Issue 7 winter 2014 2015

LAW Issue 7

Digest Africa’s Premier Law Journal

Winter 2014/15

Dele Adesina, SAN

Deeply religious, highly respected, disarmingly humble

Validity of investment related agreements in Ghana Challenging preliminary freezing and disclosure orders The genesis of the ethnic minority problem in Nigeria Appointment and removal of arbitrators Provisions for the appointment and removal of Receivers in Nigeria

Getting the best from PPP – Africa’s current dilemma UK: £3.50 US: $5.50 Nigeria: ₦1,000 www.nglawdigest.com

Law Digest Winter 2014/15

ISSN 2053-3209

Contents PUBLISHER

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EDITOR

Seyi Clement editor@nglawdigest.com

DEPUTY EDITOR

Lulu Sianga lsianga@augustineclement.com

CORRESPONDENTS NORTH AMERICA Ifeoma Uche rauze@yahoo.com MIDDLE EAST John Adetiba johnadetiba@yahoo.com NIGERIA Yinka Olojede-James linksj1@hotmail.com

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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

41 GETTING THE BEST FROM PPP– AFRICA’S CURRENT DILEMMA.

This is a report on the state of PPP initiatives in Africa. The report looks at the challenges in the implementation of PPP initiatives in Africa from the point of conception to implementation. It looks at the thorny issue of land use can be management as well as dealing with unsolicited PPP proposals.

COVER STORY 22.

An exclusive Interview: Dele Adesina, SAN of Dele Adesina & Co 4. From the Editor 5. News 8. Case Review and development

legal

COMMERCIAL LITIGATION 10. Freezing injunction regimes and offshore jurisdictions.

33.

Strategies for challenging preliminary freezing and disclosure orders.

ARBITRATION 50.

Strategies for challenging

the appointment and removal of an arbitrator.

INSOLVENCY 37. An overview of the provisions for the appointment and removal of Receivers in Nigeria CONSTITUTIONAL LAW 18. Validity of Investment related agreements in Ghana – When is Parliamentary approval required?

ADMINISTRATIVE LAW 29. The genesis of the ethnic minority problem in Nigeria – The role of the British

3

FROM THE EDITOR

Law Digest Winter 2014/15

Dear Colleagues,

Happy New Year to all our readers and welcome to the 7th issue of

outstanding contributions to the development of the African legal

Law Digest.

services market and the economy generally. As African economies grow and diversify, Managing Partners and General Counsels will be

In this issue, we examine the challenges facing Africa in the

presented with both opportunities and challenges as they seek to

implementation of Public Private Partnership (PPP) initiatives for

guide their clients and support their organisations with sound legal

the development of much needed infrastructure. We examine the

advice. We have created categories to recognise the contributions

issue of unsolicited proposals and the relationship between land

of our female and young colleagues as well.

use and project selection.

The LDA will bring the region’s legal community together for a We are proud to present Dele Adesina, SAN, and Senior Partner at

glittering awards ceremony in April 2015 at Alisa Hotel, North Ridge,

Dele Adesina & Co as our Lawyer in the News. Dele’s contribution

Accra, Ghana. The key awards include The Managing Partner of the

in the areas of constitutional law is recognised by all. However it

Year, General Counsel of the Year, Female Managing Partner of the

is his service to the Nigerian Bar Association which has earned him

Year, Female General Counsel of the Year, Young Managing Partner

the recognition by his peer as a public spirited lawyer devoted to

of the Year (under 40), General Counsel of the Year (Trade and

the development of the profession.

Industry), General Counsel of the Year (Financial Services), General Counsel of the Year (Media and Telecom), and General Counsel of

On another note, the 3rd annual International Litigation and Asset

the Year (Mining and Energy).

Recovery Forum, will be held on 5th November 2015, at the Nigerian Institute for International Affairs, Victoria Island, Lagos, Nigeria. This

For all awards and the 3rd International Litigation and Asset

is a must-attend event for lawyers specialising in fraud litigation, debt

Recovery Forum table bookings and sponsorship call our sales

recovery and insolvency litigation. Why not come and network with

team on tel. +44 20 32230800 or email sales@nglawdigest.com

forensic accountants, insolvency practitioners, in-house lawyers, risk analysts and heads of financial crime departments from banks

To contribute articles or commentaries to

and other financial institutions and other recovery specialists. As an

the Law Digest, please write to me at

addition to the Forum, we are hosting a pre-conference reception

editor@nglawdigest.com.

for our panellists and special guest on 4th November 2015 at Four Point Sheraton, Oniru, Ikoyi, Lagos. To find out more visit our event

Yours

website at www.nglawdigestevents.com.

After much consultation with the industry, we have decided to launch an award to be called the Law Digest Awards (“LDA”) this year. The LDA will recognise Managing Partners and General

Seyi Clement

Counsels of African firms and companies who have made

Publisher/Editor

Law Digest - Expanding Minds 4

News www.nglawdigest.com

Law Digest Spring 2014

Nigerians head for February polls Nigeria threatens retaliation against South Africa

N

igeria’s former military ruler Muhammadu Buhari representing APC will run against President Goodluck Jonathan in February’s polls. The elections are likely to be the most closely fought and tense since a return to democracy in 1999.

The elections are a critical test of Nigeria’s democracy, as an Islamist insurgency

has claimed more than 10,000 lives in the past year alone and plummeting oil prices have battered the economy.

This election is particularly significant because of its potential to be the first truly contested elections featuring a viable opposition to the ruling PDP since the transition to civilian rule in 1999.

L-R President Goodluck of Nigeria and President Zuma of South Africa during the former state visit to South Africa

he office of Nigeria’s T National Security Adviser (NSA), Sambo

Dasuki on 8th October threatened retaliatory action against South African companies operating in Nigeria.

The warning follows the freezing of a total of US$15.1 million of Nigerian assets by South Africa’s Asset Forfeiture Unit of the National Prosecuting Authority in two separate incidents.

In one incident, US$5.8 million was frozen in a transaction by Standard Bank, which Nigeria’s NSA claims was intended for a legitimate arms acquisition, including the purchase of M-75 cannons. South Africa’s City press claimed the transaction occurred between Cape Town-based Cerberus Risk Solutions, formerly registered as a broker recognised

by the National Conventional Arms Control Committee, and Societe D’Equipments Internationaux.

In the other incident in September, the South African authorities seized US$9.3 million from a private aircraft at Johannesburg’s Lanseria Airport, stating it violated local regulations on cash movements.

The threats by the NSA follow a deterioration of relations between the two countries. On 12th September, 84 South Africans died after a guesthouse attached to a church owned by Nigerian pastor TB Joshua collapsed in Lagos state.

Rivalries also exist between the countries over peacekeeping on the continent, which is currently dominated by South Africa, especially in the Democratic

Republic of Congo and Sudan.

Nigeria has refused to contribute troops to the South African rapid-reaction initiative, African Capacity for Immediate Response to Crises (ACIRC).

The spat between these two giants of Africa is being watched closely by the business community due to the significant investment by South African businesses in Nigeria. South African companies dominate Nigeria’s formal retail and telecoms sectors, through companies such as Game, Shoprite, NuMetro, Nandos, and MTN. Other large South African companies operating in Nigeria include Group Five (security), Standard Bank (banking), Entech (engineering), DSTV (television), and Southern Sun (hotels).

Cameroon kicks start investment under the new Private Investment Code

T

he Cameroonian government is set to confirm some of the first investment agreements under the Private Investment Code, which came into effect in 2013. The firms involved include the newly

created Brasaf brewery and First Industry Cosmetics, as well as the Cameroonian Soap Company and African Pool Construction. The total value of the four deals is US$81 million and it is estimated that

the agreements will create 1,600 new jobs.

The code does not discriminate between local and foreign investors or require a minimum investment sum. However, it does favour plans to employ

local staff and use local resources. Under the code, new investors are exempted from valueadded taxes and certain service and asset duties for five years, while corporate taxes and duties on loans are set

at a reduced amount for the first 10 years. The code also provides for international investors to be able to open localand foreign-currency accounts and to pay non-resident suppliers abroad.

Eversheds and Webber Wentzel secures top prizes Guiness-Bissau to review all contracts awarded by the previous regime at the African Legal Awards

E

versheds and the South African firms were the big winners at the 2014 African Legal Awards held on 31st October 2014 at the Wanderers Club in Johannesburg, South Africa.

The African Legal Awards set out to recognise exceptional achievement, hosted

by Legal Week and the Corporate Lawyers Association of South Africa (CLASA).

Eversheds won the most prestigious award for international firms, the International Law Firm of the Year, with Webber Wentzel picking up the award for the African Law firm of the year.

Eversheds also

picked up the Litigation and Dispute Resolution Team of the Year, whilst Webber Wentzel picked up 2 further awards, Banking, Finance and Restructuring Team of the Year and the Transportation and Infrastructure Team of the Year. One of the most sought after awards, the M&A Team of the Year was won

by Bowman Gilfillan.

Other winners include Bowman Gilfillan, Competition and Regulatory Team of the Year, Giuliani Bracewell, Energy and Natural Resources Team of the Year, ENSafrica, TMT Team of the Year, Herbert Smith Freehills, Commercial

Team of the Year and DLA Cliffe Dekker Hofmeyr, Property and Construction Team of the Year.

Whilst the South African firms may have had a good award night, the progress made by non-South African firms, particularly Aluko & Oyebode (Nigeria) should not go unnoticed.

Aluko & Oyebode was shortlisted in 4 categories including the prestigious and highly competitive categories of African Law Firm of the Year, Banking, Finance and Restructuring Team of the Year, Competition and Regulatory Team of the Year and M&A Team of the Year.

G

uinea-Bissau’s Prime Minister, Domingos Simões Pereira, stated on 29th September 2014 that an inter-ministerial committee would review all contracts awarded by previous governments.

Guinea-Bissau has consistently been ranked among the bottom five countries worldwide on international corruption indexes. This is part of the government’s drive to improve this notorious reputation and increase

revenue in order to pay salary arrears dating back to 2013.

Contract reviews are likely across all sectors, including agriculture, offshore oil (investors include Cap, BVI, Trace Atlantic Oil, and Petroguin) and telecoms (the three largest operators are Guinetel, MTN, and Orange Bissau), though our sources in Guinea-Bissau rate the risk of outright contract cancellations as low.

Prime Minister Dominigos Simoes Pereira of Guinea Bissau 5

Law Digest Winter 2014/15

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Allen & Overy sets up shop in South Africa A

llen & Overy has become the first London magic circle firm to set up its own practice in South Africa after raiding local outfit Bowman Gilfillan for a seven-lawyer team including four partners.

The Johannesburg office, which will open its doors later this month, will be led by former Bowman Gilfillan banking and finance partner Lionel

Shawe and former head of A&O’s banking practice Michael Duncan, who is relocating from London.

This development was orchestrated with Shawe’s resignation from Bowman in September 2014, leading to speculation that this move was imminent.

Shawe will be joined by fellow Bowman Gilfillan banking and finance partners Khurshid

Fazel, Alistair Collins, and Anthony Colegrave, as well as three other lawyers from the same practice. A&O said it hopes to grow lawyer headcount at the office to 40 in 2015.

Tim Scales, head of A&O’s Africa group, said: “This opens an exciting new chapter for A&O’s Africa Group. Lionel, the foremost banking and finance lawyer in

South Africa and Mike, one of the leading lights in A&O’s global banking practice, are a powerful combination and we are very excited by the depth, quality and energy of the wider team.”

A&O is the latest of a number of international firms to enter the South African market.

