‘AN OIL COMPANY CAN TRANSFER ITS ASSETS IN ANY MANNER EVEN WHERE BIDDING IS UTILISED’

ownership in Nigeria.

There are public interest arguments that justify restrictions on the ability of parties to transfer their interests in a sector as strategically important as the oil and gas sector. Chief amongst this is the importance of oil as a natural resource to the economy and security of the Federal Republic of Nigeria – being a resource vested in the Federation by the Constitution and a number of other laws.

In MONI PULO LTD v BRASS EXPLORATION LTD, the Court took the view that petroleum resources were of such a critical nature that the absence of control by the Minister, of the ownership and transfer of such interests would create security and economic risks to the country as a whole.

The much publicised case of Brittania-U v Chevron and Seplat over the sale of Chevron Oil Mining Leases brings to the fore issues surrounding the divesture of oil and gas assets. In the above case Brittania-U has a contract with Chevron of which Seplat is not a party to, as Seplat has a separate contract with Chevron. A dispute has occurred and parties are in court. Should all commercial contracts come to a halt simply because a case has been filed in court?

Commercial contracts create various legal rights and obligations – well respected by the courts going by a long line of cases. Where an asset gives rise to varying contracts difficult questions of law could arise, and a court with a good sense of commercial realism will be more cautious where huge investments are involved. It is proper that when a case is filed in court, parties respect judicial authority and not take the law into their hands – bearing in mind that nothing must be done to bring the law into disrepute, oppilate the due administration of justice or frustrate the enforcement of court orders.

Emanating from these are a number of other general principles of law. One which is much waved at defendants by plaintiffs, and at times the courts, is pendente lite nihil innovateur: that is nothing new should be introduced during the pendency of an action. By this doctrine, the law does not allow litigants or give to them during the currency of the litigation involving the rights in it so as to prejudice any of the litigating parties. The doctrine negates and disallows any transfer of rights or interest in any subject -matter that is being litigated upon during the pendency of litigation in respect of the said subject-matter.

The technical angle to that doctrine is the concept of lis pendens, which indicates that anyone who acquires interest in real property which is the subject of litigation takes his interest subject to the litigation. The doctrine of lis pendens, which applies in a technical sense to interest in real property, prevents the effective transfer of rights in any property which is the subject matter of an action pending in court during the pendency of the court action. In its application against any purchaser of such property, the doctrine is not founded on the equitable doctrine of notice (actual or constructive) but upon the fact that the law does not allow litigating parties or give to them, during the currency of litigation involving any property (i.e. the property in dispute), rights in such property so as to prejudice any of the litigating parties.

The sum of the doctrine is to preserve respect for judicial authority and decisions so as not to render a judgment futile by the transfer of interests. But it appears rather unfortunately, in my humble view, that this principle in real property law has been extended, in error not just to moveable property, but curiously and certainly most wrongly by the obiter dictum of Aderemi JSC in the case which made a man who did not contest an election Governor and suggested we voted not for people but parties, is a nonsense and extending it makes no sense. I take the view that the part of his decision will not be followed being per incuriam. But be that as it may I believe it will be a long reach to argue that rights are frozen simply by the issue and service of a writ. This is indeed untrue of most matters before the courts who for example will stop being a Mrs X because Mr X has filed divorce papers? Should interest stop running on a bank loan because there is a suit seeking a declaration that money is not owed? Should we stop going to the market because there is a claim of ownership of the market by a third party? Why should a writ hold up a commercial deal if damages can compensate the plaintiff? Should a defendant stop building his house under a time bound fixed contract because there is a frivolous claim? Should one not exploit assets in an inflationary and currency devaluing economy – when undertaking as to damages is a paper tiger? If a court can exercise jurisdiction to determine if it has jurisdiction, and indeed if at times he even hears the case along with the challenge on jurisdiction, why should life stop because one has been sued? Is it not the proper law that an application is no order?

As this case throws up a lot of legal questions, can an injunction be granted against an action that has already occurred?

