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LAW

Digest The Nigerian Lawyers’ Journal

Winter 2012

SAN-

Outdated and Unnecessary? The court’s jurisdiction to enforce awards annulled at seat The Petroleum Industry Bill - An Overview Accessing declaration of assets of public office holders - Legal Obstacles

Lawyer in the News

Okey Wali SAN-President NBA speaks exclusively to the Law Digest 1

UK: £3.50 US: $5.50 Nigeria: ₦1,000 www.nglawdigest.com


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RMC2012.162


Contents PUBLISHER

DISTRIBUTOR

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

Ellicon Limited 34 Bishop Street Surulere, Lagos, Nigeria Tel: +234 803 335 4065

EDITOR Seyi Clement editor@nglawdigest.com

DEPUTY EDITOR

Lulu Sianga lsianga@nglawdigest.com

CORRESPONDENTS North America Ifeoma Uche rauze@yahoo.com

Middle East John Adetiba johnadetiba@yahoo.com

Nigeria Yinka Olojede-James linksj1@hotmail.com Ranti Thomas lawthomas81@yahoo.co.uk Adijat Ayobami kdjbukky@yahoo.com

SUBSCRIPTIONS, ADVERTISING AND EVENTS Ruby Sehra sales@nglawdigest.com

Legal Advisors

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

DESIGN AND LAYOUT Re-Root Designs www.rerootdesigns.com

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.

21 LAWYER IN THE NEWS “Okey Wali SAN speaks exclusively to the Law Digest on his plans for the NBA, the relationship between the NBA, the various arms of Government and other international Regulators of legal practitioners. He also talks about the challenges facing the NBA and the liberalisation of the legal services market” COVER STORY 9. SAN, outdated and unnecessary?

LAWYER IN THE NEWS 21. Exclusive Interview: Okey Wali SAN.

Governance & Compliance 25. Who is entitled to Legal Professional Privilege? Noble Akzo’s revisited. 28. Role of in-house counsel in promoting compliance culture. 31. Review of the Revised Code of Corporate Governance in Nigeria.

PUBLIC LAW 5. Fight against corruption and financial crime in Nigeria. REGULATIONS Journey so far and challenges 35. Insolvency practice in 7. Accessing declaration of Nigeria – Time for regulation. assets of public office 38. Cyber Security and Cyber holders – Legal obstacles. Crime – Legal issues and challenges. ARBITRATION 41. Cashless Payment System – 14. Role of the court in the Adequacy of safeguards. arbitration process. 44. Petroleum Industry Bill 17. Court’s jurisdiction to enforce (PIB) – An Overview. awards annulled at seat. 19. Role of the Arbitrator – BUSINESS DEVELOPMENT Abuja International Hotels 48. Developing a viable brand. Ltd v Meridien SAS revisited.

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From the EDITOR Dear Colleagues,

W

elcome to the inaugural issue of the Law Digest. The Digest is the first magazine of its kind aimed at Nigerian lawyers both at home and abroad. We aim to inform and assist in the sharing of knowledge and best practice within this community and we hope you will judge us on these aims. In this issue, we examine the perennial issue that wouldn’t go away, the honourary award of Senior Advocates of Nigeria (SAN). With 25 new SAN sworn in this year, the questions still persist, is the institution relevant in today’s legal system? Can the institution continue in its present format? We would like to offer up the Law Digest as the platform for debates such as this; hence we encourage you to get involved by sharing your views with us. We have also established the “Lawyer in the News” section to highlight Legal Practitioners (LPs) who have recently made an outstanding public contribution to the community in general and espouse the high standards of our profession in particular. Selection will be based on nominations from you, our readers. You can nominate your “Lawyer in the News” by writing to me at editior@nglawdigest.com or visit our website www.nglawdigest.com to make your nominations. We are pleased to announce that our “Lawyer in the News” for this issue is none other than the eminent jurist, public servant and President of the Nigerian Bar Association, Okey Wali SAN. We invite you to see Mr. Wali SAN as you have never seen him before. His passion for the profession and the Association is

Law Digest - Expanding Minds

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palpable. His knowledge of issues confronting the profession and the Association is remarkable and his humility, infectious. As part of our objective to assist in the sharing of knowledge and best practice, we publish peer reviewed articles of professional and academic interest. We would like to thank our contributors for their support and patience. We invite LPs to submit articles for publication. Visit our website to review the guideline for contributors. We have established an Editorial Board comprising of eminent jurists to review and approve articles for publication. To ensure that you do not miss out on news affecting the community, we have a network of correspondents in the major cities across the global from London to New York, reporting on issues affecting our community. If you have been instructed on a deal which you want to share with this community, or if you have being promoted, moved or set up in practice, let us know. We hope that you will enjoy this issue of the Law Digest and we welcome your contributions, comments, criticism and support.

Seyi Clement Publisher/Editor


PUBLIC LAW Kemi Pinheiro & Co, Nigeria

Fight Against Corruption and Economic Crimes in Nigeria – Journey so far and the challenges

Kemi Pinheiro, SAN, FCIArb Managing Partner

“The judiciary has also granted bail on questionable terms, which has most often led to the fleeing of the accused person”

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he Corrupt Practices and Other Related Offences Act 2000 Act No.5 (the “CPORO Act”) was the first serious commitment to fighting corruption in Nigeria. In summary, this Act goes beyond criminalising corruption and related offences as under section 6 (f), it imposes an obligation on the Independent Corrupt Practices and Other Related Offences Commission (the “ICPC”) to educate the public on and against bribery, corruption and related offences and to enlist and foster public support in combating corruption. Unfortunately, the CPORO Act has not achieved much success in its fight against corruption. The former Chairman of the ICPC, Justice Ayoola, had during his tenure accused the judiciary as the bottle-neck to the fight against corruption. He pointed to section 40 of the Economic and Financial Crimes Commission Act, 2009 (the “EFCC Act”) which forbids the entertaining of any application for stay of proceedings in any criminal matter brought by the Economic and Financial Crimes Commission (the “EFCC”). He contended that the absence of a similar provision in the CPORO Act has impeded the ability of the ICPC to prosecute successfully, as courts have granted various manners of injunctions and stay of proceedings in cases brought by the ICPC. The EFCC Act seems to have had a greater level of success. The Money Laundering (Prohibition) Act, 2011(the “MLPA 2011”) makes various provisions prohibiting the laundering of the proceeds of a crime or of any criminal or illegal activity and provides for appropriate penalties for money laundering. Though this Act appear to be effective in combating money-laundering crimes, it is itself faced with challenges. Prior to the MLPA 2011, a major defect existed in the Money Laundering (Prohibition) Act, 2004 (the “MLPA 2004”) which manifested itself in FGN v Ibori FHC/ASB/1C/2009 before Hon. Justice Awokulehin of the Federal High Court, Asaba Division. Section 14 (1) (a) & (b) of the MPLA 2004 provides: “(1) Any person who – (a) converts or transfers resources or properties derived directly or indirectly

Law Digest Winter 2012

from illicit traffic in narcotic drugs and psychotropic substances or any other crimes or illegal act, with the aim of either concealing or disguising the illicit origin of the resources or property or aiding any person involved in the illicit traffic in narcotic drugs or psychotropic substances or any other crime or illegal act to evade the illegal consequences of his action or (b) collaborates in concealing or disguising the genuine nature, origin, location disposition, movement or ownership of the resources property or right thereto derived directly or indirectly from illicit traffic in narcotic drugs or psychotropic substances or any other crime or illegal act” The court in interpreting this section applied the ejusdem generis rule of statutory interpretation and held that “any other crime or illegal act” referred to in this section referred to monies or other pecuniary benefits derived from offences traceable to narcotic drugs and psychotropic substances. We are of the firm view that if his Lordship in FGN vs. Ibori had averted his mind to Section 14 of the Money Laundering Act, 1995 (the “MLA 1995”) vis-à-vis section 14 of the MLPA 2004 the court would have held otherwise. These two sections are impari material save for the inclusion of the words ‘illegal act or crime’ in the MLPA 2004. The inclusion of illegal act or crime in MLPA 2004 in our view was not only to enlarge the regulatory framework, but also the activities that would come within the scope of the enactment. The law is settled that in interpreting a particular section of any statute, the court must read the statute as a whole and not read particular sections in isolation. See Orakul Resources v N. C. C. 2007 (Pt. 1060) 16 NWLR at 146. With much deference to his Lordship in the case under reference, the interpretation of section 14(1) (a) of the MLPA 2004 with the aid of the ejusdem generis rule restricted the definition of ‘any other crime or illegal act’ and thus amounted to a gross misconception of the law. The adoption of the ejusdem generis rule created an absurdity as no new activity could come under the MLPA 2004 that was already an activity contemplated

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Law Digest Winter 2012

as an offence under the MLA 1995, thus rendering the entire amendment process a futility. As an alternative, the court ought to have adopted the mischief rule of interpretation and asked itself, “what was the mischief the legislators intended to eradicate by the 2004 amendment?” It is our view that the term, ‘any other crime or illegal act’ ought to include all forms of money laundering activities however connected with illegal acts beyond laundering of drug proceeds and psychotropic substances. An application of this rule will reveal the true intention and permit the construction of section 14(1) of the MLPA 2004 in order to reflect that objective. Mention should also be made of the Advance Fee Fraud and Other related Offences Act 2006. This Act is commended for its stiffer penalties compared to the EFCC Act and the MLPA 2004. This Act was enacted primarily to ‘prohibit and punish offences pertaining to Advance Fee Fraud and Other Related Offences’. The law further vests responsibility for checking advance fee fraud on the major players in the industry, which include internet service providers, telecom providers, cybercafé owners/ operators e.t.c., with the EFCC merely serving as a sector regulator. A major challenge to this Act is whether these industry players are willing to assist the EFCC to check and curb financial crimes, sometimes to the detriment of their own businesses. THE CHALLENGES A major problem for the anti-corruption crusade in modern day Nigeria is the acceptance of corruption by the populace. Another problem, with much deference to the judiciary, is that on several occasions, judges have granted ‘questionable orders’. Some spurious court orders, which are still in existence, were granted a few years ago to stop the trial of some exgovernors for corruption. The basis of such orders are difficult to explain. The judiciary has also granted bail on questionable terms, which has most

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often led to the fleeing of the accused person. An example is the case of James Ibori who was granted bail only to flee to Dubai. His trial in Nigeria has been frustrated. Several other charges have been prematurely quashed in questionable circumstances by the judiciary not withstanding very glaring evidence against the accused. Our criminal justice administration needs urgent reforms while our judges must also be mindful of granting frivolous applications especially where brought ex parte. Lack of political will can be said to be another problem which has affected the fight against corruption in Nigeria. Transparency International stated in 2010 that the fight against corruption in Nigeria was not working because of the insincerity of government. The issue of insecurity of informants and witnesses is another impediment to the fight against corruption in Nigeria. In the case of Federal Republic of Nigeria v Bode George Charge NO: ID/71c/2008, the prosecution counsel, Festus Keyamo raised in the open court, the challenge of the safety of the prosecution witnesses. The above are the collective problems and challenges, which have remained a clog in the wheel of the anti-corruption crusade in Nigeria. What then is our hope for the future? In view of the analysis proffered above, it is clear that a lot still needs

to be done in respect of the anticorruption crusade in Nigeria and the following should be given serious consideration: a. The need to pass the Special Courts (Establishment) Bill as well as the Non-Conviction Based Asset Recovery Bill which is in full conformity with the United Nations Convention Against Corruption to which Nigeria is a party; b. New laws proscribing the grant of interlocutory orders in addition to those that proscribe stay proceedings; c. Laws that incorporate provisions placing the burden of proof on accused persons in matters of economic and financial crimes subject to there being reasonable grounds to suspect that an offender is living off the proceeds of crime. Section 7(1) of the EFCC Act 2009 ought to be so interpreted; d. Stiffer penalties aimed at deterring would-be givers and takers of bribes given the lack thereof in the current various statutes; e. Funding anti-corruption commissions should be from the Consolidated Revenue Fund rather than the Executive cap. It is disheartening that the EFCC is funded from the office of the Accountant-General.


PUBLIC LAW Lekan Oladapo & Co, Abuja

Accessing declaration of assets of public office holdersLegal Obstacles Lekan Oladapo LLB (Ife) BL,

“we submit that access cannot be barred on the grounds of the Official Secret Act 2004 due to overriding public interests and fair hearing test”

F

ollowing a presidential interview conducted in June 2012, the President let it slip that he does not believe that he is obliged to make known his assets publicly. Following this incident, there have been divergent opinions on whether the President is under any legal obligation to declare his assets publicly. In this article, we consider the legal framework for the public to access declarations by public officers. The Code of Conduct Bureau and Tribunal Act (the “CCBTA 1990”) is designed as a tool for holding public office holders accountable. Therefore, the government set up the Code of Conduct Bureau (the “CCB” or “Bureau”) whose functions are provided for in the Fifth Schedule of 1979 Constitution particularly, Paragraph 15 (1) sub paragraphs (a) – (d) of the Constitution which are substantially in conformity with the 1999 Constitution as follows: (a) “to receive declarations by public officers made under Paragraph 11 of this Schedule; (b) to retain custody of such declarations and make them available for inspection by any citizen of Nigeria on such terms and conditions as the National Assembly may prescribe; (c) to examine the declarations and ensure that they comply with the requirements of this Code and of any law for the time being in force; and (d) to receive complaints about non - compliance with or breach of this Code and where it considers it necessary to do so, to refer such complaints, unless the person concerned make a written admission for such admission of such breach of non – compliance, to the Code of Conduct Tribunal”. The same provisions are provided for in the Third Schedule, Part I paragraph 3 (a) – (e) of 1999 Constitution. Therefore Sub – Paragraph (b) of Paragraph 15 Part I of 5th Schedule of 1979 and 3 (c) Part I of Third Schedule of 1999 Constitutions makes declarations discloseable to members of the public upon terms and conditions to be

Law Digest Winter 2012

specified by the National Assembly. Note that the reproduction of the exact words of 1979 Constitution, in 1999 Constitution gave credence to the seriousness the lawmakers attached to it. In essence, the Bureau is obliged to grant public access to declarations in its custody subject to the terms and conditions set out by the National Assembly. The CCBTA 1990 also provides for the CCB to receive complaints of breaches of the Code from the public and to refer such to the Tribunal for adjudication. Before the advent of the Freedom of Information Act 2011 (the “FOIA 2011”), the Bureau argued that the National Assembly had not set out guidelines for the granting of access to declarations of the public officers, as justification for barring access. Even after the promulgation of the bill into law, the same argument persists that the proviso, unless acted upon by the National Assembly, constitutes a ground upon which the Bureau will deny a request for access. This argument is predicated on the provision of Third Schedule, Part I paragraph 3 (b) of 1999 Constitution which provides as follows: to retain custody of such declarations and make them available for inspection by any citizen of Nigeria on such terms and conditions as the National Assembly may prescribe”. The Official Secret Act 2004 (the “OSA 2004”) has also been cited as the justification for non-disclosure. An examination of the CCBTA 1990 and the 1979 and 1999 Constitutions would suggest that the position of the Bureau is unsustainable for the following reasons: 1. Looking at the Act itself, and the mischief that the Act was enacted to cure, all point to the fact that public access to declarations should be unhindered. It is therefore instructive to have a community reading of the Act. For example Part 1 Section 2 of CCBTA 1990 provides as follows “… to establish and maintain a standard of morality in the conduct of government business and to ensure that the actions and behavior of public officers conform to the highest standards of public morality and accountability”. In ensuring that the purpose of the Act cited above is achieved, the proviso cannot be a

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bar to public access. It is also noted that the word ‘may’ as used in the sub paragraph (b) is not mandatory. Moreover, the function of the Bureau becomes otiose if the public cannot access the declarations. The provision of Third Schedule, Part I Paragraph 3 (d) of 1999 Constitution, which empowers the Bureau to receive complaints from the members of the public also becomes ineffective. As the law cannot be made in vacuo, then it follows that the proviso barring access to declarations is merely directive and not mandatory. 2. Furthermore, we submit that access cannot be barred on the grounds of the OSA 2004 due to overriding public interests and fair hearing test. It is of relevance here, that declarations are not ‘classified’ information for this purpose. Section 9 of the OSA 2004 defines ‘classified’ “as any information or thing which under any system of security classification, from time to time, in use by or by any branch of government, is not to be disclosed to the public and of which the disclosure to the public would be prejudicial to the security of Nigeria.” Even if such information is regarded as classified or privileged, the court in a number of cases on the grounds of public interest and fair hearing, have pronounced such information discloseable. In the case of United States V. Nixon 418 U.S 683 (1974), the Supreme Court of United States rejected the claim of executive privilege made by former President Nixon for the ‘Watergate Tapes’. It held that the special motion

by the prosecution to subpoena the recordings of presidential discussions for use in criminal proceedings could not be rejected by the general assertion that a president’s communication must be made in confidence. In the case of A.C Western Nigeria v. African Press and another (1965) NSCC 10, a case on invocation of privilege by the DPP, the Supreme Court held that such would be fatal to the case of the prosecution based on Section 22(3) of 1963 Constitution (which is now Section 36 (4) of 1999 Constitution). It further held that that the injustice

Act, the court could adopt a liberal approach in the interpretation of the clauses restricting the access to information, as demonstrated above. 3. The FOIA particularly section 12 (1) (v) and section 12 (2) settle whatever difficulty arising from the proviso under Part I of Paragraph 3 (c) Third Schedule of the 1999 Constitution and the OSA. The preamble of the FOIA 2011 shows the intention of the legislature and complements the proviso of the CCBTA 1990. It is also arguable that the FOIA 2011 provisions can be construed as the “terms and conditions” envisaged by the CCBTA 1990, in as much as it is an Act of the National Assembly. Whilst it is accepted that a community reading of the Evidence Act 2011, OSA 2004 and FOI 2011 would suggest that certain classes of information cannot be freely accessed on the ground of security, public interest and privilege, we submit that declaration of private assets and liabilities of those in public office required under provision of Part 1 Paragraph 11(1) of the Fifth Schedule of the 1999 Constitution does not fall into any of these classes of information. Therefore, neither the proviso in the CCBTA 1990 nor the OSA 2004 can be used as bar to public access. However in view of the ambiguity in the drafting of the CCBTA 1990 with regards to the free access to declarations, it might be necessary for the National Assembly to amend this provision for the sake of clarity.