In August, Clyde & Co opened offices

in Cape Town and Johannesburg, after taking partners from Webber Wentzel to lead its South African practice.

Linklaters was the first of magic circle firm to enter the country when it formed an alliance with Webber Wentzel in 2012.

However, A&O’s launch marks the first time one of the UK’s big five firms has opened its own base.

Tanzania lifts the embargo of foreign share ownership

The opening of the Dar es Salaam Stock Exchange

he Dar es Salaam T Stock Exchange (DSE) confirmed on

25th September 2014 that the restriction on foreign share ownership had been lifted. Foreign investors were previously limited to a maximum of 60% ownership of shares in companies listed on the DSE. Following the amendment, they are now free to own shares without limitation. The proposed change, which was published in a Government Gazette on 19th September, was sponsored by the Capital

Markets and Securities Authority (CMSA), the government agency responsible for regulating the activities of the DSE. Back in May, the Bank of Tanzania (BoT – the central bank) moved to allow investors from the regional East African Community (EAC) to buy up to 40% of Tanzanian government securities.

This additional measure will become effective along with the amendment to the Capital Markets and Securities Authority Act (Foreign Investors) affecting shares. Foreign

investors, including those from the EAC, were previously excluded from participating in the sale, purchase, or trading of government securities.

The decision to open up the DSE to unlimited foreign capital is aimed at boosting foreign investment in the east African country.

Although the DSE is a relatively small market even by regional standards, with just 13 listed companies and a market capitalisation of TZS21,946.89 trillion (USD13 billion) as of 25th September 2014, the DSE is already the best performing exchange in Africa in 2014, gaining some 73% to date this year.

The lifting of the limit on foreign ownership is likely to encourage existing players to increase their shares,

as well as attracting new ones. It will also encourage domestic firms that have been considering a listing on the exchange as a way of raising capital, potentially

boosting investment. In parallel, the measures relating to debt should broaden the distribution of Tanzanian government securities and could lower borrowing costs.

Corruption Scandal hits Ghana

T

he European Union is withholding a US$211-million budget support fund for Ghana pending the conclusion of an investigation into an alleged payroll fraud in the country, according to a report by the Sunday Times on 14 December, accusing the Ghanaian government of running a ‘ghost worker’ scheme whereby tens of thousands of names are on the government’s payroll but are not being employed.

The International Monetary Fund (IMF) has repeatedly warned the Ghanaian government about the high publicsector wage bill, which is largely driving the current-account and budget deficits. However, the government has blamed the Single Spine Pay Policy, introduced in January 2010 for the almost 480,000 state employees, “to ensure equity, fairness and transparency” in the public sector.

Mali cancels 12 major oil concessions and production sharing agreements

O

n 1st November 2014, Malian Mines Minister Boubou Cisse announced the cancellation of 12 oil concessions and production-sharing agreements with companies that his ministry has accused of “non-compliance with contractual obligations”.

The main complaint is the delay in oilexploration activities.

The firms affected include Petro Plus Angola, Simba Energy, New Catalyst Capital Investments, Moh Oil, Corvus Resources Managements, Mali Petroleum SA, Oranto Petroleum, and Afex Global Ltd. The cancellations concern 10 blocks at

three exploration sites: Taoudeni, Gao, and Nara (in Koulikoro, west Mali). The cancellation of the oil-concession agreements, several of which are known to have been signed under former interim president Dioncounda Traoré’s government (April 2012– September 2013), was expected after incoming president Ibrahim Boubacar Keita promised an audit of existing oil and mining contracts in late 2013.

Some investors are suggesting the cancellations were motivated by the Government’s desire to renegotiate the agreements rather than any delay on the part of the companies, as

the cancelled blocks will revert to the state and are likely to be renegotiated to increase the government’s share of the concessions, as well as the taxing potential of future extractions.

The government is currently drafting revisions to the oil law to encourage foreign investment, and new agreements will be negotiated in line with these amendments, expected in the next six months. Most operations in Taoudeni and Gao have been suspended by investors since 2012 due to the severe risk of targeted jihadist attacks against assets and foreign personnel (hence the delays).

Boubou Cisse, Mines Minister, Mali

Law Digest Winter 2014/15

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Mogadishu parliamentarians kick against Al Bayrak contract

O

n 22nd September 2014, 20 Somali parliamentarians tabled a motion against the contract awarded to Turkish company Al Bayrak on 21st September to manage and develop Mogadishu harbour, after the auditor general raised concerns around the legality of the tendering process.

This follows the launch of a government review of contracts awarded to foreign companies

amid donor pressure to tackle corruption and ensure transparency.

In early 2014, Somalia established a donorbacked Financial Governance Committee (FGC) to support the government’s Financial Governance Program (FGP) and improve the management of public funds. The committee is chaired by Minister of Finance Hussein Halane and composed of officials from the central bank, president’s office, the

International Monetary Fund, World Bank and African Development Bank. To date, the FGC has reviewed at least nine contracts, with three of the most salient being an agreement with US law firm Shulman Rogers to recover Somalia’s frozen overseas assets, an oil exploration contract with UK firm Soma Oil, and a management agreement for Mogadishu’s Aden Adde International Airport with Turkish

company, Favori LLC. The FGC disclosed that these contracts were not subject to competitive bidding. In line with the FGC’s guidance, the government, which relies heavily on donor funding for its budget, cancelled its contract

with Shulman Rogers on 17th September, and agreed to renegotiate contracts with Soma Oil and Favori LLC. Parliament’s probe into Al Bayrak’s concession exposes it to a severe risk of contract renegotiation.

Mitsui increase investment in Mozambique

Namibia cranks up PPP initiatives

J

T

apanese corporation Mitsui & Co has confirmed it is to invest US$951 million in Brazilbased Vale’s coal projects in Mozambique. Mitsui is to take a 15% stake in Vale’s giant Moatize open-cast coal mine and a 50% interest in the Nacala Logistic Corridor (NLC) rail and port infrastructure project.

In the announcement on 9th December, Mitsui said it would also invest US$188 million in the

development of the Moatize mine, which is one of the world’s largest coking-coal deposits.

The investment follows a visit by Prime Minister Shinzo Abe to Mozambique in January to promote Japanese business interests in the African country, where Mitsui also has stakes in liquefied natural gas projects.

In November, Vale told IHS coal experts that it would start loading coal

on to vessels in Nacala in the first quarter of 2015. On 5th December, Vale confirmed to IHS that it had delivered the first coal train to Nacala port. From 2015, coal consignments on the NLC are set to relieve the strain on the Sena railway line, which requires renovation and expansion works, so mitigating transport bottlenecks and lowering transportation fees for coal exporters.

Kikwete sacks Minister for Lands resident Jakaya Kikwete P of Tanzania announced on 22nd December in a

national televised address that he had dismissed Minister for Lands, Housing, and Human Settlements Development Anna Tibaijuka, following a parliamentary vote that called for the dismissal of several senior officials over their alleged involvement in a corruption scandal that is currently under investigation. Tibaijuka’s dismissal follows the resignation on 16th December of AttorneyGeneral Frederick Werema.

A parliamentary debate concluded that the officials

had fraudulently facilitated the payment of at least US$122 million to Pan Africa Power Solutions Tanzania Limited from an escrow account held jointly by state power utility Tanzania Electric Supply Company Limited and Independent Power Tanzania Limited in 2013.

All officials named in the parliamentary debate and in earlier reports by the acting controller and auditor-general and the Prevention and Combating of Corruption Bureau have denied the allegations.

President Kikwete said he would await the conclusion of the

investigation before taking any action against Energy and Minerals Minister Sospeter Muhongo and the permanent secretary in the Ministry of Energy and Minerals, Eliakim Maswi, who have also been named in the parliamentary investigation.

he Namibian government is to seek private investment in 2015 to fund the country’s massive transport infrastructure development programme, according to a statement by a spokesperson for the Bank of Namibia, the country’s central bank, on 16th December.

From next year, the government will commence the expansion of rail, road, air, and sea port infrastructure in a programme to establish Namibia as a

regional transport hub within the Southern African Development Community (SADC).

The government will finance at least US$6.5 billion over the next five years, while it will also encourage private investors to contribute some US$1.9 billion through listed infrastructure funds and public-private partnerships. The plan includes the construction of the deep-water SADC Gateway Port, near the existing Walvis Bay port.

Freshfields Bruckhaus Deringer to target private equity work in Africa he London margic T circle firm has pledged to target private equity

President Jakaya Kikwete

work in Africa as the firm hopes to capitalise on surging demand across the continent. The new strategy emerged after the firm held a conference in Cape Town with its relationship teams across Africa, bringing together more than 30 senior and managing lawyers from its relationship firms with Freshfields partners including senior partner Will Lawes. The firm, which is due to release a report on private equity trends

in Africa next week, also believes that recent US hires, give it “a real edge” over US law firms when it comes to covering inbound investment into Africa for US corporates.

The firm currently has some 100 lawyers whose main work is focused on Africa, including 65 partners, a number which the firm aims to double in three years’ time.

The firm boasts at least one relationship partner for every single African country, a strategy it plans to maintain in the near future.

are likely at Lumwana from March 2015 if the suspension takes effect.

Lumwana was acquired by Barrick for US$7.2 billion in 2011 and is valued by Barrick at US$1 billion.

Other mining companies are likely to place unprofitable operations on care and maintenance over the next year, especially as global copper prices are unlikely to

recover in 2015, according to IHS specialists. Mining companies also face higher operating costs, as a series of wildcat strikes since 2011 has increased wages, and increasing costs of electricity (including diesel generators during increasingly frequent power outages).

The government has also withheld some US$600 million in value-added

tax (VAT) refunds owed to mining firms over the past 15 months, while there is no clear repayment strategy. Moreover, the ongoing political instability triggered by the death of President Michael Sata in October 2014 has stalled the revision of the mining code and confused the outlook for further tax changes and transparency regulations.

Zambia introduces new mining tax new mining taxation A regime is to come into force in Zambia on 1

January 2015, replacing corporate income tax with a 20% gross royalty on revenue (up from 6% previously) on open-pit mining. The change in Africa’s second-largest copper producer was approved by parliament on 17th December, despite criticism from the World

Bank over the royalty’s unsustainability given low copper prices.

On 18th December, Barrick Gold Corporation said it would start suspending operations at its Lumwana copper project, stating the operation could not support the new royalty.

Some 4,000 job cuts (including almost 2,000 Zambian employees)

7

Law Digest Winter 2014/15

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Case Review and Legal Development From the Research Desk

UK

Common Law Defence of ex turpi causa Injunction Damages Cross undertaking

Les Laboratoires Servier and another (Appellants) v Apotex Inc and others (Respondents) [2014] UKSC 55 On appeal from [2012] EWCA Civ 593 JUSTICES: Lord Neuberger (President), Lord Mance, Lord Clarke, Lord Sumption, Lord Toulson BACKGROUND TO THE APPEAL This appeal is about the meaning of “turpitude” in the common law defence of ex turpi causa. This defence allows a defendant to resist a claim which is founded on the claimant’s own illegal or immoral acts.

