Kenyan Court Deals Blow to Bank of South Sudan as Millions are Seized for State Debt
The Index Post
May 15, 2026
Kenyan Judiciary - Nairobi
NAIROBI, Kenya — In a legal battle with sweeping implications for sovereign immunity and central bank independence across East Africa, the Kenyan Court of Appeal has delivered a split decision in a high-stakes tug-of-war between the Bank of South Sudan and a private trading company seeking to recoup millions in unpaid debts from the Juba government.
The ruling, delivered on April 30, 2026, by a three-judge bench comprising Justices F. Tuiyott, A.O. Muchelule, and G.V. Odunga, marks a critical chapter in a multi-year saga that began in the halls of international arbitration and has now landed in the heart of Kenya’s commercial justice system.
The Core of the Conflict: A Ghost from 2019
The origins of this dispute trace back to Permanent Court of Arbitration (PCA) Case No. 2019-36. In that proceeding, Gadano General Trading Company Limited (the 2nd Respondent) secured a final arbitral award against the Government of the Republic of South Sudan. While the specific nature of the original dispute was not detailed in the latest ruling, the financial fallout has been immense.
After the award was issued on June 9, 2021, Gadano moved to have the decision recognized as a formal decree by the Kenyan High Court, allowing the company to begin "garnishee proceedings"—a legal process to seize assets held by third parties to satisfy a debt.
The target of this seizure was not just any government account, but nine specific bank accounts held at Stanbic Bank Kenya Limited. Crucially, Gadano moved to include accounts belonging to the Bank of South Sudan (BOSS), arguing that the central bank was merely an extension of the South Sudanese government and should therefore be liable for its debts.
The Bank of South Sudan has fought this characterization with every legal tool at its disposal. In its petition to the Court of Appeal, the BOSS argued that it is an autonomous corporate entity incorporated under the Bank of Sudan Act of 2011.
Represented by counsel Mr. Mwangi, the BOSS asserted that it is a "banker of banks" rather than a government department. The bank’s statutory mandate includes:
- Initiating and setting monetary policy.
- Printing legal tender.
- Controlling inflation and managing foreign exchange reserves.
- Supporting international remittances for individuals and commercial banks.
Most importantly, the BOSS argued that the funds held in the targeted accounts—specifically Account Nos. 0100000296637 and 0100000296613—do not belong to the South Sudanese government. Instead, the bank contends these funds are held on behalf of its own customers and depositors, and that seizing them to pay a government debt would cause irreparable prejudice to the bank’s operations.
The Diplomatic Immunity Defense
A central pillar of the BOSS’s appeal is the claim of diplomatic immunity. The bank argued that the Kenyan courts lacked the jurisdiction to seize its assets because its accounts enjoy protection under the Vienna Convention of 1961.
This argument seeks to draw a sharp line between "commercial transactions" and the "statutory mandate" of a sovereign central bank. The BOSS maintains that it was never a party to the original arbitration between Gadano and the South Sudanese government, and therefore, its assets should be untouchable in the execution of that specific award.
The Court of Appeal’s ruling, while providing a pathway for the BOSS to continue its fight, also delivered a stinging blow regarding the immediate fate of the money.
The judges granted the BOSS "leave to appeal" the previous High Court decisions. In legal terms, this means the court found the bank’s arguments regarding its autonomy and diplomatic immunity to be "arguable" and not frivolous. The court noted that the question of whether a central bank must shoulder the state's liability is a significant legal issue that merits "serious judicial consideration".
However, the court declined to grant a "stay of execution"—the legal order that would have frozen the funds until the appeal was finished.
"Overtaken by Events": The Money is Gone
The reason for the denial of the stay is a dramatic twist in the case's timeline. According to an affidavit filed by Wahura Mwangi, a legal advisor for Stanbic Bank Kenya, the bank had already complied with a "garnishee order absolute" issued on November 20, 2024.
On March 19, 2025, Stanbic Bank remitted all sums standing in the credit of the Bank of South Sudan to the decree-holder. The amounts involved included 61,922 Euros and 69,509.48 USD.
"Currently, the 3rd respondent [Stanbic Bank] no longer holds any funds in whatever currency on behalf of the applicant," the ruling noted, concluding that the application for a stay had been "overtaken by events". The BSS had hoped to prevent further seizures if new money was deposited, but the court dismissed this as "premature and speculative," noting that garnishee orders only apply to funds held at the time the order is made.
In reaching their decision, the appellate judges leaned heavily on established Kenyan jurisprudence. They cited the 2006 case of Kenya Shell Limited v Kobil Petroleum Limited, which established that granting leave to appeal is a matter of judicial discretion that should only be refused if the applicant has "no realistic prospects of succeeding".
The court also referenced J P Machira T/A Machira & Company Advocates v Wangethi Mwangi, emphasizing that "leave" is intended to filter out "minor procedural questions" while allowing substantive rights to be determined. By granting leave, the court acknowledged that the relationship between the Bank of South Sudan and its government is a "novel point or an issue where the law requires clarifying".
What Comes Next?
The ruling leaves the Bank of South Sudan in a difficult position. While they have the legal right to argue before the Court of Appeal that their accounts should never have been seized, the specific funds in question have already been transferred out of their control.
If the BOSS eventually wins its appeal, it may set a landmark precedent protecting central bank assets from being used to pay general sovereign debts. However, the immediate loss of over $130,000 (when combining the USD and Euro amounts) serves as a stark reminder of the risks sovereign entities face when their financial independence is questioned in foreign courts.
Furthermore, the court refused to stay further proceedings in the High Court, noting that the BOSS failed to demonstrate "exceptional circumstances" or even clarify exactly what proceedings were still pending.
As it stands, the case of Bank of South Sudan v Government of South Sudan & 3 others remains a cautionary tale for international banks and governments alike. It underscores the vulnerability of central bank reserves to private litigation and highlights the complex, often messy intersection of international arbitration and local enforcement.
For now, the legal world watches closely as the Bank of South Sudan prepares to argue its case on the merits—hoping to reclaim not just its money, but its status as an independent pillar of the South Sudanese state.
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