Law digest issue 12 winter 2016

Africa’s Premier Law Journal

Issue 12

Winter 2016

Client-Attorney privilege in Nigeria Deepening the Nigerian FX Market Maritime arbitration as an effective tool in resolving cross-border dispute in sub-Saharan Africa The coming of age of the Fintech sector in Nigeria Oligopolistic banking system in Kenya and market failure Re-visiting Nigeria’s membership of the ICC – The Al-Bashir quandary

Tribute to Sir Olaniwun Ajayi UK: £3.50 US: $5.50 Nigeria: ₦1,000 www.nglawdigest.com

Law Digest Winter 2016

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ISSN 2053-3209

Contents PUBLISHER

XL Nominees Limited 1st Floor, 3 Market Place Broadway Kent. DA6 7DU TEL: +44 20 3223 0805 FAX: +44 20 3538 9309

EDITOR

Seyi Clement editor@nglawdigest.com

BUSINESS DEVELOPMENT Bebe Clement bebe@bebeclement.com

CORRESPONDENTS NORTH AMERICA Ifeoma Uche rauze@yahoo.com MIDDLE EAST John Adetiba johnadetiba@yahoo.com NIGERIA Ranti Thomas lawthomas81@yahoo.co.uk Adijat Ayobami kdjbukky@yahoo.com UGANDA Elias Bwambale Elzbak2@live.com

SUBSCRIPTIONS, ADVERTISING AND EVENTS UK Ayomide Adediran Tel: +44 203 223 0805 sales@nglawdigest.com NIGERIA Femi Clement Tel: +234 7052105294 / 8098111237 Femiclement2000@yahoo.co.nz

LEGAL ADVISORS

Augustine Clement 1st Floor, 3 Market Place, DA6 7DU, UK Bisi Iyaniwura & Co 3rd Floor, Arinkandi House 1 Raimi Adedokun Drive Lagos

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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

LEGAL LIABILITIES All rights reserved. The contents of this publication may not be reproduced by any means, in whole or in part, without the prior written consent of the publisher.

Any submissions or contribution from readers shall be subject to and governed by XL Nominees Limited’s Terms and Conditions, which are available upon request.

The publishers regret that they cannot accept liability for errors or omissions contained in this publication, however caused. The opinions and views contained in this publication are not necessarily those of the publishers.

Readers are advised to seek specialist advice before acting on information contained in this publication which is provided for general use and may not be appropriate for the reader’s particular circumstances.

SPECIAL FEATURES 24.

Tribute to Sir Olaniwun Ajayi 6. From the Editor 7. Case Review and Legal Development 37. Events in Picture 45. Top Deals - Winter

BANKING LAW 30. Oligopolistic banking system in Kenya and market failure: is interest rate cap the answer?

TECHNOLOGY LAW 28. The coming of age of the FinTech sector in Nigeria.

ARBITRATION 26. Maritime arbitration as an effective tool in resolving cross-border shipping disputes in sub-Saharan Africa.

CAPITAL MARKET 20.

Deepening the Nigerian Foreign Exchange Market: An analysis of the FMDQ OTC Futures Market Operational Standards.

INTERNATIONAL LAW 34. Re-visiting Nigeria’s membership of the ICC – the Al-Bashir quandar y.

LAW OF EVIDENCE 16.

Client-Attorney privilege in Nigeria. In-house counsel beware. Corporation take heed.

In May 2017, Law Digest will be publishing its 13th edition. To facilitate coverage of legal issues across the African continent, we are calling for papers from practitioners, professionals, academics, organisations, interest groups and persons from both within and outside the African continent.

Contributors are invited to submit their papers online to the Editor of Law Digest, before 30th April 2017. We are interested in a wide range of topics, including but not limited to: • • • • • • • • • • • • • •

Corporate Governance Arbitration Practices Cross-jurisdictional Litigation and Enforcement measures Regulation and Enforcement Anti-Money-Laundering measures Consumer Protection Regulation and Contract issues relating to exploration/ mining of Natural Resources (including oil, gas, and minerals) in Africa Commodities Market regulation Capital Market Banking Regulation (including Islamic Finance) Regional Economic laws Commercial and corporate law Tax Criminal law

Articles should be fully referenced and not more than 3000 words ideally. More information about Law Digest including author guidelines, our terms & conditions as well as access to past publications can be obtained from www.nglawdigest.com 3

Law Digest Winter 2016

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Law Digest Winter 2016

FROM THE EDITOR Dear Colleagues,

Raise of trial by media in Nigeria and the role of anti-graft agencies.

We must declare an interest in the recent activities of the anti-graft agencies in Nigeria, as it involves two friends of the journal, but our views on the subject would have been the same, even if we have not had such an interest. Both Chief Godwin Obla, SAN, FCIArb and Justice Nnamdi Dimgba who are friends of Law Digest are currently subject to or assisting the Nigerian anti-graft agencies in their investigation into the activities of some judges in Nigeria. Chief Godwin Obla, SAN, FCIArb was featured in our Issue 11 for his contributions to the development of law in Nigeria and his charitable works. He is also a regular speaker at Law Digest International Litigation and Asset Recovery Forum. Justice Nnamdi Dimgba is a regular contributor to the journal.

We take no issue with the investigation into the activities of anyone who is suspected to be involved in any criminal activities by the anti-graft agencies, be the suspect a judge or a senior member of the Bar and in the discharge of this task, we believe the powers of the agencies should not be fettered, save by law and due process. We also take no issues with the timing of arrest or execution of warrants. The agencies must be able to execute arrests or warrants when and how they believe it would be most effective to ensure that either the suspect does not evade arrest or destroy vital evidence.

What we take issue with is the practice where the agencies or those authorised (overtly or covertly) by them, put into public domain, information held by them against the suspect, before the suspect is ever charged or has had the opportunity to defend himself. Contents of interviews with suspects appear on social media verbatim within hours of the interviews with the agencies. Information relating to the balances in bank accounts of suspects are released by the agencies without regard to the rights of the suspect.

This information on social media then takes on a life of their own and judgements are made by the public solely on

Law Digest - Expanding Minds 6

information supplied to the media either by the agencies themselves, or through their connivance. In a country, which has been led to believe that all its woes have been due to corruption in high places facilitated by lawyers and condoned by judges, it is understandable that some members of the public are whipped into a frenzy and baying for blood, based on unchallenged and untested information supplied by the agencies. We are not unfamiliar with similar cases, where the suspects were not charged at the end of the day, but because of the information that has been put into the public domain by these agencies, the suspect’s reputation has been damaged irreparably.

We question whether a suspect who has been subjected to this practice could still receive a fair trial. The pressure it creates on the presiding judge if the matter ever comes to court cannot be overestimated. It is a case of being damned if they do find the suspect guilty and damned if they do not, particularly where the suspect has already been trial and convicted in the court of public opinion based on the information put in the public domain by the agencies.

We believe that this practice is an abuse of process and we have no hesitation in condemning the practice.

To contribute articles or commentaries to the Law Digest, please write to me at editor@nglawdigest.com.

Yours

Seyi Clement Publisher/Editor

Law Digest Spring Winter 2016

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in overhauling the ease of “Doing Business In Nigeria” regime as a remit of which she is currently a key member of the Enabling Business Environment Secretariat, set up by the Federal Government to improve ease of doing business in Nigeria.

B&I B&I announces the addition of four new Partners, effective January 9, 2017, bringing the number of Partners in the Firm to eleven. The new slate of Partners affirms the Firm’s preference for organic growth and its unwavering commitment to assisting clients achieve their goals.

The four new Partners, who reflect the Firm’s culture of excellence, are: Olumide Osundolire joined the firm in 2007 and has been a key member of the firm’s Corporate, Securities & Finance Practice.

He is a versatile, intelligent and resourceful lawyer. He leads the Firm’s Property and Construction Law, Information Technology and Telecommunications as well as the Intellectual Property law practice. He has been involved in most of the Firm’s PPP transactions. His clients include public and private entities, as well as start-ups and multinationals.

He also has delivered trainings to the legal teams of some of the Firm’s clients on various areas of law including Company law, Probate, Technology Transfer Documentation and Intellectual Property law. Olumide’s versatility covers diverse practice areas including Corporate & Commercial law, Company Secretarial services, Property and Construction Law, Family law and Probate and Intellectual Property law.

Toyin Bashir joined the Firm in November 2005 and has since superintended all of the Firm’s regulatory compliance matters as well as all interactions with Government Ministries, Departments and Agencies located in the Federal Capital Territory, Abuja. Prior to her admission into Partnership, Toyin, who is best described as a lawyer with commercial Nous, was the Team Leader responsible for the Firm’s corporate office in Abuja. Toyin has unrivalled expertise in advising multinational companies, investors and international nongovernmental organisations, on all regulatory matters from point of incorporation through their operations in the country and whenever (if ever) they seek to exit Nigeria.

She also provides general Corporate and Commercial advisory services on several projects and transactions spanning several sectors. Given her extensive experience in advising clients who are keen on doing business in Nigeria, she was invited to join the team assisting the Federal Government

Isa Alade joined B&I in 2006 and was hitherto, a Senior Associate and Team Leader in the Corporate Securities and Finance Practice Group of the Firm. He has extensive experience and is widely regarded as an expert in the areas of Corporate Finance, Banking, Project Finance, and Mergers & Acquisitions. Over the last decade, he has advised local companies and multinationals on structuring a significant number of novel/complex transactions covering various sectors including the Banking, Insurance, Manufacturing, Telecommunications, Energy and Mining sectors. Isa has authored several articles in leading law publications, including the International Financial Law Review.

He has also delivered presentations on diverse subjects, including papers at seminars organized by the Nigerian Institute of Advanced Legal Studies and the Loan Market Association.

APPOINTMENTS

Azeezah Muse-Sadiq joined the firm in 2006 and is an integral member of the Firm’s Corporate Securities and Finance practice.

She has advised clients across a wide range of industries and has extensive experience structuring, negotiating and executing Corporate Commercial transactions. She has particularly distinguished herself in the areas of Capital Markets, Corporate Restructuring and Mergers and Acquisitions, and in 2010 was named as Team Leader in the Firm’s Securities and Finance Practice with responsibility for managing many of the Firm’s most complex and pioneering transactions.

Azeezah has a reputation for being very analytical. She has authored numerous articles and is frequently called upon to participate in the rules development initiatives of the Securities and Exchange Commission.

T O Solicitors & Barristers

LP

TAYO OYETIBO LP Tayo Oyetibo LP announces the elevation of Olaniran Obele and John C Aga to partnership effective from 1st January 2017.

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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.

AVAILABLE NOW

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.

PLACE YOUR ORDER TODAY VISIT www.sweetandmaxwell.co.uk EMAIL TLRUKI.orders@thomsonreuters.com CALL 0845 600 9355 (UK) +44 (0)1264 388560 (INTERNATIONAL)

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Law Digest Winter 2016

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Case Review and Legal Development

UK

Common Law Insolvency Transaction at an undervalue Setting Aside Election by Administrator Remedies Brown and another, The Joint Administrators of Loanwell Limited v Stonegale Limited [2016] UKSC 30. Brown and another, The Joint Administrators of Oceancrown Limited v Stonegale Limited [2016] UKSC 30 Brown and another, and The Joint Administrators of Questway Limited v Pelosi [2016] UKSC 30.

On appeal from [2015] CSIH 12 JUSTICES: Lord Neuberger (President), Lord Sumption, Lord Reed, Lord Carnwath, Lord Hodge.

BACKGROUND TO THE APPEALS Oceancrown Ltd, Loanwell Ltd and Questway Ltd were part of a group of companies controlled by Ralph Norman Pelosi (“Mr Pelosi senior”). Norman Ralph Pelosi (“Mr Pelosi junior”) was the sole shareholder and director of Stonegale Ltd. The three companies controlled by Mr Pelosi senior went into administration in 2011. In November 2010, nine months prior to the companies entering administration, three properties were transferred to Stonegale Ltd and one property was transferred to Mr Pelosi junior directly.

Conjoined proceedings were brought by the joint administrators

of the three companies in respect of these alienations under section 242 of the Insolvency Act 1986, on the basis that these were gratuitous alienations (a gift by the insolvent party challengeable by liquidators or administrators). Stonegale Ltd and Mr Pelosi junior argued that the four dispositions under challenge were made by the companies for adequate consideration (a reasonable price).

The Lord Ordinary held that the dispositions were gratuitous alienations, setting aside three of the dispositions and ordering Mr Pelosi junior to repay the £125,000 he had received for the sale of the fourth property. This decision was upheld by the Extra Division of the Inner House. Stonegale Ltd and Mr Pelosi junior appeal the decision to the Supreme Court.

JUDGMENT The Supreme Court unanimously dismisses Stonegale and Mr Pelosi junior’s appeal. Lord Reed gives the judgment, with which the other Justices agree.

REASONS FOR THE JUDGMENT Lord Reed finds that the Appellants’ submission that the administrators could have pursued a number of alternative remedies is not relevant to the issue which this court must determine, which is whether the Respondents are entitled to the remedy they have sought on the basis that the four dispositions are gratuitous alienations.

Lord Reed holds that the gratuitous nature of the alienations was clearly explained by the Lord Ordinary and is plain and obvious. Prior to the conveyances, the companies owned five properties: 110, 210, 260 and 278 Glasgow Road, and 64 Roslea Drive.

The Anglo-Irish Bank (“the bank”) held standard securities over each

of these five properties, having made available to Oceancrown a secured facility in the region of £17.3 million, which was cross-guaranteed by the other two companies. In August 2010 the bank’s solicitors were informed

by Mr Robert Frame, a solicitor of Miller Becket and Jackson (“MBJ”), of the “details of the properties and the relevant sale price” in relation to the release of the five properties from the bank’s securities. The bank’s solicitors were informed that the sale prices were as follows: £762,000 for 278 Glasgow Road; £200,000 for 110 Glasgow Road; £934,000 for 210 Glasgow Road; £450,000 for 260 Glasgow Road. They were also informed that 64 Roslea Drive was to be sold for £68,000, bringing the total sale price of the five properties to £2,414,000. This information was passed to the bank.

On 10 November 2010, the property at 278 Glasgow Road was disponed

by Oceancrown for £762,000 to a company called Strathcroft Ltd, which was also owned by Mr Pelosi senior.

On the same day, Strathcroft disponed the same property to Clyde Gateway for £2,467,500, a sum far in excess of an earlier valuation of £762,000. The Lord Ordinary found that Strathcroft’s involvement was to “provide a short-lived intermediary between Oceancrown and Clyde Gateway”, describing it as “a cog in Mr Pelosi’s machine”. No sales had been agreed in respect of the other four properties.

Strathcroft, on the instructions of Mr Pelosi senior, authorised MBJ to send the bank the sum of £2,414,000 “in respect of purchases of the five properties” on 16 November 2010, and Mr Frame transmitted the money to the bank. The bank then executed discharges of the standard securities over all five properties. The Lord Ordinary found that “the bank was misled in relation to the funds it

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received” and that had it known that only 278 Glasgow Road was sold, whilst the overall reduction in bank indebtedness would have occurred, the bank would only have discharged the standard security over that property.