The appellants (collectively “Servier”) hold a number of patents for perindopril erbumine (a drug used for treating hypertension and cardiac insufficiency). European patent protection for the compound itself expired in June 2003, but a UK patent protecting a crystalline form continued and Servier’s UK subsidiary was the exclusive licensee. Canadian patent protection for the compound itself will not expire until 2018. The respondents (collectively “Apotex”) are a Canadian group specialising in the manufacture and marketing of generic pharmaceutical products. The parties agreed that, for the purposes of this appeal, each group of companies could be treated as one legal entity

each. Apotex began to import and sell generic perindopril erbumine tablets in the UK at the end of July 2006. Servier obtained an interim injunction against Apotex to stop it from doing this. In order to get the injunction, Servier had to give a cross-undertaking in damages, meaning that it promised to compensate Apotex for any loss caused by the injunction if it later turned out that the injunction should not have been granted. In the event, the court found that the UK patent was invalid, and so Apotex became entitled to compensation from Servier. It is agreed that such compensation should be calculated on the basis that Apotex would have sold an additional 3.6m packs of tablets in the UK if there had been no injunction. These packs would have been manufactured in Canada but sold in the UK. Meanwhile, the parties were also litigating in Canada about the Canadian patent. That patent was found to be valid and infringed.

Damages have not yet been assessed.

The illegality issue arises because Servier argues that it is contrary to public policy for Apotex to recover damages for being prevented from selling a product whose manufacture in Canada would have been unlawful there as an infringement of Servier’s Canadian patent. Servier won on this point at first instance before Arnold J but lost in the Court of Appeal.

The Court of Appeal thought that the infringement of the Canadian patent did not count as “turpitude” for the purposes of the illegality defence, because: (i) Apotex honestly and reasonably believed that the Canadian patent was invalid too; (ii) it was important that Servier should pay once it had been discovered that it was enjoying a monopoly it was not entitled to; and (iii) the effect of the Canadian patent was limited to Canada, where (iv) the Canadian court had refused to grant an injunction and (v) Apotex

was paying damages which would be taken into account when calculating Servier’s liability on the crossundertaking. Servier appealed to the Supreme Court.

JUDGMENTS The Supreme Court unanimously dismisses Servier’s appeal, but on grounds which differ from those of the Court of Appeal. It held that the infringement of the Canadian patent by Apotex does not constitute “turpitude” for the purposes of the ex turpi causa defence. Lord Sumption, with whom Lord Neuberger and Lord Clarke agree, gave the main judgment. Lord Mance agrees with Lord Sumption and offers some further comments. Lord Toulson also dismissed the appeal but agreed with the approach taken by the Court of Appeal.

REASONS FOR THE JUDGMENTS • The majority of the House of Lords in Tinsley v Milligan [1994] 1 AC 340 rejected the “public conscience” approach on the ground that it imported a discretionary element into what was in reality a rule of law [13-18]. The Court of Appeal was wrong to treat the question as depending on the culpability of the illegality, the proportionality of the application of the defence or the general merits of the particular case [19].

• “Turpitude” involves a breach of the public law of the state (or in some cases its public policy). The paradigm case of turpitude is a criminal act. In addition, the category of turpitude includes certain “quasi-criminal” acts, such as: (i) dishonesty or corruption; (ii) certain anomalous acts (such as prostitution) which, while not criminal, are contrary to public policy and commonly involve criminal liability on the part of others; and (iii) the infringement of statutory rules enacted for the

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Law Digest Winter 2014/15

protection of the public interest and attracting civil sanctions of a penal character [23-30; 34].

• The grant of a patent gives rise to private rights, the infringement of which does not engage the public interest so as to give rise to the ex turpi causa defence [30].

• Lord Toulson agrees that the appeal should be dismissed, but he says that the Court of Appeal was right to take public policy considerations into account, because the defence is based on public policy—as a majority of the Supreme Court recognised in Hounga v Allen [2014] UKSC 47 [62]. The public interest in the enforceability of cross-undertakings in damages is an important factor pointing in favour of the recovery of damages by Apotex [63]. It may, however, be necessary to re-analyse Tinsley v Milligan [1994] 1 AC 340 in a future case [64].

References in square brackets are to paragraphs in the judgments

9

COMMERCIAL LITIGATION Peters & Peters Solicitors LLP [UK]

Freezing injunction regimes and offshore jurisdictions Introduction

Jonathan Tickner - Partner

Emma Ruane - Associate

Vlad Meerovich - Associate

10

Large scale fraudulent schemes tend to cut across national borders and almost always (where the ownership of assets is involved) tend to feature offshore jurisdictions more often than onshore countries.1 For example, Achilleas Kallakis, convicted in 2013 of conspiring to defraud banks (principally Allied Irish Banks and the Bank of Scotland) of millions of pounds and euros used forged accounts of the companies he controlled in the British Virgin Islands to obtain the finance through deception and forgery.

Similarly, it has been widely reported that Allen Stanford’s $7 billion worldwide Ponzi scheme involved a bank based in Antigua.

Opinions do differ on what is an “offshore state” and which jurisdictions belong to this category. The range of opinion notwithstanding, it is safe to say that there is a genuine concern within the international community at the level of anonymity and confidentiality that offshore countries accord to individuals and entities that use corporate and trust vehicles in those jurisdictions.

Anonymity and confidentiality are attractive to fraudsters for obvious reasons. As a result, victims of theft and fraud will often need to consider seeking relief from the courts in offshore jurisdictions. It is not possible in the space available to summarise all the potential impediments that can make life difficult for victims; and to do so with respect to a cross section of jurisdictions. It is possible, however, to consider one remedy – the availability of a freezing injunction in aid of substantive proceedings abroad – to gauge the degree to which a claimant can realistically reach and preserve a fraudster’s assets offshore. A cursory look across a number of offshore jurisdictions suggests that they might be more open to assistance than might have initially been supposed.

Law Digest Winter 2014/15

Freezing injunctions England in support proceedings

granted in of foreign

Today, section 25 of the Civil Jurisdiction and Judgments Act 1982, as extended by the Civil Jurisdiction and Judgments Act 1982 (Interim Relief Order) 1997, empowers the High Court of England and Wales to grant a freezing injunction in support of substantive proceedings anywhere else in the world. Further, paragraph 3(1)(5) of the Practice Direction 6B under the English Civil Procedure Rules empowers the Court to grant its permission for service outside jurisdiction in claims for interim remedies brought pursuant to section 25.

This, however, was not the English position ab initio. The House of Lords decision in Siskina (Cargo Owners) v Distos Compania Naviera SA [1979] AC 210 held that the right to obtain an interlocutory injunction depended on there being 1) a pre-existing substantive cause of action enforceable against a defendant amenable to the Court’s jurisdiction; and 2) personal jurisdiction of the Court over the defendant (in other words, the location of the assets within the jurisdiction alone was not sufficient).

‘The law took a wrong turning in The Siskna, and the sooner it returns to the proper path the better.’

Lord Nicholls (Mercedes Benz A.G. v Leiduck) The 1982 and 1997 legislative developments referred to above have largely rendered the Siskina decision irrelevant in England. Yet, the decision is relevant to understanding the position in the offshore jurisdiction.

This is because many offshore states, and all of the states whose rules we consider in this article, are subject to the jurisdiction in appeals of the Judicial Committee of the Privy Council and where the precedent of the UK House of Lords, now the Supreme Court, is at least of persuasive authority. However, as we report below, in some countries steps have been taken legislatively or judicially to move away from the Siskina precedent.

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Mercedes Benz A.G. v Leiduck Before turning to consider the position in the individual offshore jurisdictions, the Privy Council decision in Mercedes Benz A.G. v Leiduck [1996] A.C. 284 is worth mentioning. The case involved fraud committed by one Mr Leiduck against a very well know German automobile manufacturer. Leiduck and a Monégasque company owned by him agreed to facilitate the sale in the Russian Federation of 10,000 vehicles manufactured by Mercedes Benz.

Mercedes advanced the Monégasque company $20 million to finance the expenses of the operation on terms that it would be repaid with interest if the total price of the vehicles had not been remitted to Mercedes by an agreed date. As security, the company provided a promissory note for $20m plus interest. The transaction did not proceed, the advance was not repaid and the note was dishonoured. Mercedes commenced civil proceedings in Monaco against Leiduck in connection with the alleged misappropriation of the funds and was able to freeze Leiduck’s assets in Monaco pending judgment. The Monégasque court, however, declined to extend the freezing order to cover Leiduck’s shares in another company registered in Hong Kong, which it was alleged had received part of the misappropriated money.

In Black Swan Investment ISA v Harvest View, 23 March 2010 (Claim No. BVIHCH 2009/399), Bannister J found the reasoning of Lord Nicholls in Mercedes Benz compelling Mercedes thereupon applied ex parte to the High Court of Hong Kong for a worldwide freezing injunction.

The deputy judge granted the application on terms that Mercedes issues a writ of summons against Leiduck and his Monégasque company and gave leave for Leiduck to be served in Monaco, where he was in custody pending criminal investigations.

Leiduck

applied to the High Court of Hong Kong to have the ex parte order discharged, on the ground that the court had no jurisdiction over him. The judge held that none of the claims set out in the writ fell within the court’s power to permit service of proceedings out of the jurisdiction under Ord. 11, r. 1(1) of the Rules of the Supreme Court of Hong Kong. He accordingly quashed the leave to serve and set aside the accompanying freezing injunction.

The Court of Appeal of Hong Kong dismissed Mercedes’s appeal against the judge’s order, holding that the court’s jurisdiction under R.S.C., Ord. 11, r. 1(1)(b) and (m) would not have permitted service on Leiduck in Monaco, since an injunction sought under rule 1(1)(b) ‘ordering the defendant to do or refrain from doing anything within the jurisdiction’ had to be part of a claim for substantive relief which could properly be tried in the courts of Hong Kong; and the provisions of rule 1(1)(m) permitting service of a writ ‘to enforce any judgment’ could not be relied on before judgment had actually been obtained in Monaco.

Mercedes’s appeal to the Privy Council was dismissed by a majority decision.

The majority followed the principles set out in the Siskina decision holding inter alia that Ord. 11, r. 1(1)(b) was not intended to assert an extra-territorial jurisdiction based solely on the presence of assets within the territory; that a claim for injunctive relief did not fall within Ord. 11, r. 1(1)(m) because there was no judgment in existence to enforce; and that since Mercedes had not made any claim for substantive relief which could properly be tried in Hong Kong, it could not compel Leiduck to appear before the Hong Kong court to contest the application for injunctive relief and there had been no power in the court to permit service of a writ claiming such relief.

However, it is the dissenting opinion of Lord Nicholls that is making inroads in the jurisprudence of some offshore courts. While the dissenting opinion is blunt – ‘The law took a wrong turning in The Siskna, and the sooner it returns to the proper path the better.’2 – it is lucid and goes to the heart of the problem: ‘The first defendant’s argument comes to this: his assets are in Hong Kong, so the Monaco court cannot reach them; he is in Monaco, so the Hong Kong court cannot reach him. That cannot be right. That is not acceptable today. A

person operating internationally cannot so easily defeat the judicial process.

There is not a black hole into which a defendant can escape out of sight and become unreachable.’3 Lord Nicholls gave a number of principled reasons for reaching his conclusion.

More pragmatically, he thought the situations in which the courts may properly exercise their jurisdiction to grant injunctions must adapt to reflect changes in the circumstances around the world guided by the criterion of injustice: ‘Injustice is to be viewed and decided in the light of today’s conditions and standards, not those of yester-year’.4 And it is this pragmatism and emphasis on injustice that appears to have given the offshore courts that are willing to depart from Siskina the necessary impetus to do so.

British Virgin Islands It is difficult to find an offshore jurisdiction where Lord Nicholls’s dissenting opinion in Mercedes Benz A.G. v Leiduck has made greater inroads. It is only in a not too distant past that the High Court of Justice in the British Virgin Islands held that a cause of action must be present within that jurisdiction before a court will grant a freezing injunction. Thus, in Floyd Koch & Others v Chew and Others (1997/1998) 1 OFLR 529, HC the court refused the relief for lack of the cause of action and relying on Siskina notwithstanding that two defendants had residence and assets were present in the British Virgin Islands.

