IMPACT OF THE RECENT ACTIONS OF GOVERNMENT AGAINST MTN NIGERIA ON INVESTOR CONFIDENCE

1. The conduct of any State organ shall be considered an act of that State under international law, whether the organ exercises legislative, executive, judicial or any other functions, whatever position it holds in the organisation of the State, and whatever its character as an organ of the central government or a territorial unit of the State.

2. An organ includes any person or entity which has that status in accordance with the internal law of the State.”

Most investment treaties, contain provisions granting full protection and security for foreign investments. The wording of these clauses suggest that, the host State is under an obligation to take active measures to protect foreign investment from adverse effects. The host State’s duty, is not restricted to preventing damaging acts by private actors. The State’s responsibility, extends to actions perpetrated by its organs. The applicability of a treaty provision on protection and security to direct attacks on the investor’s person and property by organs of the host State, is beyond doubt. In Biwater Gauff v Tanzania (Award, 24 July 2008), the Tribunal said:

“The Arbitral Tribunal also does not consider that the ‘full security’ standard is limited to a State’s failure to prevent actions by third parties, but also extends to actions by organs and representatives of the State itself.”

In Azurix Corp. v The Argentine Republic (Award, 14 July 2006) the Tribunal confirmed that ‘full protection and security may be breached, even if no physical violence or damage occurs’. The Tribunal said:

“The cases referred to above, show that full protection and security was understood to go beyond protection and security ensured by the police. It is not only a matter of physical security; the stability afforded by a secure investment environment, is as important from an investor’s point of view. The Tribunal is aware that, in recent free trade agreements signed by the United States, for instance, with Uruguay, full protection and security is understood to be limited to the level of police protection required under customary international law. However, when the terms ‘protection and security’ are qualified by ‘full’ and no other adjective or explanation, they extend, in their ordinary meaning, the content of this standard beyond physical security.”

The two cases summarised above indicate that, unjustified coercive measures taken by organs of the host State against the investor and his property, constitute violations of the “protection and security” standard, if they prejudice the investor to a material degree. Juxtaposing the above restatement of the law on foreign investment to the situation at hand, MTN Nigeria can legally make a claim against the Nigerian Government for State actions which threaten its investment, or for damages resulting therefrom, if it transpires that the actions of the Nigerian Government were unjustified.

The said actions may also impact on Nigeria South Africa bilateral relations. Since the inception of democratic rule in Nigeria, South Africa and Nigeria have had encouraging bilateral economic relations. Since then, South Africa has emerged among the top investors in many sectors of the Nigerian economy. South African companies' presence is visible in the Nigerian economy, especially in areas such as telecommunications, engineering, banking, retail, hospitality, property development, construction and tourism, to mention a few.

In 1999, the South African and Nigerian governments signed bilateral agreements on trade and investment, and established the South AfricaNigeria Bi-National Commission. These agreements amongst other things, aimed to increase the amount of trade and investment between South Africa and Nigeria. The signing of these agreements witnessed inter-alia (a) improved trade relations between South Africa and Nigeria and (b) South African corporations as big players in the Nigerian economy. Sequel to the signing of the bilateral agreements, the volume of trade between South Africa and Nigeria increased from 1999. Prior to 1999, trade between the two countries was minimal. In 1994, South Africa exported US$8.1 million worth of products to Nigeria; while it imported US$3.1 million worth of commodities from Nigeria.

With the signing of the South Africa-Nigeria Bilateral Trade Agreement, the situation changed. By 2005, South Africa was exporting goods to the value of R3.4 billion to Nigeria and importing R4.2 billion worth of commodities from Nigeria. There are an estimated over 120 South African companies doing business in Nigeria, of which the single largest investor is MTN. Its entrance into the Nigerian market came by way of the first telecommunications auction process in Africa, in January, 2001. At that time MTN’s entrance into the Nigerian market, was the company’s single biggest investment outside South Africa.

South African companies are also heavily involved in Nigeria's media and entertainment sector. DSTV, as a major force in the television industry, accounts for 90% of the viewers that watch satellite TV in Nigeria between 2005 and 2009. This has seen DSTV growing into the sixth largest company, listed on the Lagos Stock Exchange.

It is hoped that the South African Government and its Nigerian counterpart, can find a middle ground to have this MTN Nigeria (which also affects another South African owned company, Stanbic IBTC Bank) issue amicably resolved, so that bilateral relations between Nigeria and South Africa are not negatively impacted. This also goes for the affected banks. It is recommended that, the Nigerian Government soft pedals and be more amenable to amicable settlement, so that wrong signals are not sent to potential investors at a time that FDI is at a low, and the rate of unemployment very high.

It is hoped that, the Nigerian Government will not learn to its cost, that if you are not nice to FDI, it ups sticks and finds a new place to live.

Michael O. Dedon, Managing Associate, Giwa-Osagie & Co., Lagos