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"President" Donald Trump, what fate awaits Africa? Wealth Management, Tax Evasion, Role of the Banks and the Panama Papers E-Commerce and Cyber Security Regulation in Africa
Lawyer in the News:
Chief Godwin Obla, SAN, FCIArb Fearless prosecutor, astute arbitrator, consummate professional.
"Optional" Arbitration Clauses: What happens when one party litigates? Position on recoverable legal cost in Nigeria Corporate Taxation AntiAvoidance Legislations in Nigeria
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Law Digest Autumn 2016
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EDITORIAL BOARD • Hon Justice S.M.A Belgore, CON, GCON, FNIALS,
LLD(Hon) (Former Chief Justice of Nigeria). • Hon Justice G. Oguntade, CFR, JSC (Rtd) • Dr. Anthony C.K. kakooza Ph.D. Dean Faculty of Law, Uganda Christian University. • Kemi Pinheiro, SAN Senior Partner, Pinheiro & Company. • Professor Dakas CJ Dakas Ph.D, SAN, Ben Nwabueze Distinguished Professor of Law, Director of Research, NIALS. • Dr. Uche Ewelukwa Ofodile LL.M (London, Harvard) S.JD. (Harvard), Professor of Law, University of Arkansas School of Law. • Dr Adetokunbo Derek Obadina B.A. (Hons) (Sussex); LL.M (London) Ph.D (Wales), (Solicitor, England & Nigeria), Dean Faculty of Law, Lagos State University. • Dr. Edwin Egede LLB (Hons), BL, LLM, PhD, Senior Lecturer, Cardiff University. • Njaramba Gichuki, Senior Lecturer, University of Nairobi, member Editorial Board, East African Law Journal
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52 "PRESIDENT" DONALD TRUMP WHAT FATE AWAITS AFRICA? This article examines Donald Trump's foreign policy as it could affect Africa if he were to become president of the most powerful and richest country in the world. The article seeks to elicit the possible position of a Donald Trump administration on issues affecting Africa such as aid, foreign direct investment, fight against terror and other socio-econimic issues. SPECIAL FEATURES 20. Corporate Taxation - Anti Avoidance Legislations in Nigeria 26. E-Commerce and Cyber Security Regulation in Africa
and the other exercises the option? LITIGATION 15. Position on recoverable legal cost in Nigeria
4. From the Editor 9. Case Review and Legal Development 34. Lawyer in the News 5. News 41. Events in Picture 60. Top Deals - Autumn 2016
REGULATION 31. Wealth management, Tax Evasion, Role of the Banks and the Panama Papers 56. Ebola Epidemic and the Freedom of Movement within ECOWAS – The Patrick Sawyer Story
ARBITRATION 18. "Optional" Arbitration Clauses: What happens when one party litigates
MINING AND NATURAL RESOURCES 46. Analysis of the new Kenyan Mining Act 3
Law Digest Autumn 2016
FROM THE EDITOR Dear Colleagues,
African firmsâ€™ share of the legal services market With the foreign international law firms tapping into the rich vein of mandates in Africa, it would be remiss for us not to ask if African law firms are actually getting a fair share of the instructions. As Africa takes centre stage in the development strategies of many international law firms, with a range of high profile appointments and promotions at Allen & Overy, Freshfields, Hogan Lovells, Holman Fenwick Willan and Fieldfisher, Norton Rose Fulbright, Baker & Mckenzie, this is a legitimate question to ask. It is undeniable that some African firms have benefitted from working alongside some of these foreign international law firms, with Linklaters (working alongside Udo Udoma & Belo Osagie) and Clifford Chance (working alongside Aluko & Oyebode) advising on Seven Energy Internationalâ€™s refinancing deal worth USD 445 million. Linklaters also recently advised a consortium of lenders on the 18-year financing of a USD 2.6 billion, 1,386 MW ultra-supercritical coal-fired independent power station near the port of Safi in Morocco. Thanks to its Webber Wentzel links, it is also advising the South African government on its 5000MW renewable energy programme. However, the evidence would suggest that instructions are still skewed in favour of foreign international law firms to the
Law Digest - Expanding Minds 4
detriment of African firms. Whilst this is understandable in some cases where African firms lack the expertise and/or the capacities, in some cases, these shortcomings have simply provided covers for prejudice. Many African firms have made giants strides over the past 5 years to develop their capacity, expertise and infrastructure to levels prevalent in some of the legal services capitals of the world, with AB & David securing Lexcel accreditation or G. Elias & Co achieving ISO standards, we should be more circumscribed in accepting these shortcoming as justification for failure to instruct African firms on some of these large transactions. African Bar Associations and Law Societies too should review internal restrictions which militates against development of Pan-African law firms, which many African firms have advised us are too restrictive and works against development of such practices.
Seyi Clement Publisher/Editor
Law LawDigest Digest Autumn Spring 2016
Abubakar Mahood, OON, SAN, FCIArb
"It is business unusual", says new NBA President.
n his inaugural speech to the National Conference of the Nigerian Bar Association (NBA), on 26th August 2016 in Port-Harcourt, Rivers State, Nigeria the incoming President Abubakar Balarabe Mahmoud, OON, SAN, FCIArb, SFNLI declares that it was
going to be business unusual for the legal profession under his tenure. In an election conducted by electronic voting (E-voting), Mr. Mahmoud, polled 3,055 votes to defeat his rival, JoeKyari Gadzama, who got 2,384 votes to become the
33rd President of the largest Bar Association in Africa. The new President promises to reconnect the Association with the citizenry and to restore confidence in the Association. Whilst acknowledging the contributions of the outgoing President, Augustine Alegeh, SAN in commencing the restoration process, he promised to accelerate the steps under the banners of “Brave New Bar” and “Open Judiciary”. His election, like most elections in Nigeria has not been free of controversy. Two days to the election, Mr. Gadzama’s campaign team had accused the outgoing president, Mr. Alegeh, of a “brazen show of preference for and serious capital and human resource investment” into promoting Mr. Mahmoud. According to Maxwell Gibado representing J-K Gadzama Campaign Organisation, “the President’s actions and utterances at several fora and on national television whereby he openly canvassed support for his preferred candidate, vilified and cast aspersions on the other, dampened confidence of objective minded lawyers to repose confidence in the ability
his appointed ECNBA (Electoral Committee of Nigerian Bar Association) to deliver free, fair and credible elections,”. Soon after the results were announced, J-K Gadzama filed an application at the High Court sitting in Abuja, Nigeria, seeking the annulment of the Presidential election result. A hearing date for the matter is still being awaited. True to his words to promote a brave new Bar, Mr. Mahmoud’s call that the controversial Economic & Financial Crime Commission (EFCC) set up by the Nigerian government to investigate and prosecute economic and financial crimes in Nigeria be stripped of its prosecutorial powers, has not gone down well with the EFCC. The Commission have suggested that the President’s call was in, “perfect in sync with a cleverly disguised campaign by powerf ul forces that are uncomfor table with the reinvigorated anti-graf t campaign of the EFCC and are hell-bent on emasculating the agency by str ipping it of powers to prosecute with the tame excuse that an agency that investigates cannot also prosecute.”
Bowmans commits to ‘one firm’ strategy and announces new brand.
owman Gilfillan Africa Group which has been on an aggressive expansion drive announced that from 1 September 2016, it will operate across Africa under one brand name: Bowmans. Chairman
and Senior Partner, Rob Legh, says, “This is a natural step forward for us. For some time, we have seen an increasing level of corporate and public sector activity across the continent. The model we chose
to address this has involved establishing offices in key jurisdictions and working in a fully integrated way to deliver a one-stop service to our clients. However, while our offices are integrated, our brand has not reflected this until now.” Legh says, “We believe this ‘one firm’ approach is superior to networks and alliances because it fosters exceptionally close working relationships
among our lawyers and service departments and reassures our clients that they will receive service of a consistently high quality.” Along with the new brand name and logo, the firm is highlighting what it believes to be its differentiator: legal knowledge, plus real experience of local complexities on-the-ground; this the firm states is encapsulated in the phrase ‘The value of knowing’.
News Kolawale Aluko
ICIJ publishes fresh revelations of use of offshore accounts by Africans following the Pamana Papers scandal.
he International Consortium of Investigative Journalists (ICIJ) says the latest research on the Panama Papers has exposed "fresh details about the misuse of corporate secrecy and hidden wealth in Africa..." The ICIJ has worked with the
African Network of Centers for Investigative Reporting and a number of African news organisations in its latest investigations. The ICIJ says that businesses in 52 African countries used offshore companies created by Mossack Fonseca. In 44
Kenya gets tough on foreign construction companies
he chief executive of Kenya's National Construction Authority (NCA), Daniel Manduku, announced on 5 September that the NCA would not register foreign construction contractors for new infrastructure projects that fail to comply with the 30% local ownership and labour-force participation requirement. The new requirements were finalised following the passage of new legislation affecting the construction sector in May 2015. Chinese firms, in particular, have been targeted by the opposition Coalition for Reforms and Democracy (CORD) party for increasing the proportion of foreign staff employed on projects such as the Mombasa to Malaba Standard Gauge railway.
The regulations are unlikely to have a significant impact on proposed new large-scale infrastructure projects, such as the majority governmentowned LAPSSET transport corridor, during their construction phases, since the new regulations are likely to be altered after the expiry of a one-year moratorium on these projects. Kenyan construction contractors also currently lack the labour, financing, and technical capacity to fulfil the 30% ownership threshold for the largest infrastructure projects. The NCA’s decision to enforce the new regulations is seen by many as a political move to try to counter the opposition CORD challenges to the government’s record on development projects ahead of August 2017 elections.
Law Digest Spring 2016
countries, offshore companies were used to assist oil, gas and mining deals and exports, in a continent where many nations rely on revenue from natural resources. In total, the Panama Papers include more than 1,400 companies whose names alone indicate activity in the extractive industries. Although many of these companies do legitimate business, ICIJ identified 37 companies within the Panama Papers that have been named in court actions or government investigations involving natural resources in Africa. The naming of people and companies with offshore bank accounts does not necessarily mean they are corrupt, but anti-corruption groups and, campaigners against illicit financial flows say the secrecy of the accounts can facilitate tax evasion and avoidance. The ICIJ and Premium Times of Abuja have published details about Kolawole Aluko, a petroleum and aviation mogul who is one of four defendants accused of helping to cheat Nigeria out of nearly $1.8
billion owed to the government on massive sales of oil. In Nairobi, the Daily Nation reports that "a company that was contracted to repair military equipment in Kenya was registered in a tax haven and had opened an offshore account explicitly to avoid paying tax." From Cairo, Aswat Masriya reports that "the family of the Egyptian business tycoon Salah Diab used a corporate network made of Egyptian and offshore companies to sign agreements and strike deals with the Egyptian government." The Namibian says that two Namibian arms dealers are among those named as clients of Mossack Fonseca. One of them was a director of the government's military company and both were among recipients of commissions from South African arms deals. In addition, the ICIJ reports on its website that twelve of 17 companies under investigation by authorities in Italy in relation to a $10 billion oil and gas deal in Algeria were created by Mossack Fonseca.
Zimbabwe to increase local content in the mining sector.
imbabwe’s government has announced plans to amend the Mines and Minerals Act, incorporating increase in local content requirements for foreign investors. The draft bill, tabled for debate in parliament in August, proposes that mining firms will be barred from holding mining rights or titles unless the majority of their shares are listed on the local exchange. The government has said it expects improvements in disclosure, corporate governance and social responsibility if firms are compelled to list locally. The draft amendments further seek to compel mining firms
to use locally registered banks in a bid to increase oversight over financial transactions and revenues. Additionally, unprocessed minerals will not be available for export unless permission is granted by the mines ministry. Foreign-owned mining firms operating in Zimbabwe include Anglo American Platinum, Impala Platinum, Aquarius Platinum, and Metallon Corporation. Many foreign-owned mining firms have expressed disappointment over the proposal. Some operators who we spoke to suggest that the proposals are simply a ploy of extract more revenue from the operators.
Law Digest Spring 2016
Cordison International suffers Obama lift economic sanction setback in Kenya’s wind power race on Côte d’Ivoire US-owned Cordison International suffered a setback in the race to develop wind power in Kenya when the Kenya's National Lands Commission (NLC) on 12 August annulled the Lamu county government’s approval of an 11,000 acre land permit granted to 2013. The site had been earmarked by Cordison for construction of a USD197.3million wind power project. The NLC did approve 3,206 acres of land issued in
Lamu to Belgium company Electrowind and its Kenyanowned subsidiary Kenwind Holdings Limited. Cordison argued its land permit was issued and approved by the county government in 2013, in line with the 2010 Constitution and Lands Act 2012. In response, the NLC’s chairman claimed Cordison had not met the necessary “legal requirements” for approval, although he failed to specify these.
Standard Chartered Bank accelerate growth projection in Africa
tandard Chartered announced on 2 August plans to step up investment and leverage its footprint and international banking expertise to drive growth in Africa. A statement, issued to the press, noted that through a new brand campaign, 'Here for Africa', Standard Chartered Bank has reiterated its commitment to investing in Africa's future, and continuing to support key growth sectors across local economies, including infrastructure, telecommunications, transport, retail and trade. The statement quotes the bank's regional chief executive officer for Africa and Middle East, Sunil Kaushal, as saying in Ghana that the focus will be on corporate and commercial segments. Standard Chartered operates in 38 African economies. Its footprint of 180 branches and outlets has an extended
reach, thanks to the bank's continuous evolution of its digital platforms and mobile banking channels. "Africa is an integral and a valuable economic partner region within our unique footprint across the region, Asia and the Middle East. This campaign is about our show of commitment and confidence in a continent that we have been in for over 150 years," he said at the launch of the Africa-focused campaign in Ghana. Currently, Standard Chartered supports over 1 million retail customers in Africa, and over 25,000 commercial, corporate and institutional clients. In November last year, the bank committed to $3 billion in strategic investments globally, over the next three years - a commitment which has already seen Africa benefiting with a multi-market upgrade of digital and mobile banking platforms.
Nigeria to miss oil revenue target
il Minister Emmanuel Ibe Kachikwu admitted on 15 August in an interview that the Nigerian government was unlikely to reach its revenue target from the oil sector due to a significant fall in production. Nigeria is currently producing around 1.5-1.7 million barrels per day, as opposed to the budget
target of 2.2 million barrels/ day. The fall in oil production is as a direct result of damage caused to oil pipelines by armed militant groups in the oil-rich Niger Delta region. Kachikwu noted that it would probably take four to six months to resolve the dispute with the militant groups and to ramp up production.
resident Obama on 15 September terminated the national emergency declared with respect to Côte d’Ivoire in Executive Order 13396 of February 7, 2006, and lifted the economic sanctions imposed pursuant to that Order. The President determined that Côte d’Ivoire’s advances in restoring peace and democracy and developing its political, administrative, and economic institutions represent significant improvements since President Bush declared the national emergency in 2006. The President’s action
highlights the great progress that Côte d’Ivoire has made since the crisis in 2010-11. The United States is optimistic about the prospects for lasting peace and inclusive prosperity in Côte d’Ivoire. Following peaceful, transparent, credible, and inclusive presidential elections in October 2015, Côte d’Ivoire is continuing the vital work of national reconciliation and security sector reform, which includes professionalising its security forces and reintegrating former combatants and refugees.
President Barack Obama
Sundance Resources investigated for alleged bribery of office in Congo
ustralian mining company, Sundance Resources announced on 25 August that it was being investigated by the Australian federal police on allegations that the company might have bribed officials in the Republic of Congo to win permits to pursue the Mbalam-Nabeba iron ore mining project. The allegations, which are denied by the Congolese government, suggest that Sundance was awarded the mining concession after agreeing to cede a percentage
of the operating company – Congo Iron – in 2006 to senior government officials close to President Denis Sassou Nguesso. Australian laws, prohibit companies from offering foreign officials or their representatives, gifts to induce them into making decisions tied to their official duties. Similar allegations in a separate matter have been made in recent months with regards to Congo's oil sector that have led to investigations by Swiss authorities.
ARBITRATION IN AFRICA A REVIEW OF KEY JURISDICTIONS John Miles, Tunde Fagbohunlu SAN and Kamal Rasiklal Shah
Over the past decade Africa has emerged as a leading centre of economic growth, with the majority of industries operating within Africa having experienced rapid expansion as a result of increased investment and interest from around the globe.
Naturally this has led to an increase in disputes, renewing the interest of arbitrators and practitioners from both within the continent and around the world. Written by a team of highly experienced practitioners, Arbitration in Africa: A Review of Key Jurisdictions is a valuable text for any arbitrator operating within Africa, providing a thorough and comprehensive account of arbitration in Africa.
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Law Digest Autumn 2016
Case Review and Legal Development From the Research Desk
Common Law Setting aside settlement agreement Misrepresentation Dishonest exaggeration of damages
Hayward -v- Zurich Insurance Company plc  UKSC 48 Lord Neuberger (President), Lady Hale (Deputy President), Lord Clarke, Lord Reed, Lord Toulson
therefore allowed to proceed. On the claim itself, the judge found that Mr Hayward had deliberately exaggerated the effects of his injury, set aside the settlement agreement, and awarded Mr Hayward a much reduced sum of £14,720. A second Court of Appeal allowed Mr Hayward’s appeal, holding that the insurer could not be allowed to set aside the settlement agreement since it was aware of Mr Hayward’s fraud at that time. JUDGMENT The Supreme Court unanimously allows the insurer’s appeal, restoring the judge’s conclusion that the settlement agreement should be set aside and that Mr Hayward be paid the reduced sum. Lord Clarke gives the lead judgment.
BACKGROUND TO THE APPEAL The respondent, Mr Hayward, suffered an injury at work in June 1998. Mr Hayward brought proceedings and the employer admitted liability, but he deliberately and dishonestly exaggerated the extent of the injury in order to achieve a higher settlement figure of £134,973.11 from the appellant, the employer’s liability insurer. At the time of the settlement in October 2003, the insurer had video evidence of the exaggeration. But by February 2009, the insurer had gathered further evidence showing that Mr Hayward had fully recovered a full year before the settlement. It sought to set aside the settlement and claimed damages for deceit. Mr Hayward applied for summary judgment on the basis that the claim had already been compromised in the previous proceedings. His application for summary judgment or strike-out was successful before the County Court, but overturned by the Court of Appeal. The insurer’s claim was
HELD The critical issue on appeal is whether, in order to show the requisite influence by or reliance on the misrepresentation in a claim to set aside a compromise on the basis of fraudulent misrepresentation, the defrauded representee (i.e. the insurer in this case) must prove that it settled because it believed that the misrepresentations were true. The answer is “no”. There is no authority supporting a freestanding requirement of belief that the misrepresentations are true. The representee’s state of mind is instead relevant to, but not necessarily decisive of, the court’s consideration of inducement into the settlement agreement, and causation. There may be factual circumstances in which a representee knows that a representation is false but nevertheless relies on it, but this is not such a case. The insurer in this case did not know that Mr Hayward was deliberately exaggerating his injuries to such an extent as later became clear, and did
everything that it could to investigate. Qualified belief in a misrepresentation does not rule out the conclusion that the insurer was induced by it. Lord Toulson, concurring, adds that the issue in this case is whether a suspicious insurer, who nevertheless settles the claim on the basis that it is likely to succeed but then later discovers a fraud, can set aside that settlement and recover damages for deceit. It must be shown that the false representation caused the insurer to act to its detriment, but such inducement is always a question of fact going to the issue of causation. Mr Hayward’s misrepresentation induced the insurer to enter into the settlement agreement in this case. It is not necessary to decide whether knowledge of the falsity of a representation would always prevent a representee from nevertheless proving that he was induced by it. In a claim for deceit based upon alleged misrepresentation it had to be shown that the defendant had made a materially false misrepresentation which had been intended to induce, and had induced, the representee to act to his detriment. It was not necessary as a matter of law to prove that the representee believed the misrepresentation to be true although the representee’s state of mind might be relevant to the issue of inducement. A claimant alleging deceit did not have to show that he had believed the misrepresentation and his reasonable belief as to whether the misrepresentation was true was not the test. The representee might settle the claim on the basis that he thought the misrepresentation would be believed by the judge. The fact that the insurers did not wholly believe the defendant did not preclude them from having been induced to reach a settlement by the defendant’s misrepresentations. Qualified belief or
Law Digest Autumn 2016
disbelief did not rule out inducement, and it was sufficient to establish that the fact of the misrepresentation had been a material cause of the defrauded representee entering into the settlement. The questions whether the insurers had been induced to enter into the settlement agreement and whether doing so had caused them loss were questions of fact which had been correctly decided in the insurers’ favour by the judge.
Common Law Agency Revocability of authority Retention of Title Constructive Trust Insolvency
Bailey and another -v- Angove’s PTY Limited  UKSC 47 Lord Neuberger (President), Lord Clarke, Lord Sumption, Lord Carnwath, Lord Hodge BACKGROUND TO THE APPEAL This appeal concerns two questions. The first is, in what circumstances will the law treat the authority of an agent as irrevocable? The second is whether the receipt of money at a time when the recipient knows that imminent insolvency will prevent him from performing a corresponding obligation, can give rise to liability to account as a constructive trustee. Angove’s PTY is an Australian winemaker, which employed an English company, D&D Wines International Ltd, as its agent and distributor in the UK. D&D bought wines from Angove’s, and also sold wines on Angove’s behalf to UK retailers. That relationship was governed by an Agency and
Distribution Agreement (“ADA”), which was terminable by either side on six months’ notice, or immediately on the appointment of an administrator or liquidator. D&D entered into administration on 21 April 2012, and into creditors’ voluntary liquidation on 10 July 2012. There were outstanding invoices in the amount of A$874,928.81, which represented the price of wine that D&D had sold to two UK retailers who had not yet paid. Angove’s lawfully terminated the ADA and purported to terminate D&D’s authority to collect the price from those two retailers by written notice on 23 April 2012. The termination notice declared that Angove’s proposed to collect the price directly from the customers and would account separately to D&D for their commission. The liquidators of D&D objected to this. They said that they were entitled to collect on the outstanding invoices, deduct the commission due to D&D, and leave Angove’s to prove in the winding up for the rest of the price. They argued that D&D’s authority as agent to collect the price of the goods was irrevocable, because they needed it to recover their commission. Angove’s disputed this. They argued in the alternative that the moneys held by D&D were held on constructive trust for them. The judge held that D&D’s authority to collect the price from the customers ended on service of Angove’s termination notice. The Court of Appeal allowed the liquidators’ appeal, holding that D&D’s authority survived the termination notice. The argument that D&D held the proceeds of the invoices on trust for Angove’s failed both at first instance and on appeal. JUDGMENT The Supreme Court unanimously allows Angove’s appeal on the first question. D&D’s agency was revoked by Angove’s termination notice, but the moneys were not held on constructive trust for Angove’s. Lord Sumption gives the judgment, with which the other Justices agree. HELD The authority of an agent is inherently
terminable, even where it is agreed to be irrevocable, unless it is coupled with a relevant interest of the agent. This requires, in addition to an agreement that the agent’s authority is to be irrevocable, that the authority is given to secure a subsisting proprietary interest or personal liability of the agent. The mere existence of such an interest will not generally be enough to make the authority irrevocable. Neither of those conditions is satisfied on the facts of this case. D&D’s authority was not expressed to be irrevocable in the agency agreement, and there is no implication to that effect. Because there was nothing in the agreement to stop customers paying Angove’s directly, collection of commission could not sensibly be regarded as a right or security of D&D. Deduction from the price paid by customers was not the only way that D&D could recover its commission: customers could pay Angove’s directly, who would then pay it to D&D. Turning to the second question, the argument was that where money was paid for a consideration which the payee knew at the time of receipt was bound to fail because of his imminent insolvency, that fact alone was enough to give rise to a constructive trust of the money in the payee’s hands. This argument is rejected. The price was paid to D&D by the customers absolutely, in discharge of their contractual liability. The judge had held that the agency relationship did not itself give rise to a trust of money in D&D’s hands which they had collected from customers, and that the agency relationship between D&D and Angove’s was in the relevant respects one of debtor and creditor. In these circumstances the mere fact that it was received at a time when D&D’s personal liability to account to Angove’s would not be performed could make no difference to the basis on which they held the money. It did not become unconscionable for them to retain it simply because the statutory insolvency regime intervened to require it to be shared pari passu with other creditors (Neste Oy v Lloyd’s Bank Plc  2 Lloyd’s Rep 658 and In Re Japan Leasing Europe Plc  BPIR 911 overruled).