“In essence, the Code of Conduct Bureau is obliged to grant public access to declarations in its custody subject to the terms and conditions set out by the National Assembly.”

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that would be caused by such invocation of executive privilege would override it. Although the Evidence Act 2011 lists categories of Privileged Communication, the peculiarity of Sections 167 and 168 of this Act is that it protects public officers from the unauthorised disclosure of some special information. This is often invoked to protect the public officers when particular information is considered sensitive and if it is considered prejudicial to the affairs of the state. However, notwithstanding the statutory provisions of both the Evidence Act and the Official Secret


Law Digest Winter 2012

COVER STORY

Two distigushed SAN at the Supreme Court of Nigeria

SAN –

Outdated and Unnecessary? picture courtesy of Ludlows. www.ludlows.com.au

Written by Ranti Thomas and Seyi Clement

C

ontroversy has continued to dog the award of one of the most prestigious honours in the Nigerian legal profession, the Senior Advocate of Nigeria (“SAN”). Each year that the list of SAN is released by the Legal Practitioners Privileges Committee (the “LPPC”), it is greeted with criticism and derision in some quarters. The SAN title is conferred on a lawyer who has practised in Nigeria for not less than 10 years and who meets certain requirements and has distinguished him or herself in the profession. Thus, in terms of the requirements, SAN are honourable, experienced and distinguished members of the profession. The qualification requirements are almost identical to those required for appointment as Queen’s Counsel (QC)

in the United Kingdom from whence it originated. They are entitled to wear silk gowns and enjoy similar privileges as the QC. However, the on-going controversy, particularly regarding the process and choice of the awardees, may have detracted from the essence of the position. This award has created a divide among lawyers in Nigeria. On the one hand are those pushing for outright abolition of the title, while on the other hand are those insisting that the status quo be maintained. One thing is certain, no lawyer is without an opinion on this subject and rightly so too. Abolitionists argue that a cursory look at the list of new SAN shows that not all deserve the accolade. They argue that the list suggests a preponderance of lawyers with ‘connections with the right people’ in the top echelon of the legal profession or lawyers related to serving or retired judges. They also point to various unprofessional conduct employed by some lawyers in order to meet the criteria for the award. It has been suggested that some lawyers are taking matters to the Supreme Court without instructions from or knowledge of their clients. Two cases are usually cited in Nigeria to demonstrate the fault in the award process. First is that of the late Chief Gani Fawehinmi who is said to have been denied the award for so long until the issue became an embarrassment to the legal profession. Notwithstanding the fact that his weekly law report became a reputable reference for lawyers and judges, the LPPC continually refused to give him the award. At one time, Chief Fawehinmi also stopped applying. Eventually, it is said that following the intervention of a Supreme Court Judge, Chief Fawehinwi was awarded the honour. The case of the human rights activist Femi Falana, is also cited by the Abolitionists as evidence of the faulty process. Ironically, Femi Falana is not an Abolitionist, rather like many senior members of the profession,

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he suggests that the process of conferring the SAN needs reform. He argues that by giving the award to all that merit it would eliminate abuses. For many Abolitionists, the system is beyond reform and the feeling amongst this group is very strong. Tunji Gomez, one of the leading members of the Abolitionists had earlier filed a suit in the Federal High Court, Ikoyi, Lagos, arguing for the abolition of the honour. According to Mr. Adebisi Iyaniwura, former Social Secretary of the Lagos Branch of the National Bar Association (the “NBA”), “there is no doubt that merit should be celebrated and hard work encouraged. But, it seems that the present manner of deciding who the Silk is conferred on in the legal profession in Nigeria leaves much to be desired. The use of quota system in prequalification is an irony in a system supposedly designed to recognize and appreciate merit.” He argues that the use of the number of cases argued in the Court of Appeal and the Supreme Court without consideration for the quality of those arguments and their outcome encourages ‘ambulance chasing’ and corrupt practices in the profession. He said this has created a perverse situation where lawyers pay clients and colleagues to get matters before those courts. The position of the LPPC has however been that the system is robust enough and does not require any amendments. The LPPC has confirmed that the accolade is not necessarily awarded to the best lawyer. The LPPC pointed out that the criteria for selection is not based only on proficiency in the law or advocacy. They argue that as the

honour is designed to honour members of an honourable profession, the conduct of the lawyer is just as important as their knowledge of the law or advocacy skills. The position of the NBA on the issue is clear. The present NBA President, Okey Wali SAN said the SAN title should not be eradicated. Oke Wali noted that the title has not lost its respect and dignity just because of the increasing number of people obtaining it. He opined that the award may be the victim of its own success. He argued that as more legal practitioners receive the honour, the aura around it diminishes – that it is a natural process and not one to cause alarm. He said that initially, the whole of Nigeria had only two SAN – the late Chief Rotimi Williams and the late Chief Graham Douglas and that as the number of SAN increased, over time the aura too began to diminish. He also argued that contrary to popular belief, the requirements for the appointment of SAN are getting more difficult. He explained that initially, one only needed to have had one matter before the Supreme Court to meet the criteria for becoming a SAN. Today, he added, one needs to have had at least six. This he believes, flies in the face of the argument by the Abolitionists that the quality of SAN has deteriorated. The growing level of dissatisfaction over the institution has caused some senior members of the Bar to voice their support for an improvement to the system. Mr Olawale Akoni SAN of Wale Babalakin Chambers explained that there are a lot of perception issues on the matter of the award. He said, “It is a misconception that some people who do not deserve the award get it. As I always say, there are bad

“The divide between those who insist on the sanctity of the Senior Advocate of Nigeria, ‘SAN’ title in Nigeria’s legal profession and those calling for its scrapping is increasing. How this is managed remains to be seen”

“contrary to popular belief, the requirements for the appointment of SAN are getting more difficult” Okey Wali SAN

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lawyers and there are good lawyers; there are bad doctors and good doctors; there are good teachers and bad teachers; there are good judges and there are bad judges; there are good governors and there are bad governors. If you can point out one or two SAN who have badly misbehaved or who have any issues, that does not justify casting aspersions on the entire rank.” Mr. Akoni offered another perspective to the issue. He explained, “the award of SAN is the beginning of another phase in a lawyer’s career. I believe it is from the rank of SAN that High Court judges should be appointed. So, if you have a larger number, there Wale Akoni SAN will be a larger pool of highly qualified and distinguished barristers who have excelled and are now going on to the Bench. That will be a lot better and you will find out that a lot of SAN go on to the Bench, and the rest who are practising will still be of very high quality.” Mr. Akoni, however, did not dismiss the need for reform in the process of the appointment of SAN, adding, “reforms are a natural part of life. Every system that we have needs to be reformed as we go along”. He advised that nothing stops the LPPC from looking at the system again with a view to making improvements, but rejects the accusation that the system is irredeemable. As with the institution of the SAN, the institution of the QC in England, Wales, Scotland and North Ireland has been the subject of much debate from which it has probably benefitted. The debate in England was just as heated to the extent that the appointment of new Queen’s Counsel was suspended in 2003, and it was widely expected that the system would be abolished. However, a vigorous campaign was mounted in defence of the system, including those who supported it as an independent indication of excellence valued by outsiders (especially foreign commercial litigants) (see “Building on Strength: The response of the Commercial Bar Association”, The Commercial Bar Association (London, 2003) and “Letter from the Lord Mayor of the City of London” Alderman Gavyn Arthur, 5 November 2003). Others further contended that the institution of QC was a means by which most able barristers from ethnic minorities could overcome prejudice. They argued that “the hopes of a rising cohort of black and Asian practitioners would be dashed at a stroke by the abolition of silk, and a huge opportunity to promote diversity in the legal profession and on the bench would be missed” (see Courtenay Griffiths; Linda Dobbs, Oba Nsugbe, ‘Barristers from ethnic minorities’ Letters

“It is a misconception that some people who do not deserve the award get it”

Cover Story Law Digest Winter 2012

to the Editor The Times (London, 3 November 2003). The Government’s focus then switched from abolition to reform and, in particular, reform of the much-criticised “secret soundings” of senior judges and other prominent legal figures upon which the old system was based and which was said to be inappropriate and unfair given the size of the modern profession; a possible source of improper government patronage (since the final recommendations were made by the Lord Chancellor, who is a member of the Government); and, discriminatory against part-time workers (especially women) and ethnic minorities. In November 2004, after much public debate in favour of and against retaining the title, it was announced that appointments of QC in England would be resumed but that future appointees would be chosen not by the government but by a nine-member panel, chaired by a lay person, which would include two barristers, two solicitors, one retired judge and three non-lawyers. Formally, the appointment remains a royal one made on the advice of the Lord Chancellor, but he/she no longer comments on individual applications, and merely supervises the process and reviews the panel’s recommendations in general terms (satisfying himself/herself that the process as operated is fair and efficient). Controversies regarding this institution is however not limited to Nigeria and the UK. In South Australia, the QC appointment process previously required the Chief Justice to make recommendations to the Attorney-General and the appointments were ‘rubber stamped’ by the Executive Council. The former appointment process was a unique interaction between the executive and the judiciary. However, it was not without its problems. Elliot Johnston’s appointment in 1969 was blocked by Premier Steele Hall because of Johnston’s membership of the Australian Communist Party. When Hall agreed to appoint all of Chief Justice Bray’s recommendations except Johnston, the Chief Justice withdrew the list. The standoff between the Premier and the Chief Justice was resolved the following year with a change of government. The new Premier, Don Dunstan, promptly approved Johnston’s appointment. This was not the last time in South Australia that a nomination for QC caused controversy. In 2006, Premier Rann requested that the Attorney-General review one of the Chief Justice’s recommendations. That controversy was, at least in part, responsible for changes in the appointment process in the State. The divide between those who insist on the sanctity of the award of SAN and those calling for its scrapping is increasing. How this is managed remains to be seen. It is not surprising that these debates have dogged the award given the prestige and recognition that comes with the honour. However, when one looks at the experience of England, Australia and other jurisdictions with a similar institution, such debates can be beneficial in not only encouraging reform but also enhancing the quality and thereby the prestige of the institution.

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ARBITRATION Masood Ahmed, Birmingham City University

Role of the Court in International Commercial Arbitration – A Reflection upon English and Nigerian approaches Masood Ahmed, MA (Cantab) Senior Lecturer, Birmingham City University

“English and Nigerian laws have traditionally been influenced by the seat theory. The arbitral statutes and judicial approaches in both jurisdictions reflect a strong tendency in favour of the seat theory”

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rbitration continues to be Act) and the Nigerian Arbitration and the most popular dispute Conciliation Act 1990 (ACA 1990) resolution mechanism and the steps which Nigeria has taken available to international to promote itself as an arbitration commercial parties. The friendly jurisdiction. benefits of arbitration over litigation are obvious. Arbitration The Seat of Arbitration and the Seat is traditionally seen as a more efficient and Delocalisation Theories and cost effective method of resolving Before embarking on an analysis of commercial disputes as opposed to the seat and delocalisation theory, it is litigation. Court proceedings are time necessary to have an understanding of consuming and as a consequence, can the central issue which distinguishes be extremely expensive for the parties both theories. Does the fact that the concerned. Further, arbitration is parties have chosen a particular a purely private form of dispute country as the seat of arbitration resolution and one which is grounded (i.e. the judicial seat of arbitration) upon the principle of party autonomy. mean that the laws of that country That principle dictates that the parties shall govern the arbitral process? to arbitration should be at liberty to Mr Justice Steyn (as he then was) decide how their dispute should be helpfully explained the characteristics resolved through of the arbitral “The degree to which the arbitral process laws in the and this should be English case state courts will interfere done without court Paul Smith of will depend upon the interference. Ltd v H&S extent to which the laws The vast International in that particular state majority of Holding Inc domestic courts [1991] 2 are influenced by the two will maintain Lloyd’s Rep. most dominant theories in some control 127 when he international commercial over international said: law: the seat theory and the “It is…a body commercial delocalisation theory” arbitration, of rules which which is being sets a standard conducted within their jurisdiction. external to the arbitration agreement, This control may be in a supportive and the wishes of the parties, for the and/or in a supervisory capacity. conduct of the arbitration. The law The degree to which State courts will governing the arbitration comprises the interfere will depend upon the extent rules governing interim measures…. to which the laws in that particular the rules empowering the exercise by state are influenced by the two most the Court of supportive measures to dominant theories in international assist an arbitration which has run into commercial law: the seat theory and difficulties…” the delocalisation theory. The delocalisation theory seeks This article will consider the to preserve the principle of party seat and delocalisation theories in autonomy and maintains that international commercial arbitration. international commercial arbitration It will take a comparative approach should remain free from the constraints and will explore the impact these of national laws. International theories have had upon the practice of commercial arbitration does not and arbitration in England and Nigeria. In should not have any connection to this regard, attention will be given to the legal mechanisms and controls the English Arbitration Act 1996 (1996 of the seat of arbitration. Only the


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‘judicial seat’ of arbitration should form part of international commercial arbitration and any territorial links to municipal laws should be disregarded. International commercial arbitration should not, as Professor Jan Paulsson has argued in his article “Arbitration Unbound: Award detached from the law of its country of origin,” 30 ICLQ 358 (1981), be ‘anchored’ in the national legal system where the award was rendered and only the country where the award is being enforced or recognised should maintain control. The seat theory places importance upon the territory or State within which arbitration is to take place in regulating the arbitral process. Those who support the jurisdictional theory argue that the national laws of the seat of an international commercial arbitration will have an automatic and legitimate right to supervise the arbitral proceedings.

The influence of the Seat Theory upon English and Nigerian arbitral laws English and Nigerian laws have traditionally been influenced by the seat theory. The arbitral statutes and judicial approaches in both jurisdictions reflect a strong tendency in favour of the seat theory. Thus, where international commercial parties have chosen London or Lagos as their seat, their arbitration will be subjected to the provisions found in the 1996 Act or the ACA 1990. However, as we shall see, Nigerian law has attempted to provide greater powers and freedoms to parties and arbitrators as compared with the 1996 Act.