As a consequence of misleading the bank, Mr Pelosi senior’s companies retained the other four properties valued at £1.525 million, free of the bank’s standard securities. On 24 November 2010, 110, 210 and 260 Glasgow Road were disponed to Stonegale Ltd and 64 Roslea Drive was disponed to Mr Pelosi junior. Nothing was paid for these properties. A loan agreement between Strathcroft Ltd and Stonegale Ltd signed by Mr Pelosi junior and dated 16 November 2010 which purported to enable the latter to finance the purchase of the properties at 110, 210 and 260 Glasgow Road was found by the Lord Ordinary to be a sham, “concocted purely for the purpose of the defence of these proceedings”.

Lord Reed finds that there was no reciprocity between the disposal of the four properties, which were gifted to Stonegale Ltd and Mr Pelosi junior, and the earlier payment to the bank. The transactions had the purpose and effect of diverting assets from the companies’ creditors, which was exactly what section 242 of the Insolvency Act 1986 is intended to prevent.

UK

Common Law Charter agreement Liability for demurrage Exclusion clause Agency Interpretation NYK Bulkship (Atlantic) NV v Cargill International SA [2016] UKSC 20 JUSTICES: Lord Neuberger (President), Lord Mance, Lord Clarke, Lord Sumption, Lord Toulson

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BACKGROUND TO THE APPEAL By a time charter dated 11 September 2008, on an amended NYPE form, the owners NYK Bulkship (“NYK”) chartered the vessel “Global Santosh” to charterers Cargill International (“Cargill”) for one time charter trip (“the charter”). Cargill sub-chartered the vessel to Sigma Shipping. The vessel carried a cargo of cement from Slite, Sweden to Port Harcourt, Nigeria, pursuant to a contract of sale between Transclear SA (as sellers) and IBG Investments Ltd, which had the ultimate obligation to discharge the cargo.

Transclear had probably subchartered the vessel, but whether this was from Sigma or by a more indirect link was not clear. Under that sale contract, IBG was to pay demurrage to Transclear in the event of delay in discharge beyond the agreed laytime in the contract. If that demurrage was unpaid, Transclear was purportedly granted a lien over the cargo. The vessel arrived at Port Harcourt on 15 October 2008 and tendered notice of readiness. She was instructed to remain at anchorage because of port congestion (caused, at least in part, by the breakdown of IBG’s off-loader).

She proceeded to berth on 18 December 2008, but was ordered back to anchorage and arrested on the basis of a Nigerian court order arising from a claim by Transclear to secure a demurrage claim against IBG. This was an obvious mistake, because the order should have directed the arrest of the cargo, not the vessel.

Following an agreement between Transclear and IBG, the vessel finally began discharging on 15 January 2009 and completed discharge on 26 January 2009. Cargill withheld hire for the period of the arrest. It relied on an off-hire clause in the charter, clause 49, which stated that the vessel should be off-hire during any period of detention or arrest by any authority or legal process during the charter, with the proviso “unless such capture or seizure or detention is occasioned by any personal act or omission or default of the Charterers or their agents”.

Cargill commenced London arbitration claiming hire, but the arbitrators determined that the

proviso in clause 49 did not apply during the period of the arrest. On an appeal, the Commercial Court allowed the appeal, holding that IBG’s failure to discharge within the laydays under its contract of sale with Transclear and to pay demurrage were omissions in the course of discharging, and remitted the question of causation back to the arbitrators. The Court of Appeal dismissed the appeal, on the basis that the delay to the vessel fell within the charterer’ “sphere of responsibility”. Cargill appealed to the Supreme Court.

JUDGMENT The Supreme Court allows Cargill’s appeal by a majority of four to one, holding that the vessel was off hire throughout the period of arrest and that the proviso in clause 49 was not engaged. Lord Sumption gives the lead judgment, with which Lord Neuberger, Lord Mance and Lord Toulson agree.

Lord Clarke writes a dissenting judgment, and would have dismissed the appeal and held that the vessel was on hire.

REASONS FOR THE JUDGMENT This appeal raises a question as to the meaning of charterer’s “agents” in clause 49 of the charter. If a ship is sublet under a charter, the charter operates as a contract under which rights are enjoyed and obligations performed vicariously. “Agents” is not used in its strict legal sense, but is used to refer to persons or subcontractors to whom the charterers’ rights are made available further down the chain, or who satisfy the time charterers’ obligations that have been delegated to them. Not everything that a subcontractor does can be regarded as the exercise of a right or the performance of an obligation under a time charter. For the purposes of clause 49, there must be a sufficient nexus between the occasion for the arrest and the function which Transclear or IBG were performing as “agent” of Cargill.

The arrest was not “occasioned by any personal act or omission or default of the Charterers or their agents”.

Firstly, Cargill was only responsible for IBG’s acts or omissions in the actual performance of cargo handling

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operations while they were in progress.

Cargill had no obligation to procure discharge at any particular time, and no contractual interest in the timing of the operation. In failing to carry out cargo handling operations between 15 October 2008 and 15 January 2009, IBG was not vicariously exercising Cargill’s rights, nor was it vicariously breaching Cargill’s obligations under the charter. Secondly, the arrest was occasioned by a dispute between Transclear and IBG about demurrage under the sub-charter.

That was not the vicarious exercise of any right made available to Cargill under the time charter. The Court of Appeal was wrong to approach the matter by asking in whose “sphere of responsibility” the matters occasioning the arrest lay. The only sense in which the arrest was occasioned by Cargill’s trading arrangements concerning the vessel was that Cargill’s sub-charter to Sigma enabled Transclear and IBG to become involved further down the chain, and it was their dispute that caused the arrest. That ignores the need for a sufficient nexus between the acts leading to the arrest and the performance of functions under the charter.

Lord Clarke, in a dissenting judgment, would have held that the vessel was on hire during the period of the arrest. The agency extended to the operation of the vessel from the giving of the notice of readiness (or perhaps earlier), until the completion of discharge.

An arrest during the period during which she was waiting to discharge is the same as an arrest in the course of the discharging operations. The arrest had nothing to do with NYK, but was linked to Cargill’s discharge functions delegated to Transclear and IBG. An absence of cargo handling operations is just as much defective performance of them. This solution makes commercial sense, because the parties knew that demurrage might be incurred down the line, because it was common ground that the vessel was not off hire by reason of IBG’s earlier failure to provide a working offloader, and because the owners had no control over Cargill’s delegation to Transclear and IBG.

SOUTH AFRICA

Administrative Law Locus Standi Group companies Cost

Areva NP v Eskom Holdings SOC Limited and Another [2016] ZACC 51 JUSTICES: Mogoeng CJ, Moseneke DCJ, Bosielo AJ, Froneman J, Jafta J, hampepe J, Madlanga J, Mhlantla J, Nkabinde J and Zondo J BACKGROUND TO THE APPEAL Before the court are four applications.

Two of them were applications for leave to appeal against a certain decision of the Supreme Court of Appeal. Another one is an application for leave to crossappeal against part of that decision.

The last one is an application for the admission of new evidence. The first application for leave to appeal has been brought by Areva NP Incorporated in France (Areva), a company that is registered in France. The other has been brought by Eskom Holdings SOC Limited (Eskom). The decision in respect of which Eskom and Areva seek leave to appeal is a decision of the Supreme Court of Appeal overturning a decision of Carelse J of the High Court of South Africa, Gauteng Local Division, Johannesburg (High Court) in favour of Eskom and Areva and setting aside Eskom’s award of a certain tender to Areva. The application for leave to cross-appeal has been brought by Westinghouse Electric Belgium Société Anonyme (WEBSA), seeking leave to crossappeal against a part of the decision of the Supreme Court of Appeal in terms of which the Supreme Court of Appeal did not award the tender to WEBSA and, instead, remitted the tender to Eskom to adjudicate it afresh.

The decision of the High Court was given in a review application brought

by WEBSA against Eskom and Areva to have Eskom’s decision to award

the tender of the replacement and installation of six steam generators in the Koeberg Nuclear Power Station (Koeberg), Western Cape to Areva reviewed, set aside and awarded to it. Carelse J dismissed WEBSA’s application with costs. WEBSA then appealed to the Supreme Court of Appeal.

WEBSA had also sought that the Supreme Court of Appeal should award the tender to it after setting it aside and not remit the matter to Eskom to adjudicate the tender afresh. WEBSA’s application for leave to cross-appeal is directed at the setting aside of the Supreme Court of Appeal’s decision to remit the tender to Eskom to award afresh. WEBSA seeks an order from this Court awarding the tender to itself. If they are granted leave to appeal, Areva and Eskom seek to have the decision of the Supreme Court of Appeal set aside and the High Court’s order restored.

BRIEF BACKGROUND In or around June 2012 Eskom called for expressions of interest for the replacement of the six steam generators for Koeberg, the only nuclear power station in Africa.

Several interested parties responded to the call for expression of interest. They included Areva and WEBSA. Suppliers who met the requisite mandatory criteria were to be invited to submit bids for the project. Areva and WEBSA were the only companies that met the mandatory criteria.

Eskom then issued the two companies with an Invitation to Tender. Both submitted tenders. There is no indication on the record whether WEBSA was responding in its own right or on behalf of another entity.

In June 2014, the two bidders were invited to parallel negotiations in regard to the tender. The negotiations took place between 24 June 2014 and 4 July 2014. On that last day, the bidders were asked to make their final offers to Eskom by 11 July 2014.

On 11 July 2014, WEBSA submitted a bid under cover of a letter dated 11 July 2014. The letter was written by Mr Luc Van Hulle and co-signed by Mr Frederic Poncelet and Mr Frederik Wolvaardt. That letter bore the

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letterhead of WEBSA. It was addressed to Eskom. The subject of the letter was given as “Westinghouse Offer In response to Eskom Request for Offer Post Negotiations for The Replacement of the Steam Generators at the Koeberg Nuclear Power Station for Units 1 and 2 (Tender no: PSE020; 021 and 022)”.

The opening paragraph of the letter reveals that WEBSA was submitting the “Westinghouse Offer” on behalf of Westinghouse Electric Company LLC an American company.

Areva also submitted its final offer on 11 July 2014. On 12 August 2014, the BTC decided to award the tender to Areva.

REVIEW PROCEEDINGS WEBSA was aggrieved by the award of the tender to Areva and instituted a review application in the High Court to have that decision set aside and the tender awarded to it. Eskom and Areva opposed the review application.

WEBSA in the affidavit in support of its application said it was the entity that lost the tender to Areva.

In its answering affidavit in the High Court, Areva contend, that the true tenderer was not WEBSA, but rather Westinghouse USA. This would mean that the applicant has no locus standi in these proceedings.

WEBSA denies Areva’s averment that WEBSA was not the true tenderer and that the true tenderer was Westinghouse Electric Company LLC. It goes on to say that WEBSA and Westinghouse USA are members of “the Westinghouse group”. It adds that WEBSA received the support of other entities in the Westinghouse group.

This was WEBSA’s defence to Areva’s challenge of its locus standi.

JUDGEMENT Does WEBSA have locus standi?

The majority decision was delivered by Zondo J, who said, in the present case WEBSA averred that it was a bidder and lost the tender to Areva. However, it has been shown that Westinghouse Electric Company LLC was one of the two bidders and the bid had been submitted by WEBSA on behalf of Westinghouse Electric Company LLC and WEBSA had not submitted the final offer in its own right. That being

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the case, it seems to me that WEBSA’s statement that it had submitted a bid in respect of the tender and had lost to Areva must be rejected in the same terms in which Cameron JA rejected Sandton Civic Precinct (Pty) Ltd’s claim in Sandton Civic Precinct (Pty) Ltd v City of Johannesburg [2008] ZASCA 104; 2009 (1) SA 317 (SCA); [2009] 1 All SA 291 (SCA) that the November 2000 resolution had sought to alienate property to itself. In that case, Cameron JA rejected that averment as “plainly wrong”. In my view, WEBSA should be told the same answer. That is that its statement that it made the bid in its own right is “plainly wrong”.

This Court held in Giant Concerts CC v Rinaldo Investments (Pty) Ltd [2012] ZACC 28; 2013 (3) BCLR 251 (CC) (Giant Concerts) that, “where a litigant acts solely in his or her own interest, there is no broad or unqualified capacity to litigate against illegalities”.

We said: “The own interest litigant must therefore demonstrate that his or her interests or potential interests are directly affected by the unlawfulness sought to be impugned”.

"Has WEBSA demonstrated the interests that confer standing on it to bring the challenge and the impact the decision to award the tender to Areva had or has on those interests? I think not. In the present case the only thing that WEBSA said in its founding affidavit in the High Court in support of its contention that it has locus standi was that it was one of the two bidders and it lost the bid to Areva. This has been shown not to be true. It also said that it and Westinghouse USA are part of the same group of companies. I deal with this later."

It is abundantly clear from the language of the final offer upon which WEBSA relies as the offer that it made to Eskom in its own right that that offer was submitted by WEBSA on behalf of Westinghouse USA and not in its own right. In the final offer submitted by WEBSA, Mr Van Hulle, who has now deposed to an affidavit in support of the contention that WEBSA submitted the final offer in its own name, wrote: “...Westinghouse Electric Belgium on behalf of Westinghouse Electric Company LLC is pleased to submit the present offer to Eskom.”

This is the offer that was rejected

by Eskom in favour of Areva’s one.

If this does not show that WEBSA submitted the final offer as an agent for Westinghouse USA and not in its own right, then nothing will. "There is, of course, also the passage quoted earlier which made it clear that the offer and the other communications were those of Westinghouse USA." "I, therefore, find that WEBSA did not submit the bid in its own right. This also means that WEBSA did not lose the tender to Areva. For that reason, it cannot be said that the decision to award the tender to Areva “adversely affects the rights” of WEBSA." "WEBSA’s other defence is that it and Westinghouse USA are part of “the Westinghouse group”. It adds that it received the support of other entities in the Westinghouse group. The answer to this is that, if WEBSA was not one of the two bidders for the tender in its own right and it instituted the review application in its own right and not as an agent of Westinghouse USA, the fact that it and Westinghouse USA are part of the same group of companies cannot help it. This is because WEBSA and Westinghouse USA are two separate legal entities and each one of them bears its own separate rights and incurs its own separate obligations."

"When each one of the two separate legal entities acts in its own right, no obligations or rights attach to the other simply by virtue of the fact that they both belong to the same group of companies. This purported defence is no defence at all in law. Just because company A belongs to the same group of companies as company B does not give any one of the two companies locus standi to institute court proceedings in its own right in a matter that only directly affects the other company.

So, if company A submitted a bid for a certain tender and lost that tender to company C, company B cannot then institute review proceedings in its own right to set aside the award and to seek an order that the tender be awarded to it just because it and company A belong to the same group of companies."

"The proposition implied in WEBSA’s second defence is as bad as would be the proposition that, if one brother submitted a bid for a tender in his own

Law Digest Spring Winter 2016

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right and lost it to a competitor, any of his brothers or sisters may institute legal proceedings in his or her own right to have the award of the tender reviewed and set aside just because the two siblings belong to the same family. The issue here is about separate legal entities. In my view, Eskom’s decision to award the tender to Areva did not affect any of WEBSA’s rights or interests because WEBSA did not bid for the tender in its own right."