LawDigest Digest Autumn Spring 2016 Law
Common Law Charter agreement Marine insurance Retention of Title Misrepresentation Repudiation
Versloot Dredging BV and anr -vHDI Gerling Industrie Versicherung AG and ors  UKSC 45 JUSTICES: Lord Mance, Lord Clarke, Lord Sumption, Lord Hughes, Lord Toulson BACKGROUND TO THE APPEAL The issue on this appeal was whether the insurers of a ship were entitled to repudiate liability on the ground that the insured had told a lie in presenting the claim, if the lie proved to be irrelevant to the insurer’s liability. The vessel “DC MERWESTONE” was incapacitated by a flood in her engine room. Her main engine was damaged beyond repair. The flood was caused by (i) the crew’s negligence in failing to close the sea inlet valve in the emergency fire pumps, (ii) damage to the pumps, (iii) the negligence of previous contractors who had failed to seal bulkheads and (iv) defects in the engine room pumping system. The appellant owners presented an insurance claim to the respondent insurers for €3,241,310.60. They told the insurer’s solicitors that the crew had informed them that the bilge alarm had sounded at noon that day, but could not be investigated because the vessel was rolling in heavy weather. This was a lie told by the owners to strengthen the claim, accelerate payment under the policy, and take the focus off any defects in the vessel for which the owners might have been responsible. The lie was in fact irrelevant to the claim, since the vessel’s loss was
found to have been caused by a peril of the seas. But the judge held that the owners’ lie was a “fraudulent device”, which meant the insurers did not have to pay out under the policy. The Court of Appeal agreed. JUDGMENT The Supreme Court allows Versloot Dredging’s appeal by a majority of 4 to 1, holding that the ‘fraudulent device’ rule does not apply to collateral lies, which are immaterial to the insured’s right to recover. Lord Sumption gives the lead judgment. Lord Clarke, Lord Hughes and Lord Toulson give concurring judgments. Lord Mance gives a dissenting judgment. REASONS FOR THE JUDGMENT The common law has long prohibited recovery from an insurer where the insured’s claim has been fabricated or dishonestly exaggerated (“the fraudulent claims rule”). The purpose of the rule is to deter fraud. This appeal concerns the more recent extension of that rule to “fraudulent devices”, i.e. “collateral lies” told by the insured to embellish their claim, but which are irrelevant because the claim is justified whether the statement was true or false. The fraudulent claims rule does not apply to collateral lies. The dishonest lie is typically immaterial and irrelevant to the honest claim: the insured gains nothing by telling it, and the insurer loses nothing if it meets a liability that it has always had. If a collateral lie is to preclude the claim, it must be material. The real test of materiality is that a collateral lie told in the course of making a claim must at least go to the recoverability of the claim on the true facts as found by the court. The test is not, as suggested by Mance LJ in The Aegeon  QB 556 and the Court of Appeal and Lord Mance. In this case, an attenuated test of materiality requiring that the prospects of the claim should apparently be improved, given the facts known at the time of the lie. Lord Clarke concurs, adding that public policy requires that the collateral lie be irrelevant to the insured’s claim, and that it would make little sense to support a rule that bars claims
involving collateral lies uttered before proceedings are begun, and not afterwards. Lord Hughes agrees, pointing out that this extension of the important fraudulent claims rule has been left open by the Insurance Act 2015. The forfeiture of the entire claim is not a proportionate sanction for the teller of a collateral lie, who will suffer in other ways if his lie is discovered. Lord Toulson, concurring, concludes that this outcome is just and appropriate. In a dissenting judgment, Lord Mance would have dismissed the appeal, upholding the principle set out in The Aegeon, but modifying it so as to require a heightened threshold test of materiality of a “significant improvement of the insured’s prospects” at the time of the lie (rather than retrospectively at the time that the court determines the facts), in order to bar the insured’s claim.
Common Law Illegal contract Restitution Public Policy
Patel – v- Mirza  UKSC 42 JUSTICES: Lord Neuberger (President), Lady Hale (Deputy President), Lord Mance, Lord Kerr, Lord Clarke, Lord Wilson, Lord Sumption, Lord Toulson, Lord Hodge BACKGROUND TO THE APPEAL Mr Patel gave Mr Mirza £620,000 to place bets on a bank’s share prices with the benefit of insider information. Mr Mirza expected his contacts to inform him of a government announcement about the bank. Mr Mirza’s expectation was not fulfilled and the intended betting did not take place. But Mr Mirza did not return the money to Mr Patel. Mr Patel brought a claim against Mr Mirza for the money and Mr Mirza contended that the claim
Law Digest Autumn 2016
should fail because of the illegality of the arrangement with Mr Patel. The issue was when involvement in illegality bars a claim. Mr Patel succeeded in the Court of Appeal and Mr Mirza was required to repay the money. Mr Mirza appealed to the Supreme Court. JUDGMENT The Supreme Court unanimously dismisses Mr Mirza’s appeal. Mr Patel is entitled to restitution of the £620,000 which he paid to Mr Mirza. Lord Toulson (with whom Lady Hale, Lord Kerr, Lord Wilson and Lord Hodge agree) gives the lead judgment. Lord Neuberger, Lord Mance, Lord Clarke and Lord Sumption concur in the result, but by different processes of reasoning. REASONS FOR THE JUDGMENT Lord Mansfield said in Holman v Johnson (1775) 1 Cowp 341, 343 that “no court will lend its aid to a man who founds his cause of action upon an immoral or an illegal act”. Behind this maxim, there are two broad policy reasons for the common law doctrine of illegality as a defence to a civil claim. First, a person should not be allowed to profit from his own wrongdoing. Second, the law should be coherent and not self-defeating, condoning illegality by giving with the left hand what it takes with the right hand. The reliance test expressed in Tinsley v Milligan  1 AC 340 bars the claimant if he/she relies on the illegality in order to bring the claim. This test has been criticised and Tinsley should no longer be followed. The essential rationale of the illegality doctrine, as explained by the Supreme Court of Canada in Hall v Hebert  3 RCS 159, is that it would be contrary to the public interest to enforce a claim if to do so would be harmful to the integrity of the legal system. In assessing whether the public interest would be harmed in that way, it is necessary to consider a) the underlying purpose of the prohibition which has been transgressed and whether that purpose will be enhanced by denial of the claim, b) any other relevant public policy on which the denial of the claim may have an impact
and c) whether denial of the claim would be a proportionate response to the illegality. Various factors may be relevant, but the court is not free to decide a case in an undisciplined way. The public interest is best served by a principled and transparent assessment of the considerations identified, rather by than the application of a formal approach capable of producing results which may appear arbitrary, unjust or disproportionate. In considering whether it would be disproportionate to refuse relief to which the claimant would otherwise be entitled, as a matter of public policy, various factors may be relevant. Potentially relevant factors include the seriousness of the conduct, its centrality to the contract, whether it was intentional and whether there was marked disparity in the parties’ respective culpability. A claimant, such as Mr Patel, who satisfies the ordinary requirements of a claim for unjust enrichment, should not be debarred from enforcing his claim by reason only of the fact that the money which he seeks to recover was paid for an unlawful purpose. There may be rare cases where for some particular reason the enforcement of such a claim might be regarded as undermining the integrity of the justice system, but there are no such circumstances in this case. Lord Kerr writes a concurring judgment elaborating on aspects of Lord Toulson’s judgment. Lord Kerr identifies that there is a choice of approaches between a rule-based approach on the one hand and on the other a more flexible approach, taking into account the policy considerations that are said to favour recognising the defence of illegality. A rule-based approach to the question has failed to lead to the predictability it sought. Further, it is questionable whether particular weight should be given to predictability where a claimant and defendant have been parties to an illegal agreement. Lord Neuberger, Lord Mance, Lord Clarke and Lord Sumption all conclude there is no inconsistency in the law in permitting a party to an illegal arrangement to recover any sum paid under it, so long as restitution is possible. An order for restitution simply returns the parties
to the positon in which they would and should have been, had no such illegal arrangement been made. Lord Neuberger goes on however to express the further view that, in relation to other issues involving illegal arrangements, the approach suggested by Lord Toulson provides as reliable and helpful guidance as it is possible to give. Lord Mance, Lord Clarke and Lord Sumption, in separate judgments expressing general agreement with each other, consider that, with the above clarification of the operation of restitution, there is no basis for substituting for the clear-cut principle identified in Holman v Johnson and Hall v Hebert, founded on the need to maintain the integrity of the law, a mix of factors as advocated by Lord Toulson, which would not offer the same coherence or certainty.
Employment Law Racial Discrimination Protected Characteristics Modern Slavery Act 2015 Equality Act 2010
Taiwo v Olaigbe and another; Onu v Akwiwu and another  UKSC 31 JUSTICES: Lady Hale (Deputy President), Lord Wilson, Lord Reed, Lord Hughes, Lord Toulson BACKGROUND TO THE APPEAL The issue in these appeals is whether the mistreatment of migrant domestic workers who are vulnerable because of their precarious immigration status amounts to direct or indirect race discrimination. The appellant in the first appeal, Ms Taiwo, is a Nigerian national who entered the United Kingdom lawfully in February 2010 to work for the respondents. She had a migrant
LawDigest Digest Autumn Spring 2016 Law
domestic worker’s visa obtained for her on the false basis that she had previously been employed by Mr Olaigbe’s parents in Nigeria. Ms Taiwo’s passport was taken from her and she was expected to work during most of her waking hours for minimal wages. She was starved and subject to physical and mental abuse. She escaped and brought successful claims in the employment tribunal for the failure to pay her the minimum wage, for unlawful deductions from wages, for failure to provide rest periods and to give her written terms of employment. She was awarded compensation in respect of these claims but her claim for race discrimination, which would have entitled her to damages for the fear and distress she suffered, was dismissed. The tribunal found that her mistreatment was because she was a vulnerable migrant worker who was reliant on the respondents for her continued employment and residence in the UK, not because she was Nigerian. Ms Onu, the appellant in the second appeal, suffered a similar experience. She had worked for her employers in Nigeria and came to the UK on a domestic worker’s visa. She worked on average for 84 hours a week, without the required rest periods, nor was she paid the minimum wage and she was threatened and abused by her employers. She brought similar claims in the employment tribunal, which all succeeded including her claim for direct race discrimination. The latter finding was reversed by the Employment Appeal Tribunal. The Court of Appeal heard Ms Taiwo and Ms Onu’s appeals together and upheld the dismissal of their discrimination claims on the grounds that immigration status was not to be equated with nationality for the purpose of the Equality Act 2010. Ms Taiwo appealed (and Ms Onu applied for permission to appeal) to the Supreme Court. JUDGMENT The Supreme Court unanimously grants permission to appeal to Ms Onu but dismisses both Ms Taiwo and Ms Onu’s appeals. It holds that neither appellant has suffered race discrimination because the reason for
their abuse by the respondents was not nationality but their vulnerability as a particular kind of migrant worker. Lady Hale gives the only substantive judgment. REASONS FOR THE JUDGMENT Under s 13(1) Equality Act 2010 (‘EA’) a person (A) discriminates against another (B) if, because of a protected characteristic, A treats B less favourably than A treats or would treat others. Race is a protected characteristic and includes colour, nationality and ethnic origins. There is no doubt in these cases that the appellants were treated disgracefully by their employers in a way which employees who did not share the appellants’ vulnerable immigration status would not have been treated. The question is whether discrimination on grounds of immigration status amounts to discrimination on grounds of nationality. Generally speaking employers are free to choose whom to employ, subject to the limits under the EA (and earlier legislation) to protect specified groups, who have historically suffered discrimination, from being shut out of access to employment for irrelevant reasons which they can do nothing about. Parliament could have chosen to include immigration status in the list of protected characteristics but it did not do so. Immigration status is a function of nationality in that non-British nationals (other than Irish citizens) are subject to immigration control, but there is a wide variety of immigration statuses. The appellants were particularly vulnerable to the abuse they suffered because of the terms of their domestic workers’ visas which meant they were dependent on their current employers for their continued right to live and work in the UK. But there are many non-British nationals living and working in the UK who do not share this vulnerability and would not have been abused in the same way. The treatment of the appellants had nothing to do with the fact they were Nigerian and they were not the subject of direct discrimination. This was not a case of indirect discrimination. There was no ‘provision, criterion or practice’
as defined in s 19 EA applied by the respondents to all their employees regardless of their immigration status. The present law does not therefore offer redress for all the harm suffered by the appellants. Parliament might wish to consider extending the remedy available under the Modern Slavery Act 2015 to give employment tribunals jurisdiction to grant compensation for ill-treatment meted out to workers.
Common Law Contract All money clause Retention of Title Sale of Goods
PST Energy 7 Shipping LLC and another -v- O W Bunker Malta Limited and another  UKSC 23 JUSTICES: Lord Neuberger (President), Lord Mance, Lord Clarke, Lord Hughes, Lord Toulson BACKGROUND TO THE APPEAL In October 2014, PST Energy 7 Shipping LLC and Product Shipping and Trading S.A., the owners and managers of the vessel Res Cogitans, (collectively, the “Owners”) ordered a quantity of marine fuel, (the “bunkers”) from OW Bunker Malta Ltd (“OWB”). The contract between OWB and the Owners provided for payment 60 days after delivery and included a clause under which property was not to pass to the Owners until payment for the bunkers had been made. It also entitled the Owners to use the bunkers for the propulsion of Res Cogitans from the moment of delivery. OWB obtained the bunkers from its parent company, OW Bunker & Trading A/S (“OWBAS”). OWBAS obtained the bunkers from Rosneft Marines (UK) Ltd (“RMUK”), which obtained them from RN-Bunker Ltd (“RNB”). In November 2014, OWBAS
Law Digest Autumn 2016
announced that it was applying to the Danish courts for restructuring and subsequently became insolvent. ING Bank NV (“ING”) became the assignee of OWB’s rights against the Owners. The Owners consumed all of the bunkers in the vessel’s propulsion, without making payment to OWB, which did not make payment to OWBAS, which in turn did not make payment to RMUK. RMUK paid RNB and demanded payment from the Owners, asserting that it remained the owner of the bunkers. The Owners commenced arbitration against OWB and ING, seeking a declaration that they were not bound to pay for the bunkers, or damages for breach of contract, on the grounds that OWB had been unable to pass title to them, owing to the application of s. 2(1) and s.49 of the Sale of Goods Act 1979 (“SoGA”). The arbitrators determined that OWB did not undertake to transfer property in the bunkers to the Owners under the Contract and that the Owners therefore remained liable to pay OWB/ ING. Males J agreed and the Court of Appeal dismissed a further appeal by the Owners. JUDGMENT The Supreme Court unanimously dismisses the appeal by the Owners, PST Energy. Lord Mance gives the only judgment, with which the other Justices agree. REASONS FOR THE JUDGMENT There are three issues before the Supreme Court: (1) Was the contract a contract of sale within the meaning of s. 2(1) of SoGA? (2) If not, was it subject to any implied term that OWB would perform or had performed its obligations to its supplier, in particular by paying for the bunkers timeously? (3) Should the Court of Appeal decision F G Wilson (Engineering) Ltd v John Holt & Co (Ltd)  1 WLR 2365 (known as “Caterpillar”) be overruled? Was the contract a contract of sale under s. 2(1) the Sale of Goods Act 1979? s. 2(1) of SoGA defines a contract of sale of goods as one “by which the seller transfers or agrees to transfer the property in goods to the buyer for a money consideration, called the price.”
OWB argues that this was a contract of sale within that definition. But bunker suppliers know that bunkers are for use prior to payment. OWB’s contract with the Owners therefore cannot be regarded as a straightforward agreement to transfer the property in the bunkers to the Owners for a price under s. 2(1). It was a sui generis (unique) agreement, with two aspects: first, to permit consumption prior to any payment and without any property ever passing in the bunkers consumed; and second, if and so far, as bunkers remained unconsumed, to transfer the property in the bunkers remaining to the Owners in return for the Owners paying the price for all of the bunkers, whether consumed before or remaining at the time of payment. Even if the contract were to be analysed as a contract of sale, in that it contemplated the transfer of property in any bunkers unused at the date of payment, OWB could not owe any obligation to transfer property in bunkers consumed before payment. It would cease to be a contract of sale if and when all such bunkers were consumed before payment. Was there an implied term that OWB would pay timeously? In consequence of his conclusion Lord Mance finds that OWB’s only implied undertaking as regards the bunkers which it permitted to be used, and which were used by the Owners in propulsion prior to payment, was that OWB had the legal entitlement to give such permission. Should Caterpillar be overruled? The Court of Appeal held in Caterpillar that where goods are delivered under a contract of sale but title is reserved pending payment of the price, the seller cannot enforce payment of the price by an action . s. 49(1) of SoGA enables an action for the price where the seller has transferred property, with or without delivery, and the buyer has failed to pay the price due. Lord Mance considers that s. 49(2) reflects an established common law exception to the rule in s. 49(1). The question of principle is whether s. 49 excludes any claim to recovery of a price outside its express terms. s. 49(2) relaxes only partially the
strictness of s. 49(1). The 1893 Act which introduced the wording now found in s. 49(2) reflected the common law in an era when freedom of contract and trade were axiomatically accepted as beneficial. Therefore, a court should be cautious about recognising claims to the price of goods in cases not falling within s. 49 but this leaves at least some room for claims for the price in other circumstances. For instance, the price may be recovered in respect of goods undelivered which remain the seller’s property but are at the buyer’s risk and are destroyed by perils of the seas or by fire. The present situation is an even stronger example. Observation Lord Mance declined to set the precise limits for the circumstances in which the price may be recoverable outside s. 49. Had the contract between OWB and the Owners been one of sale, Lord Mance would have held, over-ruling the Caterpillar case on this point, that s. 49 is not a complete code of situations in which the price may be recoverable under a contract of sale. In the present case the price was recoverable by virtue of its express terms in the event which has occurred, namely the complete consumption of the bunkers supplied.
www.nglawdigest.com LITIGATION Folabi Kuti - Partner - Perchstone & Graeys
Position on recoverable legal cost in Nigeria
Partner - Perchstone & Graeys
The Court of Appeal upheld the trial court’s dismissal of the claim for solicitor’s fee, noting, in addition to the main reason for refusing same, that it is “unethical and an affront to public policy to pass on the burden of solicitor’s fee to the other party”.
t is often the practice to make out the statement (or, particulars) of claim in civil suits with a head of claim seeking to recover, in addition to other heads of claim, a claim for solicitor’s fees; often couched as ‘legal fees’ or ‘costs for instituting and maintaining the action’. It appears fairly straightforward: the claimant is seeking, in addition to the reliefs for which he has brought an action, to be ‘made whole’ for engaging the services of a lawyer, and for incurring ancillary expenses for instituting or filing a court action. The English rule, which instructively goes through constant reforms, generally provides that the party who loses in court pays the other party's attorney's fees, and the jurisprudential basis is not too farfetched. In apportioning costs associated with a particular decision to the loser, it indemnifies the successful party for the costs he has undertaken in prosecuting/defending the action, whilst also discouraging frivolous or questionable litigation. Amazingly, the strand of the decisions around here, seem not to have been made in a consistent manner as to necessarily suggest that same is or is not a recoverable cost. It appears to have started with the decision of the Court of Appeal in Ihekwoaba v A.C.B Ltd.  10 NWLR [Pt. 571] 590 at 610-611 where the Court refused a claim for solicitor’s fees on the understandably plausible ground (disclosed by the peculiar factcircumstance of that decision) that ‘there is no system of costs taxation to
LawDigest DigestAutumn Spring 2016 Law
get a realistic figure’. Costs assessed for legal fees are, by the provisions of the rules of court, subject to tax, and the refusal of the claim here was hinged on a deficient or near-absent costs taxing system. Shortly thereafter, one of the issues that came up for consideration in Guinness Nig. Plc. v. Emmanuel Nwoke  15 NWLR [Pt. 689] 135 (yet another decision of the Court of Appeal) was whether the respondent can validly claim his solicitor’s fee from the appellant. The Court of Appeal upheld the trial court’s dismissal of the claim for solicitor’s fee, noting, in addition to the main reason for refusing same, that it is “unethical and an affront to public policy to pass on the burden of solicitor’s fee to the other party”. Curiously, even in the light of the novelty of such a proposition, the Court did not as much as offer an explanation as to how a claim for Solicitor’s fee smacks of an immoral request and/or runs contrary to public policy considerations. Each case must however turn on its own set of facts to rationalise the reason for the decision reached, and thus the Court of Appeal tried to explain, albeit without much success, in SPDC v Okonedo  9 NWLR [Pt. 1091] p. 85 the distinguishing reason for holding the hirer of legal services to the expense of his ‘bargain’ in Guinness’ case. The Court of Appeal offered that the claim for solicitor’s fee was not allowed because the respondent claimed (and indeed, ‘proved’) as ‘special damages’ his solicitor’s fee which stood at ‘a staggering sum of ₦500,000.00 and which arose after the cause of action had arisen.’ With respect to the Court, it is not out of the ordinary to have a litigant, in the normal chain of events, engage a lawyer after the set of facts donating a right to bring an action has arisen. And, again with respect, it beats the imagination how this could make for disallowing an attendant solicitor’s fee incurred thereon. Roundabout the time of this decision, the Supreme Court had an opportunity to consider a similar request in Christopher Nwanji v.