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Section 1 of the 1996 Act sets out the ‘general principles’ upon which the 1996 Act is founded. Section 1 (b) and (c) enshrine the principle of party autonomy and states: “(b) the parties should be free to agree how their disputes are resolved, subject only to such safeguards as are necessary in the public interest; “(c) in matters governed by this Part the court should not intervene except as provided by this Part.” Although the 1996 Act seeks to embrace the principle of party autonomy, this is restricted by subsequent sections which are mandatory and apply regardless

of what the parties have agreed between themselves as to how the arbitral process is to be conducted. For example, section 12 provides that the parties must make an application to the court for an order to extend time for the commencement of arbitral proceedings. Further, the English judiciary has maintained and reinforced its right to supervise as well as support the arbitral process. If parties have provided for where the seat of arbitration is to be and if that is England, then the courts will not hesitate in enforcing that agreement and will, as a result, exercise its

jurisdiction over the arbitral process. This supervisory role is evident from the leading case of C v D [2007] 2 All E.R. (Comm) 577. C v D concerned a dispute between an insurance company and its insured. The insured had paid damages and expenses in respect of claims made against it and later made a claim on the insurance policy. The insurers refused to reimburse the insured and, pursuant to the terms of the insurance policy, the insured commenced arbitration proceedings. The policy provided for London arbitration and was governed by New York law. The parties had agreed that the seat of the arbitration was London and that the law of the arbitration was English law. The tribunal found in favour of the insured and dismissed the insurer’s defences. The insurer subsequently applied to the tribunal to correct the award on the grounds that the tribunal had disregarded New York law and indicated an intention to apply to the US courts for relief. In the meantime, the insured made an application to the English High Court for an anti-suit injunction against the insurer arguing that both parties had, by choosing London as the seat of the arbitration, accepted the supervisory jurisdiction of the English courts over the arbitration. Delivering the judgment of the court, Cooke J followed the traditional approach of the English courts in upholding the courts’ supervisory powers over international commercial arbitrations which designate London as the seat of arbitration. In his

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opinion, an agreement as to the seat of the arbitration was akin to an exclusive jurisdiction clause meaning that the parties confer upon the courts at the seat of arbitration with exclusive powers to govern their arbitration. Cooke J explained: “Not only is there agreement to the arbitration itself but also to the courts of the seat having supervisory jurisdiction over that arbitration. By agreeing to the seat, the parties agree that any challenge to an interim or final award is to be made only in the courts of the place designated as the seat of the arbitration.” Cooke J dismissed the insurer’s arguments that the nationality of the legal personalities of the parties meant that the English courts did not, in fact, maintain jurisdiction over the matter and concluded in rather strong terms: “It matters not at all that the parties here are both US corporations. The important element is that there was agreement to London as the seat of the arbitration and to the supervisory jurisdiction of this court, as well as to the application of the Arbitration Act 1996 to the Arbitration Agreement. To take a step which would negate the whole framework in which the arbitration took place is, in my judgment, equally conduct which is properly described as ‘vexatious and oppressive’. It is a direct attack on the Partial Award and not just a collateral attack. It is unconscionable and an abuse of process.” Also, in Guanghou Dockyards Co v E N E Aegiali [2010] EWHC 2826 (Comm). Blaire J reinforced the supportive role of the English courts towards arbitration when he said: “The arbitral process, and the court’s role in supporting it, is a dynamic one, responding to the changing needs of international commerce.”

The ACA 1990 adopted the UNCITRAL Model Law International Commercial Arbitration 1985 in 1988. Like the 1996 Act, the ACA 1990 reflects the principle of party autonomy. Section 34 seeks to keep the interference of the court in arbitral matter to a minimum. Section 34 states: “A court shall not intervene in any matter governed by this Act except where so provided in this Act.” The ACA, however, goes further than the 1996 Act in upholding the principle of party autonomy. It is clear

agreement is brought shall, if any party so request not later than when submitting his first statement on the substance of the dispute, order or stay of proceedings and refer the parties to arbitration. (2) Where an action referred to in subsection (1) of this section has been brought before a court, arbitral proceedings may nevertheless be commenced or continued, and an award may be made by the arbitral tribunal while the matter is pending before the court.” In fact, the ACA goes further in providing the arbitrator with the power to extend the time for performance of any act required under the ACA. Section 36 states, “Notwithstanding the provisions of this Act the arbitral tribunal may, if it considers it necessary, extend the time specified for the performance of any act under this Act.” Thus, although Nigerian law has traditionally been influenced by the seat theory, Nigeria has, in recent years, taken significant steps in promoting itself as an arbitration friendly jurisdiction. Two laws were enacted in an effort to achieve this. Law No.8 established the Lagos Court of Arbitration (LCA) and Law No10 provides for the resolution of disputes by arbitration in Lagos State. The LCA reflects Nigeria’s desire to loosen the control of the courts and statute in supervising international commercial arbitration and seeks to promote greater party autonomy in arbitration. LCA is independent of state control and is wholly controlled and funded by the private sector. By doing this, Nigeria is distancing itself from its previous position of maintaining state control over international commercial arbitration.

“Thus, although Nigerian law has traditionally been influenced by the seat theory, Nigeria has, in recent years, taken significant steps in promoting itself as an arbitration friendly jurisdiction”.

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from the wording of the ACA that the parties are provided with the freedom to determine the conduct of arbitral proceedings. Unlike the 1996 Act, the ACA does not draw a distinction between mandatory and nonmandatory provisions. This is evident from a number of key provisions. Under the 1996 Act, where a party A has commenced court proceedings in a matter which should be referred to arbitration, section 9 provides that party B may make an application to the court to stay the court proceedings. Although the ACA 1990 has a similar provision under section 4 (1), it goes further than section 9 of the 1996 Act in allowing arbitral proceedings to commence notwithstanding the fact that an application for a stay is pending before the courts. Section 4 states: “(1) A court before which an action which is the subject of an arbitration


ARBITRATION David Goldberg, White & Case LLP (UK)

English Court’s jurisdiction to adjudicate on enforcement of awards annulled at seat – Yukos v Rosnelt Revisited

David Goldberg Partner

“the English courts will require cogent evidence for any allegation that a foreign court decision should not be recognised on the grounds of a failure of substantial justice”

T

he Court of Appeal has ruled on preliminary issues in the well-known and complex Yukos v Rosneft [2012] EWCA Civ 855. Yukos Capital, owned by former Yukos shareholders, had obtained arbitral awards in Russia against a Yukos entity that has since been taken over by stateowned Rosneft. These awards were subsequently annulled by the Russian courts. Nevertheless, the courts of the Netherlands allowed Yukos Capital to enforce them, holding that the Russian courts had acted without impartiality and independence. Yukos Capital then brought a second enforcement action in England. It argued that Rosneft could no longer rely on the Russian annulment judgment in light of the Netherlands judgment. Rosneft argued, to the contrary, that the doctrine of Act of State prohibits the English courts from questioning the Russian annulment. The Court of Appeal agreed with neither proposition. It did not consider a judgment to be an Act of State, but nor was Rosneft estopped from relying on the annulment decision. The trial on the merits of the enforcement action continues. This article looks in more detail at the Court of Appeal’s decision and considers what it means for parties facing controversial decisions by foreign courts. Background In March 2007 Yukos Capital began enforcement proceedings in the Netherlands of four arbitration awards against Rosneft for over US$400 million (the “Russian Awards”) made in September 2006 by an arbitral tribunal sitting in Moscow. In May 2007 the Russian Arbitrazh Courts set aside the Russian Awards (the “Russian Annulment Judgments”). In April 2009, the Amsterdam Court of Appeal allowed enforcement of the Russian Awards and refused to recognise the Russian Annulment Judgments on the basis of “partial and dependent” judicial process in Russia in these proceedings. Subsequently, in 2010 Rosneft paid the principal sum under the Russian Awards. Yukos Capital

Law Digest Winter 2012

then applied to the English Court to enforce the Russian Awards to recover outstanding interest of over US$160 million. Proceedings in the English courts By the time of the English enforcement proceedings, the English Court had before it: (a) the Russian Awards (enforced in the Netherlands); (b) the Russian Annulment Judgments (not recognised by the Dutch court); and (c) the Amsterdam Court of Appeal finding that the Russian Annulment Judgments were a result of partial and dependent judicial process. In support of its contention that the Russian Annulment Judgments were “partial and dependent” Yukos Capital argued that the Russian state, through its tax authorities and courts, had pursued an unlawful conspiracy to destroy Yukos Oil Company. Rosneft contended that this allegation was barred by a doctrine known as Act of State (which precludes an English court from adjudicating on acts of a foreign state within its own territory). The English Court at first instance found that: 1. the Act of State doctrine applied only where a litigant was challenging the validity or effectiveness of a foreign act of state, but not where the act of state was alleged to be unlawful, wrongful or improper; and 2. the decision of the Amsterdam Court of Appeal meant that Rosneft could no longer deny that the Russian Annulment Judgments were “partial and dependent” because this issue has already been decided by another court (issue of estoppel). The Court of Appeal decision Rosneft appealed and the Court of Appeal considered the two issues: the Act of State doctrine and issue of estoppel. It disagreed with the first instance judgment on both. On the first issue the Court of Appeal delivered a landmark judgment. It held that the Act of State doctrine covered

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questions of unlawfulness and wrongfulness, clarified that court decisions do not constitute acts of state for the purposes of the doctrine and concluded that the English court is entitled to examine the substantial justice available in the courts of foreign jurisdictions. Naturally, the English courts will require cogent evidence for any allegation that a foreign court decision should not be recognised on the grounds of a failure of substantial justice but the Court of Appeal emphasised that that was a matter of evidence and argument, not a matter of any immunity or doctrine of non-justiciability. On the second issue the Court of Appeal found there to be no issue of estoppel. This was because the Amsterdam Court of Appeal was guided by considerations of Dutch public order, whereas the English court would have to form its own view in line with any relevant issues of English public policy. The conclusions of the Court of Appeal on this issue are not surprising, given that under English law (a) the courts have historically been required to consider whether proceedings before foreign courts complied with English

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concepts of natural justice; and (b) it must ultimately be for the English court to decide on the question whether, on grounds of public policy, to withhold recognition of foreign judgment, since accepting the decision of a third country on the matter would be an abdication of responsibility on the part of the English court, in that it would necessarily entail acceptance that the scope of English public policy was the same as that of the third country. Comment This decision will bring comfort to litigants faced with controversial or politically driven decisions of foreign courts by confirming the English court’s ability to provide unbiased assessment of the substantial justice available in those courts (provided the matter is within the jurisdiction of the English court). The foreign courts whose justice is being assessed in such circumstances may, in due course, also find it reassuring that the English Court will not be guided by the decisions of the third country courts, thereby taking upon itself the function of a litmus test.


ARBITRATION Ned Beale, Olswang LLP (UK)

Challenging Arbitration Award: Abuja International Hotels Ltd v Meridien SAS Revisited

Ned Beale

Senior Associate

“The nature of a party’s legal representation in arbitration is a factor which the courts seem to take into account when considering whether a party had reasonable opportunity to put forward its case”

S

ection 33 of the Arbitration Act 1996 (the “1996 Act”) requires arbitrators to act “fairly and impartially as between the parties, giving each party a reasonable opportunity of putting his case and dealing with that of his opponent”. If any tribunal fails to do this and causes substantial injustice the affected party can challenge the subsequent award under section 68(2) (a) of the 1996 Act. We take a look at three recent court decisions on what the courts do with such applications. • Abuja International Hotels Ltd v Meridien SAS [2012] EWHC 87 (Comm) • K. Kablo Imalat San Ve Tic A.S. v Intamex S.A. [2011] EWHC 2970 (Comm) • ED & F Man Sugar Ltd v Belmont Shipping Ltd [2011] EWHC 2992 (Comm)

Abuja International Hotels Ltd v Meridien SAS [2012] EWHC 87 In Abuja International Hotels Ltd v Meridien SAS, the applicant challenged the award un=der section 68(2)(a) of the 1996 Act. It said that the lack of evidence of the defendant’s loss meant that the applicant was unable to respond adequately to it, so had not been given a reasonable opportunity to deal with its opponent’s case. In dismissing the challenge, the court had regard to the fact that the applicant had been represented in the arbitration by a large and experienced counsel team. The court considered that, if there had been an issue as to the adequacy of the evidence in relation to the defendant’s loss, this large and experienced team could and should have addressed it at the time of the arbitration, which it had not. The nature of a party’s legal representation in arbitration is a factor which the courts seem to take into account when considering whether a party had reasonable opportunity to put forward its case. In the older case of OAO Northern Shipping Company v Remolcadores De Marin SL[2007] EWHC 1821 (Comm) a challenge was successfully made on the grounds that the tribunal had not provided the parties with a reasonable opportunity to address fundamental points that the arbitrators relied on. One party had not instructed English lawyers and

Law Digest Winter 2012

was less likely to be familiar with the English law concepts the tribunal relied on. The court cited the inexperienced legal representation of the defendant (not the party appealing) as a factor which aggravated the injustice of the tribunal’s failure to give the parties a reasonable opportunity to address one of the essential building blocks of the tribunal’s conclusions. The tribunal was putting the defendant’s points for it and should have notified it (and the applicant) of the finding that the tribunal anticipated making.

A. K. Kablo Imalat San Ve Tic A.S. v Intamex S.A. [2011] EWHC 2970 (Comm) In dismissing the section 68(2)(a) application in A. K. Kablo Imalat San Ve Tic A.S. v Intamex S.A., the court commented that its own duty when faced with a section 68 challenge to an award is to read the award as a whole in a fair and reasonable way, with a view to upholding the award, not upsetting it. Citing the earlier case of Zermalt Holdings SA v NuLife Upholstery Repairs Ltd [1985] 2 EGLR 14, the court noted that courts should not approach awards “with a meticulous legal eye endeavouring to pick holes, inconsistencies and faults in awards and with the objective of upsetting or frustrating the process of arbitration”. ED & F Man Sugar Ltd v Belmont Shipping Ltd [2011] EWHC 2992 (Comm) In ED & F Man Sugar Ltd v Belmont Shipping Ltd, the challenger complained that the tribunal had been aware of, but not alerted the claimant to, a point in the claimant’s favour. The court held that a tribunal can, if it wishes, enquire of a party whether it has considered raising a different case and, in oral hearings, a tribunal often does interject to raise such questions and observations. But section 33 of the 1996 Act does not require the tribunal to do so. Indeed, documentsonly arbitrations (like this one) are often used to keep costs proportionate to a small claim amount, and it is understandable that a tribunal will be reluctant to ask a party, which has put in a detailed submission, whether it wishes to run a different case. The court distinguished this case from a previous authority, Bandwith

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Shipping Corporation v Intaari [2007] EWCA Civ 998 mentioned above show that the court continues to apply in which the Court of Appeal held that if an arbitrator this standard to the many challenges it hears. What are we appreciated that a party had missed a point, then fairness to make of the fact that the applications were made at all? required the arbitrator to raise it so that the party could Is section 68 and, in particular, section 68(2)(a) used as a deal with it. In that case, the point which the party had last ditch attempt to upset an award which has not gone missed was related to an issue already being debated in the in a party’s favour? Year on year, there are usually more applications made to the arbitration. In contrast in ED & F Commercial Court under Man Sugar v Belmont, there was “Court challenges to arbitration section 68 than under section no point already being debated 69 (appeal on a point of law). to which the “missed point” awards are only available in was relevant. extreme cases where the tribunal The latter requires prior permission of the court to has gone so wrong in its conduct bring, the former does not. Commentary Some in the judiciary argue Court challenges to arbitration of the arbitration that justice that prior permission should awards are a “long stop only also be required for section available in extreme cases calls out for it to be corrected” where the tribunal has gone so wrong in its conduct of the 68 applications in order to ensure that the process is not arbitration that justice calls out for it to be corrected”, Lesotho open to abuse. In the meantime, as these cases show, the Highlands Development Authority v Impregilo SpA and judiciary seems to be upholding and respecting arbitrators’ others [2005] UKHL 43. The three unsuccessful challenges autonomy and only intervening in extreme cases.

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SPECIAL FEATURE

“Providence brought me into law”

Lawyer In the News -

Okey Wali SAN Exclusive Interview by Ranti Thomas

O

kechukwu Emmanuel Wali, the current President of the Nigerian Bar Association (NBA), believes destiny played a part in his journey to his present position. Today, a quintessential and distinguished lawyer in Nigeria, Okey Wali SAN has climbed the pinnacle of his professional career. As a former Attorney-General of Rivers State, he has combined the experiences of government service with the Bar, making a fine success of both. Indeed, Okey Wali SAN believes that the law should serve humanity and the course of justice.

