Reference filed: 28th August 2017.

Articles:  6, 7(2), 8(1) (c), 23, 27(1) & 30 of the Treaty for the Establishment of the East African Community

Rule: 24 of the East African Court of Justice Rules of Procedure, 2013.

Subject matter: Alleged loss of deposits occasioned by bad governance of a bank.

The Applicant, Pontrilas Investment Limited is a legal person resident in the Republic of Kenya, incorporated under the Companies Act No.17 of 2015 of the laws of the Republic of Kenya. The Applicant is the legal assignee of those persons who made deposits at Imperial Bank Ltd including the rights to make this Reference.

The 1st Respondent is the Central Bank of Kenya, a body corporate formed pursuant to the Central Bank Act (Chapter 491) of the laws of the Republic of Kenya with its principal objects defined as being, among others, fostering the liquidity, solvency and proper functioning of a stable market-based financial system. While, the 2nd Respondent is the Attorney General of the Republic of Kenya the legal representative of the Government of Kenya.

The Applicant claims both Respondents are in breach of their obligations under the Treaty and objectives of the Protocol for the Establishment of the East African Community Monetary Union in respect to the supervision of Imperial Bank Kenya ltd (IBL), its placing under receivership and the appointment of Kenya Deposit Insurance Corporation (KDIC) as its receiver for a period of twelve months. The Applicant seek for declaration that, they are entitled to compensation jointly and severally by both Respondents for loss suffered as a consequence of the said breach.

The background of this matter is that, on 13th October 2015 Imperial Bank Ltd (IBL) was put under receivership and placed under the supervision, management and control of the Kenya Deposit Insurance Corporation (KDIC) for twelve months by the 1st Respondent actions in accordance to section 34(2)(b) of the Banking Act. The appointment of KDIC as a receiver for IBL was alleged to be in the interest of the Bank depositors, creditors and the public. This took place when the 1st Respondent realized fraudulent activities of substantial magnitude and misrepresentation of the Bank’s financial status.

On various occasions after the placing of the receivership, the 1st Respondent made several undertakings to resolve and conclude the same with the objective of safeguarding the interests of depositors, creditors and the wider public interest.  On 28th June 2017, Dr Patrick Njoroge, the Governor of the 1st Respondent while addressing depositors of Imperial Bank stated that, the Bank would be sold or liquidated thus making it known that depositors were to lose their deposits.

The Applicant alleges that, the 1st Respondent failed in its duty to regulate and supervise Imperial Bank in the interest of the public by maintaining economic stability through adherence to the rule of law, good governance and its own supervisory framework thereby leading to shocks in the economy as well as losses to depositors and creditors.

The particulars of the 1st Respondents failure in its duties include alleged massive frauds committed by the managers/administrators of Imperial Bank over the Bank’s funds, with the knowledge and/or connivance of the 1st Respondent’s officials, servants or agents through illegal transactions/acts which came to the knowledge of the Applicants in August 2017.

The Applicant also alleges that, the 2nd Respondent failed in its duty to give general direction to the 1st Respondent so as to ensure adherence to good governance and the rule of law as required by the Treaty, plus an efficient, transparent and stable financial system as required by the Protocol for the Establishment of the East African Community Monetary Union.

Consequent upon the above, the Applicant seek declarations that both Respondents have breached their obligations under the Treaty and the East African Community Monetary Union Protocol and the Applicant is entitled to compensation and costs.

The 1st and 2nd Respondent unsuccessfully raised a preliminary objection that, the 1st Respondent is neither a Partner State nor an institution of the Community to be sued under Article 30 of the Treaty. The objection was overruled by this Court on a ruling delivered 4th July 2019 for reasons that; questions raised in the objection requires evidence that cannot be conclusively disposed of at a preliminary point but rather at the substantive hearing of the Reference. In Application No. 14 of 2019 (Arising from Reference No.8 of 2017) Pontrilas Investments Limited v The Central Bank of Kenya & the Attorney General of the Republic of Kenya the Court also in its ruling dated 15th June 2020 issued inter alia witness summons to the Head of the 1st Respondent’s Bank Supervisory Department to appear in person for purposes of adducing evidence and production of documents relevant to this Reference.

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