Law Digest Autumn 2016
In apportioning costs associated with a particular decision to the loser, it indemnifies the successful party for the costs he has undertaken in prosecuting/defending the action, whilst also discouraging frivolous or questionable litigation. Amazingly, the strand of the decisions around here, seem not to have been made in a consistent manner as to necessarily suggest that same is or is not a recoverable cost Coastal Services (Nig.) Ltd.  11 NWLR [Pt. 885] 552 at 569, C-D. The Respondent in Nwanji’s case had asked the apex Court to discountenance the position in Ihekwoaba’s on the ground that the Court’s pronouncement there was made in passing. Uwaifo JSC, who, earlier as Justice of the Court of Appeal, was incidentally in the lead in Ihekwoaba’s, reiterated that the observation as to the difficulty in getting a realistic figure as damages attendant upon a properly assessed solicitor’s fees was a major part of the decision and remains a valid position. From this writer’s limited research, the apex Court has since not pronounced otherwise – even as there was an earlier decision in the 1960s where indeed the self-same apex Court, per Ademola CJF, hinted at costs being recoverable for engaging a Queen’s Counsel where there is no local expertise available in that specialised area of law (Rewane v Okotie-Eboh  1 NSCC 135). But that, for the moment, appears a digression. All considered, the question whether a claim for solicitor’s fee is recoverable still does not lend itself to an easy answer. The law as it has been interpreted to date reveals two sets of
positions on the point. On both strands, a claim for solicitor’s fee from the unsuccessful party is contextually put as an ‘unusual claim...difficult to accept in this country’, Ihekwoba v ACB, followed by the apex court’s decision in 2003 (and which decision in Nwanji’s has not been overruled or set aside by the self-same Supreme Court) appears to suggest that where such assessed costs are properly taxed, pleaded and proved as special damages, same will be allowed. The Supreme Court being at the pinnacle of judicial decisions, it is safe to simply conclude here that those are the criteria that must be crossed to avail such a claim; unless the apex Court pronounces otherwise at another opportune time. But that is not all on the subject. The moral fibre argument The claim for solicitor’s fee was refused in Guinness on twin-grounds of the claim not arising from the transaction between the parties, and that same was unethical and an affront to public policy. For some reason, how such a claim runs against ethics and public policy considerations was not expatiated upon. This appears a major pitfall in the case which, by the hallowed principle of stare decisis, many a decision from the High Court still had to follow devotedly, in dismissing a claim for solicitor’s fee. In SPDC v Okonedo (supra) an award of special damages for solicitor’s fee was allowed, with respect, on the slightly blurred line that what was claimed was for specific expense incurred in engaging a solicitor to have a brewing dispute otherwise settled out of court and such same will not constitute an immoral claim. In International Offshore Construction Ltd & 3 Ors. v Shoreline Liftboats Nig. Ltd  16 NWLR [Pt. 845] p. 157 the award made as damages for engaging solicitor’s services was affirmed by the Court of Appeal on the ground that unchallenged evidence was led in its proof. Guinness was not considered, so understandably the moral question was kept for another time. In Lonestar Drilling Nig. Ltd v. New Genesis
Executive Security Ltd  LPELR – 4437 CA there was a claim for costs incurred in engaging a solicitor to prosecute a substantive claim initiated under the Undefended List procedure. The Court of Appeal, in affirming the lower Court’s position that the claimant did not prove the claim as necessary expenses, accepted nonetheless that costs, pleaded and proved as special damages, may be awarded for securing legal representation, and, for the litigant’s “time and effort in coming to court.”
The Court of Appeal offered that the claim for solicitor’s fee was not allowed because the respondent claimed (and indeed, ‘proved’) as ‘special damages’ his solicitor’s fee which stood at ‘a staggering sum of ₦500,000.00 and which arose after the cause of action had arisen.’ The cost-shifting principle also fell for animated discussion in the Court of Appeal decision in Naude v Simon  ALL FWLR [Pt. 753] CA 1878. The Court, per Akomolafe- Wilson JCA reviewed the earlier decisions of the court on the same, inevitably drawing a close thus: “Having regard to the above recent cases, it is no more in doubt that damages for cost, which includes solicitor’s fees and out of pocket expenses, if reasonably incurred are usually paid if properly pleaded and proved. In short, the decision of this honourable court in the cited cases Ihekwoaba v. A.C.B. Ltd and Guinness (Nig.) Plc v. Nwoke where this court held that the payment of solicitor’s fees as damages is not supported in this country does not represent the present state of the mind of the courts in this country. In more recent times, it is common for solicitors to include their fees for prosecution of cases and pass same to the other party as part of claims for damages, which
Law Digest Autumn 2016
Guinness’, happily, it can be safely argued, does not represent the position of the law anymore, if it ever was. Except passing the burden of solicitor’s fee to the other side is, with respect, being mistaken for the public policy prohibition against ‘maintenance’ have been awarded by the courts once the claims are proved.” Commendably enough, the position in these later decisions of the Court of Appeal appear to make passage for recovery of solicitor’s fee. However, it is pertinent to mention that the quoted portion of His Lordship’s erudition on the point, appears to suggest that the position of the Court taken in Ihekwoaba v. A.C.B. Ltd,
as endorsed by the apex Court in Nwanji, and which has not been upturned by the apex court is no longer the law. As emphasized above, there are prescriptions in Nwanji’s which, unless upturned by the apex Court, remains the law to make for a successful outcome on a claim for recovery of professional fees. The real issue, in view of the peculiarity of ‘pleading and proving costs’ to make for a successful claim on same, is to develop our costs taxation systems/ process. Guinness’, happily, it can be safely argued, does not represent the position of the law anymore, if it ever was. Except passing the burden of solicitor’s fee to the other side is, with respect, being mistaken for the public policy prohibition against ‘maintenance’ which Lord Loughborough explained in the English case of Wallis v Duke of Portland 3 Ves. Jun. 494 at 502 in these terms: ‘parties shall not by their countenance aid the prosecution
of suits of any kind; [because] every person must bring [his action or suit] upon his own bottom, and at his own expense’, making an unsuccessful party pay the litigation costs of the successful party will not run against the thread of ethical concerns. It may be argued that it will discourage actions, but the wicket in response is that award of costs is not offered at the mere asking but as ‘regulated’ within the discretion of the court, subject to its being pleaded as special damages and proven. Commendably enough, the High Court Rules of Lagos State (2012) has made a pioneering move in providing beyond a bareknuckle statement that costs follow events. It specifies expressly in Order 49 1(1) (a) that such costs shall include ‘legal representation’. That puts it beyond cavil, and the other rules of courts may want to consider adopting such express provision. Costs should follow events, in every sense of that aphorism.
“I am Ayonimofe Alli of Banwo & Ighodalo and I read the Law Digest”
ARBITRATION James Russell Stoneham & Simon Fawell - Sidley Austin LLP
“Optional” Arbitration Clauses: What Happens When One Party Litigates and the Other Exercises the Option?
he Privy Council (British Virgin Islands) has ruled in a case where a contractual clause provided that the parties “may” submit a dispute to arbitration, but one of the parties commenced litigation. Although the commencement of litigation did not violate the “optional” arbitration clause, the court ruled that the other party, which had not yet commenced arbitration proceedings, was entitled to a stay of the litigation pending arbitration. Factual Background
James Russell Stoneham
Associate (Sidley Austin LLP)
Partner (Sidley Austin LLP)
The dispute in Anzen Limited and others v Hermes One Limited  UKPC 1 focused on the interpretation and meaning of an arbitration clause in an English law-governed shareholders’ agreement which provided that in the event of a dispute “any party may submit the dispute to binding arbitration” under the rules of the International Chamber of Commerce (ICC). Hermes commenced litigation in the BVI in respect of an unresolved dispute. Anzen had not itself started arbitration proceedings, but applied for a stay of the BVI litigation under section 6(2) of the BVI Arbitration Ordinance 1976 (Cap 6) (BVI Act). Although the decision is one of the Privy Council (and so is not binding on the English courts) and concerns a stay under the BVI arbitration regime, it is of wider application as decisions of the Privy Council are persuasive for English courts (and in other offshore
Law Digest Autumn 2016
jurisdictions, including Bermuda and the Cayman Islands), and section 9 of the English Arbitration Act 1996 (1996 Act) is materially the same as section 6(2) of the BVI Act. Section 6(2) of the BVI Act and section 9 of the 1996 Act provide that if a party to an arbitration agreement has legal proceedings brought against it in respect of any matter agreed to be referred to arbitration, that party may seek a stay of the litigation proceedings. The relevant court shall grant the stay requested unless it is satisfied that the arbitration agreement is “null and void, inoperative or incapable of being performed.”
Although the decision is one of the Privy Council (and so is not binding on the English courts) and concerns a stay under the BVI arbitration regime, it is of wider application as decisions of the Privy Council are persuasive for English courts. The Judgment It was common ground between the parties that, had Hermes commenced litigation after Anzen had already referred the dispute to arbitration, a stay must be granted. It was also common ground that, although an arbitrator could not grant the relief sought by Hermes in the BVI proceedings, the arbitrator could decide the underlying factual and legal issues which would be relevant to subsequent pursuit of relief in court. The Privy Council determined that the BVI litigation should be stayed pending any referral to arbitration. It was clear that this did not oblige either party to commence arbitration proceedings. However, the practical result was that Hermes would have to arbitrate as a precursor to obtaining the relief it sought.
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In reaching its decision, the Privy Council decided that the wording of the arbitration clause was permissive rather than exclusive. Until an election had been made by one of the parties, there was no obligation to arbitrate, but once this election was made, the obligation to arbitrate became binding, even if the other party had already commenced litigation. As a result, neither party would be in breach of the clause if it started litigation proceedings before any election had been made to arbitrate (had the language been exclusive rather than permissive, for example by using the word “shall” rather than “may,” then the commencement of litigation would have been in breach
of the clause and may have given rise to damages). However, a party against whom litigation proceedings were brought was entitled to a stay of those proceedings pending arbitration. In reaching its decision, the Privy Council noted that for “optional” arbitration clauses, one party should not be able to gain an advantage over the other by “jumping the gun” and commencing litigation. The Privy Council also determined that Anzen did not have to commence (or intend to commence) arbitration in order to elect that arbitration must be the forum for a dispute. In making this ruling, the Privy Council relied, among other things, on the inherently consensual nature of arbitration which
legislated against the need for a party to commence “artificial” declaratory proceedings in order to make good its election for arbitration. In particular, the Privy Council noted the requirement under the 1996 Act that “[t]he parties shall do all things necessary for the proper and expeditious conduct of the arbitral proceedings.” Practical Considerations The case is a further example of English judges strongly upholding arbitration clauses and highlights that if parties wish to preserve the choice to litigate or arbitrate any given dispute, the relevant provision must be very carefully worded.
“I am Sixtus Iwuoha of Banwo & Ighodalo and I read the Law Digest”
Law Digest Autumn 2016
Companies which are the subject of
incorporated under Part A of the Companies and Allied Matters Act (CAMA)2 to do business in Nigeria. For the purpose of tax, a Nigerian company’s
incorporated under Part A of the CAMA) shall be deemed to accrue in Nigeria wherever they have arisen and whether or not they have been brought into or received in Nigeria.3 Tax
reflective of the failings of the various internal monitoring devices deployed by
corporate taxation on account of their
Corporate Taxation AntiAvoidance Legislations In Nigeria: Analysing Their Inadequacy Mrs. Beatrice Shuwa LL.B., BL, LL.M, + Mrs. Rahmatu Ishaq-Ahmed LLB, BL & Dauda Dewan LLB, BL.
inadequacies. This paper hopes to highlight and proffer solutions that could result in increase of revenue from tax. THE CONCEPT OF TAX AVOIDANCE The term “tax avoidance” is not defined in any of the Nigerian tax statutes. The laws only provide for certain measures against devices that constitute tax avoidance.4 Tax avoidance is generally the legal exploitation of the tax regime to one’s own advantage to attempt
to reduce the amount of tax that is payable by means that are within the
Tax laws in Nigeria are enforced by the
law, whilst making a full disclosure
three tiers of government i.e., Federal,
of the material information to the
State, and Local Governments with
tax authorities.5 The general judicial
each having its sphere of influence
approach to tax avoidance is vividly
clearly spelt out.1 However, Nigeria
captured in the case of Ayrshire
runs a largely centralised revenue
Pullman Motor Services and David
collection system, with the Federal
Government collecting the major tax
Inland Revenue, where Lord Clyde,
President of the Court of Session, said:
royalties, crude oil sales, company
“No man in the country is under the
income tax, value added tax, customs
smallest obligation, moral or other,
and excise duties on behalf of the
so to arrange his legal relations to
his business or property as to enable
Law Digest Autumn 2016
SPECIAL FEATURE the Inland Revenue to put the largest
garnered considerable media attention
be sold goods at an inflated price
possible shovel in his stores…The
and public criticism worldwide,
(this price is a deductible expense)
Inland Revenue is not slow, and quite
corporate leaders have demonstrated
that depletes the profit margin of the
rightly, to take every advantage which
remarkable nonchalance towards it
subsidiary. It accounts for the low pre-
is open to it under the taxing statutes
or even expressed pride in their tax
tax profit of SCOA (Nigeria) Limited
for the purposes of depleting the
despite the high turnover in 1988
taxpayer’s pocket. And the taxpayer is
tax avoidance schemes utilised by
financial year.16 The transfer pricing
in like manner entitled to be astute to
companies are not captured in our tax
process is “widely abused and has
prevent, so far as he honestly can, the
statutes as tax offences, these methods
resulted in significant revenue loss
depletion of his means by the Inland
to the U. S. government.”17 This also
happens in Nigeria, being a part of
One could describe a tax avoidance
Transfer Pricing Abuse
the global economy.18 The effect of
transaction as one that would not
the ploy was said in 1990 to cost the
have been adopted, if the tax saving
United States between $13b and $30b
element had not been present. But
price is “a price, adopted for book-
a year in taxes.19 Though the statistics
the intention to save tax does not
keeping purposes, which is used to
in Nigeria are not readily available,
of itself make a transaction a tax
value transactions between affiliated
the tax revenue lost via this method is
avoidance transaction. This is because
enterprises integrated under the same
estimated to be substantial.20
there are several tax incentives and reliefs to encourage investment in some companies.7 The legality of tax avoidance lies in the fact that no statutory provision has been able to declare any of the methods used to avoid tax as being against the law but in reality, in our view, it has the effect of a breach of the law since the intention is to abridge the amount of tax payable. A very recent case in point is that of MTN using a complex tax avoidance scheme
avoid tax.8 The telecommunications giant admitted that it had made unauthorised payments to MTN Dubai and Mauritius, which are tax havens
Companies such as Vodafone have been targeted by campaigners against tax avoidance
between 2010 and 2013 to the tune of Thin Capitalisation
about N37billion. The transfers were
management at artificially high or low
made ostensibly as management fees
levels in order to effect an unspecified
paid to those affiliates with zero staff.9
income payment or capital transfer
between those enterprises.”14 Transfer
structure of a company where the
METHODS OF TAX AVOIDANCE BY
pricing is a legitimate practice as long
ownership has been hidden behind
as the corporation abides by the “arm’s
company uses in its daily operation
For today’s corporations, tax avoidance
Corporations with subsidiaries in more
belongs to a tax haven company which
and the use of tax havens have become
than one country to value transactions
leases all equipment and machinery
commonplace and even an integral
“as if they had been carried out by
to that specific company. Also, intra-
part of modern business practice.
unrelated parties, each acting in his
corporation debt arrangements are
Although these practices have recently
own best interest.”15 A subsidiary could
used to relocate profits. This leads to
Law Digest Autumn 2016
Jurisdictions such as Panama have been used as part of tax avoidance strategies
“tax relief shopping” in which profits
will be disallowed as a charge. 23 The
expenses, for top executives. Kanyip
are made where tax rates are lowest
problem can also feature between two
rightly captured this tendency by
and losses made where tax reliefs are
Nigerian entities. This could arise, for
companies when he submitted that
highest. The overall effect is that most
instance, where the lending company
quite a large number of companies
of the profits qualify as deductible
is exempted under CITA from tax
declare losses year in year out or
on interests received. It is therefore
declare very marginal taxable profits
as against their turnovers, yet such
tax-wise, to invest heavily in the
companies do not voluntarily wind
Nigerian subsidiary and the head
up, neither are they compulsorily
Normally, this arises between the or
rather than in equity
enterprise group and an associated
recipient in Nigeria. The head office
Conversion of sheltered income to
remunerations increasing every year
or the group lends to the Nigerian
as well as increases in conspicuous
subsidiary or affiliate, as the case may
and prestigious investments such as
be, and charges interest which is in
Companies minimise the incidence
excess of what would apply between
unrelated persons operating on normal
sheltered income to individual benefit
where the controlling shareholders
referred to in the Companies Income
are themselves directors and top
There is another form of tax avoidance
Tax Act21 (“CITA”) as “artificial or
known as “tax delinquency” meaning
Where the transaction is
remuneration and expensive benefits
the failure to pay tax as and when
seen as fraudulent, the whole interest
in kind which qualify as deductible
due. 27 This could be as a result of
landed property and expensive cars. 26
the Tax Delinquency
Law Digest Autumn 2016
inadequate funds or a deliberate act
Anti-Avoidance Provisions in CITA
effect to or that any transaction
on the part of the taxpayer to obtain various advantages. In Nigeria, this
which reduces or would reduce 1. The CITA provides that for a
the amount of any tax payable
is particularly acute with companies
doing business in
is artificial or fictitious, it may
Nigeria, tax shall be assessed on
disregard any such disposition
the responsibility of operating the
profits, rent, premiums, interest,
or direct that such adjustments
withholding tax. These bodies are
known to remit tax late to the Revenue
annuities, benefits, any fees,
liability to tax as it considers
dues or allowances and shall
appropriate so as to counteract
here is quite clear. The company uses
be payable at a rate specified
the reduction of liability to tax
the tax deducted for its business
by the relevant tax authority.30
purposes with the accruing interests
In order to achieve the above,
would otherwise be affected, by
or a profit going to the company;
the transaction and any company
and in an inflationary economy like
concerned shall be assessable
Nigeria, the tax ultimately remitted
with Federal Inland Revenue
to the Revenue is usually of a lesser
Service at least once a year in
value than it was when the tax ought
accordance with the provisions
The above provision, to our mind
to have been remitted. Hence, the
of section 44(1) CITA. The effect
contemplates tax avoidance by
adage tax delayed is tax gained.
of section 44(1) CITA is to impose
an obligation on every company
to asses itself voluntarily in every
transfer pricing not done at
Federal Inland Revenue Service
tax year and remit appropriate
tax to the Board.32 The potential
check some of the above abuses
While it is on the one hand an
provision contained in the CITA
do not adequately capture most of
anti-avoidance device, it is also
is the power of the Board to call
the avoidance schemes adopted by
a money saving device to those
for returns, books, documents
corporations hence avoidance has
companies who are not in default
and information for the purpose
continued without hindrance.
of this provision. This is because
substantial compliance with this
in respect of the profits of any
ANTI-AVOIDANCE PROVISIONS IN
NIGERIA'S CORPORATE TAX LAWS
such a company to a bonus of 1
avoidance measure to curb the
percent of payable tax. Though
tax avoidance schemes of making
the essence of section 44(1) was
incorrect return and incorrect
not considered illegal in Nigeria,
information in relation to any
and to curb tax avoidance, its
matter or thing affecting the
assumption that every taxpayer
liability to taxation of a company.
revenue by reducing the incidence
is well meaning and patriotic
In section 66 CITA, the provision
of avoidance. We will look at the
and as such will assess itself
on the power of the Board to
various tax laws; specifically, the
truthfully is unrealistic. The
CITA, the Capital Gain Tax Act
potential of this provision has so
even after a company has paid
1967, the Education Tax Act 1993
far been unrealised.33
its tax for a particular tax year is
and the Value-Added Tax Act 1993 which contain some anti-avoidance provisions
an anti-avoidance device evident 2. Another
provision evident in the CITA
provisions to see whether they are
is that contained in section 22
For all the anti-avoidance provision
adequate in dissuading companies
CITA which provides thus:
provided by the CITA, none is seen as
Where the Board is of opinion that
illegal, it is rather couched in a way
any disposition is not in fact given
to curb tax avoidance by companies
Law Digest Autumn 2016
rather than declaring the practice
the Board merely asses what it feels is
appropriate and the person pays.
Nigerian courts to tax avoidance has
that prescribes penalty for act of
left much to be desired. The experience
tax avoidance is not directed at the
company but to a person37 who aids
CORPORATE TAX AVOIDANCE
companies with the courts prepared to The judicial pronouncement on tax
disregard such schemes and levy tax
Anti-Avoidance Provision in Capital
countries as well as the USA have
In New Zealand, the doctrine of tax
generally agreed to the principle of the
mitigation was evolved by the Privy
right of a taxpayer to order his affairs
Council in CIR v. Challenge Co. Ltd.50
Under the Capital Gain Tax Act
to reduce his tax liability in so far as
By the doctrine, according to Lord
anti-avoidance provision in section 20
this would not involve the breach of the
Templeman, a scheme can be allowed
akin to section 22 of the CITA, provides
law as held in Ayrshir Motor Services
for tax planning purposes, only where
for artificial or fictitious transactions.
and D. U. Ritce v, C. I. R43 cited
above. The opinion of other judges like
to reduce his assessable income or
Hand J, in Helvering v. Gregory 44,
entitle him to a reduction in his tax
Pratte J. in Produits Inc v. The
liability, but such expenditure must
Queen,45 Lord Upjohn in I. R. Comr
be deductible. The formulation was
The Education Tax Act levies tax at
a follow-up to section 99 of the New
the rate of 2% of the assessable profit of
Zealand Income Tax Act 1976 which
a company registered in Nigeria.
Anti-Avoidance Education Tax Act
are that there is nothing in
advantage of the benefit allowed by law
defines tax avoidance (after declaring
assessable profit of a company shall be
to decrease the amount to be paid into
it illegal) as including first, directly
ascertained in the manner specified in
the Treasury because no commercial
or indirectly altering the incidence
the CITA.42 By virtue of the provisions
man in his senses is going to carry out
of any income tax; secondly, directly
of Section 2 (1) Education Tax Act,
commercial transaction except on the
or indirectly relieving any person
all the anti-avoidance provisions as
footing of paying the smallest amount
from liability to pay income tax; and
contained in the CITA are applicable
of tax involved.
lastly, directly or indirectly avoiding,
under the Education Tax Act.
The approach of the Nigerian courts towards tax avoidance by companies
elsewhere has shown a sturdy judicial activism in matters of tax avoidance by
and abets the act of tax avoidance by companies.38
It can be said that the approach of the
reducing or postponing any liability to income tax.