How would childhood?

you

describe

your

I grew up as the son of a civil servant who believed more in honour than riches. So, we were taught to be modest in conduct, appearance and behavior at all times and that is what I have lived by so far. Have you always wanted to be a lawyer and what actually made you go into law? (Laughs…) The irony of life is that I

am a Senior Advocate of Nigeria (SAN) and President of the Nigerian Bar Association (NBA). In fact, law was never on my mind when I was growing up as a child. I was supposed to be a medical doctor. An uncle of mine used to call me “Doctor”, it was only recently he stopped calling me “Doctor”. Up to my School Certificate level, I was a science student – Physics, Chemistry, Mathematics and all that. However, my path to law started with a chance meeting with a young Yoruba Youth Corper sent to teach Government at my school. He encouraged me to consider Government as a subject. I was persuaded by his enthusiasm for the subject. So, when I was going for my School Certificate, I added it. Surprisingly, despite not having taken the subject before, I made a good grade in it. I made A2. Ironically, I made a poor grade in Physics, one of my stronger subjects. I knew that without Physics, my dream of becoming a doctor was dead as a dodo. Out of anger (and maybe a little bit of hurt pride), I decided not to retake Physics and switched from sciences to arts. Unfortunately, I didn’t have the combination to study A’ Level arts, but the Principal of the school said anybody who studied Government could do History A’ Level as well. So, I took a straight combination of History, Economics and Government for A’ Levels and I had fantastic A’ Levels results. In fact, it was the best result they have ever had in that school. I also became the senior prefect. It taught me in life that you don’t push children, but encourage them to find their own strength. I thought I was fantastic in the sciences, but when I crossed to the arts, I found out that arts were my strength. I had chosen the University of Lagos

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(UNILAG) to read Law or Political Science. Unfortunately, I was not accepted to read Law as my “A” level result was released late. I met with the then Head of the Department, who encouraged me to register for Political Science and said that the following year, he would help me cross over to Law. I therefore was to register for Political Science with the help of a Dr. Anifowose. Just when I was about to settle down to my studies, my father called from Port Harcourt to know what was happening. I told him that I was going to register for Political Science, but he said I should come back to Port Harcourt immediately. So, I left for Port Harcourt on Wednesday. The following Saturday I was on the plane to London. I had been admitted to study Law at the University of Buckingham. You can see that I came to read law by accident. What do you remember of your first day in court? (Laughs…) It was actually a funny experience. My first day in court was in a magistrate court in Ondo State, somewhere in Ekiti, when it was part of the then Ondo State. I was handicapped because it was a Yorubaspeaking court and I didn’t understand a word of Yoruba. I was like a fish out of water. I think I nodded in places, trying my best at pretending to follow the proceedings. What is your most memorable case? I have been involved in too many cases to be able to pick out one. However, there was this striking case that affected my life. It was a murder trial I did in 1988. What was at the heart of the dispute which led to the charge was inexpensive cutlery. The accused was a family head somewhere in Rivers State. The deceased, a member of the family claimed that the cutlery belonged to the family. The disagreement led to a scuffle between the two. The accused, an ex-boxer was alleged to have punched the deceased who fell and died. I defended the accused and got the charge of murder dropped, but he was convicted of manslaughter and given a 7 year sentence. What that taught me was that life could take funny turns sometimes. That a family dispute over an innocuous object as cutlery could lead to death and a murder charge. It made a lasting impact on my life. I don’t think that I ever got over that experience. Who were your mentors and what were the qualities you saw in them? I have been mentored by a number of people in the profession. Back then and to a large extent even now, securing employment after the Law School was a problem. There was a lawyer friend of my father, the late Chief Nwanodi SAN. He had about the biggest and most successful practice in Port Harcourt. We thought it would be a walkover securing employment at his chambers, but when we got to him, he said there was no vacancy. A few other places we went to, we were told the same thing. Then,

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my dad said there was this man he knew, Chief William Chukwu. So I went to meet him. He also said there was no vacancy but that he couldn’t say no to my father. So, he said I could share the office with him. I’ll never forget him, because he gave me that opportunity. He had a good practice and gave me a solid foundation. Along the way, I met other people that influenced my life. One was, in terms of NBA and NBA activism – the late Clement Akpamgbo SAN, former Attorney-General and Justice Minister. In 1992, I met the man that changed my life in terms of litigation. I was handling a matter with my friend, Mike Igbokwe SAN. I thought I was doing ok, but the clients wanted us to get a SAN to lead. When Mike was consulted to get a SAN to lead me, he got Chief Ajayi SAN. That was one of the greatest things that happened to me. It was a wonderful experience. We went through vigorous submission and preparation in the office. At his age then and level of practice, he was very detailed in preparation in chambers. He would listen to everybody. I owe a lot of my court room mannerism to Chief Ajayi SAN. I remember one day in the Court of Appeal, Chief Ajayi was making his submission and he was going to sit down. He hadn’t touched on something I thought was very vital to our case. So, just as he was taking his seat, I said to him ‘Chief, don’t sit down’. He stood up immediately and listened to what I was going to say. His recovery was not only remarkable, but very professional. He said, ‘My Lords, you know these young men, their brains are very much alert. Mr. Wali just directed my attention to one point.’ For the next one hour plus, Chief Ajayi was addressing the court on that same point. If it had been one of us SAN now, we might have said, “how dare you tell us what to do in court”. That made a great impact on me. I owe a lot of my litigation experience to Chief Ajayi SAN. I was most delighted to see him at the Supreme Court on the day I took silk. What was your experience as the Attorney-General (AG) of Rivers State? There were so many things that I tried to put in place, which somehow we didn’t have the time to see through. I tried to come up with the idea of establishing the office of Attorney-General in every judicial division in the state, so that lawyers wouldn’t have to travel from Port Harcourt to rural areas to go to court, with all the attendant risk that went with such journeys; delays in getting to court and other issues you might have before getting to court, and then to find out that the other counsel is not there. I tried to develop a system where the office of the Ministry of Justice would be located in all judicial divisions. As the son of a Civil Servant myself, I paid so much attention to the welfare of lawyers in the Ministry. Why did you decide to contest for the NBA presidency? Well, as a young lawyer, I have always been interested in the Association because I believe if you are in a place you must


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impact on the system. So, as far back as 1992, I became the Secretary of Port Harcourt Branch of the Nigerian Bar Association. By 1998, I became the Chairman. Since 1992, I have been a member of NEC of NBA. I served on several committees. I felt that I have the experience, the passion and the skills to serve the profession. I was not unaware of the sacrifices involved, but if you love the profession, you will be willing to make the sacrifice. How will you cope with your family in Port Harcourt and your responsibility in Abuja? I believe that I have the experience and skills having served in other capacities, but it is another ball game in the Presidency, with my practice and family in Port Harcourt

Cover Story Law Digest Winter 2012

and called to the Nigerian Bar, why do you want to walk in here and practise? It is as simple as that. The day I can go into a New York court and practise law as a Nigerian practitioner, then, I will have no reason to have reservations about them coming to practise in Nigeria. Some lawyers now have websites and use social media to advertise their practice, what can you say about that since lawyers are not allowed to advertise their practice in Nigeria? I must agree that it is an issue when you talk about professional ethics because you are not allowed to advertise. For me, that is advertisement. I believe that this is an issue for the Legal Practitioners Act to deal with one way or the other. For me, it is advertisement. What can be done about some lawyers who have been struck off by other Regulatory bodies like the Bar Council in United Kingdom but return to Nigeria to continue their practice? We have our own disciplinary machinery. We cannot punish you for any offence not known to us. Also it is not automatic that if you have had problems in other jurisdictions, you will have problems with us. As NBA president, what is your opinion of the standard of lawyers produced in Nigeria, because there is a belief that the standard is falling and what do you think can be done about it?

and responsibility in Abuja, but it is a necessary sacrifice. This profession has done a lot for many of us and the least we could do is to offer service to it. What is your position on the issue of Nigerian lawyers trained abroad needing to attend the Nigerian Law School? I don’t see anything wrong in that. In fact, it is in their interest that they go through the Nigerian Law School, so that they get acquainted with Nigerian laws. I went through that, having graduated from the University of Buckingham. What is your view on liberalisation of the legal service market and what is the stand of NBA?

Standards generally are falling, not only in the profession, but also in other professions. It is all about the standard of education generally which is falling. The primary and secondary schools you went to, I believe you will not allow your children to go there. The education system is in crisis; that is where the problem is coming from. But the NBA is not relenting or accepting the situation. We are setting up a legal education committee, whose job is beyond lawyers. We are interested in intervening in the curriculum of the universities. We believe that professional ethics should not only be taught at the Law School, it should be built into the university curriculum. Ethics should be taught from year one, not what you just do for three months at the Law School. We believe that it is part of the challenges we are having in the profession. We also believe that accreditation of law faculties should be done by the Council of Legal Education, not by the Nigerian Universities Commission. We want to make sure that legal education runs properly, but you know some of these things require statutory changes and we are working on that.

Well, the problem we have is akin to what I have just addressed now. We are worried because there is no reciprocity of this in other jurisdictions. If I can not walk into London to practise law as a Nigerian-trained lawyer

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CORPORATE CORPORATE GOVERNANCE GOVERNANCE Emmanuel Emmanuel Chukwudum Chukwudum

Who can claim Legal Professional Privilege? The implication of Akzo Nobel’s case for In-House lawyers

Emmanuel Chukwudum, UK

“The risk posed by this decision could have wider implications for in-house counsels based in jurisdictions such as Nigeria”

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he recent European Court of Justice decision in Akzo Nobel Chemicals Ltd and Akcros Chemicals Ltd v Commission of the European Communities (OJ 2003 C35/10) (“Akzo Nobel”) regarding legal professional privilege (“LPP”) has been viewed by legal analysts as a groundbreaking legal precedent. In that case, it was held that communications with in-house counsels were not covered by LPP. Crucially, because such lawyers do not have the requisite degree of independence required under the principle set out in AM&S Europe Limited v Commission of the European Communities (155/79) (“AM&S Europe”). Consequently, this restricts the privileges conferred by LPP to only EU qualified lawyers in private practices but not their in-house counterparts. This decision, without doubt, will have strong implications for corporations within the EU with regards to the confidentiality of their communications with their in-house counsels. But, it could also have some implications for many in-house counsel in Nigeria. In-house counsel should tread carefully in light of this decision, as it could potentially undermine the efficacy of the legal advice they offer to their clients. Prior to Akzo Noble, the services of in-house counsel were, and still are, valued and considered within the wide ranging business communities as convenient, efficient and most importantly, confined within the business setting. But so long as this decision remains good law within the EU, in-house counsel and their employers affected by this ruling may need to devise viable damage limitation measures. It is important to emphasise that the principles of Akzo Noble currently only apply when the EU Commission is carrying out a competition investigation (or where national competition enforcers do so on its behalf) but not in litigations, for which litigation privilege continues to be available. The risk posed by this decision could have wider implications for in-house

Law Digest Winter 2012

counsel based in jurisdictions such as Nigeria. This view is formed because most Nigerian in-house counsel advise multinational corporations with branches across the world, including the EU, hence placing them within the jurisdiction of the ECJ. Consider this scenario as an example: An in-house counsel employed by a major international airline based in Lagos. Although not proficient in foreign laws, he spots something which could amount to the airline and another, fixing flight-batches in order to maximise customers and profit. He then communicates his finding in writing to an executive of the airline based in London. Prior to the Akzo Nobel ruling, if there is an investigation by the EU Commission on the airline’s office in London, that communication would be protected under LPP. The reason behind this conclusion is because, it has been submitted that LPP is substantive law (see General Mediterranean Holdings SA v Patel [2000] 1 WLR 272; R (Morgan Grenfell & Co Ltd) v Special Commissioner of Income Tax [2003] 1 AC 563, at paragraph 7). It operates as an exclusionary rule of evidence conferring the right on its owner to forbear disclosing documents over which LPP is claimed. However, in the light of Akzo Noble, the same could not be said of communication by in-house counsel. In the example above, the inhouse counsel’s communication with the executive would lose its protection under the Akzo Noble’s principle. The objective of this article therefore is to establish how in-house counsel, in a similar situation as the above scenario, can avert such potentially disastrous outcome. Before seeking to profess solutions, it is important to briefly analyse and establish the essence of LPP and rationale behind its application in some jurisdictions. LPP has always served as a safe harbour for confidential communications between clients and their lawyers, but ascertaining which communications are protected under LPP continues to be a contentious issue. It is therefore imperative that both companies and their in-house counsel clearly understand how the

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rules of LPP work and how to protect communications within it. It follows that it is very easy to unwittingly lose the protection of the privilege and if this becomes the case, that communication will have to be disclosed to an investigator. The consequences of this, as seen above, may cause undesired and disastrous damage to a business. It has also been submitted that LPP exists to protect the sanctity of the counsel-client relationship so as to enable clients to fully disclose details of their affairs to their counsel without fear that the information will be used against them in subsequent litigation or investigation. Another justification is that in the course of their duties to their clients, lawyers often become privy to sensitive information regarding clients and their dealings. Apart from the fact that this relationship gives rise to duty of care, LPP arises from a strong public interest in promoting candour between counsel and client in order to ensure the appropriateness of the legal advice and assistance given (see Re L [1997] AC 16, at 32, per Lord Nicholls; this was also later cited by Lord Caswell in Three Rivers District Council and others (Respondents) v Governor and Company of the Bank of England [2004] UKHL 48) (“Three Rivers”).. Most jurisdictions have the concept of LPP well established within their legal system. As a result of the Statutes of General Application, English legal principles continue to be a significant source or basis of Nigerian law. Both legal systems share similar views on various

The reason behind this conclusion is because, it has been submitted that LPP is substantive law. LPP operates as an exclusionary rule of evidence conferring the right on its owner to forbear disclosing documents over which LPP is claimed.

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legal principles including the LPP. Thus, LPP is preserved in Nigerian law under sections 192, 195 and 196 of the Evidence Act 2011. Hence, this article centres its analysis with regard to LPP under English law. Under English law, the idea that the forced disclosure of confidential communications between clients and their lawyers may introduce a damaging degree of reservation and possibly dissimulation into the client-lawyer relationship has long been understood as the rationale for the existence of LPP under English law. Although LPP was established within English law, the scope of its application remained unsettled and this is manifested in various cases. This has since been resolved by the case of Three Rivers (cited above). There are various issues surrounding the application of LPP in this case, but this article will concentrate on the following: the definition of a lawyer and the client; the identification of communications protected under the principle; and the justification for the application of the principle. The last among these issues has already been discussed above and needs no further examination. The rest are discussed in ascending order below. Communication This could be in any form, including oral and written. It is important to note first, that a communication seeking to be protected under LPP must be and remain confidential between the counsel and his/her client. Once a communication lacks confidentiality, it loses its privilege


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status. However, this is not the case in all circumstances. There are occasions when protected communication will retain its protection even when in the hands of a third party, as long as they are identified individuals and it is clearly stated that the communication is restricted to them. Client A fundamental factor to note is that ‘privilege’ granted under LPP is for clients and not their counsel. It is also important to understand that the concept of client, in the context of a corporation is narrowly defined. In Three Rivers, the Court of Appeal controversially held that the client will not necessarily be the corporation itself, or its employees, but will be confined to those individuals within the corporation who have been tasked with liaising directly with the counsel to seek and receive the legal advice. The implication of this ruling is that where a lawyer passes a document onto an individual in a corporation he considers a client, for instance, the company secretary, and that individual is not among those tasked with liaising directly with the lawyer, in events of investigation or litigation, that document loses its privilege status. However, if the non-assigned individual is only acting as a conduit for communication between lawyer and assigned individual, the communication would retain its privilege protection. Lawyer/counsel The conventional meaning of the term ‘lawyer/counsel’ within the context of litigation is both laconic and settled in almost all jurisdictions. By contrast, ‘lawyer/ counsel’ within the context of LPP differs depending on the investigating authority or the jurisdiction within which the investigation is instigated. Under English law, the term ‘lawyer’ for the purposes of LPP covers all qualified counsel. In-house counsel also come within this definition to the extent they are giving legal advice. However, where they are providing business, administrative or management advice, their communications in those contexts would not normally be accorded LPP status. Privilege also extends to the following: legal executives, secretaries (see Descoteaux v Mierzwinski (1982) 141 DLR (3d) 590, at 603); trainee solicitors and paralegals acting under the supervision of a qualified solicitor or barrister (see Wheeler v Le Marchant (1881) 17 Ch D 675, at 682.) This comprehensive approach is pragmatic because if the term ‘lawyer’ is restricted to its traditional meaning of qualified barristers and solicitors, the concept of LPP would be unworkable. Practically, both the English and Nigerian legal systems are paragons for the perfect application of LPP, as are legal systems of various jurisdictions based on common law. However, this is not the case in some civil law jurisdictions such as those in continental Europe and in the context of competition investigation by the EU Commission. In those jurisdictions, in-house counsels do not enjoy the same privilege as their colleagues in private practices. Focusing

Law Digest Winter 2012

on competition investigations by the EU Commission, this principle could be traced back to the case of AM&S Europe. Here, the ECJ held that communications between clients and an independent lawyer (in other words, a lawyer not bound to the client by an employment contract) who are qualified to practice in the EU will benefit from “professional privilege” (which is akin to the English and Nigerian law concept of LPP) but not communications between an inhouse counsel and his client. The recent decision of Akzo Nobel is more of a reaffirmation of these principles and has also provided an opportunity for the ECJ to rebuff all the arguments of unfairness, discrimination, etc in respect of in-house counsel. Therefore, the question now is: ‘How can Nigerian in-house counsel limit the potential repercussions of these decisions?’ It is imperative that Nigerian based in-house counsel understand that the principles of AM&S Europe and Akzo Noble have gone against them in two ways; firstly, in the light of this decision, LPP will only apply with regard to ‘external’ counsel. Secondly, the external lawyers must also be qualified to practise in the EU. In view of this, an option for Nigerian in-house counsel affected by these principles would be to ensure they appoint a law firm based in an EU country through which they should communicate with their EU clients. They must then restrict themselves as intermediaries for those communications. However, this arrangement could affect the ‘client’ concept under LPP, in that the in-house counsel could be construed as the client of the external lawyer by investigators. Consequently, information in the possession of the real client, the company, runs the risk of not being protected under LPP. A well drafted contract should therefore be in place between the external lawyer and the company. The contract should clearly indicate the position of the in-house counsel as intermediary and not the client of the external lawyer. Ambiguity and inconsistent practice would also serve as weapon for the investigators in countering any subsequent client and lawyer relationship argument. Another option would be to ensure that communications are not addressed directly to the in-house counsel. This view is taken because they would retain their LPP status even when they are in the possession of an in-house counsel or anyone, so long as the rules on ‘communication’ stated above have been complied with. Finally, all communications meant to be protected under LPP must be properly stored in a secured place with access to only those individuals classified as clients. It is very important that a disciplined approach is maintained as to how those documents move around. If there are no established standard for their movements, they could lose confidentiality and may even make the argument of lawyer-client relationship unsustainable. In conclusion, in-house counsel must always be on their guard for a possible slippery slope of the Akzo Noble’s principle in future, because if stretched, it could become a weapon of choice for litigants.

