Section 32(1) of the Government Proceedings Act provides that any expenditure incurred by or on behalf of the Government by reason of this Act shall be defrayed out of moneys provided by Parliament." Said Justice Visram. He said if execution and attachment against the government were allowed, it would not be able to pay immediately, and would be inundated with executions and attachments of its assets day in, day out. The judges said there will be no end to the list of likely assets to be attached and auctioned, and no government can possibly survive such an onslaught. "State operations will ground to a halt and be paralysed, and soon the government will not only be bankrupt, but its constitutional and statutory duties will not be capable of performance. This will lead to chaos, anarchy and the breakdown of the rule of law," said Justice Visram. He said parliamentary control over expenditure is based upon the principle that all expenditure must rest upon legislative authority and that no payment out of public funds is legal unless it is authorised by statute, and any unauthorised payment may be recovered. Justice Visram ruled that while the existence of claims and decrees may be known to the ministries and departments, they have to notify the Ministry of Finance and Treasury of the same to be provided for in the government expenditure. "Parliament is very jealous of its control over expenditure. This is as it should be. No ministry or department has any ready funds at all times to satisfy decrees or judgements," he said. The appellate judges explained that once a decree or judgement is obtained against the government, it would require some reasonable time to have it forwarded to the Ministry of Finance, Treasury, and the Comptroller and Auditor General for scrutiny and approvals for it to be paid from the Consolidated Fund. Justice Visram said the ministries and departments do not have their "own" funds to settle such decrees or payments. Considering the nature of government structure, procedures, red tape and the large number of claims, this could take a long time. According to the Law Society of Kenya (LSK), Sections 21 and 25 are rooted in the principle of sovereign immunity, which shields the State and its agencies from the coercive processes of execution. However, the LSK says that there is a lacuna in the enforcement of compensation of awards for compulsory acquisition of land. The lawyers said Article 40 of the Constitution, Part VIII of the Land Act No. 6 of 2012 and the National Land Policy Sessional Paper No. 3 of 2009 provide the minimum amount that the NLC must be assured of before granting an approval for compulsory acquisition.

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