An injunction by its nature is a prerogative order of a court to restrain or mandate the doing of an act. A court of law does not act in vain. An act which has been carried out can no longer be restrained, neither can it be compelled. An injunction therefore is not a proper remedy against an action that has already occurred, or so to speak, a completed act. In such circumstances, the proper course for the court to take is to determine the substantive rights of the parties – except as true principles of law allow for mandatory injunctive orders.

Cue may be taken in the judicious and solomonic approach of the appellate courts in the Unipetrol take over case; or even the landmark Federal High Court decision of Sanyaolu J. which refused to injunct a public issue by NBL Plc. Pitifully our appellate courts and worse still trial courts treat high court decisions as not worthy of being persuasive talk less of being controlling authorities – when indeed true administration of justice and public policy underpinning that suggest otherwise. Is it not when there are irreversible competing claims that the balance of convenience should come to play in the injunction game? How is a res destroyed if it is about economic extraction, and a decision which may lead to mandatory injunction, vesting of title, seizure of assets and payment of compensation? Let me say no more lest I am impaled on the imaginary horns of judicial or should I say utter or inner bar rascality?

What improvements can be made to the process of bidding for oil licences to minimise the occurrence of disputes between parties?

The point must first be made that an oil licence confers an interest in an asset – which implies a vesting of rights, and where rights exist, disputes cannot be precluded. Thus, it will be impossible to eliminate the possibility of disputes over oil licences or other kinds of commercial interests. It is no matter of hypothesis to say as the tongue and teeth fight, so will there be disagreements on contracts. This is why we have section 6 of the 1999 Constitution - guaranteeing access to the courts and to justice. That the gates to our courts are wide open, and the average cost of litigation in Nigeria being ridiculously is low – with real cost, like wasted cost, being a rarity, litigation will continue to dog us.

In discussing the bidding process for oil licences, this may refer to the bidding process for oil licences from the Federal Government or from individual companies. As it relates to the Federal Government, there have been complaints about the exercise of discretion in awarding licences resulting in the Federal Government making significant efforts in recent times to facilitate more transparency and increased revenue from award of oil licences. Competitive and open tenders are the preferred mode for the award of oil licences because it ensures industry players with technical competence and financial capabilities acquire licences.

For the private licences, most companies abide by global best practices in the bidding process. However, this is left for each potential vendor of an asset to decide. Generally, a private company may not be pigeon holed or required to employ an open or transparent bid process as it is free to dispose its assets as it pleases. However, notwithstanding this apparent freedom, there are other considerations and regulatory requirements, such as the provisions of the Guidelines on Ministerial Consent which stipulates certain criteria that need to be met in the choice of a transferee. It is however safe to say that no bid or sale process is fool-proof as to preclude disputes.

At the end of the day the way to avoid disputes is (a) do business only with people with chivalry; (b) a proper bid process and appertaining rules made clear and plain; (c) sincerity and bona fide of the seller; and (d) remember that clear walls make good neighbours – in other words have well negotiated and documented contracts.

Is there a basis for challenging such an open bid? Or does the mere fact that it is “open” afford it the character of a “public” bid? That is, does the nature of the asset affect its disposal irrespective of ownership?

There may be basis for challenging an open bid, which may not necessarily be a “public” bid. By “public” bid, I believe you are referring to a bid for a licence from Government. A private oil company may, in the disposal of an asset, employ an open or closed bid system; most tend to adopt the closed bid system. However, the fact that a private company employs an open bid system does not make the bid process “public”.

On the second part of the question, the nature of an asset does affect its disposal and the form of ownership also plays an important role. For example, shares are not disposed in the same manner as goods, nor are goods disposed in the same way as services. Also, the mode of disposal of shares in a public company is different from that in a private company. In the context of the oil and gas industry, the fact that the industry is regulated tints the manner in which assets in the industry may be disposed. You will find legislative or common law principles underpinning these various forms of sales.