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CORPORATE GOVERNANCE Uju Gil Okorougo

The Role of In-House Counsel in Promoting Culture of Compliance

Uju Gil Okorougo

“Culture of compliance is not simply stating a company’s willingness and ability through established corporate compliance program, processes and procedures to abide by external laws”

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hese are trying times for Lawyers working in-house and more so for those lawyers charged with compliance administration and management. New regulations governing company activities are coming thick and fast. The enforcement actions against companies that fall foul of these newly minted and often untested regulations are now much more severe than ever before. Not only must an in-house lawyer work to identify new issues, address and remedy both old and new compliance challenges with speed and efficiency, he/she must do so while preaching the merits of ethical business conduct in order to reduce future compliance issues and avoid company liability. This article looks at the role in-house lawyers play in promoting culture of compliance. WHAT IS CULTURE OF COMPLIANCE? Few issues are debated more often and more aggressively in the world of compliance than the meaning of ‘compliance culture’. For our present task and purpose, it is necessary to understand what it is not, rather than what it is; for in understanding what culture of compliance is not, we may yet develop an appreciation for what it is, albeit, in a non-utopian legal and business environment in which we operate. Culture of compliance is not simply stating a company’s willingness and ability through established corporate compliance program, processes and procedures to abide by external laws, rules and regulations governing the company’s business wherever it operates (as many companies do). Simply professing the ability to do that, which it is required by law visa-vis complying with statutes and industry regulations, does not imbue a company with a culture of compliance. Admittedly, a company must still have controls in place to discharge these duties under the law, or risk sanctions for non compliance. Above par companies anywhere in the world understand the benefits of clearly defining, communicating, measuring and reporting strategic objectives. This is part and parcel

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of a company’s business model; a norm woven within the fabric of the company and sets out their ‘way of doing things’; in essence their corporate culture. Whether in the United States, the United Kingdom or in Nigeria, a company’s corporate culture and by extension its compliance culture is set at the top of the organisation. This responsibility lies in descending order with the Chairman of the Board, the affectionately termed C-Suit: CEO, CFO, CIO, and with all senior management of the company including in-house counsel responsible for compliance matters. It is they that set the ‘tone’ and commitment by emphasizing the importance to the company of compliance and ethical conduct, which the in-house counsel must administer, and other company employees must adhere to, carry as the company’s mantra, their emblem and integrate into every level of business operations. A positive compliance culture is inseparable from the business strategy; it is not an afterthought, but built in as a business objective to be achieved. The challenge for the in-house lawyer in promoting culture of compliance in a business environment such as Nigeria where ethics and compliance as a practice, and indeed as a norm, is still in its infancy is undoubtedly herculean. Presently, one can only speak of compliance within the securities and banking industries owning to the recent bank crisis that necessitated the regulators, the Central Bank of Nigeria (CBN), Securities and Exchange Commission (SEC) and Nigeria Stock Exchange (NSE) to require banks to appoint Chief Compliance Officers. Outside the banking and securities industry, oil and gas companies have marginally robust compliance programs due largely to the fact that most are either traded on major stock markets in the United States or in the United Kingdom or have these jurisdictions as their business home countries thereby falling within the ambit of US Foreign Corrupt Practices Act (FCPA), UK Bribery Act, OECD and other international conventions and benchmarks. Outside of these,


Law Digest Winter 2012

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compliance and indeed ethics as an integral part of corporate risk management remain at best a whisper; and in the worst instances are dismissed outright with the colloquial pigeon phrase “abeg forget that thing”, denoting the unimportance attached to ethics and compliance by some employees and management alike. Even within the banking and oil sector, compliance culture is still weak as ‘do as I say and not as I do’ mentality on the part of some senior management and in some cases the board of directors, traditionally responsible for articulating through policy statements that compliance is a priority and that management expects employees at all levels of the company to comply with all applicable laws, still perverts any true semblance of ethical integrity.

objective for making money. Achieving this task requires the in-house counsel to cultivate rapport with senior management and the business leadership which will enable the lawyer to receive the necessary buy-in and support needed to carry out the task of compliance management that is necessary in any company in building a lasting culture of compliance. Here are some key steps to accomplishing this task.

The challenge lies in: (1) how to promote culture of compliance in a company where it is apparent none exists; and (2) how to administer a positive compliance culture (where one exists) while functioning as a gatekeeper and a business advisor. This requires balancing the task of building, implementing and overseeing compliance mechanisms within a company while keeping an eye on the bottom line – meeting the company’s

compromise on ethics, compliance and integrity, oftentimes translates to a workforce that ascribes to the highest ethical business standards and complies with all applicable laws and regulations. Because in-house lawyers are charged with the task of guiding and protecting company assets, tangible and intangible, it is imperative that employees are made to understand that complying with the laws, rules, regulations, and policies

1. Talk the talk and walk the walk. Research shows that the way leaders act out their own assumptions about ethics and compliance directly influence how subordinates make ethical and compliance decisions. A company leadership beginning at the top that leaves no room for

is not their only responsibility. In order to foster a compliance culture, employees must also consider not only what they are obligated to do, but also ‘what is the right thing to do?’ Doing the right thing helps protect a company’s reputation, an asset any good company cannot do without. To promote culture of compliance, integrity must therefore start with you, the in-counsel, but it must not end with you. You must be beyond reproach and viewed as a beacon of ethical behaviour. It does mean that you must be seen to do the right thing no matter the cost, and are accessible to provide help and guidance to other employees to do the same. Because employees are more apt to behave ethically if they see examples set by senior management of zero tolerance towards unethical behaviour, you must encourage senior management to adopt a holistic approach to their ethics and compliance message by speaking on the ethical, regulatory, and compliance risks the company faces; how they fit into the broader company objective at every opportunity in order to re-enforce the company’s stance on compliance and foster a culture conducive to complying with set rules and regulations including those related to internal policies such as codes of conduct. 2. Communication is key. Compliance is complicated enough to trained lawyers and those who it is their daily responsibility to deal with. Imagine an average employee whose daily function revolves around a function unrelated to legal, risk and compliance issues. It is imperative that you communicate early, honestly and completely with all employees and not just senior management about the company’s compliance obligations and requirements. Depending on the size of your company, a simple thing as sending out a bulletin about industry compliance issues in the news that affects your business helps to keep employees abreast of ‘red flags’ to look out for (no better way to learn than from others’ mistakes). Enlist department managers or line of business (LOB) managers as compliance risk owners who can pass on compliance best practices

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directly into their reports. This helps in keeping all employees involved in the compliance process, an important element to fostering a compliance culture. 3. Train not just for the sake of training. Because the ability of individual employees to act ethically and follow the processes that are essential for a company to comply with established laws is as much a function of their personal integrity as their awareness of the rules governing their company business, it cannot be emphasized enough the importance of tailored training. As gatekeepers, in-house counsel must educate employees in order to raise awareness of the Company’s expectations regarding ethics and the legal compliance risk associated with their work at a level and detail appropriate to their job function. Established trends require that as a minimum, all employees must comply, through certification in some cases, with the Company’s standards of conduct and to raise questions if the employee is concerned that the standards are not being met. By training on industry and functions specific to your company’s business, you are enabling employees to flag issues before they occur which directly enhances your compliance culture. As stated earlier, ethics and compliance is at its infancy in Nigeria. It is therefore necessary that any compliance training must include behavior modification training tailored to reorient employee’s views about the importance of integrity in business conduct. Employees will not be committed to compliance if their ‘core’ culture does not support or comprehend the importance of compliance. One is reminded in this instance of the old saying “you don’t know what you don’t

know”. If employees are not aware through examples set from their senior managers of the important rules and regulations which they must comply with; then a company cannot reasonably expect ethical conduct if the underlying culture of the company does not support ethics and compliance in its daily activities. Companies should understand that merely establishing compliance processes is not sufficient to control risks; they also need to foster a culture of communication and reporting, teach employees how to make ethical decisions in demanding situations,

employee to become a change agent able to identify potential compliance issues, or at the least, able to sense ‘red flags’ that the in-house counsel can then investigate. It is better to be proactive and learn about problems before they arise, than to react once a problem has surfaced and threatening to ruin a company’s reputation. CONCLUSION. One conclusion seems clear – the era of ‘see no evil, hear no evil, speak no evil’ approach to compliance is over. The present environment of increased regulation and enforcement activity ensures that it is no longer a question of whether regulators will come knocking, but rather when. Nigeria and Africa generally, is open for business. Foreign investors are clamouring for positions within the continent. With the increased direct investments comes the added scrutiny by regulators of transactions in the continent as a result of previous internationally publicised corruption cases. Consequently, international companies are making it a pre-requisite for joint ventures and partnerships that local companies demonstrate a robust compliance culture within their companies, so they can in turn demonstrate to their respective governments and regulators that they are not complacent in the corruption that is prevalent in the continent. In-house counsel and the senior management must work together to ensure that employees are aware of the company’s legal and compliance requirements and that they are in a position to continue to make the right choices when it comes to ethical and compliance decisions. These include reporting violations of company codes of conduct and, indeed, violations of any laws both international and local governing the company’s business activities.

“In-house counsel and the senior management must work together to ensure that employees are aware of the company’s legal and compliance requirements and that they are in a position to continue to make the right choices when it comes to ethical and compliance decisions”

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and continually monitor conduct for deviance with the established code of conduct. 4. Share compliance responsibilities across business functions. Almost all job functions have a compliance element. It is baffling then that far too many people lack the basic understanding of the compliance requirements inherent in their job function. Sharing breeds inclusiveness; inclusiveness creates a sense of ownership, and when employees feel that they own their work, positive results are achieved because they feel that they are integral to the company’s compliance efforts and that what they do will make a difference. Contrary to perception, ethics and compliance matter to employees, even in Nigeria. By simply encouraging employees to identify the compliance function within their job description, the in-house counsel empowers the


CORPORATE GOVERNANCE Elonna Ezulu, FCMB, Nigeria

Revised Code of Corporate Governance in Nigeria 2012 – “A Rising Tide That Will Lift All Boats?”

Elonna Ezulu, FCMB, Nigeria

“In the Nigerian banking industry, a common feature of most failed banks is governance failure either resulting from emergence of an overbearing CEO, or a disunited board”

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n a 1963 speech to respond to criticisms that a dam project he was inaugurating was a pork barrel project, the President, John F Kennedy used the aphorism ‘a rising tide lifts all boats’ to justify the conception that improvements in the general economy will benefit all participants in that economy and that economic policy should focus on the general macroeconomic environment first and foremost so that the ripple effect will improve specific sectors ultimately. President Kennedy’s aphorism can be successfully adduced to justify the regulatory interventions in the Nigerian financial industry. Similarly, adoption of the principles of good corporate governance and best practices by financial institutions has been identified as panache for building a sound financial sector in Nigeria. In a circular dated July 31, 2012 to banks and discount houses forwarding the exposure draft of the revised Code of Corporate Governance for Banks in Nigeria (the “Code”) for input, the Central Bank of Nigeria (the “CBN”) stated that it is currently reviewing the extant Code of Corporate Governance for Banks in Nigeria with the intention of strengthening governance policies, eliminating perceived ambiguities in and aligning the Code with current realities and global best practices. While this laudable step confirms that the Regulator is not asleep at the wheel, we are of the view that the Code when formulated may be as useful as a handbrake on a canoe in achieving the avowed intent without value added discussion and critical review of the exposure draft. At the risk of beating the gun, we have undertaken an analysis of the exposure draft with a view to assess if the draft will align with the CBN’s objective. We will undertake further discussions under the stated tripartite objectives. Strengthen i n g Gover n an ce Policies. Jeffrey A. Sonnenfeld in his celebrated work ‘What Makes Great Boards Great’ noted that good-governance advocates have over time developed several structural remedies for governance failures. Most of the remedies borders

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on rules, procedures, composition of committees, etc and are expected to produce vigilant, involved boards. However, good and bad companies alike have already adopted most of those practices. The failures of the boards of once great corporations such as Adelphia, Enron, Tyco, and WorldCom prove the inadequacy of this conventional wisdom as they met all the perceived performance oriented structural indicators. Sonnenfeld advocated that the most involved, diligent, value-adding boards may or may not follow every recommendation in the good-governance handbook but that what distinguishes exemplary boards is that they are robust, effective social systems. In the Nigerian banking industry, a common feature of most failed banks is governance failure either resulting from emergence of an overbearing CEO, or a disunited board, composed of strange bed fellows hurriedly put together from merging legacy banks for corporate survival to meet the CBN deadline for consolidation. In seeking to strengthen governance policy, the Code should not repeat the past mistake of giving the issue a lick and a promise, by focusing solely on structural remedies but must take a step further to institute factors that will make boards effective teams and not dysfunctional ones. Sonnenfeld observed that well-functioning, successful teams usually have chemistry that can’t be quantified and seem to get into a virtuous cycle in which one good quality builds on another. Dr. Nechi Ezeako in her column ‘The Governance Platform’ appears to have a mission statement running through most of the articles that corporate governance should focus on the spirit rather than the letters of the different codes of best practices. We are of the view that the focus of the draft for strengthening governance policies must therefore seek to instill self regulation rather than focus on CBN oversight since ‘a watched pot never boils’. Clause 2.4.5 of the draft Code introduces a novel concept by stipulating that the tenure of a Bank CEO shall be limited to a maximum of ten years and broken down into periods not exceeding five years at a time. In

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a developing country like Nigeria where sit tight directors turn corporations into personal empires with corporate governance and industrial democracy at its lowest ebb, the introduction of this seemingly unconventional concept is interesting and positive. This introduction can change the governance of Nigerian banks from the hands of the CEO, back to the hands of the shareholders. Unfortunately, this clause is diluted and diffused by the proviso that states that the CEO may be eligible for reappointment after a period of three (3) years following the expiration of his tenure as CEO. This proviso defeats the purpose of the ten year tenure and is prone to exploitation by the sit tight chief executives it intends to deter, as the CEO can simply put puppets in place for three years and resume his tenure thereafter. This will in turn vitiate the essence of the mandatory provision of a succession plan required under the Code. We are of the view that the proviso should be expunged and the CEO should serve a maximum of ten (10) years without an option of re-appointment or return.

Can banks get prior notice of the mopping up of their shares? It is a notorious fact that all the Banks in Nigeria are public companies and are traded on the floor of the Nigerian Stock Exchange (the “NSE”). Where such public shares are bought and CBN refuses consent, what are the immediate and future implications? The potential problem that may arise is that the investor may sue for right to purchase the shares of a public company creating additional litigation concerns for the banks. This position will be an investment disincentive on bank stocks that are the most traded shares on the NSE. Furthermore, how can banks identify investors who, through legitimate means and for legitimate purposes, are purchasing their shares through proxies? In the midst of these blazing contradictions and anachronisms, this provision may create more problems than it is intended to solve. We suggest that this clause should be amended to impose a duty on banks to ‘notify’ on being aware of the development.

Eliminating Perceived Ambiguities. One obvious lacuna in the draft Code is the absence of a ‘Definitions’ or ‘Interpretation’ clause. This absence creates ambiguity in understanding other provisions of the Code. For instance, clause 2.1.6 provides that “the board shall appoint the CEO as well as Top Management Staff…”. However, the draft Code fails to define ‘Top Management Staff’. In some organisations, top management begins from the level of Senior Manager and for others; it is a minimum of Assistant General Manager and above. The Code should provide some guidance on employee grading and what grade qualifies as ‘Top Management’. Another very interesting introduction in this draft Code is the provisions on ‘Equity Ownership’ as stated in clause 3.2.1. This provides that an equity holding of 5% and above by any investor shall be subject to CBN’s prior approval. While the intention of this provision is not in doubt, the practicality is suspect. It is understandable that the Regulator, CBN, having fought doggedly during the ‘Consolidation’ of the banking industry in 2005 to wrestle Nigerian banks from the ‘family ownership’ and ‘sit-tight directorship’ and brought the banks down to an era of new corporate governance and best practice, will not want to see the merits of the exercise go down the drain as a result of ‘recapture’ of the banks from the floor of the stock exchange. By the provision, CBN seeks to monitor bank takeovers and ensure that those previously removed or indicted, do not slip back into the system through agents or other disguised means. However, a common legal maxim founded on dictate of common sense is that ‘lex non cogit ad impossibilia’ (the law does not command the impossible). Here begins the contradictions.

