Petitioner Moves to Block Nairobi County-Sidian Bank Payroll Deal

A recent legal challenge against a payroll support services partnership between the Nairobi City County Government and Sidian Bank Limited highlights critical issues in public sector governance in Kenya. The petitioner alleges that the agreement was concluded without adhering to constitutional and statutory mandates on public participation, good governance, and administrative fairness. This case underscores the judiciary's role in enforcing transparency and accountability in public financial management and decision-making processes by county governments. For legal practitioners, it serves as a crucial reminder of the stringent requirements for public engagement and adherence to administrative law principles in all public-private partnerships and significant county undertakings.

The Nairobi City County Government finds itself embroiled in a legal dispute following a petition challenging its payroll support services agreement with Sidian Bank Limited. The core of the petitioner's argument rests on alleged violations of fundamental constitutional provisions and statutory requirements concerning public participation, good governance, and administrative fairness. This development is not merely a contractual dispute but a significant test of the principles underpinning devolved governance and public financial management in Kenya.

This article delves into the legal framework governing such agreements, examining the constitutional and statutory obligations placed upon county governments. It will analyze the implications of failing to adhere to these principles, drawing on relevant case law to provide context for practitioners. The case serves as a potent illustration of the increasing scrutiny public entities face regarding their operational and financial decisions, particularly when they involve public funds and services.

The legal landscape for public participation, governance, and administrative fairness in Kenya is robustly enshrined in the Constitution of Kenya, 2010, and further elaborated in various statutes. Article 1 of the Constitution vests sovereign power in the people of Kenya, which is to be exercised directly or through democratically elected representatives, thereby establishing public participation as a foundational principle of governance. Article 10 outlines national values and principles of governance, including patriotism, national unity, sharing and devolution of power, the rule of law, democracy and participation of the people, human dignity, equity, social justice, inclusiveness, equality, human rights, non-discrimination, protection of the marginalized, good governance, integrity, transparency, and accountability.

Specifically for county governments, Article 174(c) lists citizen participation in the exercise of the powers of the county and in making decisions affecting the county as an object of devolution. Article 196 mandates county assemblies to conduct their business in an open manner and facilitate public participation and involvement in their legislative and other business. Furthermore, Article 201 sets out principles of public finance, emphasizing openness, accountability, and public participation in financial matters. The County Governments Act, 2012, particularly Sections 87 to 92 and 115, elaborates on the principles and modalities for citizen participation in county planning and governance, requiring timely access to information and consideration of diverse views. The Public Finance Management Act, 2012 (PFMA), further reinforces these principles by guaranteeing public participation in county planning and budgeting processes, and setting standards for financial management, transparency, and accountability. Section 107 of the PFMA specifically mandates county treasuries to enforce principles of fiscal responsibility.

Beyond participation, the principle of fair administrative action is guaranteed under Article 47 of the Constitution, which stipulates that every person has the right to administrative action that is expeditious, efficient, lawful, reasonable, and procedurally fair. This right is operationalized by the Fair Administrative Action Act, 2015 (FAAA), which provides a statutory framework for challenging administrative decisions that fall short of these standards. For agreements involving public entities, the Public Procurement and Asset Disposal Act, 2015 (PPADA), gives effect to Article 227 of the Constitution, requiring procurement systems to be fair, equitable, transparent, competitive, and cost-effective. Nairobi City County also has its own specific legislation, the Nairobi City County Public Participation Act, 2015, which outlines the framework for citizen involvement in its governance.

The petitioner's challenge hinges on the assertion that the payroll support services deal with Sidian Bank Limited failed to meet the rigorous standards of public participation, good governance, and administrative fairness mandated by Kenyan law. Kenyan courts have consistently emphasized that public participation is not a mere formality or a "tick-box" exercise, but rather a genuine and substantial process. This requires that citizens are provided with timely access to relevant information, reasonable opportunities to engage in the decision-making process, and that their views are genuinely considered, particularly those of marginalized groups.

Judicial pronouncements, such as the Supreme Court's decision in *British American Tobacco Kenya, PLC v Cabinet Secretary for the Ministry of Health and Others [2019] eKLR*, have underscored that a lack of meaningful public involvement can undermine public trust and the legitimacy of government decisions. More recently, High Court rulings concerning Nairobi City County's own Finance Acts have declared them unconstitutional due to inadequate public participation, demonstrating the judiciary's readiness to intervene when these fundamental rights are violated. These cases highlight that the procedural fairness required by Article 47 of the Constitution and the FAAA extends to the process by which public bodies enter into significant financial agreements.

The nature of a "payroll support services partnership" suggests it likely involves elements of public procurement or a significant financial commitment by the county government. In such instances, the PPADA, 2015, would require the process to be fair, equitable, transparent, competitive, and cost-effective. Any deviation from these principles, coupled with a lack of public engagement, could render the agreement susceptible to legal challenge. The PFMA also demands transparency and accountability in how public funds are managed and allocated, including through agreements that impose financial obligations on the county beyond a single financial year.

The challenge for county governments, and indeed for any public entity, is to move beyond superficial consultations to truly embed public participation in their decision-making culture. The Nairobi City County Public Participation Act, 2015, provides specific guidance on how this should be achieved within the county. Failure to adhere to these localized provisions, in addition to national laws, further weakens the legal standing of any contested agreement. The current petition will likely scrutinize whether the county provided adequate notice, accessible information, and genuine opportunities for public input before finalizing the deal with Sidian Bank, and whether the decision was lawful, reasonable, and procedurally fair.

The legal challenge against the Nairobi County-Sidian Bank payroll deal serves as a critical reminder of the constitutional and statutory obligations that bind all public entities in Kenya. It reinforces the principle that public participation, good governance, and administrative fairness are not optional but are fundamental pillars of democratic and accountable governance. Should the court find in favour of the petitioner, it could lead to the nullification of the agreement, significant financial repercussions for the county, and reputational damage for both parties involved.

For legal practitioners advising county governments or private entities seeking to partner with them, this case underscores the imperative of conducting thorough due diligence to ensure strict adherence to all relevant legal frameworks. This includes not only the national Constitution and Acts like the County Governments Act, PFMA, FAAA, and PPADA, but also specific county legislation on public participation. Robust and demonstrable public engagement strategies are essential to mitigate legal risks and foster public trust in public-private partnerships. All stakeholders must closely watch the outcome of this petition, as it will undoubtedly set an important precedent for future engagements between county governments and private sector partners in Kenya.