"In the circumstances I conclude that WEBSA had no locus standi to institute the review proceedings in its own right to have the award of the tender to Areva set aside. It would have been entitled to do so as an agent of Westinghouse USA but it did not do so. Indeed, it insisted that it instituted those proceedings in its own name because it had submitted the tender in its own right which I have found not to have been the case. The result, therefore, is that Areva’s appeal succeeds and the decisions of both the Supreme Court of Appeal and the High Court must be set aside."

SOUTH AFRICA

Common Law Injunction Interference with contract

Masstores (Pty) Limited v Pick n Pay Retailers (Pty) Limited [2016] ZACC 42 JUSTICES: Nkabinde ADCJ, Froneman J, Jafta J, Khampepe J, Madlanga J, Mbha AJ, Mhlantla J, Musi AJ and Zondo J BACKGROUND TO APPEAL This is a case about alleged interference by the applicant (Masstores) with the trade of the respondent (Pick n Pay). The “trade” Pick n Pay seeks to protect is an exclusive contractual right to trade as a supermarket in a shopping complex, granted to Pick n Pay by its lessor (Hyprop) in a lease agreement.

Hyprop is also the owner of the

shopping complex.

Pick n Pay does not seek enforcement of the contractual exclusivity right against Hyprop, but against Masstores, who is also a tenant in the complex. There is no contractual relationship between Pick n Pay and Masstores. Pick n Pay seeks relief against Masstores is a variation of the common law principles of “interference with contractual relations”, as it is not pleading inducement, but rather the interference with the contract between Hyprop and Pick n Pay is said to lie in Masstores’s breach of its own lease with Hyprop. This conduct, in turn, allegedly intentionally interfered with Pick n Pay’s contractual exclusivity rights in terms of its lease with Hyprop. The question before the court is whether the law recognises that kind of interference with contractual relations as actionable in law lies at the heart of this dispute.

FACTS Hyprop entered into separate lease agreements with Masstores (Masstores lease) and Pick n Pay (Pick n Pay lease).

The Masstores lease was entered into on 20 February 2006, before Pick n Pay appeared on the scene. Masstores undertook not to trade as a general food supermarket in the shopping complex except where there was no general food supermarket trading in the shopping centre for 90 consecutive days. At the time the Masstores lease was concluded it was aware of another anchor tenant (Shoprite) having contractual exclusivity rights to trade as a supermarket at the shopping complex. Under the Pick n Pay lease, concluded on 11 May 2006, Hyprop undertook not to permit hypermarkets or supermarkets to be conducted at its shopping centre, save for existing ones.

Masstores started trading as a general supermarket at the shopping complex in 2013.1 It only became aware of Pick n Pay’s contractual exclusivity rights in May 2014.

Pick n Pay sought and obtained a final interdict in the High Court2 that prevented Masstores from operating a general food supermarket at the shopping centre, on the basis that doing so interfered with the contractual relations between Pick n Pay and

Hyprop under the Pick n Pay lease.

Masstores appealed to the Supreme Court of Appeal. That Court dismissed the appeal and confirmed the High Court order.3 Masstores now seeks leave to appeal against that order.

FINAL INTERDICT REQUIREMENTS The remedy sought and obtained by Pick n Pay was a final interdict and not a claim for damages. The requirements for a final interdict are usually stated as (a) a clear right; (b) an injury actually committed or reasonably apprehended; and (c) the lack of an adequate alternative remedy.4 In order to succeed in obtaining the remedy of an interdict against a third party like Masstores, Pick n Pay thus had to show: (a) that the contractual right it obtained from Hyprop protects an interest that is also enforceable against third parties outside the contract (part of the “clear right” enquiry); (b) that the third party, Masstores, unlawfully infringed or threatened to infringe that right (part of the “injury actually committed or reasonably apprehended” enquiry); and (c) that there was no adequate alternative remedy.

JUDGEMENT The majority decision was delivered

by Froneman J. He said there is no contract between Pick n Pay and Masstores. So the alleged unlawful interference by Masstores cannot lie in a breach of contract with Pick n Pay. He said "there is a fundamental distinction in our law between rights in rem, protected against all the world, and rights in personam that carry protection only between immediate parties. Only one of the cases referred to in the second judgment, Godongwana v Mpisana 1982 (4) SA 814 (Tk), contradicts this distinction.5 It was not followed in Motloung v Rokhoaena 1991 (1) SA 708 (W) and Reddy v Decro Investments CC 2004 (1) SA 618 (D), and I consider it to have been wrongly decided. I know of no basis in our law, other than delict (tort), that could found unlawfulness in Masstores’s alleged interference in Pick n Pay’s contractual relations with Hyprop. That is the basis upon which the case has been conducted by all throughout. I fail to discern any ground

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in the second judgment upon which the alleged interference with Pick n Pay’s rights can be said to be unlawful. And I do not know how an interdict can be granted where there is no actual or threatened unlawfulness in the infringement of a right."

LEGAL ISSUES "Masstores contends that the Supreme Court of Appeal misinterpreted this Court’s judgment in Country Cloud Trading CC v MEC, Department of Infrastructure Development, Gauteng [2014] ZACC 28; 2015 (1) SA 1 (CC); 2014 (12) BCLR 1397 (CC), and in consequence gave the wrong decision. Pick n Pay argues that its claim falls squarely within the established deprivation category of interference cases recognised in Country Cloud, and is therefore a case where wrongfulness does not need to be established positively but can be presumed. Even without that initial presumption it contends that wrongfulness has nevertheless been established.

The issues that arise from this are: (a) Whether Pick n Pay’s claim falls

14

within the alleged recognition in Country Cloud of a second category of delictual interference with contractual relations (narrow delictual enquiry). (b) If it does not, a further issue may arise, namely whether Masstores’s conduct, whilst not falling into the established categories of the delict of unlawful interference with contractual relations, nevertheless was actionable on an extended or analogous application of the principles of the delict of unlawful competition (extended unlawful competition enquiry).

Country Cloud is no authority for the proposition that the deprivation of contractual rights in delictual claims for interference with contractual relations is prima facie unlawful. Nor did it lay down that in inducement cases the wrongfulness enquiry need not be concerned with the duty not to cause harm or the infringement of rights. And it confirmed that the degree or intensity of fault may indeed play an important role in the wrongfulness enquiry in these kinds of claims.

The limits of this Court’s judgment in Country Cloud, as explained, effectively disposes of Pick n Pay’s contention that

prima facie wrongfulness on the part of Masstores has been established.

Masstores’s trading as a general supermarket does not deprive Pick n Pay of its entitlement to continue trading as a supermarket in the shopping centre. There may have been a deprivation of part of Pick n Pay’s trading interest, namely its exclusivity, but Masstores has not “usurped” that exclusivity. Masstores did not usurp any exclusive right of Pick n Pay and appropriate it as its own. It claims no entitlement to exclusivity."

Masstores disputed that it traded as a general supermarket, but the High Court found that it did and the Supreme Court of Appeal confirmed that finding on appeal.

There is no ground for this Court to interfere with the factual finding.

2 Pick n Pay Retailers (Pty) Ltd v Masstores (Pty) Ltd [2014] ZAGPPHC 769.

3 Masstores (Pty) Ltd v Pick n Pay Retailers (Pty) Ltd 2015 [ZASCA] 164; 2016 (2) SA 586 (SCA) (Masstores SCA).

4 Setlogelo v Setlogelo 1914 AD 221 at 227.

5 Godongwana v Mpisana 1982 (4) SA 814 (Tk).

1

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LAW OF EVIDENCE Ighedosa Bernard Ehigiamusor - Templars

Client-Attorney Privilege In Nigeria. In-House Counsel: “Beware”.

Corporations: “Take Heed”

T

Ighedosa Bernard Ehigiamusor Associate - Templars

Can employers rely on the provisions of Nigerian law to prevent communications to and from in-house counsel from being disclosed in court? This is a burning issue in present day Nigeria, especially in the corporate world.

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his article is a discuss on clientattorney privilege, particularly in its application to in-house counsel under Nigerian law. Although the policy guiding privilege is normative and widely acknowledged across boundary lines and different jurisdictions, the application of clientattorney privilege to in-house counsel in Nigeria is quite novel, same having never been discussed or adjudicated upon before the Nigerian courts. As such, the author’s opinion in this article is guided by decisions of foreign courts and opinions of foreign authors.

The author will argue that clientattorney privilege applies to in-house counsel as much as it applies to external counsel but in-house counsel ought to take caution in their activities by not intermeddling legal duties with business/executive functions so as not to lose the protection provided by client-attorney privilege.

INTRODUCTION. Owing to economic development, Nigeria has seen a significant increase in economic activities, which has translated into a large number of new businesses/companies and a growth of existing ones. Such growth has occasioned increase in staff numbers, including legal practitioners.

As such, there is a large number of lawyers working in-house than ever before. Thus, the need to revisit the issue client-attorney privilege vis a vis the in-house counsel cannot be overemphasised.

Can employers rely on the provisions of Nigerian law to prevent

Law Digest Winter 2016

communications to and from in-house counsel from being disclosed in court?

This is a burning issue in present day Nigeria, especially in the corporate world.

In this article, the author will contend that under the Nigerian law, particularly the provisions of the Evidence Act,1 in-house counsel are covered by client-attorney privilege (the “Privilege”), similar to attorneys in private practice (“External Counsel”). Furthermore, this article will discuss steps to be taken by inhouse counsel and their employers to ensure communications made in the course of their employment remain privileged. This article will also employ American and Indian cases to fill in the void created by a dearth of Nigerian superior courts’ decisions in this area, especially where such foreign cases apply provisions, which are similar to the provisions of the Nigerian Evidence Act. CLIENT-ATTORNEY PRIVILEGE, OR NOT? Client-attorney privilege has long been thought of as one of the oldest and most sacrosanct privileges in the law of evidence. The Privilege was created to prevent the attorney from having to testify, under oath, against his client, because such testimony would violate the attorney's honour as a gentleman.2 At its most basic, the Privilege ensures "that one who seeks advice or aid from a lawyer should be completely free of any fear that his secrets will be uncovered”3.

The aim of the Privilege is to ensure that the client is more willing to communicate to counsel things that might otherwise be suppressed. In theory, such candour and honesty will assist the attorney in providing more accurate, well-reasoned professional advice, and the client can be secured in the knowledge that his statements to his lawyer will not be taken as an adverse admission or used against his interest.4 As such, the Privilege seeks to further encourage the relationship between a lawyer and his client, in order that such lawyer may effectively discharge the duty imposed on him by

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such client.

This background is now set against the reality of the complex nature of modern day corporations, their large corporate structures and their activities. It is often the case that the best and only evidence of the conduct of many corporations is that within their own internal communications, including communications with its lawyers and admissions made therein.

Therefore, it is not unexpected that tensions will exist on the issue of extension of the Privilege to in-house counsel.

ANALYSIS OF NIGERIAN LAW PROVISION. Under Nigerian law, the Privilege is provided for in section 192 of the Evidence Act. It states: No Legal Practitioner shall at any time be permitted, unless with his client’s express consent, to disclose any communication made to him in the course and for the purpose of his employment as such legal practitioner by or on behalf of his client, or to state the contents or conditions of any document with which he has become acquainted in the course and for the purpose of his professional employment or to disclose any advice given by him to his client in the course and for the purpose of such employment.

From a judicial point of view, this provision of the Evidence Act was given judicial assent in Abubakar v. Chuks, although in this case the Supreme Court of Nigeria held that the Privilege would not apply, since the relevant information was already in the public domain.5 Notwithstanding this decision, there is still a dearth of judicial authorities in Nigeria that thoroughly examine section 192 of the Evidence Act in its application to the Privilege for in-house counsel.

LEGAL PRACTITIONER: IN-HOUSE OR EXTERNAL? The author opines that “Legal Practitioner” as used in section 192 above refers to both in-house counsel and external counsel. It should be

noted that section 192 does not distinguish between the categories of legal practitioners that enjoy the Privilege. As such, the application of the provision is general to all Legal Practitioners. The Interpretation Act6 in its definition of Legal Practitioner states that “"Legal practitioner" has the meaning assigned to it by the Legal Practitioners Act”.7 The Legal Practitioners Act8 (LPA) defines Legal Practitioner to mean: A person entitled in accordance with the provisions of this Act to practice as a barrister or as a barrister and solicitor, either generally or for the purposes of any particular office or proceedings.9 It should be noted that the definition as well as the provision of the Legal Practitioners Act dealing with entitlement to practice10 does not make a distinction between in-house and external counsel and as such no such distinction is contemplated in section 192 of the Evidence Act in the application of the Privilege. In fact, the Rules of Professional Conduct for Legal Practitioners (RPC)11 contemplates legal practitioners working as in-house counsel without losing their rights and privileges, save for those it specifically lists therein.12 The question of the applicability of the Privilege to in-house counsel has always been a burning issue in the American courts. In line with the author’s position, it has consistently been held by the American courts that there is no distinction between in-house or external counsel for the purpose of the Privilege.13 The only problem exists in practice, since the benefit of this Privilege is narrowly interpreted.14 It is also important to examine this topic from the Indian viewpoint, since the Nigerian Evidence Act largely traces its origins from the provisions of the Indian Evidence Act.15 Their similarities can be seen in the similarities between the provisions of section 192 of the Nigerian Evidence Act stated above and section 126 of the Indian Evidence Act 1872.

The wording of section 126 of the

Indian Evidence Act applies to “barristers or attorneys”, similar to the Nigerian Evidence Act’s position, which applies to Legal Practitioners, i.e. persons entitled to practice as barristers or barristers and solicitors. However, the Bar Council of India Rules16 provides that once an advocate17 accepts a job as a full-time salaried employee, such advocate shall cease to practice as an advocate,18 and in effect cease to be called a barrister or attorney.

It follows therefore, that such person will cease to enjoy the benefits an advocate would have in practice, including the Privilege. However, the current judicial attitude in India suggests otherwise, as the High Court of Bombay19 after taking into consideration the provisions of the Bar Council of India Rules went ahead to hold that salaried employees who advise their employers on legal matters should get the same protection as barristers or attorneys under the Indian Evidence Act, provided that the communication between them is not made in furtherance of an illegal purpose. Even though some authors20 and indeed foreign courts21 have disregarded the weight of this decision, at the very least, it suggests a leaning towards this author’s position in this article.

A counter argument to the one posited above by the author is that if sections 192 and 193 are read together, it would suggest that in-house counsels do not enjoy the same protection as external counsels. The preponements of this counter argument suggest that the interpretation to be given to section 192 in its application to in-house counsel can be seen if the surrounding provisions are examined, i.e. section 193 of the Evidence Act. Section 193 provides that “The provisions of section 192 shall apply to interpreters and the clerks of legal practitioners”.

