Kenya Anti-Corruption Commission Vs First Mercantile Securities Corporation [2010 eKLR (www.kenyalaw.org)
Court of Appeal at Nairobi
R.S.C. Omolo, S.E.O. Bosire & P.N. Waki (JJA)
Date: July 16th, 2010.

"The Parliament of Kenya has given KACC authority to seek such Mutual Legal Assistance and in our view it is idle to say that before the KACC can seek the assistance it must be shown that there is "reciprocity" between the requesting party and the party to whom the request is made. KACC has the right to make such request as specifically provided for under section 12 (3) of the Act which creates it."

The Kenya Anticorruption Commission (KACC) is empowered to seek assistance from International bodies and organizations in carrying out its functions, the court of appeal has ruled in one of the cases surrounding the Anglo leasing scandal.

In allowing an appeal filed by KACC against the holding of the High Court that it had no authority to seek such assistance, the Court of Appeal has ruled that there actually need not be ‘reprocity' between KACC and the party to whom the request has been made. It mattered not whether the applicable law of the foreign country differed or was in conflict with that of Kenya because in honouring the request for assistance, a Sovereign State was bound to apply its laws and not Kenya's in carrying out such request.

The background to the case was that the Postal Corporation of Kenya which was a statutory body created by the Postal Corporation Act, wanted to purchase some satellite telecommunications equipment from Spacenet, an American company at a cost of approximately Ksh 64 billion($811, 787, 000). The Government of Kenya entered contract on behalf of Postal Corporation of Kenya for the purchase of the equipment.

In order to finance the acquisition, the Government subsequently entered into a contract with First Mercantile Securities Corporation (FMSC). (The Guarantee (Loans) Act allows the government with approval of the National Assembly, to guarantee the due performance of any covenants on the part of a local authority or a body corporate). The Government honoured the payments to FMSC but defaulted in the amount of $5,936,910.09.

First Mercantile Securities Corporation then sued the Government of Kenya in December, 2005 in Geneva, claiming the balance of the sum which had remained unpaid. The Government entered a defence to the claim on the ground of inadmissibility but the motion was rejected.

Meanwhile, in May, 2007 KACC through retired Hon. Justice A. Ringera who was then the Director, wrote a Letter of Request to the Swiss authorities, regarding what the Commission believed was ‘a case of serious or complex fraud committed in Kenya, with some acts in the UK, Switzerland and other countries.'

The letter gave an account of the relevant facts constituting the alleged crimes under investigation and concluded by setting out the kind of evidence which KACC hoped the Swiss investigators were likely to find, including the principals behind the FMSC contract, banking records and the identities of the beneficiaries of the funds to whom the monies paid out by the Government of Kenya under the contract may have been remitted and the acquisition cost of equipment sold to the Kenya Government amongst other things.

The Swiss authorities started to act upon that request. Aggrieved by the actions of the Swiss authorities, FMSC in June 2007 moved to the High Court of Kenya and sought leave in a judicial review application seeking to quash the Director's Letter for Mutual Legal Assistance (LMA) and requested that the leave also act as an order staying the enforcement of the LMA. The summons were heard and allowed.

The LMA was challenged on grounds that KACC's move was an abuse of the process in that the KACC was seeking to invoke the criminal process in order to frustrate the civil litigation which the FMSC had instituted in Geneva and that KACC was seeking to usurp the power of the government to enter into commercial contracts, which it had no power to do. FMSC also argued that Mutual Legal Assistance was an inter-State procedure upon the condition that a criminal proceeding was in existence in the requesting State. In the present case, no criminal process had been commenced in Kenya relating to FMSC. Further, FMSC contended that KACC's action was a complete departure from the rights and obligations expressly stated in the contract and an unjustified intrusion into the affairs.

KACC on the other hand argued that it was an independent statutory body with clear functions as set out in section 7 of the Anti Corruption and Economic Crimes Act and that thereunder, KACC could work in co-operation with any regional or international foreign government or organization.
KACC further asked the court to refuse to grant the orders sought by FMSC as they purported to interfere with the operations of the Federal Office of Justice and Police in Switzerland, and would, by implication mean granting orders against the Swiss Government which was a Sovereign State. As such, it contended that the court lacked jurisdiction to restrain it from undertaking the investigations as that would be a violation of international law.

The High Court allowed FMSC's application holding that the letter of Request for Mutual Legal Assistance was in breach of municipal law as the Anti Corruption and Economic Crimes Act under which KACC was established did not permit the seizure of property, the freezing of bank accounts and the obtaining of documentary evidence by KACC.

Aggrieved by the decision, KACC appealed to the Court of Appeal. The Court of Appeal was of the view that section 7(1) of the Anti-Corruption and Economic Crimes Act gave KACC the power to investigate the crime of corruption and crimes of economic nature. The court further ruled that section 23(1) the Act allowed KACC to work in co-operation with any foreign government in the performance of its functions. The said section stated that the Commission may in the performance of its functions work in co-operation with any foreign government or international or regional organization.

The Court of Appeal pointed out that the Act was a creature of Parliament of Kenya and thus formed part of the law of the State of Kenya and that since Parliament had given the KACC authority to seek assistance of a foreign government, it would be idle to say that before KACC could seek such assistance, it had to show that there was ‘reprocity' between the requesting party and the party to whom the request had been made. The court stressed that the Letter for Request of Mutual Legal Assistance was a request; it could be given or refused and whichever means was used to honour the request was upon the Foreign State. Thus, the court opined, FMSC's assertion that KACC could not, without the necessary court orders search and seize documentary evidence, freeze assets or do the other things that its LMA was in effect asking the Swiss authorities to do, was irrelevant.
The court further pointed out that there was a distinction in position between KACC and the Attorney-General in terms of what KACC could do because whilst KACC was specifically covered by section 12 (3) of its Act, the Mutual Legal Assistance Bill, 2009 which was presented before court and which sought to give the office of the Attorney General similar powers, did not have legal force as it had not been passed by Parliament.

The Mutual Legal Assistance Bill, 2009 sought to provide for mutual legal assistance to be given and received in Kenya in investigations, prosecutions, and judicial proceedings in criminal matters. The Bill established a Central Authority being the office of the Attorney General with the mandate to among other things, transmit, receive, and execute requests for legal assistance. In any case, the court stated, the absence of such legislation could not in any way nullify the specific provisions of the Act under which KACC operated.
The Court of Appeal further rejected the contention by FMSC that any prosecution could only be aimed at unfairly influencing the outcome of the case in Geneva for a variety of reasons chief among them being that KACC was not a prosecuting authority and as such could not institute any criminal prosecution in court. That role had been reserved for the Attorney-General of Kenya. All that the KACC could do was to investigate alleged or suspected crimes under its mandate and if there was to be any prosecution, the Attorney-General could take over. In any case, the court held, even if KACC intended to institute recovery proceedings in civil courts, it would still need to gather evidence to enable it support the claim in the civil court.

The Court of Appeal went on to state that KACC was independent of the Government of Kenya and could investigate government of Kenya officials if they were suspected to have been involved in corrupt practices or to have committed economic crimes. The investigations KACC was asking the Swiss Authorities were not confined solely to the FMSC. Indeed, the court noted, the names of high ranking government officials had been specifically mentioned in the Letter for Mutual Legal Assistance.

For those reasons, the court allowed the appeal and awarded costs to KACC.