Anti-Avoidance Provisions in Value-
has been one that favours the tax
In the New Zealand approach, the
Added Tax Act (“VAT Act”)
avoiding companies that incidentally
fact remains that the legislature has
were multinational corporations. In
branded tax avoidance as illegal. It is
The tax is chargeable and payable on
Reiss & Co (Nig) Ltd v. FBIR,
left for the courts to take the cue. This
the supply of all goods and services
instance, Justice Karibi-Whyte after
is the approach suggested for Nigeria.51
other than those goods and services
conceding that there is a dark cloud of
The taxing statutes should declare
listed in the First Schedule to the
suspicion regarding the genuineness
tax avoidance as illegal, only then can
VAT Act. Under section 18 of the VAT
the courts approach the issue of tax
Act, an instance of tax avoidance is
companies surprisingly held that on
provided for where it states that “if a
the evidence before him, no trade or
taxable person renders an incomplete
business was carried on in Nigeria
or inaccurate returns, the Board shall
either by the Nigerian company or
assess, to the best of its judgment, the
by the Amsterdam company, and so
amount of tax due on the taxable goods
allowed the appeal. To say the least,
and services purchased or supplied by
His Lordship ignored the substance
the taxable person. Even under the
of the transaction and merely relied
VAT Act, this method of tax avoidance
on the form, thereby allowing the
envisaged is not considered illegal
foreign company to use its subsidiary
since no penalty is attached rather
to avoid tax.49
avoidance decisively. This is contained in the Taxes and Levies (approved list for collection) Decree, 1998. 2 Cap C20 Laws of Federation of Nigeria 2004. 3 Section 13 (1) CITA. 4 Ibid. 5 How tax avoidance, evasion cripple Nigeria’s economy, www.mydailynewswatchng.com, accessed on 8/7/14 6 (1929) 14 TC 754 7 ‘Investigations: How MTN ships billions abroad, paying less tax in Nigeria’, Premium 1
Law Digest Autumn 2016
Times, Sunday, October 2015, www. p r e m i u m t i m e s n g . c o m /i n v e s t i g a t o n s/ specialreports.html, accessed on 22/11/15. 8 Ibid. 9 Tax havens refer to countries that have secrecy laws in relation to banking and finance. Examples of tax havens are Caribbean countries like Jamaica and Haiti which operate high banking secrecy laws. Tax havens share a number of defining characteristics, most importantly low or zero tax rates on offer to non-residents and transaction secrecy. 10 Palan, R. et al., Tax Havens: How Globalization Really Works 4 (2010). 11 See, Floyd Norris, The Corrosive Effect of Apple’s Tax Avoidance, N.Y. TIMES, May 24, 2013, at B1; Eric Pfanner, European Countries Seek More Taxes from U.S. Multinational Companies, N.Y. TIMES, Nov. 19, 2012, at B1. 12 Google’s Tax Avoidance Is Called “Capitalism,” Says Chairman Eric Schmidt, TELEGRAPH (U.K.) (Dec. 12, 2012), http://www.telegraph. co.uk/technology/google/9739039 /Googlesta x-avoida nce-is- ca lled- capita lism-sayschairman-Eric-Schmidt.html. 13 Glossary of Statistical Terms, ORG. FOR ECON. CO-OPERATION & DEV. (Feb. 20, 2003), www.stats.oecd.org, accessed on 4/6/15 14 Organization for Economic Co-Operation & Dev., Annual Report on The OECD Guidelines For Multinational Enterprises: Conducting Business In Weak Governance Zones 176 (2006). 15 Kanyip, B. B., “Company Tax Evasion and Avoidance in Nigeria”, in Tilley-Gyado, M.N. et al (eds.) “New Perspectives in Law” (Lagos: Dee-Sage Nig. Ltd., 2005) p5.
Statement of Sen. Carl Levin on Offshore Profit Shifting and the U.S. Tax Code—Part 1 (Microsoft and Hewlett- Packard): Hearing before the Permanent Sub. comm. on Investigations of the S. Comm. On Homeland Sec. & Governmental Affairs, 112th Cong. app. at 77 (2012) “Under U.S. tax rules, a subsidiary must pay ‘arm’s length’ prices for these assets, but valuing assets such as intellectual property is complex, so it’s hard to know what an unrelated third party would pay.” 17 Kwaghkehe, I., and Samuel, S, T., “Global Perspectives in Tax Evasion and Avoidance: The Legal Quagmire In Nigeria” NIALS Journal of Business Law. 18 Ibid. 19 Kanyip, B. B., Op Cit., 20 Section 22 CITA 2007 21 Artificial or fictious transactions are transactions that in the opinion of the Board have not been made on the terms which might fairly have been expected to have been made by persons engaged in the same or similar activities dealing with one another at arm’s length. See section 22 CITA 2007 22 Arogundade, J. A., Op. Cit. 23 In corporate finance, a non-resident company can invest through debt finance by granting loan to its Nigerian subsidiary. 24 Here, the non-resident company invest through equity finance by acquiring shares of the company and becomes the owner or partowner of the company depending on the level of the holding. See generally, Arogundade, J. A., p. 87 25 Kanyip, B.B., Op Cit,, p. 65. 26 In New Zealand, this would qualify as tax avoidance, see section 99 New Zealand Income 16
Tax Act 1976 cited in Kanyip, B. B., ibid. 27 Abdulrazaq, M. T., p. 29 28 The term company for the purpose of CITA is any company or corporation (other than corporation sole or partnership) established by or under any law in force in Nigeria or elsewhere. See section 84 CITA. 29 Section 8 CITA. 30 Legal alert dormant companies-legal and tax implications, www.oseroghoassociates. com, accessed on 19/11/14. 31 Asada, D., “The regulatory Framwoak for Tax Compliance and enforcement in Nigeria: A Reflection”, in vol. 15, No. I, Nigerian law Journal, (Ekiti: Afe babalola University press, 2011) p.8 32 Ibid. 33 Section 22(1) CITA 2007 34 As contained in section 60 CITA 35 As seen in section 94 CITA. 36 E.g. Accountant and Lawyers employed by companies to render tax avoidance services. 37 Section 94(1) CITA. 38 1967. 39 1993 40 Section 1 (2) Education Tax Act 41 Section 1(3) ibid. 42 (1929) 14 T.C at p.763 43 69F 2nd 809, 810 (2nd Cir. 1934) 44 (1976) 76 DTC 6344 (FCA), at p. 6349 45 (1967) 1 All E. R. 779 at p. 784 46 Arogundade, J. A., Op Cit. 47 (1977) NCLR 443. 48 Kanyip, B. B., “Company Tax Evasion and Avoidance in Nigeria”, in Tilley-Gyado, M. N. et’al (eds.) “New Perspectives in Law”, (Lagos, Dee-Sage Nig. Ltd., 2005) p. 28 49 (1987) 2 WLR 24 50 Kanyip, B. B., op.cit, fn 55.
Law Digest Autumn 2016
E-commerce and Cyber Security Regulation in Africa
339,283,342 internet users3. The internet has provided easy access to information, simplified investigation for security agencies, enhanced social network, and advanced business to consumer sales (e-commerce). However, the adage that every good thing has a dark side has found expression even in internet usage. Notwithstanding the laudable benefit of the internet, there are peril associated with it. The internet is continuously buzzing with vices which threatens the security of Nations, businesses of conglomerates, and the privacy of individuals. These vices have been qualified as cyberattacks. Cyberattacks include but are not limited to hacking, mail bomb, trojans, web defacement, Denial-of-Service (“DoS”), trap doors, spoofing, phishing, and vishing. These cyberattacks have resulted in theft of data and money, destruction of data, extortion, distribution of pornography, and disruption of online services amongst others. The essence of this article is to discuss the growth of e-commerce in Africa, the threat posed by cyberattacks to Africa and the African Union Convention on Cyber Security and Personal Data Protection (the “Convention”) as it relates to cybersecurity. E-commerce in Africa
Introduction The advent of the internet and the dotcom era has strengthened the notion that the world is a global village. The internet has simplified human activities which could have been cumbersome. The use of the internet has surge astronomically. Over 3,440,839,840 people are connected to the internet, accounting for 40% of the world population, and more than 1,070,397,120 websites have been created.2 The world internet usage and population statistics as at June 30, 2016 showed that Africa with a population of 1,185,529,578 has
E-commerce has made purchase of goods and rendering of services easy. With a single click, goods could be purchased, shipped and delivered anywhere in the world within a short time. E-commerce has enabled companies to reach customers in countries where they do not have a physical presence. Enormous transactions are concluded daily on the internet which sum up to billions of dollars annually. Statistics showed that in 2013, global e-commerce sales amounted to $839.8 billion and is expected to reach $1.92 trillion this year (2016)4. Meanwhile in 2013, e-commerce sales in the Middle
Law Digest Autumn 2016
SPECIAL FEATURE Of importance is an attempt to enter or entry of “fraudulent data” on a computer system. Bizarrely, the Convention criminalised the entry of “data fraudulently” without criminalising entry of “fraudulent data”. East and Africa accounted for 2.2% of global e-commerce sales. With a projection that this could increase between 2016 and 2018 from 2.4% to 2.5%5. The projection demonstrate that Africa is an emerging e-commerce market. Threat Posed by Cyberattacks to the World and Africa Due to the global nature of the internet, cyberattacks have become transnational. Every gadget connected to the internet is prone to cyberattack. The proximity of the cyber-attacker is irrelevant, as the illicit act could be conducted from any location. Statistics divulged that up to 60,740 websites could be hacked daily6. The 2016 Symantec Report noted that there were more than 430 million new unique pieces of malware in 2015, a 36% increase from 2014.7 The number of zero-day vulnerabilities discovered in 2015 more than doubled to 54, a 125% increase from 2014.8 According to Laura Ani,9 “IT revolution has brought about a vast array of aides and conveniences that have indelibly influenced modern communication, travel, security and commerce. However the massive gains brought by the information age are not perfect, with the pervasive correlation of human activity with electronic resources and infrastructure, there is a crucial vulnerability, which is the ever present risk of abuse, insidious manipulation and sabotage of computer and computer networks”.10 Individuals, companies, and countries have been victims of
cyberattacks. In 2013, the financial security system of Target11 was hacked, this led to the loss of the credit and debit cards of up to 40 million customers12. This affected the shares of the company as its shares fell by 46% year-on-year in the fourth quarter of 2013 to $520 million13. In 2015, the Office of Personnel Management of the United States was hacked and the breach led to the loss of data of approximately 21.5 million people made up of both current and former federal employees14. In January 2016, Ireland's National Lottery website and ticket machines were knocked offline after a DoS attack.15 Africa has also been a victim of cyberattacks. In East Africa, governments are the top target for cyberattacks (33%), telecommunications (22%), and financial services (17%).16 Cyberattacks has caused Kenya up to 2 billion Kenyan shillings (over $23 million)17. In 2013, Google Kenya website was hacked18. A 2011 Deloitte Touche survey revealed that financial institutions in Kenya, Rwanda, Uganda, the United Republic of Tanzania, and Zambia had registered losses of up to $245 million due to cyber fraud19. In the first half of 2013, the Banks in Zambia lost more than $4 million to cybercrime20. In February 2016, the database of the South African government was hacked. Identities, details and passwords of approximately 1,500 government employees were posted online.21 In May 2016, the website of the University of Limpopo was hacked. Other than leaking exam papers, the details of over 18,000 students were leaked. In Nigeria, the websites of the Nigerian Police Force and the Central Bank of Nigeria have been hacked23. According to Dr. Vincent Olatunji24, Nigeria has experienced 3,500 cyberattacks between 2015 and 2016, with over 70% success rate and a loss of $450 million25. According to Adebayo Shittu26, Nigeria loses up to N127 billion yearly to cybercrime, which is 0.08% of her GDP.27 In addition,
Nigeria is ranked third in the world for cybercrimes28. Cyber Security Regulation in Africa The deleterious effect of cyberattack has been dominant in Africa, but ignored, and in most cases, it has been dealt with internally by companies as an information technology problem without any coordinated continental effort to address the problem. Africa did not have any panAfrican regulation on the internet and computer usage until 2014. While the European Union (“EU”) in 2012 had its comprehensive regulation to govern cybersecurity29. In addition, the EU parliament on July 6, 2016 approved the first community-wide rules designed to bolster cybersecurity throughout the EU30. By contrast, Nigeria and South Africa which boost of the largest economies in Africa dragged their feet on the enactment of cybersecurity laws. South Africa enacted her cybersecurity law in 200231 while Nigeria stalled until 201532. When compared with other countries, it is clear that African countries arrived late to the party. The United States in 1984 made her first attempt at enacting a law to curtail fraud and related activity in connection with computers33. Chile in 199334, China in 199635, Brazil in 200036, India in 200037, and Australia in 200138. Now that Africa has a cybersecurity Convention, the question being asked is, how effective is the Convention in dealing with the issues arising from cyberattacks and crimes? The Convention The Convention was adopted on 27th June 2014, by the 23rd ordinary session of the African Union (“AU”) Assembly made up of 54 Member States. The Convention is a demonstration of the AU’s attempt to establish a legal framework for information in Africa. It is worthy of note, that the main impediment to the expansion of e-commerce in Africa is lack of a continental policy to regulate
Law Digest Autumn 2016
23rd Ordinary session of the AU held in Malabo, Equatorial Guinea
The Convention is required to be ratified by at least 15 AU Member States before it would come into force. Surprisingly, only 8 Member States have signed the Convention and it has not been ratified. e-commerce and ensure cybersecurity. The terminus of the Convention therefore, is to protect personal data, regulate e-commerce, and ensure cybersecurity. Acts that constitutes Offence under the Convention Offences under the Convention are in 4 categories: a. Attack on computer systems; b. Computerised data breach; c. Content related offences; and d. Property offences. The Convention enjoin AU members to
enact laws that criminalise acts that may fall under these categorises. a. Attack on Computer systems According to the Convention, an attempt to obtain or obtain unauthorised access to a computer is an offence.39 Exceeding authorised access to a computer is also an offence. Also constituting an offence is an attempt to obtain or obtain unauthorised access to a computer with intent to commit another offence or facilitate the commission of an offence4. The Convention neither define “unauthorised access” nor “exceed authorised access”. In the same vein, it is an offence to hinder, distort or attempt to hinder or distort the function of a computer system.41 The Convention does not criminalise conspiracy to hinder or distort the functions of a computer system. An attempt to enter or entering of “data fraudulently” in a computer system is regarded as an offence. This pertains to entry of data on a computer without consent, which is the same
as entry of data without authorised access. Of importance is an attempt to enter or entry of “fraudulent data” on a computer system. Bizarrely, the Convention criminalised the entry of “data fraudulently” without criminalising entry of “fraudulent data”. The implication is that fraudulent data may be entered on a computer so long as the holder of the fraudulent data has authorised access to a computer. But a counter-argument here is that, the Convention criminalise continuous act of fraud or attempt to remain fraudulent in part or all of a computer system42 . Similarly, it is an offence to damage or attempt to damage, delete or attempt to delete, deteriorate or attempt to deteriorate, alter or attempt to alter, change or attempt to change computer data fraudulently43. b. Computerised Data Breach Under the Convention, acts that would constitute computer data breach include: i. The interception or attempt to
Law Digest Autumn 2016
intercept computerised data fraudulently by technical means during non-public transmission to, from or within a computer system44; ii The alteration or suppression of computer data, resulting in inauthentic data with the intent that it be considered or acted upon for legal purposes as if it were authentic.45 An intention to defraud may be required before criminal liability attaches; iii To knowingly use data obtained fraudulently from a computer system46; iv. To fraudulently procure, for oneself or for another person, any benefit by inputting, altering, deleting or suppressing computerized data or any other form of interference with the functioning of a computer system47; v. Negligence in the processing of data without complying with the preliminary formalities for the processing 48; and vi. Participating in an association formed or in an agreement established with a view to preparing or committing any of the offences under the Convention49. c. Content related Offences Under this category, any act in respect of child pornography is regarded as an offence.50 Promoting racism or xenophobic through a computer system constitute an offence 51. Any threat or attack of a person through a computer system due to race, colour, descent, national or ethnic origin or religion is an offence 52 . More so, deliberately denying, approving or justifying acts of genocide or crimes against humanity through a computer system is an offence 54. d. Property Offences The Convention require Member States to take necessary legislative measures
to criminalise the violation of property such as theft, fraud, handling of stolen property, abuse of trust, extortion of funds and blackmail involving computer data.54 In addition, the Convention criminalise the use of computer systems for terrorism and money laundering55. It is noteworthy, that the AU realised that Member States would need to amend their criminal laws in order to give effect to these offences. Thus, Member States are urged to amend their criminal laws to include â€œby means of digital electronic communicationâ€? 56. The purpose of this inclusion is to ensure that the substantive criminal law of the Member States reflect the use of computer and other electronic devices for the commission of a crime is an offence. To add more, the Convention require member States to enact laws that would restrict access to protected systems classified as critical National defence infrastructure due to the critical National security data they contain57. Liability for Offences Under the Convention, any party including State, local communities, public institutions, natural persons, and companies may be held liable for cybercrime.58 Sanctions for Offences The Convention enjoin Member States to legislate on the punishment that would be proportionate to the cybercrime committed59. However, the Convention has recommended some sanctions, which are: i. Fines60; ii. Injunction61; and iii. Confiscation63. Admissibility of Digital Evidence The Convention enjoin Member States to legislate on the admissibility of digital evidence for the purpose
of establishing offenses under their National criminal law. In admitting the digital evidence, the Convention require that it must have been tendered before the Court, originated from an identifiable person, made out and retained in a manner capable of assuring its integrity. Conclusion The decision of the AU to recognise, and regulate data protection, e-commerce, and cybersecurity in Africa is laudable. Although the Convention may be imperfect, it is a good start. The Convention is required to be ratified by at least 15 AU Member States before it would come into force.64 Surprisingly, only 8 Member States have signed the Convention and it has not been ratified.65 It is expected that when the Convention becomes effective, that it would attract more technological investment to Africa, foster e-commerce, secure the cyberspace, gradually mitigate cyberattacks, and punish cybercrimes. Overall, the Convention is a clear indication that Africa is joining the rest of the World to ensure cybersecurity. Akinkunmi Akinwunmi Esq. LLM in Business and Technology Law (UC, Berkeley) 2 Internet Usage Statistics, retrieved on August 23,2016 from http://www.internetlivestats. com 3 Internet World Stats Population and Usage Statistics, retrieved on August 23, 2016 from http://www.internetworldstats.com/stats.htm 4 B2C e-commerce sales worldwide, retrieved on August 23, 2016 from http://www.statista. com/topics/871/online-shopping 5 B2C e-commerce sales by region, retrieved on August 23, 2016 from http://www.statista. c om/st at ist ic s/24 4 05 4/sh a re - of- g loba lb2c-e-commerce-sales-in-middle-east-andafrica/ 6 Internet Usage Statistics, retrieved on August 23,2016 from http://www.internetlivestats. com 7 Internet Security Threat Report Volume 21, April 2016, retrieved August 23, 2016 from https://www.symantec.com/ c o n t e n t/d a m/s y m a n t e c/d o c s/r e p o r t s/ ist r-21-2 016 - en.p d f ?a id= elq _ & om _ sem _ kw=elq_16351507&om_ext_cid=biz_email_el 1
Law Digest Autumn 2016
q_&elqTrackId=283a3acdb3ff42f4a70ab5a9f2 36eb71&elqaid=2902&elqat=2 8 Supra. A zero day vulnerability refers to a hole in software that is unknown to the vendor. This security hole is then exploited by hackers before the vendor becomes aware and hurries to fix it—this exploit is called a zero day attack. Uses of zero day attacks can include infiltrating malware, spyware or allowing unwanted access to user information. The term “zero day” refers to the unknown nature of the hole to those outside of the hackers, specifically, the developers. Once the vulnerability becomes known, a race begins for the developer, who must protect users. PC Tools: What is a Zero-Day Vulnerability?, retrieved August 23 2016 from http://www.pctools.com/security-news/zeroday-vulnerability/ 9 Laura Ani is a Research Fellow, Nigerian Institute of Advanced Legal Studies. 10 Laura Ani: Cyber Crime And National Security: The Role Of The Penal And Procedural Law, retrieved on August 22, 2016 from www.nials-nigeria.org/pub/LAURAANI. pdf 11 Target cyber breach hits 40 million payment cards at holiday peak, published December 19, 2013, retrieved on August 24, 2016 from http://w w w.reuters.com/article/us-targetbreach-idUSBRE9BH1GX20131219 12 Dough Drinkwater, Does a data breach really affect your firm’s reputation? CSO Online, published January 7, 2016 retrieved 24th August 2016 from http://www.csoonline.com/ article/3019283/data-breach/does-a-databreach-really-affect-your-firm-s-reputation. html 13 Supra 14 Retrieved on August 24, 2016 from https:// www.opm.gov/cybersecurity 15 Irish lottery site and ticket machines hit by Distributed-Denial-of-Service attack published January 21, 2016 retrieved on August 24, 2016 from http://www.bbc.com/ news/technology-35373890 16 East Africa Telecoms Top Cyber Attacks Targets published June 26, 2016 retrieved August 23, 2016 from http://allafrica.com/ stories/201606270369.html 17 supra 18 Google Kenya’s Website Hacked, Defaced published April 15, 2013 retrieved on August
24, 2016 from http://techloy.com/2013/04/15/ google-kenya-website-hacked/ 19 Henry Quarshie and Alexander MartinOdoom, “Fighting Cybercrime in Africa”, Computer Science and Engineering, Vol. 2, No. 6 (2012), pp. 98-100. 20 Michael Chawe, “Cybercrime costs Zambian banks $4million”, Africa Review, 14 June 2013, retrieved on August 24, 2016 from www.africareview.com/News/Cyberc r i me - c o st s - Z a mb i a n - b a n k s - - 4m i l l i o//979180/1883006/-/128vr2iz/-/index.html. 21 SABC cyberattack not unique, published June 13, 2016 retrieved August 23, 2016 from http://w w w.iol.co.za/news/south-a fr ica/ sabc-cyber-attack-not-unique-2034215 22 supra 23 NaijaCyberHactivists Shuts down Nigeria Police Force Website published January 27, 2012 retrieved on August 24, 2016 from http://techloy.com/2012/01/27/ naijacyberhactivists-shuts-down-nigeriapolice-force-website. Nigeria’s Central Bank Website Hacked published January 27, 2012 retrieved August 24, 2016 from http://techloy. com/2012/01/27/n iger ias- cent ra l-ba n kwebsite-hacked. 24 Acting Director General of the National Information Technology Development Agency, NITDA, 25 Nigeria records 3,500 cyberattacks in last one year, published March 31, 2016 retrieved on August 24, 2016 from http://www. vanguardngr.com/2016/03/nigeria-records3500-cyber-attacks-last-one-year/ 26 Nigerian Minister for Telecommunication 27 FG Moves to Curb Cybercrime Threat to National Security published August 3, 2016 retrieved August 3 2016 from http://www. t h isdayl ive.com/i ndex.php/2016/08/03/ fg-moves -to - c u rb - c yb erc r i me -t h re at-to national-security/ 28 Nigeria Ranked Third In The World For Cyber-Crime, Says Survey, retrieved August 24, 2016 from 29 http://www.balancingact-africa.com/news/ en/issue-no-302/computing/nigeria-rankedthird/en 30 EU Directive (95/46/EC) 31 EU Parliament Approves New Cybersecurity Rules, published July 8, 2016 retrieved on August 25, 2016 from http://www. powermag.com/eu-parliament-approves-new-
cybersecurity-rules 31 Africa increases cybersecurity efforts published on June 21, 2013, retrieved on August 25, 2016 from http://www.itworld. c o m/a r t i c l e/2 70 5 9 8 6/s e c u r i t y/a f r i c a increases-cybersecurity-efforts.html 32 Cyber Crime (Prohibition and Prevention) Act, 2015 33 18 U.S.C. § 1030. This was the first major law to regulate computer related activities in the US. There are other Federal and State Laws which have been enacted to further regulate the use of Computer and internet. 34 Law on Automated Data Processing Crimes no. 19.223, published June 7, 1993 35 Regulations on Safeguarding Computer Information Systems, February 1996 36 Law No. 9,983 of July 7, 2000, insertion of fake data into systems of information Article 313-A 37 Information Technology Act, 2000 38 Cybercrime Act 2001 39 Article 29(1)(a) of the Convention 40 Article 29(1)(b) of the Convention 41 Article 29(1)(d) of the Convention 42 Article 29(1)(c) of the Convention 43 Article 29(1)(f) of the Convention 44 Article 29(2)(a) of the Convention 45 Article 29(2)(b) of the Convention 46 Article 29(2)(c) of the Convention 47 Article 29(2)(d) of the Convention 48 Article 29(2)(e) of the Convention 49 Article 29(2)(f) of the Convention 50 Article 29(3)(1)(a)–(d) of the Convention 51 Article 29(3)(1)(e) of the Convention 52 Article 29(3)(1)(f)-(g) of the Convention 53 Article 29(3)(1)(h) of the Convention 54 Article 30 (1)(a)-(b) of the Convention 55 Article 30 (1)(b) of the Convention 56 Article 30 (1)(c) of the Convention 57 Article 30 (1)(d) of the Convention 58 Article 30 (2) of the Convention 59 Article 31 (1)(a)-(b)of the Convention 60 Article 31 (1)(c) of the Convention 61 Article 31(3)(d) of the Convention 62 Article 29(3)(2) of the Convention 63 Article 29(4) of the Convention 64 Article 36 of the Convention 65 The Countries that have signed are; Benin, Chad, Congo, Guinea Bissau, Mauritania, Sierra Leone, Sao Tome & Principe and Zambia.