However, more recently in Black Swan Investment ISA v Harvest View, 23 March 2010 (Claim No. BVIHCH 2009/399), Bannister J found the reasoning of Lord Nicholls in Mercedes Benz compelling and held that: ‘Given the lacuna in the authorities to which I have referred, I propose to fill it in this jurisdiction by respectfully adopting this reasoning of lord Nicholls in Mercedes Benz. I hold accordingly that I have jurisdiction not only in the strict but also in the broad sense to continue the injunction originally granted…’ 5 The case involved a personal claim against an individual called Muller Rautenbach in South Africa. Mr Rautenbach owned two BVI companies each of which were said to be the legal owners of valuable assets. Black Swan sought a freezing injunction against those two companies in support of the

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South African proceedings, although the companies had nothing to do with the litigation and although Black Swan had no claim against the two companies. Interestingly and perhaps echoing Lord Nicholl’s observations on the need to view injustices in the light of today’s conditions and standards, Bannister J went on to observe as follows: ‘… there are sound policy reasons why important offshore financial centres … should be in a position to grant such orders in aid where necessary.

The business of companies registered within such jurisdictions is invariably transacted abroad and disputes between parties who own them and others are often resolved abroad. It seems to me that when a party to such a dispute is seeking a money judgment against someone with assets within this jurisdiction, it would be highly detrimental to its reputation if potential foreign judgment creditors were to be told that they could not, if successful, have resort to such assets unless they were to commence substantive proceedings here in circumstances where, in all probability, they would be unable to obtain permission to serve them abroad -thus presenting them with an effective brick wall or double bind of the sort so deplored by Lord Nicholls in Mercedes Benz.’ 6

VTB v Universal Telecom Investment Strategies Fund SPC (“UTISF”) (CICA, 5 June 2013) the availability of freezing injunctions in support of foreign legal proceedings, including against Cayman Islands entities against which no wrongdoing is alleged and in the absence of substantive local proceedings. Chadwick P, with whom Mottley and Campbell JJA agreed, set out four principles for the exercise of the jurisdiction:

The jurisdiction of the BVI courts to grant freezing injunctions in aid of substantive proceedings elsewhere has since been confirmed by the Court of Appeal in Yukos CIS Investments Ltd and another v Yukos Hydrocarbons Investments and others, 26 September 2011 (Claim No. HCVAP 2010/028), albeit that in this case Bannister J, whose decision the Court of Appeal upheld, refused to grant an interim freezing injunction on the ground that the relief the claimants were likely to obtain from the Netherlands court, where substantive proceedings were taking place, would not entitle them to enforce a money judgment against the respondents’ assets, nor would it establish a proprietary claim in respect of any such assets. Finally, it is also worth pointing out that the defendants to the interim relief proceedings were exclusively the BVI companies and therefore the question of serving the freezing injunctions outside jurisdiction did not arise.

(4) If those requirements were met, there was no reason in principle why the cause of action defendant should himself be a party to the proceedings in which the freezing injunction was sought.

Cayman Islands Similarly in the Cayman Islands, the Court of Appeal has recently confirmed in

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(1) The person against whom the freezing injunction was sought must be subject to the jurisdiction of the court.

In this case, UTISF was such a person, being a Cayman Islands domiciled company.

(2) Where there was no cause of action alleged against the person against whom the freezing injunction was sought, it was not necessary that the substantive claim against the “cause of action defendant” has been brought in the Cayman Islands.

(3) The substantive claim against the cause of action defendant, wherever it was pursued, must be founded on a cause of action which would be recognised by the Cayman Islands court where the freezing injunction was sought.

The Court of Appeal did, however, discharge the injunction on the grounds of discretion. The Cayman Islands proceedings were related to the VTB v Nutritek litigation in England.

That action was pursuing a prominent Russian businessman Mr Malofeev and others for alleged fraud amongst other grounds. UTISF was a corporate fund the participating shares of which were beneficially held by Mr Malofeev (through a BVI company). No wrongdoing was alleged against UTISF or against its directors. The Court of Appeal doubted that there was any real prospect that Mr Malofeev could be compelled to cause the assets of UTISF to be used to satisfy the judgment it sought in England.

It is also notable that in its earlier decision VTB Capital plc v Malofeev [2011] 2 CILR 420 the Court of Appeal found that there was no jurisdiction to grant leave to serve Mr Malofeev out of

the jurisdiction where the only relief sought against him was an interim freezing injunction in support of foreign proceedings.

Finally, on 20th October 2014, the Cayman Islands enacted the Grand Court (Amendment) Law 2014 (entered into force from 24th November 2014), which gives statutory force to the Cayman Islands courts’ jurisdiction to grant purely ancillary interim relief in support of foreign proceedings. It is understood, however, that the new Grand Court rules will be necessary to

The jurisdiction of the BVI courts to grant freezing injunctions in aid of substantive proceedings elsewhere has since been confirmed by the Court of Appeal in Yukos CIS Investments Ltd and another v Yukos Hydrocarbons Investments and others. give effect to the new procedural aspects of the Law in connection with service out of the jurisdiction, but that those rules have not yet been published.7 Bermuda Again, similar judicial developments can be observed in Bermuda where the Supreme Court has recently accepted that interim injunctive relief can be granted generally in support of foreign causes of action wherever the court has personal or territorial jurisdiction over the relevant defendant. Indeed, the Bermudan Supreme Court appears to have treated this as the current common law position generally and has in fact relied on the BVI Yukos and Black Swan decisions discussed above in support of its conclusion.8 The Channel Islands of Guernsey and Jersey Freezing injunctions in aid of substantive proceedings abroad are available in both Guernsey and Jersey although on a different

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Similarly in the Cayman Islands, the Court of Appeal has recently confirmed in VTB v Universal Telecom Investment Strategies Fund SPC the availability of freezing injunctions in support of foreign legal proceedings basis. In Guernsey the jurisdiction is confirmed by statute. Section 1(7) of the Law Reform (Miscellaneous Provisions (Guernsey) Law 1987 states that ‘an injunction may in exceptional circumstances be granted notwithstanding that proceedings have not been and are not to be instituted before the Court’. In Garnet Investments Limited v BNP Paribas (Suisse) S.A. and Government of Republic of Indonesia, 9 January 2009, Guernsey Law Reports 2009-10 GLR 1 the Court of Appeal of Guernsey set out the principles the Guernsey courts take into consideration when dealing with applications for freezing injunctions in support of foreign proceedings: 1. the jurisdiction to deal with such an application should be exercised with caution; 2. interim relief of this nature need

not be restricted to that which the foreign court could or would grant; 3. it might weigh against the grant of a freezing order in Guernsey if the foreign court could have granted similar relief and had not done so—in particular, if it had refused to do so; 4. the applicant for the freezing order should be required to identify both (i) the actual or prospective foreign proceedings in aid of which the application was made, and (ii) the prospective judgment the defendant was not to be permitted, by dissipating his assets, to frustrate; and 5. once those prerequisites had been fulfilled, the court should not hesitate to grant a freezing order needed to protect a plaintiff, whether in Guernsey or overseas, from having a future judgment rendered valueless by the dissipation of the defendant’s assets.9 By way of contrast, in Jersey the courts’ jurisdiction to grant freezing injunctions in aid of substantive proceedings abroad is not statute but common law based. The jurisdiction, however, is relatively longstanding and goes back to the mid-90s Court of Appeal decision in Solvalub Limited -v- Match Investments Limited, 1996 JLR 361. That decision was one of the first to follow the views of Lord Nicholls in his dissenting judgment in Mercedes Benz AG v Leiduck and held that the Royal Court had the power to grant

a freezing injunction in aid of foreign proceedings, even though no other form of relief was sought in Jersey.

Conclusion This short overview indicates the willingness on the part of at least some of the major offshore jurisdictions to seek to assist victims of fraud and corruption in the preservation (with a view to repatriation) of stolen funds and assets. There are clearly sound policy reasons for offshore states to have the discretion to grant interim freezing injunctions in aid of disputes litigated elsewhere and this is recognised by the judiciary of those states. Ironically, the readiness to assist “outsiders” may in fact undermine the more attractive characteristics of the offshore world.

How different offshore countries will choose to strike the balance will continue to attract no shortage of observers and commentators.

1 David Leigh, Kallakis: how offshore secrecy in British Virgin Islands lends itself to fraud, The Guardian, Wednesday 16 January 2013.

2 [1996] A.C. 284, p.314.

3 Ibid. p.305.

4 Ibid. p.308.

5 Paragraphs 11 and 12.

6 Paragraph 15.

7 Amendments to the Grand Court Law, Maples and Calder Update, available at http://www. maplesandcalder.com/fileadmin/uploads/ maples/Documents/PDFs/Litigation_ Quarterly_-_Cayman_-_Amendments_to_the_ Grand_Court_Law_-_Dec2014__JSE_CDM_ KKW_.pdf .

8 E.R.G. Resources llc v Nabors Global Holdings II Ltd, 5 April 2012; 2012: No. 110, paragraph 23.

9 Paragraphs 77 and 78.

INTERNATIONAL LITIGATION AND ASSET RECOVERY

2015

Venue: LAGOS, NIGERIA - Date: 5th NOVEMBER 2015 Hosted by:

& 13

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L-R: Theo Emuwa, partner, Aelex; Emeka Emuwa, GMD/CEO, Union Bank, and Oscar Onyema, CEO, Nigerian Stock Exchange.

L-R: Fubara Anga; Theo Emuwa; Funke Adekoya; Dapo Tunde-Olowu; Soji Awogbade, and Sina Sipasi, all partners, Aelex, at the company’s 10 anniversary dinner in Lagos.

L-R: Knut Ulvmoen, group executive director, Dangote Industrie Limited; Oscar Onyema, CEO, Nigerian Stock Exchange, and : Fubara Anga, partner, Aelex, at the company’s 10 anniversary dinner in Lagos. Pic by Francis Abiagam.

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L-R: Dapo Tunde-Olowu, partner, Aelex, and Tunji Mayaki, deputy MD, corporate services, Addax Petroleum.

Ayodele Oni, Senior Associate Banwo & Ighodalo, Theodora Kio-Lawson, Head, legal Businessday Media and Tolulope Aderemi, Partner, Perchstone & Graeys

L-R Boma Ozobia, FMR President, Commonwealth Lawyers Association, Chioma Madubuko, Company Secretary/Legal Adviser, Dangote Sugar Refinery Plc and Alex Mouka, Chairman, NBA Lagos Branch

L-R:Justice Ayotunde Philips, immediate past chief judge of Lagos State, with a guest.

Fubara Anga, Partners, Aelex; Oscar Onyema, CEO, Nigerian Stock Exchange, and Th

Herbert Wigwe, GMD, Access Bank Plc

heo Emuwa Partners, Aelex.

Senator Udo Udoma SAN With Other Guest.

L-R: Mike Igbokwe, SAN, with Pat Utomi.

L-R: Oseni Enemosah, legal manager, Nigerian Stock Exchange (NSE), and Toyin Adenugba, rules & interpretation manager/ legal & regulation division, NSE

CONSTITUTIONAL LAW Ferdinand Adadzi, AB & David

Validity of Investment Related Agreements in Ghana: When is Parliamentary Approval Required?