What therefore do you consider is the supervisory role of the courts in protecting the sanctity of a contract where tension exists between the parties and how can the tension be resolved?

By the provisions of Section 6, 17(2)(e), and 36 of the 1999 Constitution of the Federal Republic of Nigeria as amended, access to courts is a constitutionally guaranteed right. Parties seeking clarity to their rights and obligations whether under contracts or otherwise, are free to seek redress in court. For me the first point to note is that we must man our courts with men of letters in the field of controversy – this for example is the practice with trial courts elsewhere. This will bring realism as opposed to crass legalism to determination of disputes. Courts must not allow constitutional imperatives of fair hearing be vehicles of delayed justice which is denied justice. As I said we have wide gates to our courts, but an eye of a needle to pass through as exit. Trials and appeals are needlessly long. The courts in my view ought to exercise their inherent jurisdiction and powers to cut out delay tactics in the administration of justice.

In the days when books like Broom’s Legal Maxims held sway my second answer would simply have been: pacta sunt servanda. That is all agreements must be honoured. Courts employ various canons of interpretation to give effect to the intention of the parties. This will include an empirical examination of the words exhibiting the intention of the parties in their ordinary and trade usage, past dealings of the parties, and extrinsic materials pertaining to the contract in certain instances.

Depending on the circumstances of the case, the court may also be inclined not to give effect to a term or terms of the contract, if such would defeat the commercial purpose of the contract, or by reason of other vitiating factors such as the illegality of the contract, or a party lacking capacity to enter into the contract.

Although, the mantra of our Courts is “we are ever willing to lend weight to protect the sanctity of contract”, the truth is that the route to that end is tortious and punishing. It is insufficient to spout the right principles of law when the commercial object would have been lost; neither does it help if we find no controlling authorities on these matters. For me our courts go over and over the same thing, leading to a mosaic canvass, rather than a distinct painting. Consistency, certainty and speed are the things that will help, apart from confidence in the courts and development of a good supporting bar – both inner and utter.

The recent sudden fall in oil prices appears to have caught some third world countries unawares, including Nigeria. What are the consequences of this for Nigeria and how could such be averted in future?

The drop in oil, and other commodity, prices has sat with its overbearing weight upon our macroeconomics. The ripple effect of this has been the contraction of our GDP, reduction in our capital expenditure, a 12.3% decline in our foreign reserves between July 2014 and January this year and the depreciation of the Naira by 20% at the interbank market recently – with more, I believe, promising to come. Not much of it has been by surprise, as Goldman Sachs had at June last year predicted that with the change in US monetary policies, the Naira would trade at N165/$ in the next three months, N175/$ in the next six months and N195/$ in 12 months.

In order to absorb the shock and be better positioned in the future, it is imperative that Nigeria’s dependency on the sale of crude oil must be minimised. What most say, including our Overriding Minister, is that other sectors of the economy particularly agriculture, information technology, telecommunications and tourism should be developed. But it is not about diversification of the economy that is the pivot to sustenance in the time of want. Such is a good to have. Rather we need the wisdom of Joseph and the knowledge of Daniel in harnessing whatever we have. Allied to this is that stealing of crude which can be stopped in six weeks, the same way we gave six weeks to cut off the excruciatingly painful bite, confidence and arrogance of Boko Haram, by simply bombing all those tankers taking oil equivalent to what a whole Ghana produces daily will help. Transparency in administration, revision of corruption in our national civic duty curriculum will help. If we do not do these diversification of the economy will simply be diversification of new means of fleecing!

While most developing countries are now moving to shale oil, Nigeria seems to be stuck with crude drilling and its environmental devastation. What is the impact of this on the industry’s future?

Research has shown that it is greener to produce crude oil at a commercial level, than it is shale oil which involves extensive fracking and is thus damaging to the stratosphere, with increasing concerns around waste management, land and water pollution, diversion of fresh water, thus interfering with aquatic habitats. In addition, due to its status as a developing energy source