REGULATIONS Ehi Eric Esoimeme - Deputy Editor in Chief of DSC Publications Ltd. Law Digest Autumn 2016
Wealth Management, Tax Evasion and Money Laundering and the role of the Banks: The Panama Papers Case Study Introduction
Ehi Eric Esoimeme Deputy Editor in Chief of DSC Publications Ltd.
Internal data leaked from Panama-based law firm Mossack Fonseca showed that more than five hundred banks, their subsidiaries and branches, including HSBC, Credit Suisse, UBS, Société Générale and RBS-owned Coutts, registered nearly fifteen thousand six hundred shell companies for their customers through the Panama-based law firm Mossack Fonseca.
The Panama Papers have pulled back the curtain, revealing how banks help clients to avoid tax through the use of offshore companies. Internal data leaked from Panamabased law firm Mossack Fonseca showed that more than five hundred banks, their subsidiaries and branches, including HSBC, Credit Suisse, UBS, Société Générale and RBS-owned Coutts, registered nearly fifteen thousand six hundred shell companies for their customers through the Panama-based law firm Mossack Fonseca.1 While Wealth Management is not illegal, the level of diligence carried out in wealth management is expected to be higher than that needed for normal retail banking.2 Where legal vehicles and structures are used as it was done in the case at hand, it is important for banks to establish that their use is genuine and to be able to follow any chain of title to know who the beneficial owner is.3 Shell companies, particularly nonlisted shell companies, for example, have been known to be exploited by corrupt politically exposed persons (PEPs) to launder proceeds of corruption under the guise of legitimate business transactions and to hide their involvement in the transactions.4 It can be argued that from the data leaked from Panama-based law firm Mossack Fonseca that HSBC and the other four hundred and ninety-nine banks failed to establish adequate policies, procedures and internal controls reasonably designed to prevent tax evasion and money laundering. Role of the Banks Customer due diligence A strong Customer Due Diligence
program is an effective underlying control through which banks can determine the nature, purpose, and expected use of shell companies and apply appropriate monitoring and documentation standards.5 It is intended to enable a financial institution to form a reasonable belief that it knows the true identity of each customer and, with an appropriate degree of confidence, knows the type of transactions the customer is likely to undertake.6 A client may need the Bank to create shell companies and trusts to avoid identification as the account holder. These shell corporations are often referred to as ‘private investment corporations’ or PICs. They are usually incorporated in jurisdictions such as Panama. Where such legal vehicles and structures are used, it is important for the Bank to establish that their use is genuine and to be able to follow any chain of title to know who the beneficial owner is.7 The relationship manager with primary responsibility for a client is charged with meeting the due diligence requirements. These requirements include ascertaining the true identity of the client, obtaining references, and determining the client's background and source of funds. The relationship manager has also specified several categories of "high risk accounts" requiring added due diligence and monitoring. These categories include clients in high risk geographic areas, such as countries identified by credible sources as lacking appropriate anti-money laundering and counter-terrorist financing (“AML/ CTF”) laws, regulations and other measures; countries identified by credible sources as providing funding or support for terrorist activities that have designated terrorist organisations operating within them; and countries identified by credible sources as having significant levels of corruption, or other criminal activity. Enhanced on-going monitoring As due diligence is an ongoing process, a bank is required to take measures to ensure account profiles of politically exposed persons are current and monitoring should be risk-based. Banks should consider whether risk profiles should be adjusted or suspicious activity reported when the
Law Digest Autumn 2016
• mandatory exemptions for certain reports that had little usefulness for law enforcement, such as cash transfers between depository institutions and cash deposits from government agencies; and • discretionary authority for the Secretary of the Treasury to provide exemptions, subject to criteria and guidelines established by the Secretary, for financial institutions with regard to regular business customers that maintain accounts at an institution into which frequent cash deposits are made.10
Mossack Fonseca - the law firm at the centre of the Panama Papers scandal
activity is inconsistent with the profile. Failure of firms to subject PEPs to heightened monitoring may lead to corrupt PEPs laundering money through the Bank. The Panama Papers revealed that Former Delta State governor, James Ibori, working through a Swiss asset management firm, Clamorgan S.A. in Geneva, established limited liability companies and foundations in offshore tax havens, such as Panama. Mr. Ibori, who is currently serving jail term in the United Kingdom after pleading guilty to fraud charges in 2012, had his immediate family as beneficiaries of the offshore companies and foundations.8 From the revelation, it could be argued that James Ibori’s personal Bank in Nigeria conducted business without implementing adequate procedures and internal controls, as appropriate and practical, to detect and timely report suspicious activity and large currency transactions. This explains why large amount of funds were moved from the Nigerian Bank to Geneva, undetected. If the accounts of James Ibori were effectively monitored and properly scrutinized, the Bank would have been able to detect that the funds deposited into the account were
not commensurate with the legitimate income of the Governor. Currency Transaction Reports In most jurisdictions, banks are required to file a report of each deposit, withdrawal, exchange of currency or other payment or transfer, by, through or to such financial institution which involves large sum transactions. This report is referred to as a Currency Transaction Report.9 The pre-set, maximum threshold is usually ten thousand US dollars. The United States Congress established the currency transaction reporting requirements in 1970 because the Congress found then that such reports have a high degree of usefulness in criminal, tax, and regulatory investigations and proceedings and the usefulness of such reports has only increased in the years since the requirements were established. In 1994, in response to reports and testimony that excess amounts of currency transaction reports were interfering with effective law enforcement, the Congress reformed the currency transaction report exemption requirements to provide—
The unprecedented leak of millions of papers from the database of Mossack Fonseca, the world’s fourth biggest offshore law firm, show that some financial institutions are not utilising the exemption system, or are filing reports even if there is an exemption in effect, with the result that the volume of currency transaction reports is once again interfering with effective law enforcement. The amount of funds that were moved from domestic jurisdictions like Nigeria, Russia, Ukraine and China to offshore jurisdictions, confirms the above stated facts. If Banks in Nigeria, Russia, Ukraine, Zimbabwe and China had been filing their Currency Transaction Reports, money would not have moved to off shore jurisdictions. Cash Declaration Requirements Cash smuggling is one of the major methods used by terrorist financiers, money launderers and organised criminals to move money derived through illegal means to support their activities. In cash smuggling operations, couriers will, inter alia, travel by road, through airports or by lake or sea with loads of cash, often stuffed into boxes, suitcases and concealed compartments in vehicles and on persons.11 The Financial Action Task Force Recommendations (Recommendation 32) obliges countries to put in place measures to detect the physical crossborder transportation of currency and bearer negotiable instruments, including a declaration system or other disclosure obligations.12 The wording of Recommendation 32 makes the purpose of these systems clear; it is to assist in the detection
Law Digest Autumn 2016
of both licit and illicit cross-border transportation of cash.13 The panama papers leak is strong evidence that the Financial Action Task Force cash declaration system may not be achieving its primary objectives. Criminals appear to be circumventing the threshold mechanism by employing the services of individual couriers to transport cash in checked or carry-on baggage or on their persons. Conclusion The so-called Panama Papers have highlighted once again how perfectly legal corporate structures can be abused to facilitate money laundering and tax evasion or to obscure ill-gotten gains. While many have blamed tax havens for the panama papers scandal, this paper blames the Banks for not fully implementing adequate procedures and internal controls, as appropriate and practical, to detect and timely report suspicious activity and large currency transactions. This paper does not agree with those who want a global body on tax cooperation, under the auspices of the United Nations,14 and this paper does not agree with the proposal of the British Prime Minister to make facilitation of tax evasion illegal.15 The international standards on tax transparency which have been established in recent years are robust, but now we must ensure implementation is global and effective.16 Effective implementation is the key to lifting the veil of secrecy once and for all and eradicating tax evasion. This paper argues that the current anti-money laundering laws/policies are strong enough to deter money laundering if implemented to the latter. Currency Transaction Reports is one of the very strong anti-money laundering measures that could have prevented this scandal from occurring. Moore, S. (2016), ‘Panama papers: Banks including HSBC and Credit Suisse deny helping clients avoid tax using offshore companies’, Available at: http://economia. icaew.com/news/april-2016/panama-papersbanks-deny-helping-clients-avoid-tax-usingoffshore-companies (accessed 23 April 2016), see also Franklin, J and Nebehay, S. (2016), ‘Europe's banks under scrutiny as regulators look into Panama Papers’, Available at: http:// w w w.reuters.com/article/us-panama-ta x1
swiss-idUSKCN0X40QG (accessed 23 April 2016). 2 Wealth management is the provision of banking and investment services in a closely managed relationship to high net worth clients. Such services will include bespoke product features tailored to a client’s particular needs and may be provided from a wide range of facilities available to the client including: current account banking, high value transactions, use of sophisticated products, non-standard investment solutions, business conducted across different jurisdictions and off-shore and overseas companies, trusts or personal investment vehicles. See the United Kingdom Joint Money Laundering Steering Group: Prevention of Money Laundering/ Combating Terrorist Financing 2014 Revised Version: Guidance for the UK Financial Sector Part II: Sectoral Guidance, paragraph 5.1, for more info. 3 United Kingdom Joint Money Laundering Steering Group: Prevention of Money Laundering/Combating Terrorist Financing 2014 Revised Version: Guidance for the UK Financial Sector Part II: Sectoral Guidance, paragraph 5.12. 4 Otusanya, OJ. and Lauwo, S. (2012), ‘The role of offshore financial centres in elite money laundering practices: evidence from Nigeria’, Journal of Money Laundering Control, 15(3), pp. 336-361. 5 United States Federal Financial Institutions Examination Council: Bank Secrecy Act/ Anti-Money Laundering Examination Manual 2014, 276. 6 FATF Guidance on the Risk Based Approach to combating money laundering and terrorist financing, (High Level principles and procedures) 2007, paragraph 3.10. 7 United Kingdom Joint Money Laundering Steering Group: Prevention of Money Laundering/Combating Terrorist Financing 2014 Revised Version: Guidance for the UK Financial Sector Part II: Sectoral Guidance, paragraph 5.12. 8 Ogundipe, S. (2016), ‘#PanamaPapers uncovers how Ibori the thief organised massive stealing of Delta funds’, Available at: http://www.premiumtimesng.com/news/ headlines/201265-panamapapers-uncovershow-ib or i -t he -t h ief- or g a n is e d-m a s si ve stealing-of-delta-funds.html (accessed 5 April 2016). 9 See United States Codified Bank Secrecy Act Regulations 2010, s 1010.311, see also China Anti-Money Laundering Law 2007, Article 20. See Nigeria Money Laundering Prohibition Act 2011 (as amended), s. 2 (1), s. 10 (1), see also South Africa Financial Intelligence Centre Act, 2001 (as amended), s. 28. See Russia Federal Law of August 7, 2001 No. 115-FZ – «On Combating Legalisation (Laundering) of Proceeds from Crime and Financing of Terrorism» (as amended), Article 6, Article 7, see also the Law of Ukraine on Prevention and Counteraction to Legalization (Laundering) of
the Proceeds from Crime, Terrorist Financing and Financing of Proliferation of Mass Destruction Weapons, dated October 14, 2014 No 1702-VII, Article 9. 10 Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT ACT) Act of 2001, s. 366. 11 Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG), (2008), ‘Report on Cash Courier-Based Money Laundering’ (accessed 2nd January, 2014), 7. 12 While countries have followed the advice of the FATF, the laws in these countries are not identical. For example, Nigeria and the United Kingdom require all travellers to orally declare if they carry an amount of currency above the prescribed threshold, while the United States and Russia requires travelers who carry an amount of currency above a preset designated threshold to complete a written declaration form. 13 Financial Action Task Force (2015), ‘Money Laundering Through the Physical Transportation of Cash’ (accessed 5 January, 2016), 60. 14 Chonghaile, CN. (2016), ‘A system of privilege and benefits': is a global tax body needed?’, Available at: http://www.theguardian.com/ globa l-development/2016/apr/11/systempr iv i le ge -b enef it s - g loba l-t a x-b o dy- o e c d (accessed 12 April 2016). 15 Asthana, A. (2016), ‘Cameron plans to introduce new crime of aiding tax evasion’, Available at: http://www.theguardian. c om/ne w s/2 016/apr/10/jer emy- c orb y nsuggests-all-mps-should-publish-tax-returns (accessed 13 April 2016). See also Fino, J. (2016), ‘Panama papers: David Cameron announces tax evasion law following leaks’, Available at: http://economia.icaew.com/ news/april-2016/cameron-announces-ta xevasion-law (accessed 13 April 2016). 16 The Organisation for Economic Co-operation and Development (OECD) have over the years developed standards for exchange of information on request and, more recently the Common Reporting Standard (CRS) which provides for automatic exchange of financial account information between tax authorities (AEOI). The standards developed by the OECD and endorsed by the G20 and the rest of the international community are robust. They draw on the work developed by the Financial Action Task Force (FATF) on beneficial ownership, which is now incorporated into the tax transparency standards (EOIR and AEOI), and on the stringent US FATCA legislation which addresses the risks of non-compliance by financial intermediaries and other service providers. Finally, the standards also cover the issue of transparency for trusts and other legal arrangements. For more on the OECD Standards, see OECD (2016), ‘OECD SECRETARY-GENERAL REPORT TO G20 FINANCE MINISTERS’ (accessed 20 April 2016).
Lawyer in the News CHIEF GODWIN OBLA, SAN, FCIArb FEARLESS PROSECUTOR, ASTUTE ARBITRATOR CONSUMMATE PROFESSIONAL
hief Godwin Obla SAN, FCIArb has a glittering a career spanning more than three decades. A prominent member of the Nigerian Bar Association and served as a member of the Committee on Anti-corruption as well as Chairman of the Section on Legal Practice Sub-Committee on Cross-border Crimes and Financial Malpractices and other Related Matters. Chief Godwin Obla, SAN, FCIArb severally acted as Special Prosecutor for the Economic and Financial Crimes Commission (EFCC) and the Federal Government of Nigeria in white collar crimes and related offences including the Central Bank intervention prosecutions, the Halliburton Bribery case, the Siemens Bribery scandal, the Panalpina Bribery case amongst others. In his role as a Special Prosecutor for the EFCC, who has been Godwin Obla was conferred with the Fellowship of the Chartered Institute of Arbitrators, London in 1997. He has also been an Honorary member in the Association of Fellows and Legal Scholars at the Centre for International Legal Studies, Salzburg, Austria since 1998. Chief Godwin Obla was elevated to the rank of Senior Advocate of Nigeria (the equivalent of the British “Queens Counsel”) in 2013. He has several publications to his credit including; 1. “Practical problems in Arbitration under Nigerian Law”, Newsletter of committee “D” of the International Bar Association viol.2. No.2 (Arbitration & ADR) September 1997. 2. “Arbitration Involving State Parties in Nigeria”– Published in “Comparative Law Yearbook of International Business” by Kluwer Law and International Centre for International Legal Studies Austria,1998. 3. “Arbitration as a tool for Dispute Resolution In Nigeria, How relevant today?”Delivered at the 2011 public lecture of the faculty law, University of Ibadan, June 2011. 4. “Networking the criminal justice systemprosecution and detection challenges”– presented at the 2012 round table on networking the criminal justice system organised by the Nigerian Institute of Advanced Legal Studies, 2012. A quiet philanthropist who over the years has embarked on rural electrification projects in Otukpo Local Government Area and also as a member of the University of Lagos Law Class of 80/83 which is at the forefront of the Law Class’ development projects in the Faculty of Law at his Alma Mater. It is for his philanthropic spirit and bravery in the face of adversity that we have chosen Chief Godwin Obla, SAN, FCIArb as our Lawyer in the News.
Chief Godwin Obla SAN, FCIArb By Seyi Clement How would you describe your childhood? I was born to Mr. and Mrs. Joseph Obla in Kaduna. My father was a soldier and my mother was a full time housewife. I’m the fifth in the family of seven boys and one girl from my mother’s lineage. My father was polygamous. I had a fairly normal childhood. Because of my father’s military background, when he was posted out of Kaduna I had to relocate to Otukpo in 1970 to continue my primary education. Thereafter in 1973, I started my secondary school at St Francis College Otukpo.
You grew up with military background, in area where a military career is probably the first choice for most young men with similar background, why did you choose a different career? My family has an interesting history. My father had 4 siblings, 3 male and one female. It turned out that 3 of my uncles were all in the Army and all fought in the civil war. My first brother went to the Army Primary School Kaduna, ended up in the
Military School in Zaria and thereafter attended the Nigerian Defence Academy, Kaduna. I felt my family had contributed its quota to the military component of the Nigerian State and it was left for the rest of us to contribute in other ways (laughs).
How did your parents react to your decision not only to study law and to leave the North to go to Lagos? My father, from the very beginning, was supportive of my desire to study law, while my mother was nonchalant about it. This was probably because as a full housewife, and having little education herself, career opportunities and prospects were not her strongest points. However, my father was enraged when he learnt that I did not choose Ahmadu Bello University, Zaria as my first choice, and instead opted for the University of Lagos. He was even more enraged when he saw that in my application form, I had filled in University of Lagos as first and second choice of institution, and law as first and second choice of course of study. This anger stemmed from what he regarded
as my audacity and absolute recklessness in not following the footsteps of my older siblings in studying in a Northern institution. But it turned out at the end of the day that my judgment was justified and once I was admitted, every argument as to whether I took the right decision or not paled into insignificance.
At the University of Lagos, you quickly became active in Student Union politics, becoming the Secretary General of the Students’ Union in 1981, what do you think about the current state of Student Union politics? I think the current state of student union politics is reflective of the state of the Nigerian nation itself. In those days when we were in the Students’ Union, it was purely for service because you were always held accountable by the Students’ Union Parliament, which was very active, and by the students themselves. Students had a way of ticking the checklist of what you promised in your manifesto and confronting you with them from time to time 35
Law Digest Autumn 2016
in class, in public and the buttery (where students would regularly meet to eat, discuss amongst themselves and generally socialise). All those things no longer obtain today. I see a disturbing trend today in the high level of monetisation of student union politics. Student Union leaders go to see politicians to solicit for funds and so forth. In our days you didn’t have the audacity to visit politicians or to solicit for funds from them. In fact, when they offer funds, we used to reject them. I remember that we had a meeting with Adamu Ciroma, who was the Minister for Agriculture in the Shagari administration. In other to placate us and encourage us to be less militant and aggressive in our relationship with government, they offered to provide us with vacation jobs but we refused out rightly, because we felt it was going to compromise our positions on national issues. Today, you see Student Union leaders advertising positions in newspapers, supporting various politicians. This was absolutely unheard of. It costs at least ₦600,000 to place a full page advertorial in a national daily; where do they get that type of money from? You can see very clearly, student union activism/politics today cannot be divorced from what we see playing out in our national and state politics.
You were called to the Nigerian Bar in 1984, and took the brave and highly unusual decision to set up in practice immediately on your own straight after your National Service, what influenced this decision? Would you do the same if you were called in 2016? I think that the environment then was a lot friendlier, for starters. Again, the level of maturity of practitioners then was also in my opinion a lot higher. When we went for National Service in 1984, we had the opportunity of learning so much, of appearing in court alone and of drafting various documents on our own. Even though the 9 of us who served in Federal Capital Development Agency (FCDA) Abuja were offered automatic employment, we really did not see any incentive to stay behind (only one person accepted the offer). We felt we were mature enough to take the risk. It wasn’t very rosy when I started, and I had a rough time for about 2 or 3 years before I was able to find my feet. To the second leg of the question as to whether I would do it today, I do not think it would be a wise step to contemplate in the Nigeria of today. The law has changed,
the law has become a lot more dynamic and specialised, the areas that a young practitioner could easily make money in those days in terms of documentation and other legal services has become so fluid; the internet has come in so people can do a lot of these things on their own; again, so many other professionals like secretaries, estate agents etc. have encroached on the field that used to be exclusive to lawyers. On the whole, I do not think that, if 1985 were 2016, I would have the audacity to contemplate taking the same step.
The quality of young and upcoming lawyers in Nigeria has been a source of concern for many senior lawyers; do you share this concern? Where do you think the problems stem from and how can we improve the quality of our young lawyers? I would answer from two positions, Yes and no. The quality of young lawyers in some cases is absolutely deplorable. In some other cases, we have extremely and exceptionally brilliant lawyers coming into the profession. And that is where the problem lies. You have two categories of young lawyers coming in; some extremely articulate, attending the best schools and being up to date with the latest trends in the law, and the others coming absolutely unprepared. There is now a sharp dichotomy between those that are going to make it, and those who are going to fall by the way side. Why do we have problems with the ones that have challenges? We need to go back to the educational background starting from the primary school through the University. There is no gainsaying that the fact that there are some graduates who, when you really have a conversation with them, you have your doubts as to whether they really passed through a faculty of law, and if they did, you have your doubts as to whether they successfully passed through the Law School. Don’t forget that very recently the Director General of the Nigerian Law School said that some practicing lawyers were caught writing examinations for some students of the Nigerian law school. I also think that we need to continually update our law curriculums, both at the University level and at the level of the Law School.