It is argued that section 193 suggests that the class of legal practitioners referred to in section 192 are those legal practitioners known to use clerks and interpreters in the course of their service to clients, i.e. external counsel, consequently in-house counsels are

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It is argued that section 193 suggests that the class of legal practitioners referred to in section 192 are those legal practitioners known to use clerks and interpreters in the course of their service to clients, i.e. external counsel, consequently in-house counsels are excluded by implication. excluded by implication.

We submit that this view does not do justice to the intention of the drafters of the Evidence Act. Reading section 192 and 193 together, we would suggest that the provisions of section 193 are supplemental to the provisions of section 192, i.e. it applies to legal practitioners and their interpreters and clerks, if any.

It was the intention of the drafters of the Evidence Act that section 193 should prevent an absurd situation where a legal practitioner benefits from Privilege, but their employees through whom communication is made with clients are not protected. As such, section 193 should not be interpreted to restrict the interpretation of section 192, but rather to expand it where the circumstances permit.

CLIENT AND LEGAL/PROFESSIONAL EMPLOYMENT. If it is accepted that the privilege applies to in-house counsel and it is narrowly interpreted, the question which then arises is, under what circumstance can in-house counsels claim the Privilege?

Since the benefit of the Privilege under the above provision is owed to a “client”, it is important to identify what a client – attorney relation is for the purpose of section 192. This is important in order to determine whether a corporation can be a client of its own employee. It is also important since from the wording of section 192

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above, the Privilege can only exist where there is a client.

Black’s Law Dictionary defines client as “a person or entity that employs a professional for advice or help in that professional’s line of work; especially one in whose interest a lawyer acts, as by giving advice, appearing in court, or handling a matter”.

From the definition in Black’s law dictionary, a corporation can be a client if the legal practitioner employed is so employed for the purpose of rendering services connected with his profession as a legal practitioner.

Thus, a corporation that employs legal practitioners for the purpose of providing legal services (in-house counsel) is a client of such legal practitioner, so far as the services provided by the legal practitioner are legal in nature. For clarity, “legal” is defined in the same Black’s law dictionary as “of, relating to, or involving law generally; falling within the province of law”.

Consequently, the employment contemplated by section 192 of the Evidence Act is employment of a legal nature to perform services connected with the practice of law. Thus, a legal practitioner employed to provide human resource services (excluding any legal services) would not necessarily enjoy the Privilege provided for in section 192.

Furthermore, from the provisions of section 192, the communication must be in the course and for the purpose of the legal practitioner’s employment as a legal practitioner. There are thus two conjunctive tests to determine which communication is privileged under the provisions of section 192. Firstly, the communication must be made in the course of the legal practitioners employment to provide legal advice and secondly, the communication must be made to further the purpose of the legal practitioners employment.

As regards information being in the course of the legal practitioner’s employment, it is important for such legal practitioner to have a portfolio that denotes a legal capacity and for communications made to and from him to contain legal issues. This point was elucidated in an appeal before the Court

of Appeal of the State of California 22, where the appellate Court held that in respect of communications made in an insurance claims investigation, to the extent that the insurance claims adjusters (who were in fact licensed attorneys) employed by an Insurance company were performing claims investigations, any information obtained therein constituting factual matters concerning the investigation would not be covered by privilege.

It is submitted that if the “Claims Adjusters” in this case were designated as “Legal Counsel”, and their investigations and communications flowing therefrom also revealed legal matters, the decision of the Court of Appeal might have been different.

As regards the communication being made to further the purpose of the legal practitioner’s employment, even though a legal practitioner (in-house or external) has been instructed to provide advice on a certain legal issue, where the materials, documents or information provided to him are in connection with some other issues which are not legal in nature (e.g. to provide financial advice based on the company’s recent profit and loss account, especially where such legal practitioner is also a qualified accountant), such materials, documents or information will not be covered by privilege. Thus in GeorgiaPacific Corp. v. GAF Roofing Mfg. Corp,23 the Plaintiff asked the New York court to compel an attorney who was an in-house environmental counsel for the defendants and who was also a negotiator of the contract in issue, to answer certain deposition that involved the contract. The Court found that the attorney had been acting as a business advisor and not as an attorney, as such, the attorney could not rely on privilege.

In conclusion, we submit that subject to certain restrictions in its application (such as that they act in a legal rather than in an executive capacity) inhouse lawyers are included within the ambit of the Privilege. This position is justified on the ground that, although the communications between the corporation and its in-house counsel

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are internal, nevertheless such inhouse counsel performs the same function as any other external counsel.

As Lord Denning put it, “(In-house counsel) are regarded by the law as in every respect in the same position as those who practice on their own account.

The only difference is that they act for one client only, and not for several clients. They must uphold the same standards of honour and of etiquette.

They are subject to the same duties to their clients and to the court. They must respect the same confidences. They and their clients have the same privileges.

I have myself in my early days settled scores of affidavits of documents for the employers of such legal advisers. I have always proceeded on the footing that the communications between the legal advisers and their employer (who is their client) are the subject of legal professional privilege; and I have never questioned it”.24 The author posits that Nigerian courts will take the same approach adopted in other jurisdictions, including in England. Although this provides only persuasive authority, nevertheless, the strength of the arguments provided above give little reason for any derogation.

In summary, from the above analysis of the Nigerian provision in respect of the Privilege, we would like to suggest practical steps that in-house counsel and corporations alike can take in order to reduce the risk of losing the protection offered by the Privilege.

These should include: • Attachment titles, names, headers and all pages of documents, emails and other communications made to such in-house counsel, should be captioned: “Privileged and Conf idential/Attorney-Client Communication.”

• While sending such communication to in-house counsel, the practice of using the abbreviation “FYI” (For your information), which is very widely used in the corporate world in Nigeria should be refrained from. Using this can raise the notion that legal services were not sought from the in-house counsel, as such communication was only

to keep him informed. Instead, using terms that will indicate that legal services are required as per the communication: e.g. “See below/attached the requested information as regards the pending legal matter/issue”.

• The designation of the in-house counsel’s job portfolio should carry a legal connotation. For example, it is easier to prove that communications made to a legal practitioner employed as a “General Counsel” is made in the course of and for the purpose of providing legal services in his capacity as a legal practitioner, than for a corporation to prove same if such communications were made to a legal practitioner employed as a “Human Resources Manager” or “Claims Adjuster”.

[2011], Act Number 18.

See Edna Selan Epstein, “The AttorneyClient Privilege and the Work-Product Doctrine”; Section of Litigation, American Bar Association at 2 (3d ed. 1997).

3 United States v. Grand Jury Investigation, 401 F. Supp. 361, 369 (Western District of Pennsylvania, United States District Court.

1975).

4 Paul R. Rice, Attorney-Client Privilege: Continuing Confusion About Attorney Communications, Drafts, Pre-Existing Documents, and the Source of the Facts Communicated, 48 AM. U. L. REV. 967, 96970 (1999).

5 (2007) 18 NWLR (Pt.1066) 386, Per Niki Tobi, JSC. See also Dawaki General Enterprises Ltd & Anor v Amaco Enterprises Ltd & Ors (1999) 3 NWLR (Pt. 594) 224, 227 – 228 (Court of Appeal). These cases however did not extend to the application of Section 192 of the Evidence Act to in-house counsel.

6 CAP. I23, LFN 2004. (The Interpretation Act in its application section (Section 1) states that it applies to the provisions of any enactment (including the Evidence Act) except in so far as the contrary intention appears in this Act or the enactment in question).

7 Section 18 (1).

8 CAP L11, Laws of the Federation of Nigeria, 2004.

9 Section 24.

10 Section 2 Legal Practitioners Act. 1 2

Made pursuant to the Legal Practitioners Act. 12 Rule 8 RPC 13 United States v. United Shoe Machine Corp., 89 F. Supp. 357, 360 (United States District Court - District of Massachusetts, 1950) 14 See Rossi v. Blue Cross & Blue Shield, 73 N.Y.2d 588, 593 (1989), where the New York Court of Appeal stated that in the case of corporate staff counsel, the need to apply attorney-client privilege narrowly is more heightened.

15 See the similarities between section 192 of the Nigerian Evidence Act and section 126 of the Indian Evidence Act. See also Z. Adangor, “What Is Innovative in the Evidence Act, 2011?” Journal of Law, Policy and Globalization, Vol.43, 2015; Hon. Justice Abiodun Akinyemi, “The Evidence Act 2011 – An Appraisal”, being a paper presented at the Ogun State Bar And Bench Forum, on Thursday, 11th July, 2013 at the June 12 Cultural Centre, Abeokuta, Ogun State, Nigeria.

16 Part VI, Chapter II, Section VII, Rule 49.

17 The term “Advocates as used in India refers to both Barristers and Solicitors, as the practice of law in India is fused. Persons who have obtained a degree in law may be admitted as advocates in India. (See section 24 Advocates Act 1961 of India), as such there is no distinction between solicitors and barristers in India.

18 See Satish Kumar Sharma v. Bar Council of Himachal Pradesh (AIR 2001 SC 509), Indian Supreme Court.

19 Municipal Corporation of Greater Bombay v. Vijay Metal Works (AIR 1982 Bom 6) 20 L. J. Savitt and F. L. Nowels, “AttorneyClient Privilege For In-House Counsel Is Not Absolute In Foreign Jurisdictions”, The Metropolitan Corporate Counsel, October 2007, Page 18; S. Chan, “An in-house lawyer’s right to legal privilege”, Asia Law, May 2008, Page 29.

21 In Shire Development Inc. v. Cadila Healthcare Ltd., C.A. No. 10-581-KAJ (D. Del. Oct 19, 2012), a Delaware District Court found that the in-house counsel of an Indian company is not entitled to protections of confidentiality and legal privilege given the prevailing law in India. The Court was persuaded by the opinion of Justice B.N. Srikrishna (former Justice of the Supreme Court of India), who was appointed as a neutral expert.

22 See ,202 Ranch LLC v. Superior Court, 113 Cal. App. 4th 1377, 1390 (2003) (American case, which noted this exact same point) 23 No. 93 Civ. 5125, 1996 U.S. Dist. LEXIS 671 (U.S. District Court, Southern District of New York Jan. 25, 1996).

24 Alfred Crompton Amusement Machines Ltd v Customs & Excise Commissioners (No 2) [1972] 2 All ER 353, at 376, Paragraphs G – J, (Court of Appeal.

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19

CAPITAL MARKET Damilola Wright – Banwo & Ighodalo

Deepening the Nigerian Foreign Exchange Market: An Analysis of the FMDQ OTC Futures Market Operational Standards INTRODUCTION

Damilola Wright Banwo & Ighodalo

This article would analyse some of the key provisions of the Market Framework and Operational Standards for the benefit of investors considering entering into OTC FX Futures transactions in the Nigerian FX Market.

20

Following the sharp decline in Nigeria’s oil revenues and foreign exchange earnings, as well as foreign exchange scarcity, the Central Bank of Nigeria (the “CBN”) on 15 June 2016 introduced the Revised Guidelines for the Operation of the Nigerian Inter-Bank Foreign Exchange Market (the “Revised FX Guidelines”) in an attempt to freely float the Naira.

In addition to liberalising the Nigerian Foreign Exchange Market (the “Nigerian FX Market”), the Revised FX Guidelines was aimed at enhancing efficiency, and liquidity within the Nigerian FX Market.1 To this end, the Revised FX Guidelines now allow Authorised Dealers to offer Naira-settled non-deliverable over-thecounter (OTC) FX Futures in order to further deepen the Nigerian FX Market.2 Prior to the introduction of the OTC FX Futures, a number of hedging products existed within the Nigerian FX Market including FX options, forwards (outright and non-deliverable), FX swaps and cross-currency interest rate swaps.3 Nonetheless, the OTC FX Futures was introduced as an additional risk management tool to reduce the demand for foreign exchange on the Spot market.

The FMDQ released the OTC FX Futures Market Framework (the “Market Framework”)4 and Operational Standards (the “Operational Standards”)5 shortly after the Revised FX Guidelines were introduced in order to spell out the modalities for the operation of this new FX derivative product.

Law Digest Winter 2016

This article would analyse some of the key provisions of the Market Framework and Operational Standards for the benefit of investors considering entering into OTC FX Futures transactions in the Nigerian FX Market.

Structuring the Transaction Generally, Authorised Dealers may enter into the OTC FX Futures on their own account and between themselves or may enter into the transaction with endusers or clients.6 Importantly, where the OTC FX Futures contract is to be executed between an Authorised Dealer and an end-user or client, it must be backed by trade transactions (visible or invisible) or evidenced investments.7 This is to ensure that clients utilise OTC FX Futures solely for the management of foreign exchange risk and not as a speculative mechanism.8 It is worth noting that underlying transactions with matured obligations would not be eligible for the OTC FX Futures as there is no legitimate foreign exchange risk to be hedged.9 Examples of underlying investments (with FX exposures) that would qualify for the purpose of executing OTC FX Futures include: fixed income securities, longterm investments, foreign currency loans, airline remittances, import transactions, amongst others.10 It is critical to note that the CBN had by virtue of a circular,11 excluded the importers of 41 items (including rice, cement, euro bonds, share purchases) from accessing foreign exchange at the Nigerian FX Market – the official foreign exchange window. This meant that importers of these goods or services only had recourse to their own funds for such import transactions. Pursuant to the provisions of the Revised FX Guidelines, the 41 items classified as not “valid for foreign exchange” remain inadmissible so importers are to continue to source their foreign currency outside the Nigerian FX Market.12 In effect, investors whose underlying trade transactions cover any of the 41 items would be unable to execute OTC FX Futures to manage attendant foreign exchange risks.

In addition, an end-user or investor need not execute the FX Futures

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Generally, Authorised Dealers may enter into the OTC FX Futures for their own account and between themselves or may enter into the transaction with end-users or clients. contract with the Dealing Member Bank (DMB) that holds its trade or transaction supporting documentation, or with whom the Spot FX transaction is to be facilitated. For investors (particularly foreign investors), it should be noted that the OTC FX Futures transaction counterparty must be an Authorised Dealer, that is, a bank licensed under Nigerian law, and issued with a licence to deal in foreign exchange.14 Foreign investors are thus required to undertake some due diligence in this regard to ensure that the counterparty has the prerequisite authority to offer the OTC FX Futures.

The OTC FX Futures contract is to be traded on the FMDQ Futures Trading & Reporting Systems (FFTRS), and the minimum transaction amounts that may be executed on this platform between transaction counterparties is US$500,000.00 (Five Hundred Thousand United States Dollars).15 However, as between DMB’s and their clients (or end-users), lower transaction amounts may be agreed.16 Thus, transaction counterparties in the context of minimum transaction amounts mean, the CBN and a DMB or as between two DMB’s.

Transaction Documentation Pursuant to the Revised FX Guidelines, the OTC FX Futures are to be nonstandardised with bespoke maturity dates.17 OTC FX Futures contracts are, however, required to meet contractual specifications set by the FMDQ from time to time.18 The FMDQ has since published the OTC FX Futures contract specification,19 specifying inter alia, margin requirements, standard contract tenors, expiry dates, and position limits.