Aligning the Code with Current Realities and Global Best Practices. The regurgitation of Codes of Corporate Governance of other jurisdictions and blind transplantation into the Nigerian jurisdiction without modification is counterproductive and is discouraged by this writer. Marlene Davies in the article titled ‘Impracticality of an International One-Size-Fits-All Corporate Governance Code of Best Practice’ rightly argues that the hypothesis that the ‘one size fits all’ approach to corporate governance, particularly the Anglo Saxon model, is not necessarily the right approach from a global perspective. In most instances where such uncensored adoption approach is chosen, the resultant code of best practice is about as useful as a chocolate teapot. Rather, convergence on fundamental features of shareholder protection, independence of directors and establishment of committees with room for local peculiarities is preferred. However, the above assertion does not justify abject disregard for precedent provided such precedent is not followed slavishly, but viewed as a guide and applied with necessary modification since no two cases are exactly the same. This principle appears not to have been followed going by the conspicuous absence of a terms of reference in the review. Precedents for codes of corporate governance for the financial industry exist in other jurisdictions. Perhaps, the most persuasive is the ‘Walker Report’ (David Walker ‘A Review of Corporate Governance in the UK Banks and other Financial Industry Entities’ 26 November, 2009) in the UK due to the similarity in our ‘corpus juris’ and the fact that the Nigerian system is modelled after that of the UK.

“The regurgitation of Codes of Corporate Governance of other jurisdictions and blind transplantation into the Nigerian jurisdiction without modification is counter-productive and is discouraged”

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We are of the view that a guideline of the steps to ‘strengthen Governance Policies’ should be articulated and recommend that it should focus on data integrity from the banks, financial stability, disclosure, transparency, corporate governance and risk management to ensure that the gains of the ongoing reforms were not reversed. Other provisions that elicit our comment for divergence from global best practices include clause 2.5.2 of the draft Code which requires the Board to issue the terms of reference for each committee in writing. The draft ought to provide indicative terms of reference for the different committees to act as a guide to the boards as seen in international codes of best practice. Similarly, the draft Code incorporated the role of major stakeholders and innovatively included the right/role of shareholders associations in clause 3.5.1. This innovation is commendable in view of the increase in their participation in governance of Nigerian public quoted companies presently. However, the draft failed to provide for the role of the company secretary who has been described as ‘pivotal’ in corporate governance in the Combined Code (UK). This lacuna should be filled. The advisability or otherwise of including a sanctions clause has been considered by this writer and perceived as a likely domain of attacks and debate. Sanction grids

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are generally alien to codes of governance as they can be perceived as squalid, tortuous and bereft of any governance succor. However, we have already noted the danger of blind acceptance of international codes of best practice without taking into consideration cultural and social differences in the geographical areas of application. In the Nigerian reality, the practicality of the “Comply or Explain” approach of the Combined Code (UK), “Apply or Explain” of King II in South Africa, “Comply or Disclose” of the Guidelines on Corporate Governance for Licensed Institutions (Malaysia), “Adopt or Explain” of the Netherlands Code is suspect. The ‘Comply or Else’ approach of the Sarbanes Oxley Act (US) appears more suitable to Nigeria and the draft is right in taking this approach to avoid sacrificing utility for aesthetics and making the code all dressed up and nowhere to go. In conclusion, we hope that the new draft Code when enacted will not be limited to pages of circulars but followed by meticulous practicality to inculcate the letter and spirit of good corporate governance in the Nigerian financial industry. This will greatly depend on the unity of purpose of all stakeholders since a chain is no stronger than its weakest link. Only time will tell if the Code is a day late and a dollar short of all mod cons.

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O ve r 3 0 0 ye a r s o f e x p e r i e n c e i n l e g al we a r t a i l o r i n g a n d w ig m a k i n g . E de & R ave n s cro ft is o n e o f t h e wo rld’s le a din g s u p p l ier s o f c ere mo ni al d res s fo r Co ro n a t io n s, S tate Op e n in g s o f P a r l ia men t and o the r R oya l , Civic, L ega l a n d Ac ade m ic ceremo n ies .

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REGULATION Anthony Idigbe SAN, PUNUKA Attorneys & Solicitors

Insolvency Practice in Nigeria Time for Regulation

Anthony Idigbe, SAN Managing Partner

“However, the effectiveness of any insolvency system cannot be guaranteed if there is no proper and efficient regulation of its main actor, to wit, the insolvency practitioner/ professional”

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he down turn in the global economy and its effects on corporate bodies and businesses has made the need for insolvency practice very essential and imperative. The World Bank Group in its periodically published notes from the Financial & Private Sector Development Vice Presidency office stated that “the 2008 financial crisis and consequent rise in corporate insolvencies highlight the clear need for efficient bankruptcy systems to liquidate unviable firms and reorganize viable ones- and to do so in a way that maximizes the proceeds for creditors, shareholders, employees and other stakeholders.” (see note no. 328 titled “Saving Viable Businesses- The Effect of Insolvency Reform” and published in the View Point Public Policy for the Private Sector). However, the effectiveness of any insolvency system cannot be guaranteed if there is no proper and efficient regulation of its main actor, to wit, the insolvency practitioner/ professional (“IP”). A common thread in well developed insolvency jurisdictions is that the profession is reasonably very well regulated and effort is made at averting fraud and abuse on the part of insolvency practitioners who are afforded very broad powers by reason of their office and can virtually deal with the assets of the debtor company in any manner they deem fit. It is also apparent that modern approach to insolvency is geared towards ensuring that insolvency professionals are suitably qualified and trained with managerial and administrative skills to effectively carry out complex cross border insolvency work. This paper will discuss the framework or lack of framework for regulation of the practice of insolvency in Nigeria, with comparative and contrasting analysis of developments in historically (UK) or continentally (Uganda/South Africa) related jurisdictions. It will conclude with suggestions for improvement of the current framework.

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Uncertainty as to who is an IP in Nigeria. It is commonly accepted in most jurisdictions that an insolvency practitioner is a person, most certainly a qualified professional, appointed to carry out duties that entail management and or realisation of assets in relation to the business/ estate of an individual debtor or those of an insolvent company with or without the formal involvement of the court. However, the first step towards professionalising the practice of insolvency and effective regulation of insolvency practitioners lies in defining precisely the criteria for and categories of person who qualify to be described as “Insolvency Practitioners” otherwise called IPs. Depending on the jurisdiction, IPs would include persons functioning in the office of a supervisor or nominee, administrative receiver, (provisional) administrator (UK), business rescue practitioner (South Africa) or more generally trustee in bankruptcy, official receiver, receiver/manager, special manager, and (provisional) liquidator (generally obtainable in all common law jurisdictions. Whatever may be the case, insolvency framework of most jurisdictions would make effort to provide a statutory definition or description of who is an IP. For instance, S. 388 of the UK Insolvency Act, 1986 (as amended) defined an IP as any person acting in the capacity of a (provisional) liquidator, an administrative receiver, an administrator, a nominee or supervisor of a CVA but not a receiver appointed under a fixed charge or the official receiver. It would seem that the approach in the UK about who is an IP is limited to where some collective proceedings (i.e. arrangement and procedure involving general creditors with or without active court involvement) is initiated. This seems also to be the approach in South Africa having regard to the definitions in the important Chapter on Business Rescue Practitioners (ss. 128 to 137 South African CA) and other provisions relating to winding up. Section 2 of

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the recent Ugandan Insolvency Act 2011 (the “UIA 2011”) defines an IP as a person who is not an official receiver but who is qualified to act as an insolvency practitioner within the meaning of section 203 UIA 2011. The latter provision then provides an exhaustive list of persons who are IPs for the purpose of the Act and for the purpose of regulation. In contrast, the general insolvency system as provided under Nigerian company law, to wit, the Companies and Allied Matters Act 1990 (the “CAMA 1990”), provides no definition or basic list of all insolvency officers available (see section 567 CAMA 1990). The same situation obtains indeed even under special insolvency regimes created for certain key sectors of the economy such as banking (E.g. Nigerian Deposit and Insurance Corporation (NDIC) Act 2006; Asset Management Corporation (AMCON) Act 2010). In the absence of a clear definition, it would appear that anyone could claim to be an IP. Indeed practitioners in receivership and financial consultants/ advisers on assets restructuring lay claim to being IPs and are so appointed without any requirement as to qualification, registration or expertise.

The Nigerian and Ugandan legislative insolvency regimes used to be very similar in terms of their substantive operative law and conspicuous lack of statutory regulation of the insolvency profession. However, with the enactment of an Insolvency Act in Uganda in September 2011, things have improved in Uganda: Part VIII of its Insolvency Act 2011 titled Official receiver and “regulation of insolvency practitioners” however does not make provisions for issues like licensing, educational and experience qualifications. However its section 204 establishes more specific criteria for appointment of an IP in that it makes reference to eligibility of certain categories of professionals such as lawyers, chartered accountants or chartered secretary to practice as IPs.

“In the absence of a clear definition, it would appear that anyone could claim to be an IP. Indeed practitioners in receivership and financial consultants/ advisers on assets restructuring lay claim to being IPs and are so appointed without any requirement as to qualification, registration or expertise”

Legal framework for regulation of IPs in Nigeria From a combined reading of the provisions of sections 279 to 283 CAMA 1990 and 390, 393, 422 to 425 CAMA 1990, the implication of the appointment of an IP is that the powers of those who normally run the affairs of the company as a going concern cease or are suspended. In the twilight zone of the company, the IP assumes the rights of the directors pending such time as the company is rescued or liquidated. From the above, it becomes clear that IPs must be suitably qualified persons/ professionals who can be held accountable. The critical questions then are, who can be appointed as IP, what are the educational or licensing requirements as well as the level of experience expected from an IP? These are questions which legislation in many African countries failed to adequately answer. Certainly, CAMA 1990 also did not adequately address this issue. The stark absence of such regulation resonates all the more having regard to the fact that the 1999 Constitution of the Federal Republic of Nigeria (the “CFRN 1999”) under item 49 of Schedule 2 (Exclusive Legislative List) made pursuant to S.4 of the CFRN 1999 mandates the national legislator to make laws for the regulation of professional occupations.

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What does CAMA 1990 provide? Nigerian CAMA makes several provisions regarding the powers/duties of the IPs but does not make any provisions regarding their qualifications, standard, ethics, and discipline to curb incidences of fraud/defalcation, incompetence and mismanagement having regard to the position of trust that they occupy and the control given to them over the assets of the insolvent company. Given the generic perception of receiver/manager as IPs, a review of the provisions of sections 387 to 400 of CAMA 1990 dealing with receivership and managership will show that attention is only given to the procedure for appointment of receiver/managers (including mandatory requirements of notification thereof to the public under section 387 to 392, 396 to 400), duties, powers and liabilities (sections 393 and 394 CAMA 1990), and the legal consequences of such appointment (subsection 393(4) CAMA) and not to the qualification or skill of the person to be so appointed. Under sections 387 to 389 CAMA 1990, appointment of a receiver is made having regard to the basic considerations that a) the IP must be found in law to be a capable person (i.e. exclusion of an infant or found by a competent court to be of unsound mind), b) the person appointed should not have had any problem with integrity or conflict of interest related issues. CAMA 1990 however is regrettably silent on issues such as professional competence and qualifications for appointment of the IP. Even though sections 392, 396, 397, 398 and 399 CAMA 1990 extensively deal with notification and reporting obligations of a receiver, it only imposes minor financial sanctions for breach of those


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duties (section 396(7) CAMA 1990). Similarly, CAMA 1990 deals extensively on the various aspects of the modalities for appointment, as well as duties and responsibilities of the IP functioning in the office of a liquidator. For instance, section 422 of CAMA 1990 deals with liquidator’s appointment (and the legal effect thereof vis a vis directors’ powers), remuneration and title whilst sections 425 to 430 and 436 discuss powers, duties and obligations of the liquidator as an officer of the court and a trustee acting in the best interests of the creditors and contributories. Section 432 CAMA 1990 gives power to the Corporate Affairs Commission (CAC) to investigate any complaint made by any creditor or contributory against a liquidator in the discharge of his or her duties. Liquidators and Special Managers are required to give security upon appointment. Liquidators are also enjoined to keep records including cash book, which the Committee of Inspection is to audit within 3 months of submission thereof in Form 70 (see R 42, 43, 149 Companies Winding Up Rules 2001). However, these provisions unlike in the UK and South African jurisdictions fail to address the other critical aspects of regulation of the profession in Nigeria. The result is that the target company, stakeholders in the target company and ultimately the interest of the general public and the economy at large are not well protected from a potentially rogue IP. International Best Practices. Regulation of Insolvency profession and practice in South Africa and UK. The South African Companies Act No. 71 of 2008 was amended by the Companies Amendment Act No. 3 of 2011 which introduced a Chapter 6 on business rescue, making robust provisions on the regulation of IPs, by placing emphasis on the qualifications, training, experience and professional certification of IPs. For example, Section 138 of the SA Companies Act requires that a Business Rescue Practitioner (BRP) must either be a member of good standing of a legal, accounting or business management profession accredited by the Companies and Intellectual Properties Commission (the “CIPC”) or licensed by CIPC. The CIPC is given discretion to determine eligibility for

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issuance of license to an aspiring BRP. Furthermore, Regulation 127 of the Act in classifying BRP and companies into three categories, imposes a subjective standard for the qualification of an intending BRP, by which his qualification to act as an BRP in any given case will depend on the size of the Company and the years of experience of the proposed IP. This provision has the advantage of being customer specific to ensure that the IP also has the requisite experience to handle the case at hand. UK Insolvency Act 1986 (the “UKIA 1986”)as amended makes similar requirements as in those of South Africa, however the requirement of membership to accredited professional body and licensing is conjunctive (See sections.389 & 390 of UKIA, 1986). Under the UK insolvency regime, the licensing is for 3 years, renewable on the basis of certain additional number of hours of insolvency related work. Under sub-section 390(3)(b) the UK Act also requires security to be provided by the IP for the proper performance of his functions. The security takes the form of two separate bonds and an IP cannot act in addition to his formal authorisation except and until he has complied with the requirement of bond. Conclusion. The IP occupies a crucial position in a company during its hour of distress and this underscores the need for an effective legislative regime setting out rules and procedures to guide and guard the practice of insolvency in Nigeria to avoid fraud/defalcation or incompetence in the profession as well as build the economy through the reorganisation of viable business and the liquidation of unviable ones at the lowest possible cost to all stakeholders. Substantial effort is being made in the private sector by the Business Recovery and Insolvency Practitioners Association of Nigeria (BRIPAN), in drafting legislation for a comprehensive reform of the existing general insolvency framework in Nigeria and lobbying for the passing of an Insolvency Bill in Nigeria. It is hoped that if these efforts are successful, Nigeria will have a well regulated insolvency regime for the practice of IPs which will adequately protect all stakeholders in accordance with international best practices.