You made silk in 2013. What advice would you give to young lawyers coming
through the ranks who also aspire to make silk? Silk is a privilege and when you desire a rank of that nature, you need to work for it, but there must be no desperation about it. Your work will speak for itself, if you work hard and are conscientious and disciplined. Essentially, you must also keep to the ethics of the profession. That is more important than any rank that may be given to you. With time, your colleagues will acknowledge your work, and that is what the Silk simply means- acknowledgment that a practitioner has done well in the profession and the profession in turn recognising that practitioner.
It would appear that you caught the politics bug at the University of Lagos, as you returned to politics in 1998, before retiring from active politics in 2007. Some would consider your retirement premature. What brought about the decision to retire from active politics and would you return in the future? I have always been a political animal, not just from the University of Lagos but even from the secondary school. I always had a strong tendency to be an activist. Of course, at the University my political skills were better honed and my propensity for activism increased. One of the best ways to serve your people is through the Local Government. I had the benefit of being elected twice and appointed once as Chairman; thereafter I was appointed Commissioner for Energy in the government of Senator George Akume. In 2007, I made up my mind that it was time to go back to my professional calling which, to be frank, is my comfort zone. I really do not think it was premature for me to retire from politics. Politics is not a profession, I look at it as a vocation. It is an opportunity and a platform to serve your people, and you need not do it until you die. I think that is where the problem with Nigeria is. People have decided that politics is now a profession. It is not. When you serve up to the time you feel you can be of use to your people, and if you feel that you do not have the motivation to continue to be useful to your people in politics, I think that is the best time to exit. I have left that arena now and have made it clear to a lot of people who are still doubtful as to whether I will return to it or not, take it from me, I will never go back to politics as I have no incentive to do so.
Law Digest Autumn 2016
Chief Godwin Obla, SAN, FCIArb speaking to Law Digest at his Abuja office
Your name is virtually synonymous with high profile financial and economic crime prosecutions, what is your take on the current debate on the prosecutorial role of the EFCC? Well, I believe that I will be speaking from a biased position if I comment on this. Let me only say that the EFCC Act clearly permits the EFCC to prosecute economic and financial crimes. If there are challenges that affect what people perceive to be the effectiveness of the EFCC in the prosecution of these crimes, I think those challenges should from time to time be addressed. Until the EFCC Act is amended, the power to prosecute is still vested in the EFCC.
At the Law Digest International Litigation Forum held in 2015, you expressed concerns over the level of funding and structure of the EFCC’s investigatory and prosecutorial capacity vis a vis the level of public expectation on the Commission, do you still have such concern, and if so, what should be done to remedy this anomaly? If you recall, I mentioned then that the EFCC is expected to investigate economic
and financial crimes in the whole country which comprises the Government of the Federation (with all her Ministries, Departments and Agencies), the 36 State Governments and the FCT, as well as the 774 Local Government Areas in the Country. We need to go back and examine the budget of the EFCC because the expectations are so much and investigations and prosecutions are capital intensive.
prosequi by the Attorney General which has invited charges of political interference. This has given rise to calls for separation of the role of the Attorney General and the Minister of justice, what is your view on this debate?
For instance, the amount budgeted for Legal Fees in the Commission’s 2016 budget is about ₦360- 380 million. The truth is that that amount is grossly insufficient to pay legal fees and expenses even of one firm. Unless the EFCC is properly funded, placed on a first line charge like INEC to guarantee its independence and effectiveness, our expectations will continue to be a mirage. I suggested in the past a few ways to make EFCC more financially self-reliant, one of which is to allow the EFCC take a portion of the recovered proceeds to finance its activities, just as is done in England. This will go a long way to making the Commission more independent and effective.
First and foremost, I think the issue of nolle prosequi as alleged against the AGF, none of which has been identified, is actually a fallacy. Not a single financial and economic crimes case in which the Attorney General has used the power of nolle prosequi has ever been identified. Again, even where a nolle is filed, it does not function as a bar to further prosecution. Why was the nolle used in the first place? All these questions must be asked because, sometimes, out of overzealousness, some charges are filed without evidence to support them. What do you do? In such a circumstance, I think the AGF should do the needful to prevent a citizen from being subjected to unnecessary trial in the face of the available evidence. If you reinvestigate the case properly and gather more evidence, you can file a new charge.
Still on high profile financial and economic crime prosecution concerns have been raised over the use of nolle
If this is the basis for the call for the separation of the role of the AGF and the Minister for Justice, it is actually unjustifiable. There may be other reasons
Law Digest Autumn 2016
Chief Godwin Obla, SAN, FCIArb at the Law Digest International Litigation Conference, Lagos 2015
why people would call for the separation of both roles, but it remains an ongoing debate. I believe that we need to be more circumspect in approaching the issue because eventually one of them may end up being nothing more than an administrative office.
Your involvement in prosecution of high profile economic and financial crime cases, such as the Central Bank intervention prosecutions, the Halliburton, Siemens and the Panalpina bribery cases amongst others has come at a high personal price, including accusations of complicity, how do you deal with such burdens and with the benefit of hindsight, would you have steered clear of these cases? I will start with the last question. I will never have steered clear of these cases and I will continue to do them. Let me give you a background to this. I was part of the legal team that handled the Cecilia Ibru case that led to the settlement (which was finally
entered as the judgment of the Court), wherein she pleaded guilty to some counts in the amended charge and was sentenced to six months imprisonment and forfeited assets worth over $2 billion. Initially people criticized it but I am aware that the current government is revisiting their strategy and trying to fall back on that system. Why? Because there were sister cases with the Cecilia Ibru case in 2010, about five of them including the Akingbola and Nwosu cases. It is interesting that trial has not commenced in any of these cases because the Supreme Court just disposed of one of the matters this year. At the end of the day, it is all hot air. A lot of people speak from the basis of the paucity of information. They are content to sit in their rooms or under a tree to make statements not borne of any facts. The fact that people make unfounded allegations against you is not a basis to run away from your duties as a Counsel. You ought to continue to do what is right. Now, back to Halliburton. This case has been a long-standing stain on the Nigerian State’s capacity and determination to
fight financial and economic crime. This allegation has always been there. It was there about 9 years before a legal team was set up. Even the government of Chief Olusegun Obasanjo who set up the EFCC and the ICPC could not confront it headlong and everybody knew why this hydraheaded monster could not be confronted. The facts are there. But we were called in and we looked at the evidence. People forget that most of the amounts referred to in Halliburton was not what was in issue. First, no money was stolen from Nigeria. Bribes were given to obtain a contract, pure and simple. A consortium decided to use underhand means to obtain a contract and they did. This consortium was made up of large multinationals with worldwide presence. Now, the monies for the bribes were sourced and domiciled abroad, not from or in Nigeria. Most of the bribes were paid offshore. About $ 150 million was sourced but only $ 30 million was disbursed, before some of the balance was frozen by the Swiss Government in Swiss bank accounts. When people comment on the amount of fines imposed by America, they speak from a position of ignorance. America and Britain have the legal architecture to accommodate the amounts that they got. The Nigerian legal architecture could not accommodate even 5% of what we got. The only way you could have charged these persons was under the Penal Code of Northern Nigeria and if you see the penalties upon conviction, it is actually pathetic. Notwithstanding that, were the materials that we had sufficient to go to trial? The answer is simply no. We were still able to recover about $ 200 million for the Nigerian State inspite of the obvious challenges and legal shortcomings. Now compare that with the recent revelation about a week ago that from the EFCC investigations so far, they have recovered about ₦ 78 billion from people who looted monies. I’m sure that if you calculate the Halliburton recovery of about $ 200 million vis-à-vis the current exchange rate, that should come to about ₦ 61 billion. That was a single bullet transaction. So, I am very proud to have been a part of that team. It is sad that a lot of hot air has been blown as to whether lawyers were entitled to receive legal fees in respect of the Halliburton prosecution/ transaction. The Agreement between the FG and the Halliburton parties were very clear; both parties agreed (and the lawyers were not privy to this Agreement) that the offending parties will pay both the fine and the fees, EFCC signed as witness to the Agreement. This is not
Law Digest Autumn 2016
novel, in fact we got paid less than what we are traditionally entitled to which is 10%. The template for payment was set by the Pfizer case, where Pfizer, in addition to the payment of the fines, also paid 30% as legal fees to the lawyers. We are grateful that the Nigerian State gave us the opportunity to serve and we are happy that we acquitted ourselves creditably.
Another area of law that your expertise has been recognized and sought after locally and internationally is in the area of arbitration. What would you say is the state of arbitration in Nigeria and what are the main challenges facing this practice area? I think that arbitration is fast growing in Nigeria and is being embraced by a lot of Nigerians and a lot of sectors of the economy that feel that the conventional means of dispute resolution have not worked as expeditiously for them as they would like. But in running to arbitration, sadly, maybe as a result of the fixation with litigation, some practitioners come to arbitration with that fixed mind, as if it is litigation and bring in all sorts of strategies to delay, obstruct and in some cases truncate the process. Donâ€™t forget that some of these actions can be very frustrating to people who need their disputes resolved as quickly as possible. Another challenge is that the cost of arbitration is becoming too high. That is a disincentive to a lot of people to use it. If the process is made expeditious, the cost will definitely come down. I think
the practitioners need to be much more proactive in the area of reviewing the cost of arbitration. Government institutions have the habit of often taking the seat of arbitration offshore, even in respect of wholly Nigerian disputes between Nigerian parties, especially in the energy, oil and gas sectors. This attitude of surrendering the seat to countries like England who may have nothing to do with the dispute is not good for our jurisprudence and economy. It also does not assist in improving the state of the laws relating to arbitration in Nigeria. Finally, one of the critical challenges is that when an award is rendered, instead of accepting it, practitioners resort to challenging it. Even when they have surrendered the seat of arbitration to a third country, which will then require them to challenge the award in that country, you still find them challenging it in Nigeria. They continue to waste time and delay the process of dispute resolution.
Despite many favourable conditions, including high levels of economic activities and availability of expertise of practitioners like yourself, Nigeria has failed to establish itself as the Arbitration hub of Africa, why is this and what can be done to improve the state of arbitration in Nigeria? I think some of the issues I raised in relation to the last question will also apply. On the
bright side, the Lagos Court of Arbitration which was set up recently will do a lot to make Nigeria an arbitration hub. I am sure that with the leadership of Yemi CandideJohnson SAN and with what I have seen so far, if the tempo is maintained, Lagos State will in no distant time prove to be the arbitration hub for Africa.
In 2013, the â€œBill for An Act to Establish the National Alternative Dispute Resolution Regulatory Commission and for Other Matters Thereto 2013â€? drew fierce criticism from practitioners, why do you think that was? I think what happened was that when this Bill was drawn up, the input of the practitioners/users was not sought. You cannot regulate a sector without talking to the stakeholders. I think that is where the problem arose. It may be necessary to go back to see whether there is any need for the sector to even be regulated at all, or if the existing law self-regulates the sector. The criticism will always be there as long as the practitioners are not carried along.
You are involved in various philanthropic activities, both nationally and in your native state of Benue, which of those philanthropic activities are you most passionate about and why? I come from a rural area where the bulk of the people are engaged in agriculture. I know as of fact that government has not
Law Digest Autumn 2016
been able to impact on the lives of a lot of the people where I come from in terms of basic infrastructure such as roads, electricity and access to clean or processed water. For this reason, I am excited getting involved in providing electricity for communities that are far away from centres of commerce or urban areas. That way they are able to create more jobs for themselves, set up small scale businesses like barbing salons and the like, as well as preserve their foods and generally have a better life etc. Of course, there is a disincentive to go live in the rural areas because of lack of electricity. That is what I have been doing. So far I have been able to complete, from design to commissioning, the provision of electricity to about 7 villages.
What do you do to relax and unwind? Well, I chat with my friends. Thankfully the system of communication with smart phones makes things very easy. I have a class chat of the 1984 law school, I also belong to another online chat group of the 1980-83 Faculty of Law of the University of Lagos. There are a lot of interesting things that you see in these various groups which can keep you busy for a whole day (laughs).
I also like walking. I take long walks, especially when I travel, and I like reading interesting books too.
It is said that behind every successful man is a supportive wife, how would you describe the support from your wife and family?
What are your career highs and lows so far?
My wife is very supportive. I am a very “difficult” man to manage, I acknowledge that myself (laughs). She has been able to accommodate my shortcomings and always prayerful for me, always worried about my travel times, eating habits and so forth. Her support has been invaluable to me.
Career high – when I was made a Silk. There are also some exciting cases that I have had to do in the course of the profession, and it is extremely difficult to single out any one. Career low would be the last election petitions that I participated in. I was very disappointed at the way binding precedents of the Supreme Court were recklessly and needlessly ignored by both the Tribunals and the Court of Appeal. Thankfully, the CJN on the occasion of the swearing in of the latest SANs made clear and unequivocal reference to the fact that the Court of Appeal was absolutely wrong to refuse to be bound by its own judgments, not to talk of the judgments of the Supreme Court. Those were career lows. Another career low is the Halliburton investigation; when it became an issue to investigate legitimate fees earned by legal practitioners retained by the government itself. But we realize that these are occupational hazards arising from political considerations.
“I am Maryam Oyebode of Olaniwun Ajayi LP and I read the Law Digest”
I have two kids, both of whom are lawyers. They know and understand the demands of the profession, and have always been very supportive. Thankfully, they did not subject me to any needless additional payment of fees by failing their exams while in school abroad (laughs). Hopefully, they start earning their income, become self-reliant and make me once more an independent man.
What’s next for Godwin Obla? I will continue to practice my law and pray that God keeps me in good health and keeps me from trouble.
Law Digest Autumn 2016
Law Digest Autumn 2016
L-R: Dr Tunde Ogowewo, Tunde Fagbohunlu, SAN, Olumbunmi at the 1st ICC Regional Arbitration Centre, Lagos Nigeria
Dr Gerald Tanyi - Chief Counsel - IFC at the 10th NBA-SBL Conference, Abuja
Delegates at the 1st ICC Africa Regional Arbitration Centre, Lagos, Nigeria
Mrs. Kemi Adeosun, Minister of Finance at the 10th NBA - SBL Conference, Abuja, Nigeria
Dr Gbolahan Elias, SAN at the 10th NBA - SBL Conference, Abuja, Nigeria
Law Digest Autumn 2016
L-R. Dr Jumoke Oduwole and Fola Adeola, OFR at the 10th NBA - SBL Conference, Abuja, Nigeria
Gbenga Oyebode at the 10th NBA - SBL Conference, Abuja, Nigeria
L-R. Mrs. Badejo-Okusanya and other delegates are the at the 10th NBA - SBL Conference, Abuja, Nigeria
Senator Oladipo Odujinrin at the 10th NBA-SBL Conference, Abuja
Mr Anyiam-Osigwe at the 10th NBA-SBL Conference, Abuja, Nigeria
Seyi Akinwunmi at the 10th NBA SBL Conference, Abuja, Nigeria
L-R. Olubunmi Fayokun and another delegate at the 10th NBA - SBL Conference, Abuja, Nigeria
Cross section of delegates at the 10th NBA - SBL Conference, Abuja, Nigeria
Law Digest Autumn 2016
His Excellency Prof. Yemo Osinbajo, SAN at the 10th NBA - SBL Conference, Abuja, Nigeria
Femi Lijadu at the Nigeria: Opportunities in an Emerging Insurance Market conference. London
Dr. Babatunde Ajibade, SAN at the 10th NBA - SBL Conference, Abuja, Nigerian
Law Digest Autumn 2016
A soloist signing the National Anthem at the 10th NBA - SBL Conference, Abuja, Nigeria
The launch of "Arbitration in Africa - A review of key jurisdiction in London. L-R Dortothy Ulol, SAN, Tunde Fagbohunlu, SAN and Oluhunmi Fayokun
MINING & NATURAL RESOURCES Edwin N Kimani
Analysis of the new Kenyan Mining Act Introduction
Edwin N. Kimani1
The recent discoveries of rare earth are estimated to be worth USD 62.4B which will propel Kenya to the list of top five countries with rare earth deposits in the world. In addition, the country has the world’s top six deposits for Niobium.
Finally, Kenya can boost of a modern mining law which came into effect on the 13th of May 2016. As Kenya was historically mapped as an agricultural country, mining was not a key issue in the minds of the Government, potential investors and citizens at large. This was mainly because many exploration attempts in parts of the country yielded nothing. Kenya had focused on developing agriculture, tourism and other service industries such as the hospitality industry. The mineral deposits were predominately titanium and non-metallic substances such as soda ash, kaolin, fluorspar and gemstones. Metallic minerals currently produced in the country include titanium, gold and iron ore. Gold especially, has been produced informally through artisan/small scale mining, and has been starved of any meaningful development thus leading to poor production methods that have resulted in deaths, smuggling and an industry whose system and methods are stuck in time. However, export statistics indicate a constantly growing sector. In February 2014, for instance, Kenya exported 25,000 tons of titanium ore, but it is expected that with increased development, the country could contribute substantially to annual global supply. With further exploration and uptake of mineral rights, it is estimated that Kenya will
Law Digest Autumn 2016
have the capacity to position itself as a regional mining sector hub for Eastern Africa. 2 Kenya also recently made announcements of having world class deposits of rare earth elements in the coastal region of the country and sizable deposits of oil amounting to an estimated potential of more than 6 Billion barrels of oil. The recent discoveries of rare earth are estimated to be worth USD 62.4B which will propel Kenya to the list of top five countries with rare earth deposits in the world. In addition, the country has the world’s top six deposits for Niobium. Commercial deposits of coal have been discovered in the north eastern region of the country and are currently under review for potential uses and production3. The new mining law seeks to guide mineral wealth exploitation and address governance and environmental issues. It also seeks to address key gaps in the Mining Act 1940, and align the sector to the latest global trends such as value-addition and use of technology to spur investor interest. It also seeks to give effect to Article 60, 62(1(f ), 66(2) and 69 of the 2010 Kenyan Constitution, to provide for prospecting, mining, processing and any dealings in minerals. This paper, critique some issues addressed in the Mining Act 2016 (the “Mining Act”) such as the general architecture of the Act, pre-emptive rights, mineral agreements, mineral rights, important institutions and bodies, dispute resolution, environmental matters, impact benefit programs and local equity participation, labor relations and matters revenue sharing among others. Pre-Emptive Rights Section 8 of the Mining Act provides that the National Government will enjoy pre-emption rights over any mineral obtained and acquired in Kenya. The mineral rights holder is therefore obliged to offer the National Government the first opportunity to purchase the minerals before offering
Law Digest Autumn 2016
Section 8 of the Mining Act provides that the National Government will enjoy pre-emption rights over any mineral obtained and acquired in Kenya. them to other potential buyers in the market. Environmental Matters The meaning of environment under the Mining Act has the meaning assigned to it under the Environmental Management and Coordination Act, 1999. Part XI of the Act addresses issues on health, safety and the environment. Section 176 (1) states that a mineral right or other license or permit granted under the Act shall not exempt a person from complying with any law concerning the protection of the environment. In Kenya, environmental matters are regulated by a legal and institutional framework established by the Environmental Management and Coordination Act 1999 (EMCA) and the subsidiary legislation, Environmental Impact Assessment and Audit Regulations 2003 (EIAAR), which prescribes procedures for environmental regulation. In addition to addressing principles of sustainable development that promotes responsible use of natural resources, EMCA spells out the requirements for Environmental Impact Assessment (EIA) for industrial activity including mining activity. It confers the responsibility on the National Environmental Management Authority (NEMA) for EIA planning and implementation as well as environmental audit and monitoring. Mineral rights holders under the environmental laws and Mining Act are required to conduct environmental impact assessments and receive a license under section 176 (2). The same has to be accompanied by a social heritage assessment and the environmental management plan which should be approved. The
Artisan mining in the northern eastern region of Kenya
process is supervised by the National Environmental Management Authority (NEMA) and requires a registered Environment Impact Assessor expert to conduct the study and develop appropriate action plans. Section 177 specifically states that provisions of the Mining Act and rights or entitlement conferred under a mineral right shall not exempt a person from compliance with the provisions of the Water Act 2002 concerning the right to the use of water from any water resource. This specifically protects our water resources. The Act further provides that the mineral rights holder is expected to provide a bond or other forms of financial security which will be sufficient to cover for any costs associated with the implementation of the EIA and rehabilitation of the land. The bonds shall be known as Environmental Protection Bonds. The bond to be paid by the applicant shall be determined by the Cabinet Secretary. This bond is also to be released if there has been successful completion of all environmental and rehabilitation obligations.
This and the provisions of section 176 are positive steps for the protection of the environment, as they embrace the principles in the preamble of the 2010 Constitution on respecting the environment and the Constitutional right to a clean and healthy environment. It also entrenches responsible investment in the mining industry. Such provisions strive to maintain a balance, often very delicate, between environmental rights and business interest. This section however well meaning, has its own intrigues which arise from its ambiguity. An example is section 176(2) which states that a mining license shall not be granted to a person under this Act unless the person has obtained an environmental impact assessment license, social heritage assessment and the environmental management plan has been approved. It is not clear who approves the environmental management plan. It is expected that NEMA shall approve these plans. One would expect that section 180(1) which states that the Cabinet Secretary shall not grant a license to an applicant, unless the applicant
Law Digest Autumn 2016
Mineral rights holders under the environmental laws and Mining Act are required to conduct environmental impact assessments and receive a license under section 176 (2). The same has to be accompanied by a social heritage assessment and the environmental management plan which should be approved. has submitted site mitigation and rehabilitation or mine-closure plans for approval, would fall under the purview of the environment department because it has the expertise to review the site mitigation and rehabilitation or mine-closure plans. Why the Cabinet Secretary is invested with such authority is baffling. The same can be said on subsection 2 of the same section. The legislature through such legislation outrightly usurps the role of the environment department and wrongly invests such technical matters to the wrong office. This is a grave error since the Cabinet Secretary lacks the expertise to deal with intricate issues touching on the environment. This could either be cured through an amendment that rightly bestows such authority to the National Environmental Management Authority (NEMA) or through an amendment, requiring that prior to making any such approvals, proper consultations are carried out with the NEMA, aimed at verifying the suitability of the plans. Mineral Rights Under section 4, mineral rights are defined to mean a prospecting license, a retention license, a mining license, a prospecting permit, a reconnaissance license, a mining permit; or an artisanal permit.
