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The High Court of Kenya has dismissed a petition seeking to block Kenya Airways (KQ) from training its pilots abroad. The petition, in which ALN Kenya | Anjarwalla & Khanna acted for KQ, sought to, among other things, stop KQ’s Ab Initio Pilots Training Programme, through which KQ trains its future pilots, with no prior experience and its foreign-based pilot training programmes.
The basis for the petition was that KQ used public monies to fund the programme and that KQ discriminated against local pilot training schools and pilots trained by local institutions licensed by the Kenya Civil Aviation Authority. The petition, therefore, sought to have KQ designated as a public entity and subject it to Article 227 of the Constitution of Kenya 2010 (CoK), the Public Finance Management Act, 2012 (PFMA), Public Procurement and Asset Disposal Act, 2015 (PPADA) and State Corporations Act, 1986 (SCA). The petition was centred on shareholder loans extended to the airline by the Government of Kenya which has a 48.7 percent shareholding in the national carrier.
While KQ ultimately discontinued the programme, the effect of an injunction or termination at the time would have hampered its operations and made it difficult, if not impossible, for the carrier to keep up with its regional and international competitors, as well as the requirements under the International Civil Aviation Organisation’s (ICAO) standards and recommended practices (SRAPs). This would have seriously exacerbated the difficulties the airline was facing with its operations, ultimately threatening its survival as a national carrier and devastatingly affecting the country’s air transport sector.
Potential Effects of the Petition
The petition, had it been successful, would have had the following adverse effects:
In dismissing the petition, the High Court found that KQ is not a public entity because the Government of Kenya neither holds a controlling interest in it nor is KQ established under the State Corporations Act. KQ is a company registered under the repealed Companies Act (CAP 486 of the Laws of Kenya) and therefore does not fall under the provisions of the PFMA or the SCA. Further, the High Court found that shareholder loans extended by the Government do not amount to public money. As such, KQ is not subject to Article 227 of the CoK, the PFMA or the PPADA on procuring goods and services. The judgment further clarified what constitutes a public entity, especially companies where the government has a stake and advances loans in its capacity as a shareholder.
The implication of the judgment is that:
Should you have any questions regarding the information in this legal alert, please do not hesitate to contact Faith M. Macharia.