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REGULATION Chinedu Okpaleke, PORRES + REGIS, Legal Practitioners

Cyber Security and Cyber Crime – Adequacy of regulatory framework

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ollowing a recent survey by the International Telecommunications Union (“ITU”), Nigeria was ranked the largest, fastest growing Internet market in Africa. In addition, according to Internet World Statistics, Nigeria, with its 45 million Internet users, has the highest number of users in Africa. The quick adaptation to ICT technologies in Nigeria continues to yield increased online business transactions. In spite of this widely acknowledged outstanding growth, Internet use and online activities in Nigeria have remained largely unguided by adequate, Internet or technology specific legislative and regulatory framework. In terms of regulatory oversight, a multitude of government

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fall appallingly short of requirements as they fail to address the larger issues involved in electronic/Internet/ cyberspace related crimes, which by their borderless nature and scope, aided by the ubiquitous and increasing accessibility of smart phones, iPads, laptops and other technological tools, have recorded alarming increase in recent times. Many of the present and emerging trends in Internet based activities challenge the continued adequacy or relevance of existing traditional legal statutes. In assessing this topic, one may be tempted to say that theoretically, it may appear as if there is a plethora of traditional regulatory guidelines and structure which could, to some extent, guide Internet use and cyberspace conduct

“In terms of procedural law, as Internet use continues to grow and as technologies continue to attract wide spread use, the issues of privacy and data protection will become more pertinent”

Chinedu Okpaleke, Managing Consultant

“Internet use and online activities in Nigeria have remained largely unguided by adequate, Internet or technology specific legislation and regulatory framework”

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agencies are currently involved in Internet regulation in Nigeria, including the Nigerian Communications Commission (“NCC”), the National Information Technology Development Agency (“NITDA”) and to some extent the Economic & Financial Crimes Commission (“EFCC”). In 2004, the Nigerian Cybercrime Working Group (“NCWG”) was established, followed later in 2007 by the Directorate for Cyber-security (“DfC”). Still, at present, Nigeria has no law regulating online content or online conduct specifically. The existing laws (the Advanced Fee Fraud and other offences Act, 2006, (the “AFFO Act”) which, at best, is an appendage so to say, of existing traditional criminal laws) are directed to a limited extent, towards fighting online/Internet scams, credit card fraud, regulating cybercafés etc. Although some of these laws have recorded a few minor successes, they

(since online activities may as well be subject to pre-existing legal concepts such as laws relating to contracts, defamation, intellectual property, evidence, tort, broadcast/print media, as well as provisions of criminal law, among others). In practical terms however, it is quite clear that more radical overhaul is required and a legal system which focuses on issues of control and ownership of physical, animate or inanimate objects must, of absolute necessity, acquaint itself with current developments within its environment, as well as globally and keep updating to suit current requirements therein. Apart from the recently enacted Nigerian Evidence Act, 2011 (a replacement of the outdated Evidence Act, 1945 and its updates of 1948, 1958 and 1991), which has expanded admissible evidence to include electronically generated evidence and goes on to


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specifically describe the word ‘document’ to include “any device by means of which information is recorded, stored or retrievable including computer output’’ (section 258 (1)d), as well as listing in Section 84, conditions precedent under which statements contained in a document produced via a computer would be admitted as evidence in a court of law in Nigeria, among other pertinent provisions such as authentication of electronically stored information or , electronic signatures etc – most traditional statutes in Nigeria have not in their provisions, recognised the wide ranging entry and use of computers and technology in almost every aspect of legitimate and illegitimate day to day activities. The provisions of the Evidence Act, 2011 were relied upon in a recent Supreme Court ruling in the case brought against former Aviation Minister Femi FaniKayode by the EFCC – FRN v Femi Fani-Kayode where the court ruled that a computer generated print-out of the defendant’s statement of account was admissible in evidence. This effectively laid to rest previous case law precedents as set down in UBA Plc v S.A.F.P.U. (2004) 3 NWLR Part 861 p.516 and the Supreme Court’s decision in YESUFU v ACB Ltd (1976) ANLR Part 1, 328 where the court had ruled that a computer printout cannot be legally admissible as an entry in a banker’s book. The challenge, far from being the identification of legal provisions which are relevant to Internet use and activities thereon, is rather, the development of appropriate, relevant Internet and technology specific legislation and mechanisms for effective law enforcement. For instance, by its very nature, the Internet crosses many traditional boundaries. It can be used to publish visual materials, text and sound. Many Nigerian radio stations now stream their programmes live online and it is possible to listen in on many of their programmes over the Internet, from almost anywhere in the world. As broadband constraints and issues reduce (which is expected to start happening soon, with the recent inauguration of the Presidential Committee on Broadband Development) television broadcasts will follow the same trend. Through the use of some software packages like MP3 etc., the Internet is used to disseminate audio works, while video works are instantaneously disseminated to a global audience via Youtube and other similar platforms. The Internet is also now a channel for voice telephony or voice-video telephony (as evidenced by increasing use of Skype for international calls and to a lesser extent, the Facebook video-call feature etc.). Traditionally, technologies such as telephony, cinema/ video, audio broadcasting and print media have long been disparate and subject to different, diverse regulatory regimes and policies. The recognition of the convergence of these technologies through the Internet, as evidenced in the above instances, is of increasing importance

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in the development of necessary, specific and relevant regulatory policy and requires commensurate updating of our already existing traditional statutes since, by virtue of technological input, the scope, ramifications and potentials of most activities are greatly enhanced. The fact that these technologies are converging makes it imperative that regulatory regimes in the different relevant sectors should move together and that the Nigerian Communications Act, 2003 and other relevant statutes should of necessity be updated and/or amended to reflect these developments in the telecommunications, broadcasting, and information technologies. Today, just as legitimate and ethical computer/ Internet based activities intersperse every sphere of human endeavour, the Internet has also increasingly become a flourishing ground for wide ranging illegal activities, including criminal acts such as hacking, child pornography, cyber-stalking, online identity theft, credit/ debit card fraud, Denial of Services (DOS) attacks, malware attacks, computer fraud (email scam, Internet fraud etc), etc. Unfortunately, the AFFO Act, which at present, is the “make-shift” law that deals with internetoriginated fraud in Nigeria, as earlier mentioned above, only covers fraud, regulation of Internet service providers and cybercafés. It does not deal with the broad spectrum of computer misuse and cyber crimes. To date, of the six draft Bills which have so far been presented before the Nigerian National Assembly, all of which deal with computer misuse, security and cyber-crime, none has been signed or enacted into law. The six draft bills, namely: the Computer Security and Critical Information Infrastructure Protection Bill 2005, the Cyber Security and Data Protection Agency (Establishment, etc) Bill 2008, the Electronic Fraud Prohibition Bill 2008, the Nigeria Computer Security and Protection Agency Bill 2009, the Computer Misuse Bill 2009 and the Economic and Financial Crimes Commission Act (Amendment) Bill 2010, all h a v e

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remained pending and due perhaps to inadequacy of use, the issues of privacy and data protection will become follow-up, lack of will or duplication of efforts, were not more pertinent. Measures which become necessary for enacted into law. The aforementioned Computer Security acquisition of relevant evidence in cases of Internet and Critical Information Infrastructure Protection Bill or computer related crimes in other climes, are proving which was proposed in 2005, requires internet service controversial as these measures, for instance, sometimes providers (“ISPs”) to retain user data and to make same involve the interception of communications which, in most available to law enforcement agencies, if so ordered. This cases are private or restricted to the persons concerned. bill in its unrevised format creates lacunae which may Under the ECBC, (Articles 16 – 20) law enforcement serve as loophole for extensive filtering or Internet control, agencies can: surveillance and other anti-privacy issues. This calls to • Obtain orders requiring the preservation of data question, issues of Data protection, privacy etc. (held perhaps by an ISP) which may be considered to The Harmonised Cyber Security Bill 2011 made indicate criminality and which may be deemed to be possible by a committee convened by the NSA, has been vulnerable to destruction; described as a unified, • Require the retention of traffic comprehensive legal framework that aims “Many of the present and emerging trends data; • Require to enhance cyber the in Internet based activities challenge production of data security and protection of computer the continued adequacy or relevance of held on a computer system; systems, networks existing traditional legal statutes” • Require ISPs to and electronic supply subscriber communications, data information; and computer programmes, intellectual property and privacy rights. It criminalises specific computer and internet • Provide for the search and seizure of computer data in the context of a criminal investigation; related offences, including unlawful access to a computer, data forgery, unauthorised disclosure of access codes, • Empower the interception of electronic communications; computer fraud, identity theft, child pornography, unlawful • Collect and require an ISP to collect real-time data and pass this on to a law enforcement agency. interception, cyber squatting, racist and xenophobic offences etc. It further provides for the security and protection of The scope of these provisions may be said to infringe critical information infrastructure and deals also with issues on privacy and perhaps even certain fundamental rights of jurisdiction, powers of search and arrest, obstruction and it would be interesting to see how these statutes are of law enforcement officers, prosecution, forfeiture interpreted through case law and in application, as more of assets, compounding of offences, compensation, signatory and non-signatory countries adapt their domestic regulatory issues, extradition, Mutual Assistance Requests, laws in line with the EU Conventions and other international expedited preservation of data etc. The provisions of the standards/best practices. In the light of increasing Internet use and interface draft Bill seem to have met the specifications and content requirements for cybercrime legislation, even when of technology in daily activities as evidenced by the reviewed against international conventions and standards imminent transition to a cashless economy, it’s important set by the Council of Europe’s Budapest Convention, that all necessary regulatory policies and legislations are 2001 (“ECBC”) and the ITU Toolkit on Cyber Security. thoroughly worked out and a robust regulatory framework In terms of procedural law, as Internet use continues to put in place to ensure adequate checks and balances within grow and as technologies continue to attract wide spread the system.

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REGULATION Dr. Khrushchev Ekwueme, Olaniwun Ajayi LP, (Nigeria)

The Cashless Payment System: Adequacy of the Regulatory framework

Dr. Khrushchev Ekwueme, Partner

“The New Cash Policy is aimed at reducing (and not eliminating) the use of physical cash in the Nigerian economy”

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igeria is still a cash-based economy with retail and commercial payments primarily made in cash. In recognition of the significant drawbacks of a cash-based economy and the pivotal role of an efficient payment system to economic development and financial stability, the Central Bank of Nigeria (“CBN”) initiated the National Payment Systems Policy Objectives (“NPSPO”). A key component of the NPSPO is the migration from a predominantly cash mode of payment to cash-less modes of payment in Nigeria. The CBN in 2011 issued a new policy on cash-based transactions. The thrust of the new policy (“New Cash Policy”) is to deter the use of physical cash in effecting payments and to foster payments through electronic channels. This article essentially provides an overview of the New Cash Policy and also critically examines the existing regulatory framework for cashless payment system in Nigeria with a view to demonstrating its inadequacies. The article rounds off with suggestions on how to improve the regulatory regime. Overview of the New Cash Policy The New Cash Policy is aimed at reducing (and not eliminating) the use of physical cash in the Nigerian economy. The key components of the New Cash Policy are: • the introduction of a “cash handling charge” on daily cash withdrawals or cash deposits that exceed N500,000 for individuals and N3,000,000 for corporate bodies; • the limitation of cash pick-up services to companies licensed to provide cash pick-up service; • the prohibition of banks from carrying on cash-in-transit lodgement services rendered to merchant-customers and the imposition of appropriate sanctions which will be meted out on banks which violate the policy; and • the non-eligibility of third party cheques above N150,000 for encashment over the counter.

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An Overview of the Existing Regulatory Framework A cashless system can only function optimally if there is an enabling legal framework with adequate measures for: • the licensing of service providers and agents; • competition; • the security of funds and data; • the prevention of anti-money laundering and cybercrimes; • dealing with electronic contracting issues; • liability of the parties to an electronic payment transaction; and • regulating disruption of the cashless payment channels. Presently, there are four notable regulations issued by the CBN to facilitate the implementation of the cashless payment system. These are (i) the Guidelines on Electronic Banking 2003; (ii) the Regulatory Framework for Mobile Payments Services in Nigeria 2009; (iii) the CBN Standards and Guidelines on Automated Teller Machine (ATM) Operations in Nigeria 2010; and (iv) the Guidelines on Point of Sale (POS) Card Acceptance Services 2011. In 2003, the CBN introduced the Guidelines on Electronic Banking to impose certain data protection obligations on banks in respect of their customers’ information and data. The Guidelines also address issues of adequate security and risk control in electronic and mobile payment transactions. Unfortunately, the Guidelines apply to banks only. Given that the key players in the Nigerian payments system transcends banks and include Discount Houses, the Nigerian Stock Exchange, Switching Companies and Telecommunication Companies, it is imperative that the pathway to electronic transactions is open to non-banks and is also protected from initiation to completion of a cashless transaction. The Regulatory Framework for Mobile Payments Services in Nigeria (“the Regulatory Framework”) was issued by the CBN in 2009 in a bid

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to encourage the payment of services through mobile phones. The overriding objective of the Regulatory Framework is to achieve a nationally utilised and internationally recognised payment system. Some other objectives of the Regulatory Framework are the provision of an enabling environment for mobile payments services in reducing cash dominance in the Nigerian economy; specification of minimum technical and business requirements for various participants in the mobile payments services industry; stipulation of roles and responsibilities of participants in the provision and usage of mobile payments services; and the provision of broad guidelines for implementation of processes and flow of mobile payments transactions from initiation to completion. The Regulatory Framework also imposes an obligation on the CBN to establish an Office of the Ombudsman primarily to receive, investigate and resolve specific complaints, promote consumer education and awareness, sustain the confidence of consumers in mobile payments schemes, create an environment that encourages expeditious resolution of complaints and ensure instant compensation. Towards this end, the CBN in March 2010 established the Consumer and Financial Protection Division (CFPD) which operates as a division within CBN’s Financial Policy and Regulation Department and is entrusted with the mandate to: educate consumers and defend interests; detect money laundering and combat financial terrorism; and enhance awareness. Furthermore, the CBN sponsored the Nigerian Financial Ombudsman Bill (“FOB”) which is still pending before the House of Representatives. The FOB presents the most recent effort to protect consumers of financial products and services, by providing an alternative avenue for redress against the financial products and services providers. The FOB seeks to establish the Office of the Nigerian Financial Ombudsman which shall be an independent entity charged with

the responsibility of enquiring into and settling complaints and disputes between: (i) individuals or corporate; (ii) financial institutions; (iii) regulators in the financial services sector; and (iv) financial institutions and regulators of the financial services sector. The Guidelines on Automated Teller Machine (ATM) Operations in Nigeria were issued by the CBN in 2010 to provide for minimum standards and rules for the operation of ATM services in Nigeria and to ensure the efficiency of ATM services and the protection of customers. Specifically, it provides for standards on ATM technology specifications, card industry data security standards, ATM deployment, charges on the use of ATM, and

inevitable that the personal data of customers such their names, home addresses, and credit card information will be exchanged in the course of effecting cashless transactions. Unlike the United Kingdom where there is specific legislation on data protection, there are no specific laws on data protection in Nigeria. For example, by virtue of the Data Protection Act 1998 applicable in England and the Privacy and Electronic Communication (EC Directive) Regulations 2003, data must be processed fairly and for specified, lawful purposes. Also, requested data must be relevant and not excessive and sensitive data may not be processed generally without the consent of the data subject. These data protection principles underscore the need for specific legislation to address the purpose for which the personal data is processed, the prohibition of unlawful processing of personal and imposition of stringent penalties for breach of data protection provisions in the law. Nigeria must consciously strive to ensure that personal data (in whatever form) of Nigerian citizens and residents is safeguarded. This will strengthen the right to privacy enshrined in Section 37 of the Constitution of the Federal Republic of Nigeria 1999 (as amended).

“E-payments raise the potential of cybercrimes such as identity theft and fraud, spamming, unauthorized access, cyber bullying and cyber stalking”

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dispute resolution in the event of irregularities in the account of an ATM user and liability shifting. The Guidelines on Point of Sale (POS) Card Acceptance Services (the POS Guidelines) introduced in 2011, regulates the operation of POS service providers. The POS Guidelines were developed to provide minimum standards and requirements for the operation of POS card acceptance services within POS environments. The Regulatory Inadequacies The extant pieces of subsidiary legislation in Nigeria (some of which will be considered later on in this paper) do not address all the challenges associated with the implementation of a viable cashless system. There is therefore the need to create a more enabling regulatory regime for the cashless system in Nigeria, which should, inter alia, address the following challenges. Data Protection. The need for data protection is essential to the cashless modes of payment. This is because it is

Sale of Goods. Some of the general laws in Nigeria which may impact on electronic payment transactions include the Sale of Goods Act 1893 and the sale of goods laws applicable in various states in Nigeria. These laws are however obsolete and in desperate need of reform as they do not address the complexities of modern day e-commerce. Amending these laws in line with commercial realities will boost the confidence of consumers in the system and facilitate commercial transactions in the country. Cyber Crimes and Money Laundering E-payments raise the potential of


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A key component of the NPSPO is the migration from a predominantly cash mode of payment to cash-less modes of payment.

cybercrimes such as identity theft The Cybercrime Bill also has should be passed into law as quickly and fraud, spamming, unauthorized provisions on the statutory duties as possible. The role of the tele-communication access, cyber bullying and cyber of service providers and rules on stalking. The Economic and Financial the retention of records by service industry cannot be over-emphasized as most cashless Crimes Commission Act 2004 (“EFCC Act”), “The New Cashless Policy is laudable but the transactions are the Money Laundering effected through the (Prohibition) Act, regulatory regime to ensure its seamless use of mobile phones 2011, the Advanced Fee and tablets which rely Fraud and Other Fraud implementation is far from adequate” on telecommunication Related Offences Act channels. Enhancing 2004 and the Criminal Code Act 2004, providers. The said Bill is still the performance of the existing are the major legislation relating to pending at the Nigerian House of telecommunication infrastructure and financial and other economic crimes in Representatives and the Senate. upgrading them periodically will go Nigeria. Worthy of note is the Nigerian a long way in boosting the cashless Cybercrime Bill, which, if passed into The Way Forward. system in Nigeria. law, will criminalise a wide range of The New Cashless Policy is laudable There is the need for greater activities that could be perpetrated but the regulatory regime to ensure collaboration between the various through the use of cashless modes its seamless implementation is far stakeholders (public and private) to of payment such as computer identity from adequate. It is thus suggested ensure private sector participation theft and impersonation, illegal that there should be adequate data in the evolution and implementation communication using electronic protection legislation in Nigeria along of policies and rules on the cashless messages, illegal interception, data the lines of the UK model. Similarly, system. Finally, the education of the and system interference and misuse the Nigerian Financial Ombudsman unbanked people in Nigeria is crucial of devices. Bill and the Nigerian Cybercrime Bill to financial inclusion.