The Act through Part VI of the general provisions on mineral rights, section 32 categorises the mineral rights into two: Large Scale Operations and Small Scale Operations. In distinguishing between the two, the Mining Act provides that licenses (a reconnaissance license, a prospecting license, a retention license, a mining license) fall under Large Scale Operations while the permits (Prospecting and Mining permit) fall under Small Scale Operations. A further distinction can be found can be found in the second schedule of the Mining Act. The Mining Act through section 32 (4) empowers The Cabinet Secretary on the recommendation of the Mineral Rights Board, to designate through a Gazette Notice any other license to be granted. This means that in addition to the license already provided for in the Act, the Cabinet Secretary may designate any other license to be granted. Section 32 (1) invests the power to grant, deny or revoke a mineral right on The Cabinet Secretary. However, such powers are to be exercised only on the recommendation of the Mineral Rights Board. The Act is rather ambiguous on the classification of the Artisanal mining permit. Section 4 defines “artisanal mining” to mean traditional and customary mining operations using traditional or customary ways and means. Section 123 does not classify them under small scale operations, neither does section 32. The wordings of section 96 (2) seem to suggest that an Artisanal Mining Permit is a category on its own. It categorically states that “A holder of an artisanal mining permit may apply to convert it to a small scale permit in the manner as may be prescribed in Regulations”. This means that section 32, as a whole does not completely classify categories of mineral rights. However, their placement in sections 92 to 100 which seems to fall under the large scale operation classification is confusing. Is this simply poor draftsmanship or intentional? If intentional, what was the intention
of the legislature? What we can conclusively say, is that the categories stated in section 32, omit the Artisanal mining permit which from the wording of section 96 suggest that it is neither a small scale permit nor a large scale license. It is evident that these sections (92 to 100) are part of the latter additions to the Act, which were not in the Bill. One is left to fathom how such additions came into being since they do not look quite well thought out. The danger of such shortcomings is the confusion the potential artisan miner is exposed to. Not knowing their classification may cause anxiety as to their treatment, incentives if any and requirements required of them for their operation. Again, was it necessary to further classify mining rights to artisanal mining while we have artisan mining permits?
Mineral and Surface Land Ownership As mentioned previously, all natural resources are vested in the people of Kenya with the government as trustee. Minerals under the Constitution are classified as public land and therefore belong to all the citizens of Kenyan. There is thus a distinction between the ownership of subsurface land, minerals and surface land. The law requires that holders of prospecting and mining titles secure access to the land required for prospecting and mining and offer adequate compensation for the same. Specifically, the licensing procedures require consents from local communities, owners and occupiers of land, as well as other governing bodies at the devolved level of government. Licensees are also obligated to offer adequate compensation for damages, obstructions, and other inconveniences, to owners and/or occupiers of the land, where applicable. Mineral Agreements Mineral Agreements are agreements entered between the National Government and a prospective holder
Law Digest Autumn 2016
Oil rigs off the coast of Kenya are becoming a common site
of a mineral right. Section 177 (1) of the Mining Act gives the Cabinet Secretary power to enter into and negotiate the mineral agreements and where the proposed investment exceeds USD5M, the Cabinet Secretary is required to consult with the National Treasury before entering into the agreement. This probably comes from the recommendations of the Government Task Force on Mining, set up to review the prospecting, exploration and mining license agreements, that the State should have more say in mining agreement entered on behalf of the Government.4 The Cabinet Secretary may also on behalf of the State, on the advice of the Mineral Rights Board, negotiate with an applicant for or holder of a prospecting license, a retention license or a mining license in respect of large scale mining or exploitation of minerals in the marine and terrestrial areas. The Mineral Agreement shall provide for the terms of the mining activity, the rights and obligations among others in accordance to section 177 (2) (a-l). All the Mining Agreements entered by the
Cabinet Secretary have to be ratified by Parliament. Mining Agreements are public documents and should be accessible to all persons as required in Article 35 of the Constitution and section 199. Institutions, Bodies and Dispute Resolution i. National Mining Corporation Part V of The Act provides for the establishment of mining bodies and institutions that will help in regulating the mining sector. The Act provides for the establishment of the National Mining Corporation whose main objective shall be to serve as an investment arm of the National Government. The Corporation shall be a body corporate with perpetual succession, and a common seal and shall, in its corporate name, be capable of suing and being sued, taking, purchasing and disposing of movable and immovable property, borrowing money with the approval of the National Treasury in accordance with the relevant law and
entering into contracts. Section 23 spells out its functions which mainly entail investing in mining activities. The Corporation shall be managed by a Board (National Mining Corporation Board). The Cabinet Secretary is supposed to make regulations to provide for the criteria of appointing the members of the board. ii. Mineral and Metal Commodity Exchange. Section 28 of the Mining Act directs the establishment of the Mineral Commodity Exchange to act as a market place for minerals. The Cabinet Secretary is required to make regulations for the establishment of Minerals Commodities Exchange. iii. The Mineral Rights Board The Mineral Rights Board is established under section 30 of the Act and the function of this Board can be found in section 31 which entails advising and making recommendations, to the Cabinet Secretary on- the grant, rejection, retention, renewal, suspension, revocation, variation,
Law Digest Autumn 2016
The Act is rather ambiguous on the classification of the Artisanal mining permit. Section 4 defines “artisanal mining” to mean traditional and customary mining operations using traditional or customary ways and means. Section 123 does not classify them under small-scale operations, neither does section 32. assignment, trading, tendering, or transfer of Mineral Rights Agreements, advising on the areas suitable for small scale and artisanal mining, the areas where mining operations may be excluded and restricted, the declaration of certain minerals as strategic minerals and advising on cessation, suspension, or curtailment of production in respect of mining licenses among others. iv. Artisanal Mining Committee The Artisanal Mining Committee is established in section 94 of the Act. Its purpose is explained in subsection 94(3), which shall be to advise the representative of the Director of Mines on the granting, renewal or revocation of artisanal mining permits. It shall comprise of a representative of the Governor of the relevant County Government who shall be the chairperson of the committee; the representative of the Director of Mines who shall be the secretary; three persons not being public officers and elected by the association of artisanal miners in the county; a representative of the inspectorate division of the Ministry; a representative of the National Environment Management Authority; and a representative of the County Land Board. Though section 94(4) states that members of the Committee shall hold
office for a period and on such terms and conditions as may be determined in the instrument of appointment, it fails to disclose who appoints them or the procedure of their appointment.
claiming the same; or assessment and payment of compensation where provided for under this Act. The procedure for determining disputes is provided for under section 156 of the Act.
Employment and Training Royalties and Benefit Sharing In an attempt to ensure that employment opportunities are created in Kenya and education is promoted, the Act expressly provides that each mineral right holder shall ensure skill transfer and capacity building among Kenyans. Each mineral right holder is required to submit to the Cabinet Secretary, a program detailing how it shall recruit and train Kenyans. In giving further effect to this provision, the Cabinet Secretary is required to come up with policy guidelines on how this is to be achieved. The holder of a mineral right is also required to give preference to Kenyans when it comes to employment. This will help improve the living standards of Kenyans and also improve education. Dispute Resolution Section 154 provides for dispute resolution. It provides that any dispute arising as a result of a mineral right issued under this Act, may be determined by the Cabinet Secretary, through a mediation or arbitration process as may be agreed upon by the disputing parties or as may be stated in an agreement; or through a court of competent jurisdiction. Section 155 grants the Cabinet Secretary power to inquire into and determine the following matters; disputes over the boundaries of an area held under a prospecting or mining right; any wrongful act committed or omitted in the course of prospecting and mining operations by any persons against any other person; a claim by any person to be entitled to erect, cut, construct or use any pump, line of pipes, flume, race, drain, dam or reservoir for mining purposes; a claim to have any priority over water taken, diverted, used or delivered for mining purposes as against any other person
The Act through section 183 provides that the Cabinet Secretary shall determine, through a regulation published in the Gazette, the royalties to be paid on the various classes of minerals. In ensuring that there is equitable sharing of resources between the National Government, County Government and Communities living in mining areas, the Act provides that there shall be sharing of benefits derived from the minerals. The Act even goes further and states the exact percentage to be shared as between the National Government, County Government and Communities. Section 183 (5) provides that the National Government shall be entitled to 70% of the royalties while the County Government will receive 20% and the Community will get 10% of the royalties. This provision is viewed by certain quarters as being probably the most progressive provision in this Act, if not the environmental provisions. There are challenges to this provision too that may actually cause difficulties in one way or the other. For example, in arriving at the royalties payable on the various classes of minerals, what considerations or variables shall guide the Cabinet Secretary in arriving at the exact figure? This of course, has a direct implication on the share of royalties payable to the different entities. The ambiguity in the definition of community in the Act is also disconcerting. In the Interpretation section of the Act, a community is defined as (a) a group of people living around exploration and mining operations area; or (b) a group of people who may be displaced from land intended for exploration and mining operations. The definition, worryingly, does not clarify what ‘around’ or
Law Digest Autumn 2016
‘group’ means nor does it include other communities who may still be affected by mining operations. Certain quarters also rightly challenge such provisions on royalty sharing. Is it necessary to further share out the royalties to communities, while sharing of wealth can be met through the provisions of section 49 which see a distribution of the fortunes of the mineral through the local stock exchange? Does such a provision as set requiring the sharing of royalties encourage business? Does such a provision as well as sections 46, 47 & 49 burden the mineral rights holder with social responsibilities that are the roles of the central government and the county government? It may seem so, and could be viewed as a means of the two levels of government heaping their responsibilities on the mineral rights holders. Impact Benefit Programs, Equity Participation
This law is particularly impressive mostly due to the provisions which demand social responsibility, through programs aimed at achieving technology transfer from a mineral rights holder. Corporate Social Responsibility, Technology Transfer and Impact Benefit Programs are enshrined in sections 46, 47, 49 and 50. Section 46 categorically states that to ensure skills transfer and build capacity of the citizens, the holder of a mineral right shall submit to the Cabinet Secretary a detailed program for the recruitment and training of citizens of Kenya in a manner as may be prescribed by the Cabinet Secretary. The detailed program is what we have dubbed the “Impact Benefit Program”. These programs are internal programs that form part of the recruitment and retention policies of the organisation which is the mineral rights holder. These programs ensure that skills are transferred from the organisation, which many at times are foreign, to the country of operation, in this case Kenya, so that in the near future; the country can enjoy a wealth of
knowledge and skill. Section 47 requires that preference is given to Kenyans in employment and only engage non-citizen technical experts in accordance with such local standards for registration as may be prescribed in the relevant law. This is another added advantage to the local economy as it adds more Kenyans to the payroll, empowers them through acquisition of technical skills and widens the tax base. Also, the requirements that mineral rights holders should work towards replacing technical non-citizen employees with Kenyans, within such reasonable period as may be prescribed by the Cabinet Secretary provide a linkage with the universities for purposes of research and environmental management; where applicable and necessary, facilitate and carry out social responsible investment for the local communities; and implement a community development agreement as may be prescribed in Regulations, are added advantages to the law and the community at large. However, there are ambiguities to such provisions. An example is what exactly amounts to social responsible investments and what are the expected impacts from such investments and the community development agreements? The law states that “where applicable and necessary…” What deems it applicable and necessary to have such programs? These are some of the ambiguities that may cause conflicting interests between communities and mineral rights holders to clash. Many at times these programs have been argued to be very cosmetic. As the African topography is littered with examples of similar programs tailored to look like impact benefit programs but whose effect is negligible and are intended to remain that way. It is therefore important that the regulations meant to give effect to these provisions address the gaps to avoid such lacunas.
mining law that would strike a proper balance between investor interest, public interest and financial obligations of the mineral rights holders. This is a very delicate balance that nations around the world have tried to strike. The question though is; does this piece of crucial legislation strike this proper balance? That remains an arguable point. It is undeniable that there are wins in this legislation such as environmental matters, technology transfer, local equity participation, larger parts of the labor relations matters and other incentives on local investments. Just like there are wins, there is what we could call losses. The general architecture and placement of certain sections especially pertaining to artisan mining looks ambiguous. It may also be argued that the Act manifests an overzealous legislature that passed an Act taking so much from the mineral rights holder thus not catering much for the investor interest. What is also ambiguous is the term “community” as used in the Act. Whether this Act has really met the threshold of a proper balance between investor relations, regulation and financial obligation is an issue that will be judged with time, as scenarios unfold and institutions address the issues by interpreting the laws as they are. Edwin N. Kimani is an Advocate of the High Court in Kenya. 2 Extracted from the “Kenya Mining investment handbook 2015” on the Kenya Ministry of Mining website on the 5th of May 2016 3 Extracted from the “Kenya Mining investment handbook 2015” on the Kenya Ministry of Mining website on the 5th of May 2016 4 “Kenya Seeks Equity Stake In Mining Companies” Story by Kennedy Senelwa on The Business Daily, posted on Saturday, February 1 2014 1
Conclusion Kenya has been progressively working towards the realisation of a modern
Law Digest Autumn 2016
“President” Donald Trump – What fate awaits Africa Besides the race for the US presidency which ushered in Barak Obama, no other US presidential race has arrested the attention of Africans like the current race. Most if not, belong to the “Anyone but Donald Trump” camp. Donald Trump is caricatured daily in the African press, and demonised on social media.
Seyi Clement – Editor Law Digest and Partner – Augustine Clement
How has Donald Trump earned this vilified status and is this justified? More importantly what would his presidency, if elected, mean for US-Africa relationship. Whilst the relationship between Africa and the US could not in any way be described as special, Barak Obama and Bill Clinton struck a chord with Africans, either for sentimental or strategic reasons. Donald Trump on the other hand has been held up, with no
little help from the man himself, as antiblack. On 26 October 2015, numerous African web sites published articles claiming Republican presidential candidate Donald Trump made a host of racist remarks at an unspecified event in Indianapolis. The first version of the story appeared on October 2015 in an article on the Kenyan web site <<www.politics.co.ke>> and was subsequently picked up by the Nigerian web site, <<www.nigerianwatch.com>>. The websites reported that Mr. Trump said "African Americans are very lazy. The best they can do is gallivanting around ghettoes, lamenting how they are discriminated. These are the people America doesn’t need. They are the enemies of progress. Look at African countries like Kenya for instance, those people are stealing from their own government and go to invest the money in foreign countries”. A version on one of the sites also reported that Mr. Trump suggested that all African Americans were good at was lovemaking. The alleged comment that rubbed most Africans the wrong way the most was the comment that in his opinion most of African countries ought to be recolonized again for another 100 years because they know nothing about leadership and self-governance. We have spent considerable energy trying to verify this story without success. It is curious that no media in the US or Europe carried the story, not even the Indianapolis media, where the comments were made, allegedly. Our research however reveals some unsavoury facts about Mr. Trump. In October 1973, the Justice Department filed a civil rights case in a federal court in Brooklyn against Fred Trump, Donald Trump, and their real estate company, (i.e. Donald Trump Management Inc). The complaint alleged that the firm had committed systemic violations of the Fair Housing Act of 1968 in their many complexes, with reference to 39 buildings, which between them contained over 14,000 apartments. The allegations included evidence from black and white "testers" who had sought to rent apartments; the
Law Digest Autumn 2016
LEAD STORY white testers were told of vacancies; the black testers were not, or were steered to apartment complexes with a higher proportion of racial minorities. The complaint also alleged that Trump employees had placed codes next to housing applicant names to indicate if they were black. The Trumps counter-claimed against the government, seeking $100 million in damages for defamation. The court dismissed the counterclaim and allowed the Fair Housing Act suit to proceed. After two years, the matter settled with a consent decree, signed June 10, 1975. It included the ordinary
& Casino, John R. O’Donnell, titled, “Trumped!” The Inside Story of the Real Donald Trump's Cunning Rise and Spectacular Fall”, published by Simon & Schuster2, Mr Trump was accused of making racial slurs against black people. It was alleged that he once said, “Laziness is a trait in blacks”. He was also alleged to have said to Mr. O’Donnell in reference to a black accountant at the Trump Plaza, “Black guys counting my money! I hate it. The only kind of people I want counting my money are short guys that wear yarmulkes3 every day”. It has been alleged that Trump later told Playboy in 1999: "The stuff
interested in his policies regarding Africa, rather than comments that he may or may not have made. Aid -vs- Investment President George W. Bush won praise for his aid initiatives in sub-Saharan Africa. The biggest part of that was a $15 billion commitment to prevent and treat HIV infections, known as “Pepfar”, and a $1.2 billion program to fight malaria. However, it is recognised by all that what Africa needs is investment, not aids. In recognition of this fact, in our view, the question of Aid -vs- Investment
The alleged comment that rubbed most Africans the wrong way up most was the comment that in his opinion most of African countries ought to be recolonized again for another 100 years because they know nothing about leadership and self-governance. disclaimer of liability (the settlement was “in no way an admission” of a violation"), but prohibited the Trumps from "discriminating against any person in the terms, conditions, or privileges of sale or rental of a dwelling." Fred and Donald Trump were ordered to "thoroughly acquaint themselves personally on a detailed basis" with the Fair Housing Act. The agreement also required the Trumps to place ads informing minorities they had an equal opportunity to seek housing at their properties. According to reports in the New York Times 16th October 1973, Trump Management was required to furnish the New York Urban League with a weekly list of all apartment vacancies, for two years; the League would get three days to provide qualified applicants for every fifth vacancy in Trump buildings where fewer than 10 percent of the tenants were black.1 In 1991, in a book written by a former President of Trump Plaza Hotel
Trump believes that the US must recognise the economic and political threats posed by Chinas's growing influence
O’Donnell wrote about me is probably true. The guy’s a fucking loser. A fucking loser. I brought the guy in to work for me, it turns out he didn’t know that much about what he was doing. I think I met the guy two or three time total and this guy goes off and writes a book about me, like he knows me”.4 Unfortunately, we have not been able to verify this alleged comment and we have not been able to find a record of the interview. Given this background, it is not surprising that Africans generally and blacks in particular have not warmed to Mr. Trump. We are however more
will determine the legacy of “President Trump” on Africa, just like Obama sought to build a legacy in Africa by shifting the U.S. approach to helping the continent toward investment over aid. This is not surprising considering that US investment in Africa totalled US$85billion in 2015, whilst Chinese investment totalled US$200billion.5 Earlier in his administration Obama unveiled initiatives to double access to power in six African countries and expand trade, food security and health initiatives. The Power Africa initiative6, which envisioned a five-
Law Digest Autumn 2016
On 26 October 2015, numerous African web sites published articles claiming Republican presidential candidate Donald Trump made a host of racist remarks at an unspecified event in Indianapolis. year $7 billion plan to double access to power in Ethiopia, Ghana, Kenya, Liberia, Nigeria and Tanzania, singled out for good governance practices, has largely failed. For all President Obama’s gesture towards Africa and the “Obamamania”, which heralded this presidency, he has failed to shift the focus of the US on Africa from aid to investment significantly. At the first U.S.-Africa Leadership Summit held in Washington DC from 4-6 August 2014, which was attended by over fifty African leaders, Obama said he expects more than $900 million in deals to be signed at the summit, with an emphasis on development driven by private business. Given that Africa is home to the world’s fastest-growing middle class and six out of the top 10 fastest-growing economies in 2014 and global companies like GE, Caterpillar, and Procter & Gamble which are increasing looking to Africa for investment opportunities not as a choice, but as a necessity, were all in attendance at the Summit, US$900 million in deals, is not a sign of a successful summit. By contrast, during China’s Premier Li Keqiang recent tour of Ethiopia, Nigeria, Angola, and Kenya, meeting with numerous heads of state to discuss the developing relationship between China and Africa, he capped off his visit with a pledge for an additional USD$12 billion in credit and funding to boost economic development on the continent. The level of expectation by Obama from the Summit is considered by many as an admission of failure, considering that throughout the Obama administration, trade with
Sub-Saharan Africa still represents a small portion of U.S. trade, accounting for 1.5 percent of all exports and 1.7 percent of imports.7 The nature of the trade deals would also suggest that President Obama’s administration has had little or no effect in increasing access to the US market for African countries, despite signing into law of the Africa Growth and Opportunity Act in 2000, which was the centrepiece of the U.S. commercial relationship with the continent during the Obama administration. This gives dutyfree entry to the U.S. for almost all products from sub-Saharan nations that practice good governance. It is reported that imports covered under the law amounted to $26.8 billion last year, quadruple the amount in 2001. 8 Unfortunately, most of the imports, 86 percent, were petroleum products. Nigeria, being the main beneficiary with $11.7 billion in exports. Angola, another oil producer, was second with $8.7 billion in exports to the U.S.9 By contrast, US increased its export Africa significantly in the same period. It is reported that the U.S. exported $24 billion in goods to sub-Saharan Africa in 2013, an increase of 6.9 percent from the year before and up 250 percent from a decade ago.10 Where President Obama has achieved significant success is in the area of aids. More positively, Obama continued the generous funding of the AIDS programmes introduced by Bush in Africa, increasing the number of people receiving treatment from 1.7 million in 2008 to 6.7 million by 2013, according to figures released by the White House11. He also showed strong leadership during the West African Ebola crisis, deploying a 3,000-strong military contingent to build emergency hospitals in Liberia.12 Donald Trump’s Policy on Africa Identifying Donald Trump’s position on Africa has been an exercise that can best be described as chasing shadows. It would appear that whilst South and Central America and Asia have features strongly in his policy statement, Africa has been conspicuous by its absence. In his
first major foreign policy statement made on 27th April 2016, the only mention of Africa was in a reference to Obama’s policy on Libya, which he criticised. We have nevertheless tried to piece together some of his statements to decipher his position on the aid -v- investment debate. Central to Donald Trump’s foreign policy is what he has termed “America First”. Though he has not f leshed out what this means, two issues which have been central to Donald Trump’s position in this campaign has been the US’s manufacturing trade deficit against the G20 economies, particularly China and Japan which is now approaching $1 trillion a year and the export of American jobs, (as he sees it) to Central America particularly Mexico. In his statement delivered on 27th April 2016, he stated the he would change the US’s trade, immigration and economic policies to the strengthen economy, but gave no further details of what this entails. This would suggest an inward looking economic policy, to the detriment of investment abroad. How will foreign aid programme fair under President Donald Trump? His speeches would suggest that he has always considered foreign aid, a waste of America’s resources. On 1st July 2013, Mr. Trump tweeted in response to the release of the foreign aid figure for the years 2000 to 2013, “We should be concerned about the American worker & invest here. Not grant amnesty to illegals or waste $7B in Africa”. He went further to state that, “every penny of the $7 billion going to Africa as per Obama will be stolen - corruption is rampant!’ Donald Trump’s tough stance on foreign aid to Africa also extends to medical assistance. In 2014, as Ebola devastated Guinea, Sierra Leone and Liberia, Trump’s tweets appear to show that he would have much preferred it if the US had kept its distance and minded its own business as the disease tore through West Africa. To be fair to Mr. Trump, his criticism was not directed at the medical assistance, but the preparedness of the US for the mission. On 20th Sept 2014, he tweeted asking, “Why are we sending thousands of illtrained soldiers into Ebola infested
Law Digest Autumn 2016
areas of Africa! Bring the plague back to U.S.? Obama is so stupid”. Again on 1st October 2014, he tweeted, “How dumb is our president to send thousands of poorly trained and ill-equipped soldiers over to West Africa to fight Ebola. Stop all f lights”. We have seen no evidence that a Trump administration would have fundamental queasiness for continuing the foreign aid programme to Africa. Whilst we may not have been able to elucidate Mr. Trump’s position on foreign direct investment in Africa, we believe that one central issue which would determine his policy on foreign direct investment in Africa is China. Trump is firm in his view that the great war is between US and China. The war for global inf luence and resources. This central belief more than most will determine Trump’s policy on Africa.
