The Supreme Court has dealt a major blow to Portside Freight Terminals Limited, a private port operator linked to the establishment of a second grain bulk handling facility at the Port of Mombasa, overturning a Court of Appeal decision that had given the firm the greenlight to proceed with the controversial project.
In a landmark judgment, the apex court judges led by Deputy Chief Justice Philomena Mwilu, Justices Mohammed Ibrahim, Isaac Lenaola, William Ouko, and Smokin Wanjala, found that the Kenya Ports Authority (KPA) erred in awarding the license to Portside Freight Terminals using the Specially Permitted Procurement Procedure under Section 144A of the Public Procurement and Asset Disposal Act (PPAD Act), 2015.
“The judgment of the Court of Appeal is hereby set aside in respect of its findings that the trial court erred in holding that the invocation of the Specially Permitted Procurement under Section 144A of the Public Procurement and Asset Disposal Act violated the Constitution,” the judges ruled.
The five judges however, halted the construction of the facility after finding that the KPA licence awarded to Portside Freight Terminals Limited was illegal and unconstitutional
The court went further to declare that KPA’s decision to grant the license to Portside Freight Terminals “was inconsistent with articles of the constitution which require public entities to carry out procurement in a fair, equitable, transparent, competitive, and cost-effective manner.
“The decision of KPA to grant Portside Freight Terminals Limited the license to establish a second grain bulk facility through the Specially Permitted Procurement Procedure was inconsistent with Articles 10(2)(c), 201(a) and 227(1) of the Constitution,” justice Mwilu led bench declared.
The decision follows an appeal filed by Busia Senator Okiya Omtatah, alongside the Dock Workers Union, who sought to stop Portside Freight Terminals Limited and its affiliates, Portside CfS Limited and Heartland Terminals Limited, from constructing the grain handling facility at the G-Section Island Berth, land owned by KPA.
In his submissions, Omtatah claimed that the KPA bypassed public procurement laws by using a special procedure to directly single-source Portside, instead of conducting an open tendering process as required under the Constitution and the PPAD Act.
“The procurement process was discriminative to four companies namely Kilindini Terminals Limited, Grain Terminal Limited, Kapa Oil Refinery, and Africa Ports and Terminals,” Omtatah told the five-judge bench.
“The appeal is not frivolous since it raises vital and arguable points of law on the violation of the Constitution and other procurement laws,” he added.
Omtatah further alleged that KPA’s Board of Directors acted ultra vires, purporting to review and approve the license and wayleave without legal authority.
“The KPA Board of Directors does not have the mandate to procure goods and services. That function is reserved for the KPA’s management,” he said in his court filings.
Omtatah also alleged that the Specially Permitted Procurement Procedure was used to favor Portside Freight Terminals Limited, a firm reportedly linked to former Mombasa Governor Hassan Joho, thereby locking out six other firms that had expressed interest in developing similar facilities at the Dongo Kundu or Lamu ports.
“It is evidently clear that KPA and the CS Treasury employed the use of the specially permitted procurement procedure to avoid competition of bidders and applied it in favour of Portside Freight Terminals,” he said.
He maintained that no public notice was issued and no competitive bids were invited, rendering the procurement unlawful under Article 227 of the Constitution, which outlines public procurement principles.
In its judgment, the Supreme Court emphasized the importance of selecting the right procurement method at the outset to ensure compliance with constitutional values and international obligations.
“The choice of the right procurement method frames the whole design of the procurement process in terms of transparency, efficiency and competitiveness,” the court observed in a detailed judgement.
The judges reaffirmed that Kenya’s procurement system must align with Article 9 of the United Nations Convention against Corruption (UNCAC), which mandates state parties to establish procurement systems that are transparent, competitive, and resistant to corruption.
In its judgment, the five-judge bench made several critical findings regarding the actions of the Kenya Ports Authority and their compliance with legal and constitutional standards, including finding that the KPA possessed the authority to vary project sites under the Port Master Plan without necessitating fresh public participation.
Secondly, the court found no evidence that the KPA Board had overstepped its mandate or usurped the responsibilities of the accounting officer.
However, the court identified a significant constitutional breach in the process used to award a direct license and wayleave to Portside.
It found that the reliance on Section 144A for this award contravened key constitutional provisions.
Specifically, the court concluded that the KPA failed to meet the minimum threshold of transparency, accountability, and fairness in procurement processes as mandated under Articles 10(2)(c), 201(a), and 227(1) of the Constitution.
Despite the Supreme Court acknowledging the public interest and economic urgency of developing a second grain handling facility, it held that constitutional requirements must not be bypassed.
“We cannot emphasize enough… the public interest nature of the project, the second bulk grain facility, its importance to the economy, and the urgency of its implementation,” the judges noted, “but public interest cannot justify constitutional breaches.”