A

Ferdinand Adadzi

Partner at AB & David and Lecturer at GIMPA Law School

This article seeks to provide a general overview of agreements that require the approval of the Parliament of Ghana in order to be valid and enforceable

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s in the case of most developing economies, the Government of Ghana remains the biggest spender in terms of the purchase of goods, works and services. In addition, most investment opportunities in Ghana involve some direct government involvement. Government, therefore, remains a critical party to most foreign investment arrangements. In that respect, foreign investors enter into one form of agreement or another with the Government in respect of their businesses. One of the pertinent concerns of investors is the nature of the ultimate approval required for the validity and enforceability of such agreements. Increasingly, the concern has become more pervasive since the decision of the Supreme Court of Ghana in the cases of: Attorney General vrs.

Balkan Energy Ghana Ltd, Balkan Energy LL, and Philip David Elders;1 Martin Alamisi Amidu vrs Attorney General, Waterville Holding (BVI) Ltd, and Alfred Agbesi Woyome;2 and Martin Alamisi vrs. Attorney General, Isofoton S.A and AnaneAgyei Forson.3 In all the above cases, agreements executed between a private party and Government were held to be invalid and unenforceable as they were not approved by Parliament as required by the 1992 Constitution and other laws of Ghana. The question, therefore, becomes: which agreements with government require parliamentary approval?

This article seeks to provide a general overview of agreements that require the approval of the Parliament of Ghana in order to be valid and enforceable.

Law Digest Winter 2014/15

Parliamentary Approval to Agreements executed by Government.

The system of government in Ghana, as enshrined in the Constitution, is based on the concept of Separation of Powers. The executive power is vested in the Executive branch of Government and exercised by the President. The Executive, therefore, has the power to implement policies and enter into agreements to give effect to those policies. The legislative power is vested in the Legislature (Parliament) and the judicial authority vested in the Judiciary.

However, this concept of Separation of Powers is subject to various checks and balances spelt out in the Constitution and given effect to in various Acts of Parliament. As part of the checks on the executive power to implement policies and enter into various agreements, parliamentary approval is required in some instances for these agreements to be valid and enforceable. The approval powers given to Parliament over agreements entered into by Government (Executive) is therefore to ensure accountability of the Executive.

In order to ensure such provisions are fully complied with, the highest court of the land, the Supreme Court, has consistently held that without the required parliamentary approval such agreements are void. The agreement would, therefore be deemed as never coming into force and will not confer any right or benefit on any of the parties to such an agreement. It is, therefore, important for an investor entering into an agreement with the Government to understand which agreements require parliamentary approval and which do not require such approval. For the protection of the investor, they must ensure the approval is obtained where necessary. The following agreements, per the current laws of Ghana, require approval of Parliament in order to be valid and enforceable. (a) Loan Under Article 181 (3) of the Constitution, “no loan shall be raised by the Government on behalf of itself or any other public institution or authority otherwise than by or under the authority of an Act of Parliament.� This position is further reiterated under the Loans Act, 1971. Section 3 provides “the Government may, whether by

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As part of the checks on the executive power to implement policies and enter into various agreements, parliamentary approval is required in some instances for these agreements to be valid and enforceable itself or any other public institution or authority and in such manner and such terms and conditions as may be agreed between the Government and the party by whom the external loans is to be granted, enter into any agreement providing for the raising by the Republic of an external loan.” Section 7 provides that the “terms and conditions of any loans obtained by the Government shall not come into operation unless they have been laid before the National Assembly [Parliament] and approved by the National Assembly [Parliament] by resolution.”

From the above, any agreement for a loan raised by Government of Ghana is subject to parliamentary approval. It is, therefore, important for lending institutions to ensure that such approval is obtained prior to disbursement of loans. In addition project companies that are to be paid from funds/loans to be raised by Government must also be aware of this requirement. (b) Guarantee Closely related to the above is the issue of guarantee by Government either for the repayment of a loan or other payment obligations by public or private entities. This may occur in a number of instances including the following: • The guarantee of repayment of a loan granted to a public institution; • The guarantee of repayment of a loan granted to a private entity for projects executed for Government; • The guarantee of payments due to a private entity from a public sector agency.

Such guarantee requires the prior approval of Parliament in order to be valid and enforceable. Section 10 of the Loans Act 1970 provides that “no agreement providing for a guarantee by the Government of any loan shall come into operation unless the terms and conditions of the agreement have been laid before the National Assembly [Parliament] and approved by the National Assembly [Parliament] by resolution.”

The express terms of the section provide that guarantee for all loans is subject to parliamentary approval.

The argument has been in respect of guarantee of other payment obligations which are not repayment of loans. Even though there are no express provisions on this, the import of the Loans Act 1970 and the constitutional requirement that government expenditure are subject to parliamentary approval is that prior parliamentary approval will be required for guarantee of all payment obligations. This is especially the case with guarantees because they result in contingent liabilities which Government must budget for. Indirectly, that may amount to government expenditure if the contingency occurs. It is therefore important that all payment guarantees issued by Government to private investors must be approved by Parliament to be valid and enforceable. (c) Taxation In most instances, investments, especially those involving large capital outlay often attract some tax concessions in the form of waiver, deferral or reduction. The private investor may, therefore, enter into an agreement with the Government that provides for such tax concession.

Under the Constitution, Article 174 provides: “(1) No taxation shall be imposed otherwise than by or under the authority of an Act of Parliament (2) Where an Act, enacted in accordance with clause 1 of this article, confers power on any person or authority to waive or vary a tax imposed by that Act, the exercise of the power of waiver or variation in favour of any person or authority, shall be subject to prior approval of Parliament by resolution.”

Any

agreement

with

Government

under which there is a waiver or variation of applicable tax is, therefore, subject to prior approval of Parliament in order to be valid and enforceable.

Related to the above, the Ghana Investment Promotion Centre (GIPC) Act, 2013 (which replaces the now repealed GIPC Act, 1994) provides some benefits and incentives for entities registered with the GIPC. These incentives include exemption from import duties and related charges

In order to ensure such provisions are fully complied with, the highest court of the land, the Supreme Court, has consistently held that without the required parliamentary approval such agreements are void. on plant, machinery and equipment.

An application to the GIPC for an exemption must be submitted to the Ministry of Finance for consideration and recommendation to Parliament for the grant of the exemption. The application to GIPC has, in some instances, been erroneously construed to mean the GIPC has power to grant tax exemption to entities registered with the Centre.

As indicated above, the only authority that can grant tax exemption in Ghana is Parliament. Therefore, on submission of the application by the GIPC to the Minister of Finance, any grant of exemption from import duties and related charges on the plant, machinery or equipment is further subject to parliamentary approval. (d) Public Private Partnership Agreements Ghana like most developing countries, is embracing public private partnerships (PPPs) as a mechanism to deliver needed infrastructure and ensure efficient provision of related services. Even though Ghana is yet to pass a specific legislation to govern the implementation of PPPs, the Government has adopted the National Policy on PPPs (approved by Cabinet on 3rd June, 2011) to provide the framework for the implementation of

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PPPs. Under the National Policy on PPPs, a PPP is defined as “a contractual arrangement between a public entity and a private sector party, with a clear agreement on shared objectives for the provision of public infrastructure and services by the public sector.” This definition is wide enough to cover all variants of PPP arrangements. The National Policy also provides some guidance to determine whether a project satisfies the definition. These include the following: 1. The private sector party performs part or all of a government’s service delivery function; 2. The private sector party assumes the associated risks of a project for a significant period of time; 3. The private sector party’s consideration for the implementation of the project is derived from: • service tariffs or user charges; • Government budgets which may be fixed or partially fixed periodic payments (annuities) and contingent; or • a combination of the above.

The National Policy expressly excludes outsourcing of routine operations and privatisation from the ambit of PPPs. Once a project qualifies as a PPP, the National Policy on PPPs require various approvals from project inception to project implementation. Of relevance here is the approval of Parliament for PPP agreements. The National Policy requires parliamentary approval for PPP agreements in two instances: 1. Where the PPP agreement falls under Articles 174 or 181 of the Constitution. Article 174 as indicated above, provides for parliamentary approval for tax waiver or exemptions. Article 181 provides for parliamentary approval for loan transactions (as discussed above) or for agreements that qualify as “international business transaction to which Government is a party” as discussed below; or 2. Where the PPP at project inception or planning stage involves a total estimated project cost exceeding fifty million Ghana Cedis (GHS 50m) (which is about US $15m as at the end of July, 2014).

From the above, where a private sector party and a public sector entity enter into an arrangement which qualifies as a PPP, the agreements would require prior parliamentary approval in one

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of two instances. First, where the estimated project cost is above the threshold, and secondly, for projects with an estimated project cost below the threshold, but the project is caught within the ambit of the requirement for parliamentary approval as discussed, in this article. (e) Agreement for Exploitation of Natural Resources Article 268 of the Constitution provides that “any transaction, contract or undertaking involving the grant of a right or concession by or on behalf of any person including the Government of Ghana, to any other person or body of person howsoever described, for the exploitation of any mineral, water or other natural resources of Ghana made or entered into after the coming into force of this Constitution shall be subject to ratification by Parliament.”

Pursuant to the above provision, contracts entered into for the exploitation of natural resources including water, petroleum products, mining, forestry, etc are subject to parliamentary approval. Consequently, specific laws that have been passed to regulate specific natural resources have provided that such agreements or concessions are subject to prior parliamentary approval.

One of the specific laws regulating a natural resource is the Petroleum (Exploration and Production) Law, 1984. The Law, which regulates exploration, development and production of petroleum, provides

From the above, any agreement for a loan raised by Government of Ghana is subject to parliamentary approval that petroleum agreements entered into by the Minister responsible for Energy are subject to ratification by an Act of Parliament or a resolution of parliament supported by the votes of more than one-half of all the members of Parliament.

Also, the Minerals and Mining Act, 2006 which regulates mining activities gives the Minister responsible for mines the power to grant Licences or rights for mining purposes on the advice of the Minerals Commission. That power of the Minister is, however, subject

to parliamentary approval. The Act provides that “a transaction contract or undertaking involving the grant of a right or concession by or on behalf of a person or body of persons, for the exploitation of mineral in Ghana shall be subject to ratification by Parliament.”

The Water Resources Commission Act, 1996 establishes the Water Resources Commission and empowers the Commission to, inter alia, grant water rights to applicants. However, the Act provides that the grant of water right is subject to ratification by Parliament.

As a general rule, investors entering into agreements for exploitation of natural resources ought to be aware of the requirement of parliamentary approval for the validity and enforceability of the agreements for exploitation of natural resources. (f) International Business Transaction to which Government is a Party In addition to loan agreements, Article 181 of the Constitution requires a second category of agreements to be approved by Parliament. This second category of agreements falls under “international business or economic transactions to which the Government is a party.” Article 181 (5) provides that “this article [181] shall, with necessary modification by Parliament, apply to an international business or economic transaction to which the Government is a party as it applies to a loan.”

In essence, where an agreement qualifies as an international business or economic transaction to which Government is a party, that agreement must be approved by Parliament in order to be valid and enforceable. This provision has been interpreted by the Supreme Court in the cases listed in the introductory paragraph of this article.

The Supreme Court has declared that the agreements that have not been approved by Parliament are void. From the various decisions of the Supreme Court, it would appear that any of the following agreements could fall under this category: 1. Agreements for business transactions between a foreign or non-resident company and the Government of Ghana.

2. Agreements for business transactions between a resident company (incorporated in Ghana) and the Government of Ghana where the shareholders are nonGhanaian. The Supreme Court, in the Balkan case, said issues

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• • • • • •

to be taken into account may include: source of funding originate outside Ghana; jurisdiction of the originator of the project is not Ghana; jurisdiction of the project sponsor is not Ghana; individuals

negotiating with Government are of foreign nationals; place of management of the

project company is outside Ghana; or whether there is an international arbitration clause in the agreement, etc.

