Tuju challenges EA bank's immunity at the regional court

Jubilee Party Secretary-General Raphael Tuju at a past press conference. [Jenipher Wachie, Standard]

Jubilee Party Secretary-General Raphael Tuju has moved to the East African Court of Justice to challenge a move by the regional bank to claim immunity from a Kenyan High Court decision.

Tuju had moved to the Kenyan High Court seeking Sh3.1 billion for damages and violation of a contract for a loan from East African Development Bank (EADB).

He claimed that the lender had killed his dream of acquiring and developing a multi-billion-shilling estate.

The bank filed a response claiming it had immunity from prosecution in Kenya, Uganda, Tanzania, Rwanda and Burundi.

It also asked the court to dismiss the case. Mr Tuju claims the bank was pursuing "immunity for impunity".

The battles between the politician and the EADB began in 2015 when his firm, Dari Restaurant took a loan of Sh1.2 billion from the bank. Tuju and S A M Company Ltd had signed a deal for the acquisition and development of a prime piece of land in Karen.

In the loan agreement, EADB would finance the purchase of a 22-acre forested land dubbed Entim Sidai and a 94-year-old bungalow owned by a Scottish missionary, who was operating a high-end restaurant and 14 accommodation rooms.

Tuju said EADB then advanced his firm, Dari Restaurant Sh951.6 million on July 31, 2015. The additional Sh294 million was to help in the construction of 12 luxury two-storey bungalow homes to be sold at Sh100 million each worth Sh1.2 billion on land.

But, Tuju in a case at the Kenyan High Court whose hearing starts next month, has accused EADB of reneging on the contract to finance the second part of the loan (Sh294 million) for the development of a housing project to refinance the repayment.

The EADB then filed their response claiming immunity.

In the court papers filed at the Arusha-based East African Court of Justice, Tuju argues that a commercial entity cannot claim immunity when they are dealing with clients, and wondered how their customers can get recourse if they were injured by the decision of the financial institution.

He cites the US Supreme Court ruling of March 7, 2019, that stated that the World Bank did not have immunity and could be sued when its overseas investments go awry.

Tuju noted that the US Supreme Court, issued a 7-1 decision in Jam vs International Finance Corporation, ruling that international financial institutions, including various branches of the bank, can be subject to lawsuits in cases where their investments in foreign projects cause harm. 

The Supreme court decision overturned a decades-old presumption dating to the founding of the World Bank in 1945 that bank-affiliated organisations are fully immune from such suits.

In the court papers, Tuju also claimed that EADB had not been legislated at the East African Legislative Assembly thus lack regulations to give the lender diplomatic immunity.

He said the regional bank was supervised by the council of ministers of finance of the five countries with the board run by permanent secretaries. The chairmanship is rotational.

Tuju argues that though the rules of the bank require board members to serve for six years, some were serving for over ten years, adding that its board members award themselves free loans - misusing taxpayers money.