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Lecture

Law Digest Winter 2012

*

By Gbenga Oyebode MFR – Managing Partner – Aluko & Oyebode, Nigeria

Salient Features of the PIB. The objectives of the Bill include: (a) creating a conducive business environment for petroleum operations;

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picture by Kenny Passley

T

he Petroleum Industry Bill (the “PIB” or the “Bill”) is perhaps the most talked about piece of legislation in Nigeria ever, given the far reaching reforms which it proposes to an industry which is the single most significant contributor to the national economy. Originally introduced in December 2008, the Bill has undergone numerous revisions and has been the subject of intense debate by stakeholders. Expectedly, the prospect of a new fiscal regime which almost certainly would guarantee increased government take elicited strong opposition from the international oil companies which argued that the Bill would create a harsh environment that would materially change the economics of new and existing investments. Initial reactions to the Bill prompted intense discussions among stakeholders in the industry and signalled the commencement of a process of multiple revisions of the Bill in an attempt to produce an acceptable draft. This revision process culminated in a proliferation of diverse and oftentimes irreconcilable versions of the Bill. This, more than any other singular factor, has militated against all efforts to pass the Bill since 2008. Deliberations on the PIB were suspended and only came back on the agenda on 18th July 2012, when President Goodluck Jonathan, presented a new version of the Bill to the National Assembly for consideration and enactment. The resurgence of the Bill can be traced to a number of factors: the gradual cessation of investments in the sector as a result of uncertainty as to the Bill and its potential impact on the industry, the emergence of alternative petroleum investment opportunities in other sub-Saharan Africa countries such as Ghana, Angola, Sao-Tome and Principe and more recently, the attempt by the Nigerian Government to deregulate the downstream industry in January 2012, which led to an increase in fuel prices and the resultant nationwide strike. The Federal Government on its part, and as part of efforts to contain the strike, committed to expedite the reform of the oil and gas industry by, among other things, fast-tracking the passage of the PIB. Subsequently, the Federal Government inaugurated a Special Task Force with responsibility to produce a harmonized version of the Bill which would be re-presented to the legislature for passage. The current Bill which has now been submitted to the legislature is believed to be largely the product of the Special Task Force and its Technical Committee.

“the Government will do well to consider and give due regard to the genuine concerns of stakeholders especially the international oil companies and other regions of the country regarding what is perceived as the potential adverse impact of the regime proposed under the PIB” (b) enhancing exploration and exploitation of petroleum resources for the benefit of Nigerians; (c) optimizing domestic gas supplies particularly for power generation and industrial development; (d) establishing a progressive fiscal framework that encourages further investment in the petroleum industry while optimising revenue accruing to the government; (e) establishing commercially oriented and profit driven oil and gas entities; deregulating and liberalising the downstream petroleum sector; (f) creating efficient and effective regulatory agencies; (g) promoting openness and transparency in the industry; and (h) encouraging the development of Nigerian content. 1. The Regulatory and Institutional Framework 1.1 Regulatory Institutions created under the PIB • The Minister of Petroleum Resources. • Upstream Petroleum Inspectorate. • Downstream Petroleum Regulatory Agency. • Petroleum Technology Development Fund. • Petroleum Equalisation Fund. • Petroleum Host Communities Fund.


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THE PETROLEUM IDUSTRY BILL - AN OVERVIEW

1.2 Commercial entities created under the PIB • National Petroleum Assets Management Corporation (established as a holding company) to acquire and manage investments of the government in the Nigerian upstream petroleum industry • Nigerian Petroleum Assets Management Company Limited (a subsidiary of the National Petroleum Assets Management Corporation to be incorporated as a company limited by shares under the Companies and Allied Matters Act) to take over certain assets and liabilities of the NNPC including: unincorporated joint ventures; bonds, loans, financing arrangements, joint operating arrangements; and litigation and staff. • National Oil Company (to be incorporated as a public company limited by shares under the Companies and Allied Matters Act) to take over certain assets held by NNPC on behalf of the Federal Government excluding unincorporated joint ventures and assets held by the National Gas Company. • National Gas Company Plc (to be incorporated as a public company limited by shares under the Companies and Allied Matters Act) to take over certain assets held by NNPC on behalf of the Federal Government excluding unincorporated joint ventures and assets held by the National Oil Company. 2. Licensing Regime for Upstream and Downstream Operations under the PIB The PIB introduces a new licensing regime to replace the existing regime. Consequently, the Oil Exploration Licence, the Oil Prospecting Licence and the Oil Mining Lease presently granted will be replaced by the Petroleum Exploration Licence, the Petroleum Prospecting Licence and the Petroleum Mining Lease respectively. 2.1 Components of licences and leases for upstream operations under the PIB

Petroleum Exploration Licence will be granted for a maximum of 3 years giving the licensee the nonexclusive right to carry out geological, geophysical and geochemical exploration for petroleum within the licence area and to drill core holes not deeper than 150 meters using only percussion drilling techniques unless otherwise allowed by the Inspectorate. It does not include any right or option to win, get, work, store, carry away, transport, export or otherwise treat petroleum discovered in or under the said licence area.

Petroleum Prospecting Licence will be granted for a maximum of 5 years (consisting of an initial exploration period of 3 years and a renewal period of 2 years) for onshore and shallow water areas and, a maximum of 8 years (consisting of an initial exploration period of 5 years and a renewal period of 3 years) for deep water areas and frontier acreage - with a possibility of further extensions of the duration of the licence subject to prescribed conditions. The licensee is given the exclusive right to carry out petroleum operations within the area of its licence and, the right to carry away and dispose of crude oil, natural gas or bitumen won during prospecting operations as a result of production tests.

Petroleum Mining Leases will be granted for a maximum 20 years to holders of either of the two above licences, giving exclusive rights to conduct petroleum operations over the lease area. Lessees will be subject to the domestic gas supply obligation as may be determined by the Inspectorate, where they produce natural gas.

2.2 Award Process for Petroleum Prospecting Licence and Petroleum Mining Lease The PIB provides that a licence or lease may be granted only to a company incorporated in Nigeria under the Companies and Allied Matters Act or any corresponding law. A licence or lease may be granted to a winning bidder pursuant to an open, transparent and competitive bidding process conducted by the Inspectorate as prescribed by the PIB or, directly to an existing licensee or lessee. The processing of all received bids shall be in accordance with the published guideline and monitored by the Nigeria Extractive Industries Transparency Initiative. It is also worthy to mention that the PIB on one hand abolishes the grant of discretionary awards of licences

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2.3 Assignment, Mergers and Acquisitions Pursuant to the provisions of the PIB, where a licensee, lessee or production sharing or service contractor is taken over by another company or merges, or is acquired by another company either by acquisition or exchange of shares, including a change of control of a parent company outside Nigeria, it shall be deemed to be and treated as an assignment within Nigeria and shall be subject to the terms and conditions of the PIB. The assignment of licences, leases or contracts including any accompanying rights, power or interest requires prior written consent of the Minister. Proposed assignees must satisfy the Minister that it is of good reputation, has sufficient technical knowledge, experience or financial resources to enable it effectively carry out the responsibilities under the licence, lease or contract which is to be assigned. Further, where the proposed assignee is to serve as operator, that such assignee has proven operating experience or is supported by a competent operator under a technical service agreement with respect to operations to be carried out under the licence, lease or contract which is to be assigned. 2.4 Licensing for downstream operations under the PIB. The Downstream Petroleum Regulatory Agency (the “Agency�) is responsible for granting licenses in the downstream sector and this includes but is not limited to licence for – construction and operating a process plant, including those for gas liquefaction; construction and operating a petroleum transportation pipeline for crude oil or gas or condensate or petroleum products; construction and operating a petroleum transportation network; construction and operating a petroleum distribution network; undertaking the supply of downstream products or natural gas; or owning and running a downstream products or natural gas processing or retail facility. In addition, the Agency is responsible for granting licenses in respect of the utilization of all chemicals used for downstream petroleum operations in Nigeria, including, chemicals used in the processing, distribution and storage of petroleum products in Nigeria. Conducting any downstream petroleum operations without a licence issued by the Agency is prohibited under the PIB and the Agency can modify, amend, revoke

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picture by Kenny Passley

and leases but creates an exception in the case of the President who is permitted under the Act to grant licences or leases in special circumstances.

or suspend licences. It is also pertinent to note that the issuance of the licence is subject to certain conditions stipulated in the PIB and a licensee is prohibited from assigning or transferring its licence or rights and obligations arising from such licence without the prior written consent of the Agency. 3. Fiscal Regime under the PIB Under the current fiscal regime, companies and entities engaged in upstream petroleum operations are subject to petroleum profits tax pursuant to the Petroleum Profits Tax Act while other companies (including those engaged in downstream petroleum operations) are subject to corporate income tax pursuant to the Companies Income Tax Act. The current rate of petroleum profits tax is 50% for operations in the deep offshore and inland basin and


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Law Digest Winter 2012

THE PETROLEUM IDUSTRY BILL - AN OVERVIEW

“the Government should also give careful consideration to the potential impact of the proposed fiscal regime on existing contracts and must be ready to engage in good faith negotiations as may be required (pursuant to the stabilization provisions of any existing contracts) to counteract the adverse impact of the new fiscal regime.”

85% for operations onshore and in shallow waters. The PIB introduces the Nigerian Hydrocarbon Tax (“NHT”) which is proposed to replace the existing petroleum profits tax and applies to the profits of any company engaged in upstream petroleum operations. Rates are fixed at 50% for onshore and shallow areas of not more than 200 metres depth or 25% for bitumen, frontier acreages or deep water areas. In addition to NHT, the PIB also introduces companies income tax at the rate of 30% on companies engaging in upstream and downstream petroleum operations. Under the existing regime, upstream petroleum operations are not subject to companies income tax. The PIB addresses matters concerning double taxation arrangements with other territories and vests the Minister with the power to make orders and rules in this regard. Conclusion It can hardly be disputed that Nigeria is ripe for a comprehensive review of the legal and regulatory framework applicable to its oil and gas industry. However, if the PIB is to achieve its worthy objectives (which will undoubtedly benefit the Nigerian oil and gas sector) care must be taken by the legislature to ensure that the Government’s legitimate interest in seeking a progressive fiscal framework that optimises revenues for the Government is balanced against the equally important objective of ensuring that the Nigerian oil and gas sector remains attractive to both existing and prospective investors. In this regard, the Government will do well to consider and give due regard to the genuine concerns of stakeholders especially the international oil companies and other regions of the country regarding what is perceived as the potential adverse impact of the regime proposed under the PIB. Furthermore, the Government should also give careful consideration to the potential impact of the proposed fiscal regime on existing contracts and must be ready to engage in good faith negotiations as may be required (pursuant to the stabilization provisions of any existing contracts) to counteract the adverse impact of the new fiscal regime. This will be necessary in order to ensure that the Government entity which is the counterparty in these existing contracts is not at the receiving end of a rash of stabilisation claims. * Extract from the Annual lecture to the BNLF in London

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BUSINESS DEVELOPMENT Yvonne Fuchs, Branding Workshop, (UK)

Building a viable brand

Yvonne Fuchs*

“Credibility and visibility are the cornerstones of developing a reputable brand strategy.”

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W

hether intended or not, your business has a unique set of qualities that defines it in the minds of your clients, qualities which determine how people feel about spending money with you. What promises do you make about what clients can expect from you? How do you communicate that the way you do things is different from others? Your beliefs, what you understand about yourself and how you operate, all influence the success of your business. Who are you? Think about the traits that make you YOU! Are you Knowledgeable? Assertive? Vibrant? Creative? Dogged? Come up with five words or phrases that sum you up. Connect these aspects of your personality with the experience that your clients receive when they engage with you and your brand. Your personality gives your practice a sense of being real, something that customers can relate to. Know your Values: What are you really passionate about? What makes you happy? What makes you mad? What fulfils you? Take some time to think about the things that really matter to you. This is a great starting point for identifying your ideal way of working. It is important that you communicate your values well, not just in official communications but throughout your practice. For example, if one of your values is to be approachable, this has to be delivered in every part of your activity. How do you (and your staff) treat your clients; colleagues, suppliers? These things all say something about you, so make sure they are congruent with your overall vision.

Law Digest Winter 2012

How do you like to work? Are you a people person? Do you work best alone? Do you like to analyse a problem? Or do you sleep on it? A great way to understand the culture of your business is to spotlight your skills, as this may add another insight into how you operate. Concentrate on what you like to do, not just on your CV. Try to be specific. To say that you are a “good communicator” doesn’t really throw a lot of light on the subject. However, if you know that you enjoy talking informally to small groups of people but hate making formal presentations, then you’re starting to get somewhere. Personality, Values and Culture (PVC) are the key components of a brand. Using these effectively and communicating them consistently will provide “the difference that makes the difference”. The key to PVC is that it is YOU that makes your brand unique. That’s what gives power to a brand-led business over a sales-led business. Developing a strong understanding of yourself and your brand will help you grow your business. Having defined the cornerstones of your brand, you can integrate them into your practice. The qualities that form your PVC feed into areas like design (the visual manifestation of your brand’s personality); your brand rituals (places where you make an emotional connection); business organisation (mission statement); and your business strategy (your process, marketing and financial arrangements) Pulling is the key to branding (which is very different from Pushing). A ‘Push’ strategy means you have to go and find your customers, using your promotions and marketing strategy to create demand. You are in effect ‘Pushing’ your product out. A ‘Pull’ strategy is built over time by brand reputation, consistently developing your brand and creating an emotional experience in the minds of clients so they will come looking for you. Your brand is in effect ‘Pulling’ in clients. ‘Pulling’ strategies are based on the credibility and visibility of your practice. As you build up your Pull strategy, you will want to look at a number of elements. If you have a design budget, use your PVC to develop visuals with an agency to produce business cards,


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letterhead, website etc. Alternatively you may take care of these in-house. Either way, make sure all the places your brand is visible are consistent. Think about your brand essence and how you can communicate it here. You might use a unique message or quote on the back of your business cards to make your interactions more memorable, or choose a paper stock that reflects your brand values. A website is essential, even for a small practice. It can just be a few pages, the online equivalent of a basic flyer, or more elaborate. Using interaction, your website becomes much more than a static on-line brochure. Think of ways your website can be useful and interesting to your clients and your potential clients. Use short on-line surveys to gather opinions, send a newsletter, create a members’ forum, post information sheets or video clips. A well-designed website is only effective if it can be found via search engines so whether you build your own site or have a professional do it for you, make sure it is listed with Google and other search engines (SEO). Social networks such as Facebook Pages, Twitter or a blog can all increase visibility. Take care to ensure these adhere to the essential qualities of your brand, especially if you choose to delegate these tasks to an assistant. This is a great example of how a thorough understanding of your PVC will help you define the types of content you wish to be associated with. Public Relations is a means of telling journalists about your business in a controlled way. This could be via a press release sent to carefully selected editors, or it could be an event specifically designed to attract coverage. You might offer your clients the opportunity to meet and network with each other, or choose a relevant project to support – a local school or hospital for example. As a lawyer you understand the importance of staying abreast of your field. Regular market research on your competitors and your industry will

also keep your brand informed. Follow the best websites and blogs on the issues that concern you, subscribe to trade magazines and attend annual conferences. Always be aware of what’s new. What are the trends that you can pick up on and take advantage of? Remember also that your competitors aren’t always competitors; they can also be collaborators, so consider those you could develop a mutual relationship with. Now that you understand the environment surrounding your

know of you, or will easily know you (via your contacts). Did you realise how many people you know? Over time, you can build a stronger relationship with them, perhaps with a newsletter or an invitation to a relevant local event. Credibility and visibility are the cornerstones of developing a reputable brand strategy. Credibility relates to your performance, style, reliability and purpose. You have to have a credible product before you can give it visibility. In other words, if your service doesn’t deliver, any marketing efforts will be completely wasted. Bring credibility and visibility together and you have reputation, the emotional experience. This is what stays in the mind of your clients, brings them back to you and makes them recommend you to others. You have now seen that the difference that makes the difference is YOU, and that by using your personality to make your offering unique you develop a magnetic brand that will pull clients towards it. By making branding a conscious activity, you can use credibility and visibility to build your reputation by using your PVC to make your offering unique. It’s now up to you to get out and communicate your PVC convincingly and effectively. Enjoy your business journey.

“By making branding a conscious activity, you can use credibility and visibility to build your reputation by using your PVC to make your offering unique” business, you still have to come back to you and your role at the heart of your brand. Your expertise is valuable, so get out there and share it. There are lots of ways you could do this: networking, joining associations, commenting on blogs, speaking at meetings and events on radio, in newspapers. Make yourself visible as an expert in your field and let local media groups know you’re available for interviews. Listen to radio talk shows, and when the topic is within your realm of expertise, call in and offer your opinion. Join professional and social groups on-line and off-line to develop networks and be seen as a professional in your sector. Volunteer to speak at local meetings and seminars. Talk with local colleges to offer workshops in your area of expertise. Participate in community events to enlarge your networking circle and gain brand presence. Write short articles on your area of expertise and send or email them to relevant trade publications or newspapers. As well as these outreach activities, remember just how many people you already know. Many of them are potential clients, not to mention the people that they know – so get networking! Here is a captive audience for your service, an audience easy to tap into, because they know you, or

* Yvonne Fuchs is the author of “The difference that makes the difference” available on Amazon

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