3. Project agreements which fall under (i) and (ii) above for which the funding or loan agreement has been approved by Parliament.

There are a number of exemptions applicable. For example, where the agreement is regarded as “minor”, parliamentary approval may be dispensed with. The issues on the exemption and the uncertainty relating to the Article 181 (5) provision have been discussed in Issue 5 Spring 2014 Edition of Law Digest.

Government Under Article 181 of the Constitution above, a loan agreement entered into by the Government or an international business or economic transaction to which Government is a party requires

ratification by Parliament. The issue of what entity is “Government” came up for discussion in the case of Felix Klomega vrs. (1) Attorney General; (2) Ghana Ports and Harbours Authority (GPHA), and others.4 The question in the above mentioned case was whether GPHA, a statutory corporation established by law, falls within the definition of “Government” as used in Article 181(5). Essentially, the question was whether agreements entered into by GPHA must be ratified by Parliament to be valid and enforceable. The Supreme Court came to the conclusion that GPHA does not fall within the definition as used in Article 181. The court further indicated that “Government” as used in the Article refers to the central government and not operationally autonomous agencies of government. In that respect, Government would include ministries, departments and agencies that are not autonomous from the Executive arm of government. It would appear that statutory corporations, autonomous agencies and companies that have separate legal personality, distinct from the central government are not caught within the ambit of “Government” as used under Article 181.

Two limitations should be noted in this interpretation. First, the interpretation is limited to Article 181 of the Constitution. Second, the Supreme Court indicated that the interpretation does not lay down an absolute rule and each case would be considered on its facts. Extreme caution should therefore

be exercised in the application of the Felix Klomega case.

Conclusion In conclusion, investors as well as international law firms advising investors must be aware that Ghanaian law requires parliamentary approval for a number of agreements entered into with Government. The position of the law is that without the parliamentary approval, such agreements are not valid and enforceable. These agreements include • Loan agreements; • Guarantees issued by Government; • Agreements having tax waiver or variation provisions; • Public Private Partnership Agreements; • Agreements for the exploitation of natural resources; and • International business or economic transaction to which Government is a party.

Supreme Supreme Supreme 4 Supreme 1 2 3

Court, Court, Court, Court,

Ghana Ghana Ghana Ghana

No. J6/1/2012 Writ No. JI/15/2012 Writ No. JI/23/2012 Writ No. JI/10/2012

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Lawyer in the News DELE ADESINA, SAN DEEPLY RELIGIOUS, HIGHLY RESPECTED, DISARMINGLY HUMBLE

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Dele Adesina SAN, was called to the Bar in July 1982. His faith in God is undeniable. He makes bold that God has been faithful to His plan and purpose for his life. He expressed his belief in the biblical statement that “those who know their God, they shall be strong and they shall do exploits,� and no one who has been opportuned to witness his rise from humble beginnings to the pinnacle of the profession with the conferment with the prestigious rank of Senior Advocate of Nigeria in 2007, can doubt that he has in fact done exploits.

For Adesina, life has not always been a bed of roses. His first 12 years at the Bar were full of challenges which would test the resolve of even the most tenacious of souls. In 1983, he was the victim of an arson attach in which he lost all his possessions, save his wig and gown, prophetic one would say.

He served his pupillage with Chief Doja Adewopo and worked for six years before he established Dele Adesina and Co. However, the challenges he faced were unrelenting. He recalled a story of a time he travelled with his bosom friend, Femi Falana SAN to their home town, when they had a flat tyre. It was then that Falana realised that he was travelling in a car without a jack!

Adesina was however not deterred from holding firmly to his belief that God would indeed do exploits through him.

From those challenges, he has risen to become the General Secretary of the Nigerian Bar Association (NBA) and life member of the National Executive Committee of the NBA. His time as General Secretary between 2002/2004, Before that time, he had served his NBA branch, Ikeja, in different capacities; from the Publicity Secretary to Secretary and ultimately the Chairman of the branch between 1998 and 2000.

He is also a life member of the distinguished body of Benchers, the highest regulatory body in the profession.

A very active member of the Section on Legal Practice, Adesina was Chairman of constitutional and Administrative Law Committee of the Section of Legal practice. He was also the Chairman of the Rule of Law action group of the NBA. It is for his triumphs against all odds and his service to the profession that Julius Oladele Adesina SAN, is our Lawyer in the News.

www.nglawdigest.com

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Dele Adesina, SAN

By Seyi Clement

Have you always wanted to be a lawyer?

Yes, l have always wanted to be a lawyer. If it wasn’t for law I don’t know what I would be doing at the moment. The truth is that I never gave myself any option. I was inspired very early in life to be a lawyer. In secondary school, I had cause to follow my father to a court in AdoEkiti, Ekiti State, I was a very young boy at the time. That was my very first contact with people I was later told were lawyers. I was impressed by what I saw, their appearances in wig and gown (which is why I’ve never been one of those who are advocating that the profession should do away with the wig and gown in Nigeria). I was fascinated by the big cars which I was told they owned. Of course, I loved the idea of courtroom advocacy,

which is that of fighting for and defending the rights of others.

Who or what has had the most profound influence on your life and your career?

I have always said I don’t have a single hero. I have so many heroes, both in life and in my career. I have several mentors both directly and indirectly. Some of my mentors may not even know that they have actually mentored or have had a positive effect on me. In my life, Bishop David O. Oyedepo, my spiritual father, has had tremendous and profound impact on my life. Through him and his teachings, I knew a long time ago that everything is possible with God and if everything is possible, then everything is realisable as long as a

man is prepared to do his own part.

Through him, I know that success in life is a covenant and there are two people to this covenant i.e. man himself, and God. Every single miracle is a product of a partnership between God and man. That is why the scripture says faith without God is dead.

In the legal profession, I have several mentors, starting with Chief G.O.K Ajayi, SAN (of blessed memory). In him I learnt how to carry myself with dignity, candor and respectability.

Chief Ajayi was a man of integrity, discipline and honor. In Aare Afe Babalola SAN and Chief Wole Olanipekun OFR SAN, I learnt the virtues of hardwork. In Chief Gani Fawehinmi SAN, I cultivated the culture of soaking myself into the case of my clients. Once I believe in

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by the Constitution, regulating the entire judiciary, including the State judiciary. For me, I rather prefer a wholesale replacement of the 1999 constitution to piecemeal amendments of several sections at a time. The greatest characteristic of a Federal system is lacking in the 1999 Constitution and as an organic document and the grundnorm for all our laws, the Constitution ought to provide proper framework as to how Nigeria should be governed.

You have some radical ideas for the reform of the Judiciary and the electoral system. Do you mind sharing some of these with our readers?

a case and I accept the brief, I sink or swim with the clients. I cultivated the culture of self-belief, self-pride, and assertiveness. Even in my good senior friend and brother, Olisa Agbakoba SAN, I tapped into the culture of impeccable appearance.

So I’m a product of so many people and to every single one of them, I am eternally grateful for being who they were/are to me.

Your name is virtually synonymous with Constitutional law, what do you think of the 1999 Constitution.

Is it still fit for its purpose?

I’m not sure you are correct in saying my name is virtually synonymous with constitutional law.

I know very many distinguished legal practitioners, both dead and alive who I still prayerfully look up to as front-runners in this area of law.

This notwithstanding, I have a settled position on the state of the 1999 Constitution and I have expressed this in several interviews and lectures which I’ve had the privilege to deliver.

That the 1999 constitution is flawed in some fundamental respects is no longer an issue. The issue is how to respond to these areas. I recognise that a Constitution may not be perfect and it may not address all problems at the same time, hence

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the allowances for amendment. Some of the key areas in the Constitution are to do with the fundamental system of government we run.

The Constitution boldly proclaims Nigeria as running a federal system of government. Paradoxically, you find several unitary provisions in the constitution.

There is also the issue of over concentration of powers at federal level to the detriment of the federating States. For example, you know as much as I do that as at today, no State can get up and say it’s going to conduct a census of people in the State. They do not have such constitutional powers. Yet, statistics are very fundamental to proper planning and development. Nigeria is perhaps the only federal state with a monolithic Police structure. Despite the manifest inadequacies of this structure, as we witness today in Nigeria with unprecedented security challenges everywhere, we are still debating whether or not State Police and/or community Police are desirable.

Even, some have argued (and I agree with them in toto), that the Judiciary in Nigeria is essentially a unitary framework. This explains why you have the National Judicial Council, a federal executive body created

There is the perception that the Judiciary is corrupt, this perception is doing a lot of damage to the trust and confidence of the members of the public. I recognise that perception does not amount to proof, nevertheless, perception can be more dangerous even than reality. There is therefore, a compelling need for the stakeholders of the system to fight this perception and change it. To this extent, we demand, not just a reform of the system but also, a change of attitude of both the operators and the users of the system. A situation where people do not believe that they can win a case genuinely, without any corrupt move, does not help the system.

A situation where people will not readily accept the finality of even the decisions of the Supreme Court, particularly on political matters should be discouraged. I make bold to say that there are still impartial judges in our courts, who are doing justice without fear or favour, affection or ill will. We must arrest the situation where we continue to judge a whole system by the inadequacies of a minority. The proper thing to do is not a general condemnation of the system because of the questionable acts of a few, but eradicating corruption out of the system. That is what can guarantee purification. I am talking about attitude because it takes a man to operate a system.

The second problem is the question of delay. An average matter or suit

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still takes between five to eight years in the court of first instance and much longer than that from the High Court to the Supreme Court. Indeed, I have it on good authority that in June this year 2014, the Supreme Court was still sitting over 2009 appeals. The problem of delay in the administration of justice in Nigeria is both attitudinal and systemic. Like I said earlier, the operators, i.e. the lawyers as well as the judges, must change their attitude. The Rules of Court must be obeyed as regards timing for taking one step or the other.

Frivolous actions and appeals must stop. I do not believe that all cases must get to the final court of the land before a party can convince himself or herself that he or she has got justice.

Regarding systemic challenges to speedy administration of justice, I have looked at the Constitution and I have read many literatures. There are hundreds of High Courts all over the 36 states of the federation, as well as Abuja, where appeals lie either as of right or with leave to the Court of Appeal with only about fourteen divisions. Similarly, appeals lie from these fourteen divisions of the Court of Appeal, to one Supreme Court. The system itself has inbuilt delay. One wonders why we cannot have a federated Judiciary with constitutional provisions for State

Courts of Appeal and even State Supreme Courts. I think it was Professor Ben Nwabueze SAN, that erudite constitutional lawyer who said that the 1999 constitution is a unitary constitution operating in a federal system of government. It is a paradox.

As regards a reform in the electoral law, I think the law in operation is still the Electoral Act 2010. I quarrelled with some of the controversial provisions on adjudication of election petition in that Act, because of the patent injustice that were evident in the application by the courts post 2011 elections. For instance, there is the Section 18(1) and (4) which talks about application for the issuance of a Pre-hearing Notice within seven days after completion of pleadings, and went further to say that failure to file such application will be taken to have been abandoned. Indeed Section 18(4) says that no application for extension of time to file the Prehearing Notice shall be entertained. I do not think provisions like this help our democracy to grow. I believe as much as possible that technicality should be avoided. Technical justice is no justice and the Supreme Court in a plethora of cases, has deprecated this, preferring instead substantial justice.

Another area of concern is Section 285(6) and (7) which stipulates 180 days for hearing and disposition of an election petition and 60 days respectively for appellate courts. These provisions have been interpreted by the Supreme Court to be immutable and as constant as the rock of Gibraltar or Mount Zion that cannot be moved. I am not aware if something has been done to address the injustice that we saw post 2011 elections in the strict application of these sections. I think election petitions as a matter of public policy ought to be decided on the merits.