A number of foreign investors are

particularly interested in the form of documentation that would govern the OTC FX Futures contractual terms so as to ensure that the contract is in a form in which they are familiar with, which would give them a certain level of comfort. Typically, the legal, credit, and trading relationship between parties to a derivatives contract is governed by a master agreement.20 The most common master agreement is that published by the International Swaps and Derivatives Association Inc.(ISDA) in 1992, and subsequently revised in 2002.21 The Operational Standards provide that as a matter of prudent business practice DMB’s are required to execute appropriate agreements with their clients similar to global master agreements executed with the CBN such as Nigerian Master Foreign Exchange Agreement (NMFA). This should give investors some comfort as the NMFA is a master agreement like the ISDA, and there is no explicit exclusion of the ISDA form of agreements under the Operational Standards.

It is critical to note that for the purpose of OTC FX Futures contracts executed in the Nigerian FX market, an event of default will be strictly construed and is limited to those events declared by the FMDQ to be an event of default.22 Events of default under the Operational Standards are in broad terms limited to regulatory action against the DMB that would affect its viability as a

going concern, initiation of winding up proceedings, insolvency, and mergers or acquisitions of property of a DMB which negatively impacts on the ability of the DMB to meet its obligations under its OTC FX Futures contract.23 These events of default are peculiar to OTC FX Futures executed within the Nigerian FX Market. ISDA form agreements usually cover events of default and termination events such as a failure to pay or make delivery under the agreement; breach or repudiation of agreement; misrepresentation; bankruptcy; force majeure, amongst others.24 Importantly, the Operational Standards state that in the event of a conflict between the OTC FX Futures Market Operational Standards and any other related document, the Operational Standards will supersede such document to the extent of the inconsistency.25 This means that the termination events and events of default under the ISDA master agreement would be inapplicable (save for similar provisions under the Operational Standards), and any attempt to close-out the OTC FX Futures contract for an event outside of the items contained in the Operational Standards, would have no effect. Despite this limitation to default events under the Operational Standards, a close review of the Operational Standards would show that a force majeure event may trigger an event of default under

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The Operational Standards provide that “transaction counterparties” are prohibited from engaging in activities which may classified as futures market fraud.

the OTC FX Futures contract because the Operational Standards state that force majeure may be construed in accordance with the provisions of the relevant master agreements executed between DMB’s and clients.26 Following an event of default, a closeout amount would accrue. The closeamount refers to the amount of loss or gain to the non-defaulting party in the event of default which would be determined at the early termination date in accordance with the FMDQ OTC FX Futures close-out methodology.27 It is worth noting that the FMDQ is yet to release its close-out methodology.

In terms of credit support, beyond standard margin requirements, the Market Framework recognises eligible collateral for use as margin collateral in connection with OTC FX Futures contracts including cash, federal government of Nigeria bonds, and treasury bills.28 The Market Framework and Operational Standards contemplate a security trust structure where eligible collateral is pledged and held in trust by the clearing agent, the Nigerian Interbank Settlement System (NIBSS). The Operational Standards stipulate that the “collateral margin shall remain the assets of the DMBs, the clients margined for their OTC FX Futures trades executed with DMBs and CBN, and the Clearing Agent shall hold the collateral margin in trust for the DMBs, the relevant margined Clients, and CBN respectively.”29 This appears to suggest that a security pledge is the only valid form of collateral as it relates to OTC FX Futures. In practice, however, the FMDQ has also recognised title transfer arrangements as these are generally accepted in other derivatives markets.

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Futures Market Fraud The Operational Standards provide that “transaction counterparties” are prohibited from engaging in activities which may be classified as futures market fraud.30 The Operational Standards, however, define transaction counterparties in the context of OTC FX Futures contracts to mean transactions involving the CBN, and a DMB or a DMB and another DMB.31 This raises the question of whether liability can accrue to an end-user or client of a DMB for futures market fraud since they do not fall strictly within with definition of transaction counterparties. In addition, the Operational Standards refer to some form of penalty only as it relates to erring DMB’s found to have been engaged in futures market fraud or other unethical activity, this further casts doubt on the applicability of this provision to end-users or clients.32 While there remains some uncertainty in this regard, there is a likelihood that end-users may be caught by this provision because futures market fraud is defined to include front running which is “the act of taking positions on an OTC FX Futures contract based on advanced knowledge of non-public information about an impending transaction in the same or related OTC FX Futures contract, obtained -from transaction counterparties, clients or third parties.” 33 This suggests that endusers or clients may be complicit in certain fraudulent activity within the market for OTC FX Futures. Other acts of futures market fraud include: price distortion or manipulation, prearranged trading, fictitious trading, amongst others.34 Settlement Amounts & Externalisation of Proceeds Settlement amounts refer to the difference between the OTC FX Futures contract rate and the Nigerian Foreign Exchange Market (NIFEX) rate on the settlement date of the contract.35 OTC FX Futures contracts are cashsettled in Nigerian Naira such that no physical delivery of the underlying foreign currency (US Dollar) will ever take place.

The Revised FX Guidelines provide that settlement amounts on OTC FX Futures

may be externalised for Foreign Portfolio investors (FPI’s) with Certificates of Capital Importation (CCI’s).37 It is worth noting that settlement amounts are evidenced by an FMDQ settlement advice.38 The Operational Standards impose certain restrictions on the externalisation of proceeds for FPI’s, and obligors under foreign currency loan agreements.

FPIs are prohibited from externalising imported capital until after the maturity date of the OTC FX Futures contract. FPIs may also externalise settlement amounts without liquidating capital.39 It would also appear that the maximum amount that obligors under foreign currency loans can repatriate is the principal and interest sum. Settlement amounts in this regard would not be released to clients of DMB’s until valid utilisation of the foreign loan is ascertained.40 In other cases, OTC FX Futures for all eligible invisible transactions qualify for externalisation only after the completion of the transaction cycle that is, where there is a remittance on the invisible transaction hedged, and on the presentation of an OTC FX Futures settlement advice issued by FMDQ. Therefore, foreign investors would be required to present CCI and the FMDQ settlement advice if they are to validly repatriate settlement amounts.

Conclusion The Nigerian FX Market is evolving and the introduction of the OTC FX Futures is an indication that regulators are eager to foster development within the market, and encourage foreign investment. Since the introduction of the OTC FX Futures, a number of trades have been recorded and open contracts exist but there remains some room for improvement in the regulatory posture within the market. In particular, the FMDQ as the key stakeholder responsible for organising the market, and promoting market standards must act to provide some clarity on the grey areas of the Operational Standards such as the scope and effect of the proposed closeout methodology, and the validity of forcemajeure clauses as events of default or termination events in master agreements between transaction parties.

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Paragraph 1.0, Revised FX Guidelines Paragraph 2.2.1, Revised FX Guidelines 3 Paragraph 2.0, Guidelines for FX Derivatives and Modalities for CBN FX Forwards 4 This was released on October 26, 2016 5 The revised version of the Operational Standards was released on August 24,2016 6 Paragraph 2.4.2 (vii) of the Revised FX Guidelines; Paragraph 1.2 of the Operational Standards 7 Paragraph 2.2.3, Revised FX Guidelines; Paragraph 2.2 of the Operational Standards 8 Paragraph 1.1 of the Operational Standards 9 Paragraph 2.2 (iii) of the Operational Standards 10 Paragraph 2.3 of the Operational Standards 11 The circular is dated 23 June 2015, and titled “Inclusion of Some Imported Goods and Services on the List of Items Not Valid for Foreign Exchange in the Nigerian Foreign 1 2

Exchange Market” (REF: TED/FEM/FPC/ GEN/01/010) 12 Paragraph 2.3.5, Revised FX Guidelines 13 Paragraph 1.6 of the Operational Standards 14 Section 41, Foreign Exchange (Monitoring and Miscellaneous Provisions) Act 15 Paragraph 1.5, Operational Standards 16 Ibid 17 Paragraph 2.2.2, Revised FX Guidelines 18 Paragraph 1.7, Operational Standards 19 https://www.fmdqotc.com/markets/otc-fxfutures-market/ (Last accessed: 15 January 2017) 20 Page10, Henderson S.K, (2003) Henderson on Derivatives LexisNexis UK 21 Ibid 22 Definitions, Operational Standards 23 Ibid 24 See generally Clause 5 of the ISDA Master Agreement 2002

Paragraph 14, Operational Standards Paragraph 6.4, Operational Standards 27 Definitions, Operational Standards 28 Paragraph 3.2, Market Framework 29 Paragraph 8.1, Operational Standards 30 Paragraph 1.18, Operational Standards 31 Definitions, Operational Standards 32 Paragraph 4.12, Operational Standards 33Ibid 34 Definitions, Operational Standards 35 Definitions, Operational Standards 36 Paragraph 3.5, Market Framework 37 Paragraph 2.2.7, Revised FX Guidelines 38 Ibid 39 Paragraph 7.1, Operational Standards 40 Paragraph 7.2, Operational Standards 41 The total value of open contracts as at 13 January, 2017 was 3,823.44 ($ ‘mm) https:// www.fmdqotc.com/markets/otc-fx-futuresmarket/ (Last accessed: 17 January, 2017) 25

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“I am Naomi Amobi of Aluko & Oyebode and I read the Law Digest”

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Law Digest Winter 2016

24

In His Own Words On Marriage

“I have grown to view marriage as a sacred institution and another form of communion”

On Education “I would like to apologise to the reader for my continued praise of education, but I became the man that I am today, against all odds, because of the privilege of obtaining an education.”

“Lack of education is so costly to the extent that the mind of an uneducated man is a congenial abode to morbid desires.”

On Success

“It is also my belief that the success of a man is measured by what he creates, produces or moulds and not by the wealth he acquires”

On Hardwork “Some might argue, judging by the face value of my life and living that I have climbed to the masthead; the appropriate answer to that judgement of course, should be that if I have advanced that far, it was not without my having crawled through the lubber’s hole”

On Challenges “There is hardly any occupation, profession or even vocation without latent danger. Life as we all know is one of risks and challenges. We live to overcome these, and where we cannot, the failure builds our bank of experience”

On Nigeria “Nigeria ought to be a giant of Africa and Africa’s leader in its own right. But Nigeria’s inability lies in its inorganic political structure from which flows the inability of successive political leaders to govern the country properly, efficiently and effectively. “Democracy in Nigeria has been prejudiced, ignorant, superstitious, landing itself from time to time in chaos”

On Equity and Fairness “Anything whatsoever done with sentiment or emotion, bias and prejudice as opposed to objectivity and principles, equity and fairness, such an enterprise is bound to totter and ultimately collapse”

On Democracy “Any nation that has no capacity for peaceful non-violent demonstrations to defend and protect its democratic rights is not ready for democracy”

On Leadership

“Any human being entrusted with the leadership of his fellowmen has a sacred duty to perform”

ARBITRATION Andrew Pike - Bowmans

Maritime arbitration as an effective tool in resolving crossborder shipping disputes in subSaharan Africa

M

Andrew Pike, Head of the Ports, Terminals & Logistics Corridors Sector at Bowmans’ Durban office

The number of maritime arbitrations in Africa may be further bolstered by the establishment of one or more maritime arbitration centres in Africa.

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aritime arbitration in Africa has the potential to become an effective tool in resolving cross border shipping disputes in sub-Saharan Africa.

Where maritime services are provided in South Africa between one or more local parties, it has been our experience that the parties are more likely to refer disputes arising to high court litigation and less likely to refer disputes arising to arbitration (for example, in ship agency agreements).

On the other hand, some government organisations such as South Africa’s Transnet National Ports Authority and Transnet Port Terminals, already turn to arbitration in many instances (for example, in their port leases and port or terminal usage agreements).

In the international shipping contracts that we encounter in the course of our South African practice, English law remains by far the most popular choice of law and London the most popular choice of seat for arbitrations. The laws and arbitration seats of Singapore and New York follow on second and third in the popularity stakes, in our experience.

Parties engaged in international maritime disputes, however, could agree a seat of arbitration in Africa, even where they are applying a foreign law to the resolution of the dispute itself. In such a case, it is envisaged

Law Digest Winter 2016

that any arbitration hearing would take place at a venue in Africa and also be subject to the procedural rules and court supervision of the country in Africa so chosen by the parties. Encouraging parties to arbitrate their shipping disputes in Africa may require changes to the legislative framework of those countries seeking to host more international arbitrations.

To this end, South Africa already has an established maritime enforcement regime. South African is also considering a draft International Commercial Arbitration Bill incorporating the United Nations Commission on International Trade Law’s (UNCITRAL) Model Law on international commercial arbitrations and repealing the existing Enforcement Act to replace it with a new enforcement framework.

The number of maritime arbitrations in Africa may be further bolstered by the establishment of one or more maritime arbitration centres in Africa, possibly with their own set of bespoke maritime arbitration rules, and seeking to bring together Africa’s local legal, technical and commercial shipping expertise.

These would of course require the support of an experienced panel of shipping arbitrators who would be able to respond to appointments at short notice.

In addition, both the African Maritime Transport Charter and 2050 AIMS seek to increase Africa’s share of global ship ownership. They envisage the possibility of an African fleet doing cabotage trade around Africa. Cabotage places restrictions on the ships that are allowed to trade within a particular region. So, for example, only ships beneficially owned/operated by nationals of African countries might be allowed to trade between African states.

If these and other initiatives had their desired effect, more nationals from African countries owning/ operating ships will be negotiating charterparties, bills of lading and

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other shipping contracts with African counter-parties. They will therefore be in a stronger position to influence the law and dispute resolution mechanisms governing their charterparties, bills of lading and other shipping contracts.

These parties might be persuaded

to incorporate clauses into their contracts, which provide for arbitration to be held in a country in Africa, either in the country concerned or at a specialist African maritime arbitration centre, either adopting local bespoke arbitral rules or else importing rules, such as those

of the London Maritime Arbitrators Association. These parties might further be encouraged to draw on Africa’s wealth of local legal, technical and commercial expertise in the maritime spheres, such as the members and rules of the Maritime Arbitrators Association of Nigeria.

“I am Lotanna Nwodo of Aluko & Oyebode and I read the Law Digest�

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TECHNOLOGY LAW Akinkunmi Akinwunmi, LLM – Chris Ogunbanjo & Co

The coming of age of the FinTech sector in Nigeria

INTRODUCTION

Akinkunmi Akinwunmi, LLM – Chris Ogunbanjo & Co1

The emergence of FinTech as a means of conducting financial transactions has been regarded as a benefit of the modification of financial regulation after the 2008 financial crisis.

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FinTech is an acronym for Financial Technology. FinTech connotes the use of technology to develop innovative financial products for the purpose of simplifying financial transactions.

FinTech provide services, which are typically within the purview of traditional financial institutions, hence disrupting established banking systems, and transforming the financial sector. The financial products offered by FinTech include money transfer, investment, lending, crowd funding, digital currency, and peer-topeer payments amongst others.

The emergence of FinTech as a means of conducting financial transactions has been regarded as a benefit of the modification of financial regulation after the 2008 financial crisis.2 However, FinTech is being stimulated by digital infrastructure, smartphones, and easy access to information via the internet. FinTech leverage technology and propelled people (especially millennial) with preference for online activities to adopt FinTech as an alternative to traditional financial institutions.

