The High Court has struck out a seven-year-old case by governors seeking to compel the National Treasury to release counties’ equitable share of national revenue every month.
The Council of Governors (CoG) wanted the Treasury compelled to release counties’ share of nationally raised revenue by the 15th of every month to prevent cash flow delays from disrupting operations and the delivery of essential public services.
However, Justice Roselyne Aburili ruled that the Council had not exhausted the statutory mechanisms for resolving disputes between the national and county governments before moving to court.
“There is no evidence that the petitioner attempted to explore any of the dispute resolution mechanisms set forth under Sections 30–34 of the Intergovernmental Relations Act or to demonstrate that the statutory mechanisms were inadequate,” Justice Aburili said.
The legal dispute began after the Treasury delayed disbursements to counties, crippling operations in the devolved units, derailing budgeted development projects and threatening essential public services.
It asked the court to declare that the Treasury and the Controller of Budget must release counties’ equitable share by the 15th of every month. It also sought an order barring the Treasury from withholding more than half of a county’s allocation even in cases of a serious or persistent material breach.
The Council relied on Article 219 of the Constitution and Section 17(6) of the Public Finance Management Act, arguing that county allocations must be transferred without undue delay.
By early June 2022, the Council said only 25 counties had received their April allocations, while just one had received its May allocation.
It also accused the Treasury of linking disbursements to the settlement of county pending bills, including debts owed to Kenya Power and unpaid retirement contributions.
The Attorney General opposed the petition and asked the court to strike it out, arguing that the CoG was merely a statutory forum, lacked legal personality and had no capacity to sue.
The court rejected that argument, holding that the CoG qualifies as a “person” under Article 260 of the Constitution because the definition includes an association or other body of persons, whether incorporated or unincorporated.
The Milimani Law Courts in Nairobi.
Photo credit: File | Nation Media Group
“The fact that the petitioner is empowered under the Act to carry out specific functions affecting the public and to conduct dispute resolution within the framework of the Act and to consider matters that are referred to it as well as any other functions stipulated by the Act or other laws, gives the petitioner the legal capacity to file a Petition affecting its functions, before this Court,” the court ruled.
However, the Council lost the jurisdiction battle.
Sections 30 to 35 of the Intergovernmental Relations Act require national and county governments to attempt negotiations and alternative dispute resolution before commencing judicial proceedings.
The court found no evidence that the Council had invoked those mechanisms or demonstrated that they were inadequate.
The ruling therefore brought the 2019 case to an end without the court determining the CoG’s substantive complaints over delayed county financing.
The Supreme Court, in a May 2020 advisory opinion, held that Article 219 of the Constitution requires transfers of county revenue to be made “without undue delay” but does not prescribe a specific deadline.
The Supreme Court said courts were not the appropriate forum to determine precisely when the Treasury should transfer county funds. However, it also held that the Treasury could not arbitrarily determine when to make the payments and that any delays had to be justified.
The advisory opinion followed a 2019 dispute involving all 47 counties over the Division of Revenue Bill after Parliament disagreed over the allocation to counties. The Supreme Court also held that recommendations by the Commission on Revenue Allocation were not binding on Parliament.
In January 2024, the CoG said the Treasury owed counties Sh81 billion covering the November 2023, December 2023 and January 2024 allocations. It said the delays had affected salaries, statutory deductions and emergency responses.
In April 2025, the Council said it was seeking Sh63 billion owed for February and March, comprising Sh31 billion for February and Sh32 billion for March.
The funding dispute has continued into 2026, with governors raising concerns over delayed disbursements from the National Treasury and warning that key development projects under the 2025/26 financial year could stall.