One of your most radical ideas for the decongestion of the Supreme Court is for interlocutory appeals to terminate at the Court of Appeal, how would this sit with the right to hearing?

This idea is not my copyright. The truth is that so many people in the profession at one level or the other have preoccupied themselves with the need to find a solution to this cankerworm called delay.

Chief T.J. O. Okpoko SAN once headed a committee that raised this recommendation and their report was widely circulated. Some of the suggestions may be strong and fundamental, but a fundamental problem needs a fundamental solution. As to how this will affect the right to fair hearing, I do not see any negative here. An interlocutory application that has been tried and adjudicated upon first at the court of first instance with one judge, and Court of Appeal with at least three justices, the party concerned must have had the benefit of the opinion of four judges, and that should be enough. After all, what novel issues arise in interlocutory appeals? Fair hearing is not a magic wand. It simply means first, hear the other side, and secondly, no person should be a judge in his own case. Besides, if the law says this is how far you can go, then you have to comply with the law. It is justice according to law.

What role should the professional play in the decongestion of the courts generally?

Nigerian lawyers must come to terms

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with the fact that litigation is not a game of hide and seek. It is a process founded on law both substantive and procedural law. Compliance with these laws constitutes relevant elements of the system and we know cases that are solid and iron cast, and we know cases that are frivolous and vexatious.

Again, there are situations when counsel, because of one reason or the other, will not take a step required to be taken within the time stipulated by the rules of court and result to filing applications for extension of time. There are situations also when a matter duly adjourned for hearing will not go on because counsel is not ready or because witnesses are not in court. These are daily occurrences in our courts and I think we as lawyers and officers of the court can and must put a halt to this. If I recall correctly, these are some of the reasons why the rules of court have enacted provisions for personal liability of counsel in circumstances such as those stated above. Regrettably, these provisions for personal liability of counsel for cost are applied in the breach.

It has been said that practitioners like you and the courts are the real custodians of democracy in Nigeria, is this an indictment of the political system or a vindication of the legal profession?

Straight away, I will say it is a vindication of the profession. It cannot be an indictment in any way.

First of all, legal practitioners, both at the bar and on the bench, are the defenders of the rule of law and promoters of democracy. Rule of law is the basis of democracy and without it you cannot have democracy. Rule of law connotes due process as against arbitrariness, absolutism, impunity and dictatorship. Rule of law guarantees the fundamental rights of all including but not limited to freedom of assembly and association, right to freedom of expression, including the freedom of the Press as well as the right to fair hearing.

With very profound respect to other professions which are equally

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important in the process of nation building, no other profession can defend as much as the legal profession will, any of the rights that I stated above. It is important to mention that the judiciary, which is manned by the legal practitioners on the bench, is the stabiliser of the process. It also plays a significant role to grow the process by clothing the letters of the Constitution with flesh through judicial interpretation of the provisions of the constitution.

You have been critical of the high cost of the administration of the Nigerian political system.

However, some critics seem to have laid the blame at the door of the legal profession. Is there any justification of this criticism?

Let us break this into two. First of all, the cost of the administration and the cost of running the political system. Both are interrelated but distinguishable. Let me start with the cost of running the political system which I believe is the area that touches the legal practitioners, tangentially. It appears the language that our democracy speaks largely is money, our political system is not issue oriented or ideology based.

Furthermore, when elections are held, no candidate believes he has lost justly, rather they believe that

they have been schemed out and so, the battle ground shifts to court and really, when you examine the facts of some of the petitions that have been fought, won or lost at the tribunals and the appellate courts, you will discover that some of the claims have been justified.

After the 2007 elections, the contest among the political gladiators shifted to the courts in so many states of the federation.

Let me give two contrasting examples here to explain the point that I am trying to make.

In Edo, Ekiti, Osun and Sokoto States, the election disputes lasted for several months. Osun and Ekiti States lasted for about three years each and in Edo, Ekiti and Osun States, the decisions of the authority responsible for the elections were reversed by the courts. Recently, the election tribunal confirmed the decision of the body of the June 2014 election in Ekiti State. The lawyers involved in these cases, as well as the parties who secure the services of the lawyers know the volume of work that is put into the process. The problem we have had is that people look at the charges of lawyers who handle these petitions superficially without considering the work done or the sacrifice involved in handling the petitions. Besides, let me say jokingly, that lawyers’ professional charges are a product of negotiation

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between two contracting parties.

By and large, I believe that election disputes and their resolutions constitute an integral part of the electoral process. The lawyers both at the bar and on the bench are playing a very prominent and indispensable role in determining who governs Nigeria.

The second aspect is the cost of running the administration. I read an article some time ago that our democracy is the most expensive in the world, taking into consideration the number of appointments at both federal and state levels, the huge wages and allowances of the legislators particularly at federal level. I hope you will recall that the former Governor of the Central Bank of Nigeria, now his Royal Highness, the Emir of Kano was very critical of this. Let me also inform you that the Nigerian people are fully concerned about the huge allowances that we are talking about here, particularly, when you take note of the constitutional provision that talks about sitting for a minimum of 181 days. Many stakeholders and public commentators, relying on this provision, have argued that the job can be a part time job. A year is 365 days out of which they can sit for about 181 days or a little more. Also, some have argued that we need to reduce the number of our representatives in the legislative houses or even reduce the bicameral legislature and run a unicameral legislature at the Federal level as they are doing in the states of the federation. There is a lot of sanity in these opinions. As we speak, the fortune of the country economically is going down as a result of the downturn in the price of oil. For a monolithic economy like Nigeria, it has become more urgent to carry out an audit of our political system.

It is not an overstatement in saying that the drive for holding political office in Nigeria today is hardly to render service. Many see it as a viable option to amass wealth. So we need a holistic change of orientation in all these things.

You have served and continued to serve the NBA diligently.

What would you like to be

most remembered for as your contribution to the NBA to date?

Everyone who knows me will know that I am very passionate about the profession and the NBA. In fact, I have been quoted as introducing the word passion to the lexicon of NBA politics. You cannot give your best to what has not consumed you and this is the problem. I will like to be remembered for my commitment and total dedication to the legal profession using the NBA as a platform for my contribution. Every time and every area has been momentous for me. I served as the General Secretary of the association between 2002 and 2004. Chief Wole Olanipekun SAN was the President of the association then. We made our mark highly visible and tangible. If I am permitted to mention some of our impactful areas, they include the creation of sections within the association. We created the Section of Business Law (SBL) and Section on Legal Practice (SLP) as well as changing the face of the annual conferences and patterned them on the International Bar Association.

Many in the profession have raised concerns over the quality and capacity within the profession.

How can these issues be addressed?

The Nigerian Bar Association must position itself to exact influence over the statutory bodies and institutions providing legal education and regulating the profession in order to have an enhanced quality assessment and to set up a standard benchmark for the profession. Some of the ways to exact these influence by the Association is to begin a process of strategic interventions through direct involvement, engagement and participations. The American Bar Association does not directly have accrediting or statutory powers over American law schools but according to my information, every American law school seeks American Bar Association accreditation and recognition. Nothing goes for nothing.

Leadership is all about influence.

To gain the needed influence, therefore, the NBA must directly engage itself actively in the affairs of the institutions of the profession.

Such strategic interventions include but are not limited to organising conferences for the Law Schools, reviewing the curriculum of the faculties of law in the Universities, organising students competitions for their development, and raising funds to fund research and consultancy projects in Universities.

The first and only time that I know that the NBA has had a real intervention in legal education in Nigeria at the level of the Nigerian law school was when the association made a financial donation to the four campuses of the law school in 2003. I was the General Secretary of the Bar at that time.

Finally, the leadership of the Bar must do everything within its powers to ensure the enactment of the new Legal Practitioners Bill into law by the National Assembly. A lot of innovations that can positively affect our quality assessment and standard are packaged in that Bill. Regrettably, this Bill has been pending in the National Assembly since 2004 and has marked its 10 year anniversary.

You were made SAN in 2007, but there is growing clamour for the abolition of the title or at least a reform of the selection process.

Where do you stand on this?

In 2010, there was a programme of the Association in Kaduna and the academic forum of the Association organised a programme on this issue and I was one of the speakers. I pitched my tent towards preserving and protecting the rank while making it more respectable by suggesting reform in the selection process and that is my position till today. I think the agitation for abolition has gone down. They were indeed defeated at that conference in Kaduna. I am also aware that a lot of reforms have been introduced into the process of selection by the Legal Practitioners Privileges Committee. These include inspection of law offices and libraries of the applicants, oral interviews of applicants and so on. The largest room in the world is the room for improvement. The selecting authority will continue to come up with new ways and ideas that will guarantee

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only the best are given the award.

You are a devout Christian. How has your belief influenced your practice and your life choices?

Let me say that firstly, Christianity is not an appellation; it is a way of life. It is a personal relationship between man and God. Expectedly, I have been positively influenced in all ramifications. For me, the whole essence of the practice of law in terms of litigation, arbitration, or any other alternative dispute resolution mechanism is to locate where the truth is. That is the whole essence and the other name for God is truth.

A lawyer must seek after the truth in all his dealings. Secondly, as my belief does not give room for half measures, in anything that I do I give my all. I pursue every single aspect of my life with conviction and passion.

I set my goals and pursue them with single mindedness. I do not do anything for the sake of it. Everything

I do must be targeted towards the attainment of an objective. With my Christian belief, I have always seen opportunities in every situation. I see victory in every defeat and success in every failure. I am a product of my belief.

You are involved in various philanthropic activities, which of those philanthropic activities are you most passionate about?

There is one we called Akindoye Akinyemi Foundation. It was set up to tend to the needs of widows and God has used this foundation to bless so many in this category of people.

The foundation tries to put money to their hands in order to set up small businesses and I think that we have succeeded in putting a smile on their faces. I am the Vice President of the foundation which is founded and named after one of my elders in the church. I am also in the process of establishing a foundation in memory

of my mother. The foundation which is called Comfort Iyalode Adesina Foundation also known as CIA Foundation is in the process of registration at the Corporate Affairs Commission. We intend to cater for the needy, particularly the aged, the deprived in the community and people with one limitation or another.

Generally, the desire to put a smile on the faces of people is my driving force in this area.

How would Adesina?

you

describe

Dele

Well, nobody can know you more than you know yourself. Dele Adesina is a purposeful person, assertive, selfless, dependable and trusting to a fault. Dele Adesina expects the same level of trust, honesty and character from others in return, forgetting that he has no right to such expectations.

Thank you and God bless you.

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Many thanks, Susan Evans QC - UK Thank you, my wig arrived safely and I am very pleased with it.

HH Judge David Morris The Wig arrived in Sri Lanka yesterday. Thank you very much for the trouble you took to send the wig to Sri Lanka. As you have mentioned, the wig has come out very well. I have no hesitation in recommending Chancery Wigs to any counsel interested in ordering a wig.

Thank you once again.

Best Regards, Uditha Egalahewa LL.M (Col), LL.M. (Malta) Sri Lanka

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ADMINISTRATIVE LAW Emmanuel C. Obikwu

The Genesis of the Ethnic Minority Problem in Nigeria – The role of the British Introduction

Emmanuel C. Obikwu B.A., (Hons) LL.B.,(Hons) B.L., M.A., LL.M.

“It is proposed to discuss how certain aspects of British Colonial administration and the constitutional laws that underpinned it originated the problems of ethnic minority groups in Nigeria”

This article is an attempt to jurisprudentially trace the origin of the ethnic minority problem in Nigeria.