United States -v- Fred C. Trump, Donald Trump and Trump Management, Inc. FHNY-0024 Docket/Court 73-1529 (E.D.N.Y) 3 a skullcap worn in public by Orthodox Jewish men or during prayer by other Jewish men 4 h t t p : // w w w . h u f f i n g t o n p o s t . c om/2 011/0 4/29/don a ld-t r u mp -bl ack s lawsuit_n_855553.html 5 http://www.usnews.com/opinion/economicintelligence/2015/03/24/china-beating-usin-race-to-invest-in-africa 6 h t t p s :// w w w. u s a i d . g o v/ p o w e r a f r i c a 7 h t t p : // w w w . b l o o m b e r g . c o m / n e w s / articles/2014-08-03/obama-building-africalegacy-by-changing-u-s-approach 8 h t t p : // t o d a y . m o n e y w e b . c o . z a / article?id=766618#.V7rPYJgrLy0 9 https://ustr.gov/countries-regions/africa 10 http://t rade.gov/dbia/us-sub -sa ha ra nafrica-trade-and-investment.pdf 11 https://w w w.whitehouse.gov/the-presso f f i c e/2 013/1 2/0 2/f a c t- s h e e t- s h a r e d responsibility-strengthen-results-aids-freegenerati-0 12 https://www.theguardian.com/world/2015/ jul/21/obama-kenya-africa-policy-symbolic 1
“I am Enyioma Madubuike of Olaniwun Ajayi LP and I read the Law Digest”
INTERNATIONAL LAW Expemi Exhabafe - University of Helsinki
Ebola Epidemic and freedom of movement within ECOWAS - The Patrick Sawyer story Introduction: The Ebola Virus Disease Epidemic in West Africa between 2013 and 2014 resulted in border closures and travel bans against citizens of affected states. This brings to question the practical reality of habitants of an epidemic savaged region that may seek to migrate for the purpose of safety. This paper examines the validity of the right to life and freedom of movement of habitants in epidemic stricken regions vis-à-vis the obligations of States, generally and within the ECOWAS region particularly to protect its territory from threats to public health.
This paper examines the validity of the right to life and freedom of movement of habitants in epidemic stricken regions vis-à-vis the obligations of States, generally and within the ECOWAS region particularly to protect its territory from threats to public health.
a. International Law The Right to life, and free movement are guaranteed to all persons, irrespective of migration status, by the International Bill of Rights1 Universal Declaration of Human Rights ‘UDHR’ 2, International Covenant on Civil and Political Rights,3 and the International Covenant on Economic, Social and Cultural Rights. The right to life in this context includes also the right to liberty and security of persons.4 The exercise of the right to free movement means everyone has the right to move without hindrance and reside within the borders of each state5. It also includes a right to leave any country, including his own, and to return to his country.’6 Also instructive is the right to health stipulated in the International Covenant for Economic, Social and Cultural Rights’ which mandates Member States to recognise the right of everyone to the enjoyment of the highest attainable standard of physical and mental health, including taking steps to ensure the prevention,
Law Digest Autumn 2016
treatment and control of epidemic, endemic, occupational and other diseases.7 The right to life shall not be deprived8 neither shall freedom of movement be denied to persons9, arbitrarily, in both cases, by States or/their Institutions. However, it remains the prerogative of States to put measures in place to protect their borders and formulate immigration laws, which must not be repugnant to natural justice, good conscience, and protection of public policies, public health and the interest of its nationals, while maintaining limited derogation from all international treaties signed and international law.10 b. Ebola and West Africa Ebola virus disease ‘EVD’ is a severe, often fatal illness, with a case fatality rate of up to 90%.11 It is one of the world’s most virulent diseases and the 2013/2014 outbreak in West Africa is arguably the deadliest epidemic in recent history.12 This EVD outbreak has recorded over 28,132 infections, and resulted in over 11,305 deaths in the West African region; specifically Guinea, Liberia, Sierra Leone, Mali, Nigeria and Senegal. The Economic Community of West African States (ECOWAS) was formed in 1975. It currently has 15 member states: Benin, Burkina Faso, Cape Verde, Ivory Coast, Gambia, Ghana, Guinea, Guinea Bissau, Liberia, Mali, Niger, Nigeria, Senegal, Sierra Leone and Togo. In 1979, in recognition of the utmost importance of movement of people both within and outside the region, members of ECOWAS eliminated visa requirements for citizens of member States, for travel and settlement within the ECOWAS region. This was done by the signing and coming into force of the Protocol on Free Movement, Right of Residence and Establishment13 c. Nigeria and Patrick Sawyer EVD is transmitted from persons to persons14 and easily carried across borders. An instructive case for this paper is that of a certain Patrick Sawyer. Mr. Sawyer, was a dual
Law Digest Autumn 2016
EVD containment operation in Liberia
citizen of Liberia and the United States of America. He was therefore an ECOWAS citizen. He was reported to have contracted the EVD in Liberia. While being aware of his state of health, he nonetheless travelled from Liberia to Nigeria. Mr. Sawyer became the index patient of EVD in Nigeria and subsequently led to the infection of 19 more people and resulted in 8 deaths. The arrival of Mr. Sawyer in Nigeria sparked outrage among Nigerians, many questioning his motive, and more calling for travel bans for citizens of affected countries like Liberia and Sierra Leone. Immediately after the “Sawyer-gate”, Nigeria stopped flights to and from affected countries and closed its borders, in a bid to curb transmission of EVD. Former President of Nigeria, Goodluck Jonathan, described late Patrick Sawyer actions as pure ‘madness’ and ‘craziness’. Reacting to the dehumanization of Patrick Sawyer, his widow issued a
statement defending her husband’s decision to travel to Africa’s most populous country, saying he did so in desperate search for a country with better healthcare system than his own country. This brings into question the right of Patrick Sawyer to make the trip from Liberia to Nigeria under international conventions dealing with right to migrants and the ECOWAS’s Protocol on Free Movement, Right of Residence and Establishment and the duty of the state to protect public health. i. Did he have a right to travel to Nigeria? Patrick Sawyer had a right to leave his own country, by virtue of Customary International Law.15 International Law, however, does not provide for a corresponding right for countries to receive persons who are not their citizens.16 A person only has a right
In this case, EVD posed a genuine threat to the life and health of Mr. Sawyer. Under the ICESCR, there is a right for migrants to access preventive, curative and palliative health services. This contrasts with the ICRMW’s provision that restricts this right to urgently needed health care for the preservation of life or avoidance of irreparable damage to health, in a host country.
Law Digest Autumn 2016
of entry into country of citizenship/ nationality.17 This is called the right of return.18 Because International Law recognises a right to leave a country but gives no corresponding right to enter another state’s territory, those who enter without proper permission do so illegally. The State’s sovereign authority to remove those who are physically but irregularly in its country has been slightly modified through human rights bars to refoulement and in situations where removal would violate rights to family life.19 Generally, although migrants have rights, they have no right to migrate.20 Even refugee law does not require a State to admit a refugee, only that a refugee is not sent back to a situation of persecution,21 and respect the rights of those physically within its territories, irrespective of legal status.22 States can however relax migration laws of citizens of certain States with whom they are obliged through treaty agreements. For example, freedom of movement and residence for persons in the European Union was established by the Treaty of Maastricht in 1992.23 Similarly, by virtue of the Revised 1993 Treaty of ECOWAS (signed 24 July 1993 in Cotonou, Benin), which reconfirmed the article 59, the right of community citizens to enter, reside and establish in member states; Mr. Sawyer had a right to migrate to Nigeria. ii. Was Nigeria obligated to receive him? Nigeria as a signatory to the ECOWAS free movement protocol is obliged to receive citizen of member states into its territories. This obligation is, however, not absolute. Article 4 of the Protocol A/P.1/5/79 Relating to Free Movement of Persons, Residence and Establishment, Chapter IV, provides thus: “Notwithstanding the provisions of Article 3 [granting community citizens the right of entry and stay provided they have valid travel documents and health certificates] above, Member States shall reserve the right to refuse admission into their territory
any Community citizen who comes within the category of inadmissible immigrant under its laws.” Under Customary International Law, Nigeria may derogate from its treaty obligations.24 International Law of Treaties envisage a system of derogations, which allows parties to adjust their obligations temporarily under the treaty in exceptional circumstances, i.e. in times of public emergency threatening the life of nation.25 In essence, derogation clauses express the concept that states of emergency do not create a legal vacuum. The derogation regime aims at striking a balance between the protection of individual human rights and the protection of national needs in times of crisis by placing reasonable limits on emergency powers.26 Applying these principles to the instant case: an international health certificate is a prerequisite for admission into an ECOWAS member state. It is unclear whether Mr. Sawyer possessed one despite his health condition, but faulty implementation mechanisms for ECOWAS migration is a known flaw of the system.27 States have wide discretion to decide on the admission of migrants, and arguments supporting exclusions include the potential of migrants to make excessive demand on health benefits.28 Mr. Sawyer was nonetheless admitted into Nigeria. The subsequent closure of the borders and issuance of travel bans for citizens of EVD affected countries could be justified under the discretionary power of States to protect public health.29 iii. Right to Health In this case, EVD posed a genuine threat to the life and health of Mr. Sawyer. Under the ICESCR, there is a right for migrants to access preventive, curative and palliative health services. This contrasts with the ICRMW30’s provision that restricts this right to urgently needed health care for the preservation of life or avoidance of irreparable damage
to health, in a host country.31 It is however suggested that migrants ought to be entitled to the most protective human rights provisions from a public health standpoint.32 The facts of this case study proffer no suggestion that Mr. Sawyer was deprived of his right to health in any way. He was reported to have been immediately admitted in a Hospital in Lagos, Nigeria upon arrival at the Murtala Mohammed Airport, where he first exhibited symptoms of EVD. This is in line with International Law. Although Mr. Sawyer had a right to life, health and free movement, the individual right of a migrant pales in comparison to the obligation of a State to protect its nationals. This consists of the Universal Declaration of Human Rights (adopted in 1948), the International Covenant on Civil and Political Rights (1966) with its two Optional Protocols and the International Covenant on Economic, Social and Cultural Rights (1966). 2 UN General Assembly, Universal Declaration of Human Rights, 10 December 1948, 217 A (III), Article 3 3 Articles 6 and 12, respectively. 4 Ibid 5 UDHR, Article 13 (1) 6 UDHR, Article 13 (2) 7 ICESCR, Article 12 8 ICCPR, Article 6 9 ICCPR, Article 12 10 ICCPR, Article 4 11 United Nations Educational, Scientiﬁc and Cultural Organization, UNESCO’s response to Ebola, Strategy Paper, December 2014 12 Ibid 13 1979 Protocol A/P.1/5/79 relating to Free Movement of Persons, Residence and Establishment; the original treaty was revised and updated in 1993. The Revised 1993 Treaty of ECOWAS (signed 24 July 1993 in Cotonou, Benin) reconfirmed at article 59 the right of community citizens to enter, reside and establish in member states and enjoined member states to adopt all appropriate measures to implement and ensure such right. 14 United Nations Educational, Scientiﬁc and Cultural Organization, UNESCO’s response to Ebola, Strategy Paper, December 2014 15 The Universal Declaration of Human Rights (adopted in 1948), the International Covenant on Civil and Political Rights (1966) with its two Optional Protocols and the International Covenant on Economic, Social and Cultural Rights (1966). 16 Marie-Benedicte Dembour and Tobias Kelly, ‘Are Human Rights for Migrants?: Critical Reflections on the Status of Irregular Migrants 1
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in Europe and the United States’, Routledge, 27 May 2011. 17 Human Rights Committee, general Comment No 27: Freedom of Movement (article 12), 67th session, UN Doc CCPR/C/21/Rev.1/Add.9 (2 November 1999) 18 Brian Opeskin, Richard Perruchoud and Jillyanne Redpath-Cross, ’Foundations of International Migration Law’ (Cambridge, 2012) 130, 5.3 19 British Broadcasting Corporation News, ’Italy Takes in Stranded Migrants’, 20 April 2009. 20 Marie-Benedicte Dembour and Tobias Kelly, ‘Are Human Rights for Migrants?: Critical Reflections on the Status of Irregular Migrants in Europe and the United States’, Routledge, 27 May 2011. 21 ibid 22 Global Commission on International Migration, Migration in an Interconnected World: New Directions for Action, 2005, Geneva: GCIM, pp vii, 4 and 55. Referenced in - Marie-Benedicte Dembour and Tobias Kelly, ‘Are Human Rights for Migrants?: Critical Reflections on the Status of Irregular Migrants in Europe and the United States’,
Routledge, 27 May 2011. 23 European Parliament, Fact Sheets on the European Union, available online <http:// www.europarl.europa.eu/atyourservice/en/ displayFtu.html?ftuId=FTU_2.1.3.html> 24 Derogation clauses are provided for in Article 4 of the International Covenant on Civil and Political Rights (ICCPR), Article 15 of the European Convention on Human Rights (ECHR) and Article 27 of the American Convention of Human Rights (ACHR). 25 The Geneva Academy of International Humanitarian Law and Human Rights, ‘Derogation from human rights treaties in situations of emergency’, Rule of Law in Armed Conflict Project; Ilia Siatitsa and Maia Titberidze, "Human Rights in Armed Conflict From the Perspective of the Contemporary State Practice in the United Nations: Factual Answers to Certain Hypothetical Challenges", ADH Research Paper, 2011. 26 Ibid 27 Kristina Touzenis, FREE MOVEMENT OF PERSONS IN THE EUROPEAN UNION AND ECONOMIC COMMUNITY OF WEST AFRICAN STATES: A comparison of law and practice, UNESCO Migration Studies, (UNESCO, 2012).
Brian Opeskin, Richard Perruchoud and Jillyanne Redpath-Cross, ’Foundations of International Migration Law’ (Cambridge, 2012) 130, 5.3.2 29 Committee on Economic, Social, Cultural Rights, General Comment No 14: The Right to the Highest Attainable Standard of H 30 International Convention on the Protection of the Rights of All Migrant Workers and Members of Their Families Adopted by General Assembly resolution 45/158 of 18 December 1990. 31 ibid; Article 28 32 Human Rights Council, Report of the Special Rapporteur on the Human Rights of Migrants, Jorge Bustamate, 14th Sess, UN Doc A/HRC/14/30 (16 April 2010). 33 Committee on Economic, Social, Cultural Rights, General Comment No 14: The Right to the Highest Attainable Standard of H 34 International Convention on the Protection of the Rights of All Migrant Workers and Members of Their Families Adopted by General Assembly resolution 45/158 of 18 December 1990. 28
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Law Digest Spring 2016
TOP DEALS A U T U M N
2 0 1 6
This issue’s top mandates are dominated by Werksman, with Werksman featuring in 3 of the top for transactions. Established in the early 1900s, Werksmans Attorneys is a leading South African corporate and commercial law firm serving multinationals, listed companies, financial institutions, entrepreneurs and government. Operating in Gauteng and the Western Cape, the firm’s reputation is built on the combined experience of Werksmans and Jan S. de Villiers, which merged in 2009. With a formidable track record in mergers and acquisitions, banking and finance, and commercial litigation and dispute resolution, Werksmans is distinguished by the people, clients and work that it attracts and retains. Werksmans’ more than 180 lawyers are a powerful team of independent-minded individuals who share a common service ethos. The firm’s success is built on a solid foundation of insightful and innovative deal structuring and legal advice, a keen ability to understand business and economic imperatives and a strong focus on achieving the best legal outcome for clients. Special mention needs to be made of Gerhard Johannes of Werksman, Ezra David of Bowmans, and Tamara Dini also of Bowmans who are undeniably the Kings and Queens of M&A transactions for Autumn. To be considered for publication in the next issue, the deal must be one commenced or completed within the next publication circle, i.e., 1st Sept – 31th Nov to reach us by 15th December. Description of each deal must not exceed 500 words, which should include the value of the transaction in USD, description of the transaction, your firm’s role, the client(s), the transaction lead and his/her profile, the supporting team, and the firm(s) representing the other side(s). This should be sent with a high-resolution picture of the transaction lead. Entries may be edited to meet space, clarity and style requirements. Deals notification for this column should be sent to email@example.com
Law Digest Autumn 2016
Pick n Pay Holdings Limited Holdings and Stores Firm: Werksmans (South Africa) Deal Value: USD1.06 billion (circa) Lead Partner: Kevin Trudgeons Client: Pick n Pay Holdings Limited Holdings and Stores
KKR & Co. LP – Merger notification Firm: Bowmans Deal Value: USD1.2 billion Lead Partner: Tamara Dini Client: KKP & Co LP
Kevin Trudgeons Werksmans acted for Pick n Pay Holdings Limited Holdings and Stores in relation to the collapse of the pyramid control structure in the Pick n Pay Group ("Transaction"). The Transaction results in the creation of a single listed entry point into the Pick n Pay Group through, inter alia, the following steps, namely -
The unbundling of the shares in Stores held by Holdings to
its shareholders in terms of section 46 of the Income Tax Act (value circa R15 billion); The acquisition of all of the shares in Holdings by Stores through a scheme of arrangement in terms of section 114 of the Companies Act, and the consequential de-listing Holdings; The issue of a new class of B shares by Stores to Controlling Shareholders.
Bowmans acted as South African counsel to KKR & Co. L.P., as instructed by Simpson Thacher & Bartlett LLP, for the preparation and submission of a merger notification to the South African Competition Commission. In terms of the transaction notified, KKR & Co. L.P., intends to acquire indirect control of Airbus DS Optronics GmbH, Airbus DS Electronics and Border Security GmbH, Airbus DS Electronics and Border Security SAS (collectively “Airbus Defence Electronics”).
The transaction was notified to the competition authorities in South Africa, Brazil and the EU, and has already received clearance decisions in South Africa and Brazil. The transaction sees Europe's largest aerospace group implementing the portfolio reorganisation announced by the Airbus Defence and Space Division in September 2014, through selling several businesses to focus on its defence division on warplanes, missiles, launchers and satellites.
enX Group Limited Acquisition of business and shares in Eqstra Firm: Werksmans (South Africa) Deal Value: USD 551M Lead Partner: Gerhard Johannes Client: Eqstra Holdings Limited
Werksmans advised Eqstra Holdings Limited ("Eqstra") in the disposal to enX Group Limited ("enX") of Eqstra's fleet management and logistics businesses and the acquisition by enX of shares in Eqstra and preference shares MCC Contracts (Pty) Ltd (a subsidiary of Eqstra). The transaction value was R7.8
billion in the aggregate, and the parties concluded a Transaction Agreement executed on 29 June 2016. Werksman assisted Eqstra in the negotiation and drafting of the necessary agreements and the drafting of the resultant circular to the shareholders of Eqstra.
Law Digest Autumn 2016
Other deals of note Sale of ADT Security Proprietary Limited to Fidelity Security Group Firm: Bowmans Deal Value: approximately USD 140,000,000 Lead partner: Ezra Davids Supported by: Cathy Truter, Ryan Wessels, Ulrike Naumann, Jean Meijer, Burton Phillips, Lusanda Raphulu, Miles Carter, Livia Dyer PPC Limited rights offer and financial restructuring Firm: Bowmans Deal Value: approximately USD 295,000,000 Lead partner: Ezra Davids Supported by: Charles Douglas, Casper van Heerden, Claire Van Zuylen, Happy Wandisile Mandlana, Lusanda Raphulu (Ngidi), Mogola Makola, Ryan Wessels, Shamilah Grimwood
Ernest Mazansky - Head of Tax Practice
Bidvest Group Limited in the acquisition of shares and claims in Brandcorp Holdings (Pty) Ltd and Brandcorp (Pty) Ltd Firm: Werksmans (South Africa) Deal Value: Confidential* Lead Partner: Gerhard Johannes & Ernest Mazansky Client: Bidvest Group Limited
Werksmans advised The Bidvest Group Limited in the acquisition of shares and claims in Brandcorp Holdings (Pty) Ltd and Brandcorp (Pty) Ltd from Ethos Private Equity Fund V (comprising Ethos Capital V GP (Jersey) Limited, Ethos Capital V GP (SA) (Pty) Ltd and the trustees for the time being of the Ethos Fund V Co-Investment Trust), Ethos General Partner SPV (Pty) Ltd, the trustees for the time
being of the Brandcorp Founder Investor Primary Trust, the trustees for the time being of the Brandcorp Empowerment Trust, DEG - Deutsche Investitions-und Entwicklungsgesellschaft mbH and Sphere Fund 1 GP (Pty) Ltd (collectively, the "Sellers"), for a purchase consideration of *, in terms of a Sale of Shares and Claims Agreement executed on 20 May 2016.
ARM Cement Limited subscription investment by CDC Africa Cement Limited. Firm: Bowmans Deal Value: USD 140,000,000 Lead partner: Paras Shah Supported by: Vruti Shah Client: ARM Cement Limited Schneider Electric SAS – Disposal of Shares Firm: Bowmans Deal Value: approximately USD 63,000,000 Lead Partner: Ezra Davids and Charles Young Supported by: Judd Lurie Client: Schneider Electric SAS Disposal of Tata shares in Neotel Firm: Bowmans Deal Value: approximately USD 481,000,000 Lead Partner: Ezra Davids and Charles Young Supported by: Tholi Gcabashe, Lischa Gerstle, Lloyd Chater, Claire Tucker, James McKinnell, Matthew Purchase, Michael Swartland, Mogola Makola Client: Tata Communications Limited Sale of shares in Centurion Systems Proprietary Limited Firm: Werksmans Deal Value: Confidential* Lead Partner: Jannie de Villiers Supported by: Ayodeji Oyetunde (Partner) and Abisayo Olawale-Cole (Associate) Client: The trustees of respectively the Dickens Business Trust, the Rohman Business Trust and the Doski Trust. *Deal value disclosed to the Editor for rating purposes
Deals notification for this column should be sent to firstname.lastname@example.org. To be considered for publication for the next issue, the deal must be one commenced or completed within the next publication circle, i.e., 1st Sept – 30th Nov to reach us by 15th Dec. Description of each deal must not exceed 500 words, which should include value of the transaction in USD, description of the transaction, your firm’s role, the client(s), the transaction lead and his/her profile, the supporting team, and the firm representing the other side(s). This should be sent with a high-resolution picture of the transaction lead. Entries may be edited to meet space, clarity and style requirements.
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