It has been reported that $5.4 billion was invested in global FinTech companies in the first quarter of 2016,3 with an estimate that the global cumulative investment in FinTech could exceed $150billion within the next 3 to 5 years.4

Law Digest Winter 2016

As FinTech spread globally, it is gradually taking root in Africa. In 2016, the total volume of digital payments carried out in Africa was valued at $51.937 million with the expectation of an annual growth rate of 23.12% (between 2016 and 2020) which would result in the total sum of $122.308 million in 20205.

In Nigeria, the government is using an online platform to collect revenue into its treasury single account6. In 2016, a Nigerian FinTech startup successfully secured the sum of $1.3 million seed investment from both international and home grown investors7. Nigerian banks now have internet banking and mobile payments platforms to ease business transactions while there are some FinTech companies that provide online payment services. In addition, the Central Bank of Nigeria (“CBN”) in 2015 issued a regional banking licence to a commercial bank which seeks to provide mainly FinTech banking in Nigeria.8 Meanwhile, the CBN has set up a committee to deliberate on the possibility of legalising the use of the Bitcoin for transactions.9 LEGAL REGIME OF FINTECH IN NIGERIA The gradual inclusion of Nigeria in the FinTech ecosystem may be linked to the introduction of the cashless policy by the CBN in 2012. The objective of the policy is to reduce the physical circulation of cash in the economy, and encourage payment (for goods, services, transfers) through electronic means.10 The CBN then issued Guidelines on Point Of Sale (“POS”) Card Acceptance Services for the purpose of providing minimum standards and requirements for the operation of PoS card acceptance service.11 The CBN also issued Guideline on Mobile Money Services in Nigeria. The objective of the guideline is to ensure a structured and orderly development of mobile money services in Nigeria.12 The scope of the guideline cover models, agent network, business rules, roles and responsibilities of participants under the mobile money services in Nigeria.13 The CBN subsequently

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In 2016, the total volume of digital payments carried out in Africa was valued at $51.937 million with the expectation of an annual growth rate of 23.12% (between 2016 and 2020) which would result in the total sum of $122.308 million in 2020. introduced the Mobile Payment Regulatory Framework which covered business rules governing the operation of mobile payment services in Nigeria, but does not apply to the use of mobile phone as an access to the internet for internet banking services.14 It has been reported by KPMG that since the introduction of mobile money operations in Nigeria, mobile money has grown from an average monthly transaction value of US$5 million in 2011 to US$142.8 million in 2016.15 In addition to the CBN guidelines, there are 2 pertinent bills before the National Assembly capable of expanding FinTech and e-commerce in Nigeria. The bills are the Payments System Management Bill of 2009 (the “Payments Bill”) and the Electronic Transaction Bill 2015 (the “e-Transaction Bill”).

The purpose of the Payments Bill is to regulate payments, clearing and settlement systems in Nigeria.

The Payments Bill provides for the structure and responsibilities within the payment systems in Nigeria. The Payments Bill unequivocally provides that no person shall carry out payment system in Nigeria without the authorisation of the CBN.16 The e-Transaction Bill provide amongst others for the legal and regulatory framework for conducting transactions through the use of electronic or related media, and e-commerce in Nigeria.17 It is expected that when the e-Transaction Bill becomes an Act of the National Assembly, it would spur e-commerce and FinTech.

CONCLUSION The global banking system is evolving and FinTech is at the centre of it. A potential impact of FinTech is that traditional methods of performing financial transactions which would involve visit to the bank, filling of forms and holding physical meeting with bank officials may be eroded.

Just as Goldman Sachs recently estimated that the sum of $4.7 trillion in financial services revenues is at risk of being displaced by FinTech.18 The transformation should not be seen as a competition between traditional financial institutions and FinTech rather, as an obligation to deliver quicker and more qualitative services to customers.

Traditional financial institutions in an emerging market like Nigeria need to collaborate with FinTech companies to provide optimum financial services to customers. This is because customers still prefer traditional financial institutions in the area of trust, quality of service, security, and transparency while FinTech is preferred for timely/ efficient service and better value for money.19 As FinTech continues to grow exponentially, it will continue to attract Venture Capitalist to Nigeria FinTech ecosystem; capture the unbanked persons; grant small scale businesses access to finance; and make it easier for customers to complete financial transactions in real-time. FinTech companies and startups must continue to provide innovative technological financial services which are capable of meeting the needs of customers, and protect their platforms from cyber-attacks.

In order to fully harness the potential of the FinTech sector in Nigeria, the pending bills (the Payments Bill and e-Transaction Bill) before the National Assembly and digital infrastructure should be highly prioritised. The government need to desist from introducing policies which may stifle internet access and consequentially, the growth of FinTech and e-commerce in the country.

Akinkunmi Akinwunmi Esq. LLM in Business and Technology Law (University of California, Berkeley); Solicitor in the Business and Technology Group of Chris Ogunbanjo & Co. 2 Goldman Sachs Global Investment Research (March 13, 2015): The Future of Finance Part 3: the Socialization of Finance, page 5.

3 Global FinTech Investment Hits Record High in 2016, published June 13, 2016 retrieved on January 11, 2017 fromhttp://www. investopedia.com/articles/markets/061316/ global-f intech-investment-hits-recordhigh-2016.asp. The amount invested in FinTech companies dropped to $2.4billion in the third quarter of 2016. Source: KPMG-The Pulse of FinTech Q3 2016 Report, page 8.

4 Blurred lines: How FinTech is shaping financial services, PWC Global FinTech Report, March 2016 5 Into Africa – The rise and success of FinTech Startups published on April 22, 2016 retrieved on January 11, 2017 from https:// vc4a.com/blog/2016/04/22/into-africa-therise-and-success-of-fintech-startups/ 6 Payment into the treasury single account is an example of collaboration between FinTech and traditional financial institution.

7 Nigeria FinTech Startup Paystack Raise $1.3million,published on December 19, 2016, retrieved on January 11, 2017 from http://www.forbes.com/sites/ mfonobongnsehe/2016/12/19/nigerianf i ntech-st a r t up -payst ack-ra ises-1- 3 million/#4459ce364c6e 8 CBN licenses SunTrust Bank Nigeria Ltd published November 24, 2015, retrieved on January 11, 2017 from http://www. vanguardngr.com/2015/11/cbn-licensessuntrust-bank-nigeria-ltd/ 9 CBN May Legalise Use of Bitcoin for Transactions, Says NDIC, published in Thisday Newspaper, Volume 21, No. 7915 on December 20, 2016, page 40.

10 Cash-less Nigeria, retrieved on January 12, 2017 from https://www.cbn.gov.ng/cashless/ 11 See: CBN Guidelines on Point Of Sale Card Acceptance Services, page 2 12 See: CBN Guidelines on Mobile Money Services in Nigeria, page 3 13 Ibid page 4 14 See: CBN Mobile Payment Regulatory Framework, pages 3 – 4. The CBN Guideline on Mobile Money Services in Nigeria apply to the use of mobile phone as an access to the internet for the purpose of using internet banking services 15 KPMG FinTech in Nigeria: Understanding the Value Proposition (November 2016), page 7 16 Section 2(1) Payments System Management Bill of 2009 17 Section 1(1) Electronic Transaction Bill 2015 18 Goldman Sachs Global Investment Research (March 13, 2015): The Future of Finance Part 3: the Socialization of Finance, page 5 19 World FinTech Report 2017, published by Capgemini, page 10 1

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BANKING LAW Edwin Kimani

Law Digest Winter 2016

Oligopolistic banking system in Kenya and market failure: is interest rate cap the answer?

Edwin Kimani*

Unfortunately, the Kenyan banking industry is already showing signs of a perfect market failure.

This is so, if viewed from a competition law stand point.

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other factors, according to Marubu Munyaka’s4 article, has been a big hurdle to accessing credit by Kenyans and businesses, thus hampering economic growth. In the past, interest rates have soared to as high as 18%5 in some banks, pushing hard working Kenyans and Small and Medium sized Enterprises to financial doldrums. This also had a grievous effect on Kenya’s economic ambitions, one of which is to increase the ease of doing business.

The Kenyan Banking Industry at a Glance

Market Failures Explained

and

Oligopolies

Kenya, is recognised as a world leader in banking and finance innovation, and as one of the most financial inclusive countries in the world. As of June 30, 2015, there were 46 commercial banks, 12 microfinance banks (MFIs) and one mortgage finance company regulated by the Central Bank of Kenya.1 Kenya, as compared to its African counterparts, has a higher number of banks compared to its population. For example, Nigeria has 22 banks for 180 million people, and South Africa 19 banks for 55 million.2 Also in the market, there are over 4000 savings and credit cooperative societies (SACCOs), of which more than 100 are deposit-taking, licensed by the Kenyan Savings and Credit Cooperative Societies Regulatory Authority. There are also two fully fledged Islamic banks, Gulf African Bank and First Community Bank. The Banking Act 2014 has not yet been amended to allow Islamic products and so the Central Bank of Kenya approves them on a case-by-case basis. So far, the two banks have 150,000 clients.

The appeal of sharia-compliant banking products extends well beyond religious boundaries. With 4m Muslims in the country, the potential for growth in this segment is sizeable.3 Unfortunately, the Kenyan banking industry is already showing signs of a perfect market failure. This is so, if viewed from a competition law stand point. Market failure manifests itself in the banking system where a few banks are oligopolistic ‘powers’. Such powers have proven oppressive to the common Kenyan as well as the Small and Medium size Enterprises. This, among

Market failure can be defined as an equilibrium allocation of resources that is not optimal, the potential causes of which may be market power, natural monopoly or oligopoly, imperfect information, or externalities. Market failure could result from existence of a monopoly or an oligopoly and/ or imperfect, or to a large extent, false representation of the economy.

Such an imperfect or false representation of the economy could be in the form of a robust growth in certain sectors of the economy while others struggle. It could also, reflect a growing national economy driven by the activities of the dominant players while the situation with other organisations, not part of the dominant circle, are dire.

But is the presence of a market power, such as the dominate banks, in an economy a sign of a market failure? To understand this and to fully answer this question, one has to understand what a market power is and how it operates.

According to William M. Landes and Richard A. Posner6 the term "market power" refers to the ability of a firm (or a group of firms) to raise price above the competitive level without losing so many sales.7 In a perfect competitive economy, market participants have no market power. Here it is assumed that they are equal in strength and one or a group, does not enjoy undue advantage over the other. Therefore, if a company or a group of companies enjoy undue advantage to the extent that they can control prices or fix prices in the market, then, that is a true manifestation of a market failure.

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Another classic effect of an oligopoly as witnessed in the Kenyan banking sector is pricing that exceeds average cost.

If the banking market was looked at in the microscope of a price market economy, the prices would be interests charged on loan facilities and returns on deposits.

We therefore submit that the existence of an oligopoly, or a monopoly is an example of a market failure. Where just a few companies are able to control a large market share, the playing field is uneven, therefore, the few are able to engage in anti-competitive behaviour such as price fixing. The existence of oligopoly also has a detrimental effect on consumer choice or supremacy.

Market failure and its effects to the economy of Kenya The situation in the banking industry in Kenya mirrors a perfect market failure which manifests itself as an oligopoly.

In essence, a look at Kenya in relation to the definitions and explanations of a failed market, the banking institutions mirror price markets institutions, with interest on deposits and loans being a key business of the industry.

In Kenya, 6 banks control 52.4% of the entire industry of 42 banks8. The biggest 10 banks account for 70% of the market and seven of them are local9. It is therefore a skewed market which drives the agenda of preserving their dominance by raising and maintaining high interest rates. The ability of a minority of the price market institutions, to arbitrarily control the prices, herein being the interests charged on loans or paid on deposits, represents a market structure quite detrimental to the welfare economy and the other players in the market.

The effect of the existence of the

oligopolies on the Kenyan banking market has been typical of any skewed market. They can be viewed from two stand points, one on pure economics, while other on consumers, consumer welfare and the general welfare economy From the economic standpoint, the effects of the banking oligopoly on the Kenyan economy has been typical.

Already, the words of Lifton R. Musser and Lee and Brena Freeman10 have come to pass and there exists an imperfect or false misrepresentation of the economy in the form of a robust growth of a certain key sector of the economy while others struggle, or an overall reflection of a growing national economy, driven by the activities of the dominant players while the situation with other individual organisation, not part of the dominant circle, is dire. If the banks were used as a standard measure of Kenya’s economy, the results would be shockingly distorted and far from the truth. A look at the profit disparity between the 6 major banks and the rest is a good mirror of the situation. The 6 banks have aggressively expanded to an extent that they have entered the larger East African regional markets such as Rwanda, Uganda and South Sudan and are already showing signs of dominance. On the other hand, the SMEs are struggling to stay afloat in the market.

Also, typical of any oligopoly, the dominant market players tend to lock out competitors. This is ‘mutually’ done to ensure that the interests of the dominant players are protected. This also has a domino effect of curtailing and clamping down on the bargaining power of the citizenry by leaving them with fewer options. The Kenyan market is no different. As noted by the Oxford Business Group’s report, foreign banks find it hard to enter the local market and those that enter face stiff competition from the local dominant banks.11 Another classic effect of an oligopoly as witnessed in the Kenyan banking sector is pricing that exceeds average cost. If the banking market was looked at through the microscope of a price market economy, the prices would be interests charged on loan facilities and returns on deposits. High interests on

lending and minimal or no returns on interest on deposits are a manifestation of pricing that exceeds average costs.

With competition low, dominant banks have been able to charge more than the set Central Bank Rates on loan facilities and pay little or no returns on deposits. This has had an effect on consumer bargaining power as well as affecting financial inclusion in Kenya.

Ease of doing business has been a major challenge in Kenya. Not just because of corruption, but also because of the high interest rates which have hampered access to affordable finance.

This has had a detrimental effect on the ease of doing business in Kenya.

According to The World Bank’s annual fact sheets on doing business, in 2016, Kenya was ranked 108 globally, and a distant third in East Africa, despite being the regional economic powerhouse.12 One of the reasons for Kenya’s dismal performance has been access to credit. According to The World Bank, the trend taken by Kenya is worrying as it is spiralling downwards in ranking. This is attributed to the high lending rates by Kenyan banks.

As it is also well stated above, the effects of an oligopoly can affect the consumer welfare negatively. Consumer sovereignty, being an essential principle guiding the pursuit of proper competition policies and laws, could be hampered by oligopolistic markets.

Consumer sovereignty is exercised by the consumer when he or she is able to make a choice between goods or services in a market, based on prices and quality on a variety of goods or services offered within an economy.

With the clout the oligopolies enjoy, the choices are limited.

Legislative efforts to correct the market failure.

Kenya’s Competition and Consumer Protection Legal Framework Kenya’s Constitution has many times been hailed as the one of the most progressive in the world. A study of Kenya’s rich history of constitutional ontology, will show that its making has come through tumultuous times

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Ease of doing business has been a major challenge in Kenya. Not just because of corruption, but also because of the high interest rates which have hampered access to affordable finance. and hard fought battles. Prior to its promulgation in 2010, there was no specific law dealing with consumer protection.

