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State spends Sh2.5b on legal fees as cost burden piles on taxpayers

BUSINESS
By Frankline Sunday | October 5th 2021

Cases yet to be determined could cost the country Sh1.2 trillion. [Courtesy]

The government paid Sh2.5 billion in legal fees in the 2020-21 financial year, an increase of 90 per cent compared to Sh1.3 billion the previous year. 

This is according to the latest report from the Controller of Budget that details increased recurrent expenditure amid the economic slowdown caused by the Covid-19 pandemic.    

The State departments for Interior and Citizen Services, Wildlife and the Independent Electoral and Boundaries Commission led in legal costs, paying out Sh773 million, Sh537 million and Sh538 million as of June 30 this year.

The State Law Office and the Department of Justice spent Sh442 million in legal fees, almost seven times the Sh64 million paid out in 2020. 

In March this year, the National Assembly’s Budget and Appropriations Committee (BAC) flagged rising legal costs against the Kenyan government, with taxpayers on the hook for tens of billions of shillings in demands in the near term alone. 

“The committee observed that there are suits against the government with financial risks to the tune of Sh1.2 trillion,” said the committee in its report. 

The lawsuits are at various stages of determination, including compensation against torture, wildlife-human conflict, compulsory land acquisition, breach of contract and wrongful dismissal.  

“In addition, the awards against the government that have not been paid stand at approximately Sh150 billion,” said the BAC report.

“These range from awards to victims of torture as well as business litigants against the State.”  

The cases have already been determined and ongoing delays in settling the payments continues to attract interest.

Earlier this year, the Supreme Court ordered the Kenya Bureau of Standards (Kebs) to pay Sh2.2 billion to inspection firm Geo-Chem Middle East after a protracted legal dispute.

According to court documents, Kebs was accused of arbitrarily cancelling a three-year tender awarded to the oil inspection firm in 2009, just one year after it was signed.

Geo-Chem sought Sh248 million in unpaid invoices, Sh46 million used in setting up a laboratory, Sh120 million in operational expenses and Sh1.6 billion in lost income plus interest.   

In yet another case, the Environment and Land Court ordered the Kenya Urban Roads Authority (Kura) to pay Belgo Holdings Sh22 million in general and exemplary damages. 

Belgo Holdings argued that Kura had constructed a 60-metre road on its 21-acre property without compensating the property owners. 

Justice Loice Chepkemoi found that Kura trespassed on the piece of land and that the awards were necessary to deter similar action by other institutions. 

The Controller of Budget in the report flagged rising recurrent expenditure, where the government spent a total of Sh489 billion in compensation to employees in the 2020-21 financial year, a 10 per cent increase compared to Sh445 billion the previous year.

The 68 ministries, departments and State agencies further spent a cumulative Sh14.1 billion in domestic and foreign travel in the financial year to June, despite the Covid-19 pandemic grounding international travel for several months.

The travel expenditure recorded last year was a marginal drop compared to Sh14.6 billion recorded over the 2019-20 financial year.   

The Controller of Budget has urged the government to reduce expenditures on recurrent activities, especially foreign travel, and re-evaluate spending on less critical development activities.

The government has also been urged to allocate funds for stalled projects and freeze the launch of new ones. This is expected to free more funds to pay pending bills which stood at Sh36.3 billion as at June 30, 2021.

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