The core of the Constitution’s strength lies in its recognition of the people’s sovereignty in the preamble and The Bill of Rights13. The Constitution states; “(1) Consumers have the right-(a) to goods and services of reasonable quality; (b) to the information necessary for them to gain full benefit from goods and services; (c) to the protection of their health, safety, and economic interests; and (d) To compensation for loss or injury arising from defects in goods or services.”14 With that provision, sovereignty of the consumer is well recognised and protected. Not only are consumers entitled to expect such reasonable quality of goods and service but also the information necessary, to enable the consumer to make an informed decision. The best, and probably the most cited case, for jurisprudential purposes, which interpreted this portion of the law is Hon. Nicholas R.O. Ombija V Kenya Commercial Bank Ltd15. There is a wide array of consumer protection laws in Kenya such as the Trade Descriptions Act16, Standards Act17, Weights and Measures Act18, the Foods, Drugs and Chemical Substances Act19, the Pharmacy and Poisons Act20, the Public Health Act21, the Fertilizers and Animal Foodstuffs Act22, as well as private law measures in the law of

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contract and the law of tort.

These and other statutes touching on consumers are criminally oriented as they seek to ban one malpractice or the other and to prosecute offenders for breach of their provisions, but do not empower a consumer to sue the offender to get redress, including compensation, where the said breach affects him or her adversely.

However, for purpose of the oligopoly in the Kenyan banking industry, it is important to restrain ourselves to The Competition Act23 and the Central Bank Act24. The new Competition Act sets it agenda by stating that; “AN ACT of Parliament to promote and safeguard competition in the national economy; to protect consumers from unfair and misleading market conduct; to provide for the establishment, powers and functions of the Competition Authority and the Competition Tribunal, and for connected purposes”25 The objects of the Act are to enhance the welfare of the people of Kenya or otherwise known as the welfare economy, by promoting and protecting effective competition in markets. Its objects also include preventing unfair and misleading market conduct, which complements Article 46 of the Constitution.

To achieve such an objective, it has created bodies whose aim is to keep in check the conduct and practices of business entities. Such bodies include the Competition Tribunal whose mandate and composition are set out in Part VII of the Act. On the face of it, one could argue that with such a robust legal framework, market failures are nonexistent as the existence of the legal and institutional framework prevent such market failures as oligopolies to exist. But not so, Kenya seems to have become a slave to the corporate world, more so the banking industry, as it seeks to strike a fine balance between incentives aimed at making industries grow and controlling their growth to prevent undesirable market dominance and uncompetitive behaviour. The courts on the other hand have focused so much on consumer protection, but there has been no pronouncement on

observation of consumer protection by the market at large.

Market Failure Distortion

and

Market

This has led to a market distortion in the form of a government intervention by legislating on capping of interest rates. On the 28th of July 2016, Kenya’s National Assembly passed a Bill26 to remedy the situation. The Bill sought to cap lending rates at 4% above the Central Bank Rate (CBR) which currently stands at 10%27 and set a minimum interest rate on a deposit held in interest earning account to at least seventy per cent of the base rate set and published by the Central Bank of Kenya. The President assented it into law, inevitably putting him on a collision course with the banks.

Parliament had flirted with idea of legislating on interest rates on previous occasions. Prior to 1991, Kenya’s economy was not liberalised and therefore, its approach on interest rates was on capping rates to avoid predatory pricing of interest rates and damaging a struggling low income economy. In 1991 however, things changed and Kenya, after sustained pressure from international financial institutions such as the World Bank, decided to inject key reform into its system of government and its overall economy. These reforms, included, but were not limited to, liberalising the economy by doing away with interest caps and ensuring political inclusivity through a multiparty form of democracy.28 Since then, the relationship between the banking industry, the public and the government has not been quite rosy. With the Kenyan banking industry growing stronger and exposing Kenyans to financial vagaries, legislators in the past have threatened time and time again to have interest capped due to what they perceived as arbitrary fixing of interest rates.

This time however, Kenya’s National Parliament acted and the President, under significant pressure not to, assented to the Bill. The President

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explained that he assented to the bill because after the two previous occasions when Parliament resisted the temptation to pass similar legislation, the “banks failed to live up to their promises” to introduce measures to curb the rates.29 One could therefore argue that this act by the legislator, which has been termed arbitrary by many in the banking sector, was an act of political expediency, necessitated by oligopolistic players’ actions in a crucial sector.

To legal and economic analysts, this raises serious competition questions.

In light of the fact that distribution of market power in the banking industry is skewed towards 6 large banks that control 52.4% of the entire industry of 42 banks30, is the market distortion of capping of interest rates going to end oligopolistic conducts by leading banks in the banking industry? Is this the end of a market failure in the banking industry characterised by oligopolies?

In truth, it is not. Capping of interest rates will not cap the great financial strength of a few banks that are dominant in the market. This will also do little to dent their already great influence in the market. However, it could be the beginning of the end of the oligopolistic banking system, if the law is backed up by more regulations aimed at creating a level playing field in the market and giving the consumer more power and options.

Is the capping of interest the beginning of the end of the oligopolistic banking industry?

There is no definite answer to that question. In itself, a market distortion in the form of capping interest rates stifles predatory pricing by oligopolies.

At the same time, experts point out that it could hurt fledging financial institutions. It could also prevent low net individuals from accessing credit since returns would be minimal to the banks, thus the banks would be selective to whom they allow credit.

However, it is a good move aimed at reinstating consumer sovereignty, but would require multi-agency approach to championing consumer

sovereignty. Secondly, there is a need for clarity from a jurisdictional point on view, on the relevant mandates of the agencies tasked with consumer protection. For example, the issue of oligopolies in the banking industry, using interest rates as a means of exploiting their competitive advantage raises jurisdictional questions. Does this fall under the regulatory powers of the Competition Authority or the Central Bank? With the lack of a clear legislative framework, the best proposal would be a review of the legislative framework in order to allow for a multi-agency approach in dealing with competition issues among other steps.

Conclusion The rapid liberalisation Kenya has obviously paid off in some regards, but with a price. Giants have emerged in the market in the form of oligopolies, enslaving the sovereign. Now, with the new constitution with such provisions as article 46 in its Bill of Rights, and a fresh Competition Act on the way, Kenya seems to have realigned its ideology to a socio-capitalist type of market.

“Growth opportunities for Kenya's banking sector” article by Oxford Business Group accessed on the 16th December, 2016; 2 “Fitch: Consolidation Will Be Positive for Kenya's Banks” Information on Reuters Wed Jun 24, 2015.

3 “THE EFFECT OF SACCO SOCIETIES REGULATORY AUTHORITY’S REGULATIONS ON FINANCIAL PERFORMANCE OF SACCOS IN NAIROBI COUNTY” Thesis of Duncan Ndegwa, from Nairobi University, School Of Business. *Edwin Kimani is an Advocate of the High Court in Kenya and a Consultant at Strathmore Extractives Industry Center at Strathmore Law School.

4 Article on The Business Daily, by Marubu Munyaka, copy of April 3, 2016 accessed on the December 13, 2016; 5 Interest Rates Data sourced from Trade Economics website, accessed on December 13, 2016; Link 1

They are Lifton R. Musser Professor of Economics and Lee and Brena Freeman Professor of Law, respectively, at the University of Chicago Law School.

7 “Market Power in Antitrust Cases” an article by the above Professors on the Havard Law Review, issue of 1981, accessed on the 14th December 2016. Link 8 “The Impact of Capping Interest Rates on the Kenyan Economy” A report by Cytonn Investments Management Ltd, accessed on the 13th of December, 2016. Link 9 “Growth opportunities for Kenya's banking sector” article by Oxford Business Group accessed on the 16th December, 2016; Link 10 They are Lifton R. Musser Professor of Economics and Lee and Brena Freeman Professor of Law, respectively, at the University of Chicago Law School 11 “Growth Opportunities For Kenya’s Banking Sector” a report by the Oxford Business Group accessed on the 20th of December, 2016 via www.oxfrodbusinessgroup.com 12 “The World Bank Fact Sheet: Doing Business 2016 in Sub-Saharan Africa” a report compiled by The World Bank in October 27, 2015.

13 Chapter IV of The Constitution of Kenya 2010 14 Article 46 sub article 1 of the Constitution of Kenya 2010.

15 High Court Of Kenya At Nairobi (Milimani Commercial Courts) Civil Case 547 Of 2008.

16 CAP 505 Laws of Kenya 17 CAP 496 Laws of Kenya 18 CAP 513 Laws of Kenya 19 CAP 254 Laws of Kenya 20 CAP 244 Laws of Kenya 21 CAP 242 Laws of Kenya 22 CAP 345 Laws of Kenya 23 No. 12 of 2010 24 Cap 491 Laws of Kenya 25 Long Title of the Competition Act No. 12 of 2010 26 The Banking Amendment Bill, 2016 was passed by the National Parliament and signed into law by the President. Currently, it is the Banking (Amendment) Act of 2016 which commenced, or in layman, came into force on the 14th or September 2016.

Central Bank Rates and Monetary Policy Stance as of the 28th November, 2016, accessed from The Kenya Central Bank on the 13th of December, 2016.; Link See Bascom (1994) and Fry (1988) regarding financial liberalization in developing countries. With regard to Kenya's financialsector reform, see the World Bank (1991, 1992) “Uhuru Kenyatta signs banking amendment bill into law” Article by Faith Mwema on the KUtv done on the 28th of August 2016 and accessed on the “The Impact of Capping Interest Rates on the Kenyan Economy” A report by Cytonn Investments Management Ltd, accessed on the 13th of December, 2016.

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INTERNATIONAL LAW Dr. Tonye Clinton Jaja

Mr Bashir - President of The Sudan

Re-visiting Nigeria’s membership of the International Criminal Court – the Al-Bashir quandary This paper considers the issues raised by the Africa Union (the "AU") call for defiance of the ICC’s resolution on the arrest and surrender of Al-Bashir and Nigeria’s membership of the ICC. BACKGROUND

Dr. Tonye Clinton Jaja, Research Fellow, National Institute for Legislative Studies

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1998-2015 The United Nations Conference of Plenipotentiaries on the Establishment of the International Criminal Court took place in Rome from June 15 to July 17, 1998. On July 17, 1998, member states of United Nations (UN) overwhelmingly voted in favour of the Rome Statute of the ICC (the “Rome Statute”), creating the treaty establishing the first

Law Digest Winter 2016

permanent international criminal court capable of trying individuals accused of genocide, war crimes and crimes against humanity.

Sixty countries were required to bring the treaty into force. On April 11, 2002, the 60th ratification necessary to trigger the entry into force of the Rome Statute was deposited during a special ceremony at UN headquarters, and the treaty then entered into force on July 1, 2002.

In accordance with section 12 of the 1999 Constitution of the Federal Republic of Nigeria (the “1999 Constitution”), the National Assembly is supposed to enact a national law as a pre-condition to giving effect to any international Treaty before such a Treaty can become operative within the territory of Nigeria.

Nigeria signed the Rome Statute on June 1, 2000, and ratified it on September 27, 2001, becoming the 39th State Party. A Workshop on National Implementation of the Rome Statute was convened in Nigeria in November 2002. The Workshop resulted in a plan of action for the development of domestic implementing legislation.

The Federal Ministry of Justice sent an Executive Bill, entitled “The Rome Statute of the International Criminal Court (Ratification and Jurisdiction) Bill 2001” to the National Assembly for adoption (pursuant to Section 12 of the 1999 Constitution). On 1 June 2004, the House of Representatives passed its own version of the Bill. The Bill was re-submitted by the executive arm of government in 2003. On May 19, 2005, the Senate passed a legislation implementing the Rome Statute. The Bill was never signed into law by the then President.

The Rome Statute (Ratification and Jurisdiction) Bill, 2006 was passed by both Chambers of the National Assembly, but was not harmonised for assent by the President before the end of the last civilian administration in May

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2007. The Bill is to be re-submitted by the Ministry of Justice, which committed to re-submit the Bill as soon as possible during the 10th anniversary of the Rome Statute.

Nigeria recently joined the bandwagon of AU members who chose to obey the 2009 AU Resolution not to co-operate with ICC to arrest and surrender AlBashir should he visit their States.

Al-Bashir on the 15th of July 2010 attended the AU Summit on HIV/ AIDS, Tuberculosis and Other related Infectious Diseases (ORID) in Abuja and despite calls from the civil societies and international communities to arrest and surrender Al-Bashir to the ICC, Nigeria refused to do so but rather chose to abide by the AU Resolution.

The AU Assembly of Heads of State and Government decided inter-alia that “the…AU Member States shall not cooperate with the request by to ICC made pursuant to the provisions of Article 98 of the Rome Statute of the ICC relating to immunities, for the arrest and surrender of President Omar Al-Bashir of The Sudan to the ICC”.

For the avoidance of any doubt, the AU Assembly's decision was adopted at the 13th Ordinary Session of the Heads of State and Government in Sirte, Libya on 3rd July, 2009, as it concerns President al-Bashir of The Sudan.

January 2016-date As of November 2016, the countries that have withdrawn from the ICC include The Gambia, Burundi, South Africa, Kenya and Russia. The often cited reason for withdrawal of membership of ICC is that the ICC is an erosion of a country’s sovereignty, as it refuses to recognise the principle of immunity from prosecution that the national Constitutions and laws of most countries confers upon certain elected officials such as the President, Vice-President, Governors et all.

Nigeria’s position The management of counter insurgencies in Nigeria has generated much accusations of infringement of human rights, extra-judicial killings bordering on war crimes and not an insignificant number of complaints to the ICC. This

has brought the relationship between Nigeria and the ICC into sharp focus.

On Wednesday 13th April 2016, it was reported1 that Nigeria’s Minister of Justice and Attorney-General, Abubakar Malami during a meeting with the ICC delegation, expressed the Nigerian government’s commitment to upholding the highest standards of human rights, including during counter insurgency operations in the country.

In a statement issued by his Special Adviser on Media and Publicity, Salihu Isah, the minister assured the delegation that Nigeria has high value for its relationship with the ICC. The Attorney-General defended the conduct of the Nigerian Army in the North East of Nigeria. He was reported to have said that the Nigerian Army has conducted its operations in the North East region of the country in a highly professional manner, imbibing best practices in the areas of international human rights.

He said he was aware of the eight case files against Nigeria at the ICC, but he insisted that Nigeria has the prerogative rights in handling the alleged crimes referred to in the prosecutor’s 2015 report of activities in the country. He however solicited the support and understanding of ICC and the international community especially in regards to the conduct of the affairs of the Nigerian Armed Forces.

Responding, the leader of delegation, Mr. Phakiso Choko, said that the prosecutor did not intend to compromise the sovereign rights of Nigeria in investigating crimes and meting out punishment. He said that most cases referred to the ICC were the ones host nations were unable to resolve through internal mechanism.

Conflict between ICC Rules and National Laws As suggested by Mr. Phakiso Choko, the Rome Statute that established the ICC was never intended to usurp the role of national courts or the internal mechanism(s) and the national legal systems. This is supported by the provisions relating to the jurisdiction of the ICC as stipulated under Articles 5, 11 and 13 of the Rome Statute, which supports the contention that the

intention of the drafters was that the ICC would play a “complementary” role.

As Mr. Phakiso Choko succinctly put it, it is only when the internal mechanisms of Nigeria (and other national legal systems) have failed that “cases are referred to the ICC." Notwithstanding the above however, under the current legal regime, there are certain potential areas of conflict that arise between the Rome Statute establishing the ICC and the 1999 Constitution (as amended), particularly in relation to immunities granted under the 1999 Constitution.

It is arguable that Articles 27, 59 and 89 of the Rome Statute could involve constitutional questions for Nigeria when the State is obligated to surrender its national, irrespective of his rank or status at the ICC’s request.

This is because under section 308(1) and (3) of the 1999 Constitution, the President or Vice-President, Governor or Deputy-Governor of a State shall not be arrested or imprisoned, and no process of any court requiring or compelling the appearance of such persons shall be applied for or issued.

Under Section 308 (1) (a), no civil or criminal proceedings shall be instituted or continued against any of the persons mentioned above during his period of office. Under article 27 of the Rome Statute, a Head of State or other officials of Government who commits a crime within the jurisdiction of the ICC will lose his or her immunity and can be prosecuted by the ICC. The provisions of the Rome Statute are applicable to everyone regardless of any distinction based on official capacity.2 LESSONS FROM COMPARATIVE LAWFOREIGN JURISDICTIONS The question therefore is, can and should Nigeria remain a member of the ICC in view of the conflict between the Rome Statute and the 1999 Constitution and more generally, if it continues to differ the decision of the ICC vis a vis the arrest and surrender of Al-Bashir?

There are a broad spectrum of options and decisions on how to resolve the issues raised by national membership of the ICC. At one extreme, as a means

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of dealing with the above issues, as stated earlier, some African countries and Russia have recently taken the decision to withdraw their membership of the ICC. They have argued that in addition to the conflict sited above, the complimentary jurisdiction of the ICC is not only superfluous but unnecessary, as they have other relevant legislation which contain sufficient internal mechanism(s) to handle the crimes over which the ICC has jurisdiction.

At the other end of the spectrum are those advocating full compliance with the Rome Statute by amending the 1999 Constitution. This is the route adopted by countries such as France.

However, it must be noted that this option is based on the fact that France’s legal system is based on the MONIST model of international law which implies that rules of customary international law have almost an automatic direct application in France. This is not the same as in Nigeria.

Unlike France, Nigeria on the other hand is a DUALIST country wherein international law requires the enactment of a national legislation to give them effect.

A professor of international law has succinctly explained the procedure as follows: “Having ratified the Rome Statute of the International Criminal Court on 27th September 2001, Nigeria is automatically obliged to the Court, and the Statute operates in the future and does not apply retroactively. In the case of Nigeria under the 1999 National Constitution, a treaty is not Justiciable in our domestic courts unless it has been domesticated or incorporated into Nigerian Law or enacted into law by an Act of the National Assembly. On the authority of the African Reinsurance Corporation case (1986) 3NWLR pt.

31, p. 811. At 834 supported by a long line of English cases of the common law tradition, it would appear that a person may not be able to invoke the jurisdiction of a municipal court to directly enforce the provisions of the Rome Statute in Nigeria. Thus section 12 of the Nigerian Constitution provides as follows:(1) “No treaty between the Federation

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and any other country shall have the force of law except to the extent to which any such treaty has been enacted into law by the National Assembly.” (2) “The National Assembly may make laws for the Federation or any part thereof with respect to matters not included in the Exclusive Legislative list for the purpose of implementing a treaty.” (3) “A bill for an Act of the National Assembly passed pursuant to the provisions of subsection (2) of this section shall not be presented to the president for assent, and shall not be enacted unless it is ratified by a majority of all the Houses of Assembly in the Federation.

The domestication process in Nigeria therefore, requires the provisions of the Rome Statute of the ICC to be enacted into law by the instrumentality of the Rome Statute of the International Criminal court (Ratification and Enforcement) Act, of a particular No., and of a given year.

This is subject to the requirements of subsections (2) and (3) of section 12 of the constitution. This was the method adopted in enacting into law by the National Assembly in 1983 of the African Charter on Human and Peoples’ Rights as Cap. A.9 Laws of the Federation of Nigeria 2004. Consistent with the subject matter of jurisdiction of the Rome Statute of the ICC, Nigeria has equally ratified and domesticated the relevant provisions of the Geneva Convention of 1949 as part of Nigerian Law: - Cap. G.3, Vol.7 Laws of the Federation 2004” 3 Conclusion and Recommendation This writer recommends a middle of the road approach on this issue. Although, Article 120 of the Rome Statute specifically prohibits the entering of reservation by State Parties, Nigeria could make a belated case for entering a reservation to the portions of the Rome Statute that violates section 308 of the 1999 Constitution (as amended).

The relevant legal steps to achieve this are specified under VIENNA CONVENTION ON LAW OF TREATIES, 1969. It requires “denouncing” the Treaty and later entering a reservation upon re-ratification subject to the approval of the UN Security Council.

After Nigeria has completed that first

step, Nigeria could achieve its ultimate goal of re-ratifying a modified Rome Statute that is consistent with the provisions of the 1999 Constitution (as amended).

However, it should be borne in mind that in fact, under the Rome Statute establishing the ICC, it is not a requirement that a country must sign and ratify the Treaty before it could apply to its citizens. The Security Council of the UN could refer an official of any government for investigation and prosecution. This is exact case of the then President of The Sudan in the year 2009. At that time The Sudan was not a signatory to the Rome Statute neither had they ratified the Rome Statute, yet a UN Security Council Resolution was sufficient for the ICC to investigate and issue an arrest warrant against him. Consequently, withdrawal of Nigeria’s membership of the ICC would be nothing more than a hollow victory, as the persons immune under the 1999 Constitution would still be subject to the jurisdiction of the ICC. It could also be argued that the benefit of Nigeria’s membership of the ICC far outweighs any real or imagined benefit(s) of withdrawal of membership.

The ICC holds the potential of acting as an independent arbiter for the alleged war crimes or crimes against humanity that result from conflicts amongst the multi-ethnic groups that make up Nigeria.

The majority of the eight (8) cases that were preferred against Nigeria at the ICC borders on allegations of genocide against the Igbo ethnic group in the South Eastern part of Nigeria who are agitating for creation of an independent state of Biafra just to mention a few.

Chukwuemeka Eze, “Nigeria’s Obligation under the Rome Statute in THE NATION newspaper, August 6, 2013, 2 Muhammed Tawfiq Ladan, AN OVERVIEW OF THE ROME STATUTE OF THE INTERNATIONAL CRIMINAL COURT: JURISDICTION AND COMPLEMENTARITY PRINCIPLE AND ISSUES IN DOMESTIC IMPLEMENTATION IN NIGERIA in Afe Babalola University: Journal of Sustainable Development Law and Policy Vol. 1 Iss. 1 (2013) pp. 37-53 at p.50 3 Supra at p.46 1

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2ND ANNUAL LAW DIGEST AFRICA AWARDS 2016,ORIENTAL HOTEL, LAGOS, NIGERIA

Jackson Etti & Edu -

Africa’s IP and Technology Firm of the Year.

Ayo Awe -

Stephenson Harwood LLP

Olumide Akpata Templars

Segun Osuntokun

Berwin Leighton Paisner and one of the Award judges

Priscilla Ogwemoh

Africa’s Female Managing Partner of the Year 2016

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L-R: Ngozi Okonkwo – General Counsel – Oando plc and Cecelia Madueke – General Counsel/Company Secretary – Julius Berger Nigeria Limited

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L-R: Defolu Olufon – General Counsel – First E&P and Oladotun Alokolaro - Advocaat

Isobel Boaten AB & David

Bebe Clement -

Business Development Director Law Digest

Mr. Yinka Soyombo - Yinka Soyombo Legal and Mrs. Yinka Soyombo - DG Lagos State, Ministry of Education

Mr & Mrs Okonkwo

Ajumogobia & Okeke

Africa’s Litigation and Dispute Resolution Firm of the Year 2016

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L-R: Kamal Shah, Babatunde Fagbohunlu, SAN and Andrew Ohanjo – Head Counsel – NLNG

Osarieme Edokpolo

L-R: Kamal Shah, Bebe Clement and Seyi Clement

Chief Bayo Ojo, CON, SAN, FCIArb and one of the award judges

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TNP

Africa’s Capital Market Firm of the Year 2016

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Templars

Africa’s Banking an Finance Firm of the Year 2016 and Africa’s Power, Energy and Natural Resources Firm of the Year 2016

L-R: Promise Nadubuobu and

Nneoma Mbelede

Aluko & Oyebode

Africa’s Property, Infrastructure and Construction Firm of the Year 2016

L-R Bebe Clement and

Justice Wale Abiru the Court of Appeal

L-R: Osarieme Edokpolo and Olumide Obayemi

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4TH INTERNATIONAL LITIGATION AND ASSET RECOVERY FORUM 2016, CIVIC CENTRE, LAGOS, NIGERIA

Professor Konyin Ajayi, SAN Session Chair

Bebe Clement

Business Development Director Law Digest

Chacha Odera

Oraro & Co (Kenya)

Jonathan Tickner

Peters and Peters (UK)

Chief Bayo Ojo, CON, SAN, FCIArb Session Chair

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Delegates

Emma Ruanne

Peters and Peters (UK)

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Babatunde Ajibade, SAN L-R Kamal Shah and

Chacha Odera Babatunde Fagbohunlu, SAN

Yomi Okunnu

Yomi Okunnu & Associates

Funke Adekoya, SAN

Titilola Akinlawon, SAN

Delegates

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L-R: Seyi Clement and

Yomi Okunnu

Chief Godwin Obla, SAN, FCIArb Q&A session

Panel of discussants

Babatunde Ogungbamila Olisa Agbakoba Legal

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Panel of discussants

L-R: Kamal Shah, Ayo Awe and

Jonathan Tickner

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Law Digest Winter 2016

Law Digest Spring 2016

TOP DEALS W I N T E R

2 0 1 7

It is all about Aluko & Oyebode. The indomitable giant of Nigeria dominates the deal chart for this issue. Aluko & Oyebode is one of the largest integrated law firms in Nigeria providing a comprehensive range of specialist legal services to a highly diversified clientele including top-tier Nigerian, international and multinational clients. The Firm’s is consistently ranked as a leading commercial law firm in Nigeria for Banking, Finance, & Restructurings, Energy and Natural Resources, Mergers & Acquisitions, and Capital Markets. The Firm has its offices in Lagos, Abuja, and Port Harcourt.

Established in January 1993, the Firm has 16 Partners and 60 Senior Associates/ Associates, with varied areas of expertise and combined experience that spans several decades in all areas of Nigerian law. The Firm was named Law Digest Africa Law Firm of the Year 2015 and Law Digest Africa Real Estate, Construction and Infrastructure Firm of the Year 2016.

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 DEC 2016 – 31TH MARCH 2017 TO REACH US BY 15TH APRIL 2017.

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 editor@nglawdigest.com

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and negotiating the Transaction Documents; collating and reviewing conditions precedent in relation to the restructuring; and filing and perfecting of the Transaction Documents.

The Firm is coordinating the CP collation process along with international counsel (Linklaters LLP) and will provide a closing legal opinion to provide comfort to the lenders and DFIs.

Kofo Dosekun

Syndicated Loan Firm: Firm: Aluko & Oyebode (Nigeria) Deal Value: US$1,970,000,000.00 (One Billion, Nine Hundred and Seventy Million United States Dollars Only) Team Lead: Kofo Dosekun Transaction Team: Oludare Senbore, Funmilayo Otsemobor, Omonigho Erhonsele, Naomi Amobi, and Ademola Fashola Clients: A syndicate of Nigerian Commercial Banks, the Africa Finance Corporation and Shell Western Supply and Trading Company Borrower’s Counsel: Detail Commercial Solicitors, and Sefton Fross.

International Lender’s Counsel: Linklaters LLP In May 2014, Aluko & Oyebode (“the Firm”) was appointed as counsel to the Lenders in connection with the provision of a US$2 billion loan comprising a US$1.488 billion senior facility to the Aiteo Eastern E & P Company Limited (the “Borrower“) as well as an offshore of US$512 Million tranche provided by Shell Western Trading and Supply Limited for the acquisition of OML 29 and Nembe Creek Trunkline (the “Assets”). This transaction remains the largest ever oil and gas asset divestment, in terms of value, in Nigeria.

Following the sharp fall in oil prices, oil theft, and pipeline vandalism in the Niger Delta, as well as a rising demand for shale oil, a number of restructurings were trigged within the oil & gas sector as companies in the sector experienced declining revenues and were forced to operate in difficult economic conditions.

The Firm was appointed

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as counsel to the Lenders in connection with the restructuring of the outstanding amount under the US$2 billion loan facilities granted to the Borrower to fund the acquisition of the Assets (the “Transaction”). The Firm was charged with reviewing the covenants and obligations under the onshore finance documents to ensure that the interests of the Lenders were adequately protected, with consideration to the tough operating environment for the Borrower. The Firm also ensured that the amendments made to the facility agreement, and other onshore finance documents did not upset the existing security package/arrangements.

Specifically, the scope of work undertaken by the Firm in connection with the Transaction includes conducting limited due diligence on the Borrower, advising on the terms and structure of the transaction; drafting, reviewing

Ayodeji Oyetunde

Eurobond – HIS Netherlands Holdco B.V Firm: Aluko & Oyebode Value of Transaction: US$800,000,000 (Eight Hundred Million United States Dollars Only) Client: Joint Lead Managers, Citibank Global Markets Limited, Goldman Sachs International and Standard Chartered Bank Team Lead: Ayodeji Oyetunde Transaction Team: Jennifer Martins-Okundia, Abisayo Olawale-Cole and Lotanna Nwodo.

International Lender’s Counsel: Latham & Watkins (London)LLP and Nauta Dutilh N.V. Borrower’s Counsel: White & Casae LLP, Templars and Stibbe N.V. The Firm acted as Nigerian Legal Counsel to the Joint Lead Managers, Citibank Global Markets Limited, Goldman Sachs International and Standard Chartered Bank in connection with the US$800 Million Eurobond issuance by IHS Netherlands Holdco B.V., the holding company of IHS Nigeria Limited, which is the largest mobile telecommunications infrastructure provider in Africa.

The Notes issued were guaranteed by IHS Nigeria Limited, IHS Towers NG Limited (formerly Helios Towers Nigeria Limited) and Towers Infrastructure Company Limited and the proceeds of the bonds will be used to repay existing debt

obligations of IHS Nigeria Limited and IHS Towers NG Limited.

The transaction also incorporates the tender of the outstanding US$250 Million bond issued by IHS Towers Netherlands FinCo NG B.V. (formerly known as Helios Towers Finance Netherlands B.V.) which was acquired through the Helios Towers Nigeria Limited acquisition that was completed in June 2016.

This dynamic transaction is the largest high yield corporate bond ever issued in Africa and represents one of only two Eurobond transactions involving Nigerian corporates in 2016, despite the country’s current economic challenges.

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Law Digest Winter 2016

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