It has been averred that Nigeria is exceptional in being a region with many languages, tribes and races and a major meeting point of African linguistics groups. According to the United Nations, Nigeria is composed of about 400 ethnic, religious and linguistic groups.2 However, out of all these, the Nigerian Constitution recognises only the three dominant languages of Ibo, Hausa and Yoruba (spelt Yaruba on the map) as well as English, as the official languages for the conduct of government at national level.3 This article examines the origins of the ethnic minority question in relation to these three dominant ethnic groups whose position has been officially recognised and protected by the highest law of the land.4 It would be urged that it was British Colonial policy that unwittingly created the problem, not in the administration of law and justice, which in itself protected the rights of all Nigerians without distinction within the colonial legal order, but in the implementation of its colonial administrative policies, most especially in the tripartite division of Nigeria, which was given legitimacy by Orders in Council, it was this first that precipitated the ethnic minority issue.

The British Colonial Legal Order It is proposed to discuss how certain aspects of British Colonial administration and the constitutional laws that underpinned it originated the problems of ethnic minority groups in Nigeria.

Following the annexation of Nigeria by the British, British laws were

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introduced and included those which were made to apply directly to Nigeria by their own force or by the directive of the British Government, as well as those which were received into Nigeria by local legislatures.5 Under British colonial rule, as indeed under post-colonial constitutions in Nigeria, every person has the fundamental rights of life, dignity of the human person, personal liberty, fair hearing, private and family life, freedom of thought, conscience and religion, freedom of expression, and the press, peaceful assembly and association, as well as freedom of movement and property. The state is encouraged not to violate or contravene these rights and their violation being amenable to redress by the courts through appropriate remedies.6 That this was the norm under the colonial legal order as shown by cases like Eshugbayi Eleko v Officer Administering the Government of Nigeria,7 Amodu Tijani v Southern Nigeria 8 and Laoye v Oyetunde,9 which are testaments to these facts.

This tradition of fidelity to law, due process, fair hearing and all that goes with ensuring that justice is meted out to the parties are what constitutes perhaps the most significant bequest of the British to their erstwhile colonial subjects.10 The genesis of the problem The evidence suggests that the problem of ethnic minorities in Nigeria is attributable not in the administration of justice or the rule of colonial law instituted by Britain, but in the administrative policies that went side by side with it. It has been argued that the territory of present Nigeria was defined, not on the basis of its peoples’ shared historical, economic or social experiences, but merely by arbitrary amalgamation of a number of ethno cultural units which happened to occupy contiguous land areas that were then under British colonial administration.11 This we believe laid the foundation for the minority problem in Nigeria today.

Thus what is being put forward is that in the creation and administration of colonial Nigeria, heed was not paid to ethnic groups in Nigeria, especially its minorities. Thus in 1899, the British Government revoked the Charter it had given the Royal Niger Company to administer territories on its behalf.

It then constituted all the territory

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north of Idah as the Protectorate of Northern Nigeria. The Niger Coast Protectorate and all the territories formerly administered on behalf of the British Crown by the Royal Niger Company south of and including Idah were amalgamated to form the Protectorate of Southern Nigeria.

The two protectorates became legal entities by the Northern Nigeria Order in Council 1899, and the Southern Nigeria Order in Council 189912 and came into being from January 1900.13 In 1906, the Colony and Protectorate of Lagos (comprising of the present Lagos State) and the Protectorate of Southern Nigeria were amalgamated to form the Colony and Protectorate of Southern Nigeria.14 The Colony of Lagos, Protectorate of Southern Nigeria and the Protectorate of Northern Nigeria were united in 1914 to form the Colony and Protectorate of Nigeria.15 A further administrative division of Southern Nigeria took place in 1939 when the Eastern and Western Provinces came into being.16 The boundaries of the Protectorate of Northern Nigeria were disproportionally larger in comparison with the east and west combined. It would have been sensible to expect the Colonial power to have reconfigured the Protectorates, as was the case when the Protectorate of Southern Nigeria and the Colony and Protectorate of Lagos merged in 1906, to form the colony and Protectorate of Southern Nigeria. Instead the newly created Southern Nigeria was divided into three provinces, Eastern, Central and Western. In addition, in 1918, the colonial administration extended the boundary of northern Nigeria southeastwards to include a good deal of territory that previously belonged to the Eastern province of Southern Nigeria. The first Governor of Nigeria, Lord Lugard rejected moves for the redefinition of boundaries between the North and South. The only ground given was the transfer of the small community of Otun from the North to the south-west in 1936.17 The boundaries between North and South Nigeria as changed in 1918, 1924 and 1936, was confirmed by the British Government in 1942.18 Nwabueze, has urged that there was no outstanding reason why Northern Nigeria should have been left unchanged. Its boundary with the south was not natural. It did not conform to geographical boundaries: the rivers Niger and Benue being the most obvious ones. On the contrary,

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the North was extended far beyond the Benue in the south east and far beyond the Niger in the south west.

When in 1939, the Protectorate of Southern Nigeria was divided into two East and West, the boundary was drawn along the natural frontier using the River Niger. It must also be noted that the boundary of the North did not also follow the distribution of Tribes.

The Hausa- Fulani were the dominant tribes but there were a host of other major tribes plus two hundred or so minor tribal groups.19 Thus, from 1939 onwards, Nigeria had been sub partitioned into three powerful regions and in each of these regions, a major ethnic group dominated, the Hausa Fulani in the

colleges from which representatives were selected by the three groups of native administrations. These sat on the Central Legislative Council which, while the Governor retained the casting vote and other powers, legislated for the whole country as a political unit.

A further constitution came into force in 1951, known as the Macpherson Constitution by which the three

North, the Ibo (spelt Igbo below), in the East and the Yoruba in the West.

In each of these regions there were minority ethnic groups and tribes with genuine concerns which were not addressed in the arrangements.

regional administrations set up in 1947 were converted into regional governments.

This Constitution represented a major advancement from the pre-existing constitutional arrangement for it brought in elected majorities in the central legislature and in the regional houses of assembly, which were now endowed with independent legislative powers with resultant legislative powers in clearly limited local issues.20 National affairs remained a matter of the central government on which the three component regional governments were represented.

The Lyttleton Constitution came into force in October 1954 and created the Federation of Nigeria, the three regions remained and there was

Nigeria’s Colonial Constitutions and Ethnic Minorities The status quo was reaffirmed and strengthened by successive constitutions imposed by the administering colonial power. The Clifford’s Constitution of 1922 was followed by the Richard’s Constitution of 1946, which provided for three Regional Councils based upon the traditional ethnic groupings of the country, the councils acted as electoral

It is argued therefore that federalism provided the local institutional base for an appeal to tribal or group sentiment

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also the Federal Territory of Lagos which was demarcated from the Western Region.21 With the grant of limited political power in Nigeria from 1951 onwards to the indigenes, the evolving federal structure allowed the predominant tribal parties in control of the regional governments to use the constitutional framework to uphold, at both the regional and federal political levels, the interests of the tribes which they represented; putting the minority groups which were not represented in

Yet as self-government was being gradually conceded to Nigerians, the question had to be faced of how to preserve this libertarian heritage against not only the executive, but also legislatures controlled by tribal majorities this structure at a disadvantage.

It is argued therefore that federalism provided the local institutional base for an appeal to tribal or group sentiment.

According to Arthur Lewis, “Any idea that one can make different peoples into a nation by suppressing the religious or tribal or regional or other affiliations to which they themselves attach the highest political significance is simply a non-starter. National loyalty cannot immediately supplant tribal loyalty; it has to be built on top of tribal loyalty by creating a system in which all the tribes feel that there is room for selfexpression.”22 Prior to independence, with the increase of political activities by Nigerians, there was in general among the Nigerian elites suppression of political adversaries regardless of ethnic backgrounds, by the leading tribal political parties. Persons perceived as opponents were discriminated against and were victimised regardless of their ethnic group. It has also been alleged that the indigenous nationalists and ruling party leaders were vindictive and oppressive towards political opponents and there was the tendency to perpetuate one party rule in each of the region they held sway. These

observations contributed in no small measure to the problem of ethnic minorities who as independence for Nigeria approached became very apprehensive.23 The anxiety felt by the many ethnic communities prior to independence was captured in these words. “As long as power resided ultimately in a Colonial Governor, various elements in Nigeria believed that they would get justice; but as soon as power began to pass progressively from the imperial administration to the more indigenous government a feeling of apprehension set in.”24 Nigeria had been divided in such a way that the three major ethnic groups that dominated each region were mainly concerned with the interest of their tribes and used successive constitutions from the 1950s onwards for this purpose. Whilst not denying the tribal hegemony of the dominant tribes in the three regions, from which it is easy to infer that indigenous preindependence politicians contributed their quota to the problem of ethnic minorities, it must be appreciated that these indigenous political activities were carried on within the constitutional framework created by the colonial administration.

The Willink Commission With the approach of self-government, Great Britain was in a position to address the fears of minorities. The agitation of these groups was for the creation of more states or regions to protect the interest and promote self determination for the minority groups.

This moved the British Government to set up the Willink Commission, following the 1957 Constitutional Conference on Nigeria held in London, to inquire into the concerns of minorities and to come up with ways of allaying them.25 However, it has been urged that at the time, the Northern Region was in principle opposed to the creation of more states and in their stance had the support of the British Government.

The Secretary of State for the Colonies set up the commission in such a way as to basically stop it from advocating for the creation of more states.26 The commission was permitted as a last option to recommend the creation of not more than one region from any of the subsisting regions, “if but only if, no other solution seems to the commission to meet the case.”27 Despite the compelling case put forward by Nigeria’s ethnic minorities

for the creation of more states, the Willink Commission’s Report was against this method as a way of dealing with the fear of minorities.

It however, recommended inter-alia that a procedure for creating more States be added to the Independence Constitution28 as well as the addition of fundamental human rights clauses.29 It was reasoned that a Bill of Rights is intended not only to be an insurance against the oppression of minorities by majorities but also to safeguard the liberties of individuals irrespective of their ethnic origins. However, Chief Awolowo, himself a jurist and leader of the Action Group who had pushed for new States found, the commission’s finding ‘bad and astonishing.’ He asked, “what intrinsic and inseparable nexus is there between the fears of minorities and fundamental human rights? None whatsoever...Fundamental Human Rights are ordained not for the protection of ethnic minorities as such but for the protection of the citizens at large against executive and legislative tyranny or excess. In other words, even if Nigeria was divided into states on an ethnic basis, or even if it consisted of one homogenous ethnic group, it would still have been necessary to entrench fundamental human rights in our constitution.”30 His protestation about the connection between the safeguarding of ethnic minorities and a Bill of Rights found sympathy with de Smith who agreed that, “justiciable guarantees of fundamental rights do not in terms safeguard the rights of minorities; they safeguard the enumerated rights of individuals.”31 When the Report of the Willink Commission came up for consideration before the 1958 Constitutional Conference, the Colonial Secretary after hearing the submissions of the Nigerian delegations indicated that if the calls for more states was insisted upon either before or after the 1959 federal elections, then the British Government would be compelled to postpone the date for independence to allow such new regions to gain experience in government under British tutelage. Nigerian nationalists being anxious to obtain full self-government by 1st October 1960, therefore dropped their demands for the creation of more states.32 Concluding Remarks The libertarian tradition of common

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law and its system of justice was one of the greatest legacies of British colonial rule. Resting upon a laissezfaire conception of society, common law is concerned with the protection of private rights, not only civil and political liberty, but individual freedom of action generally. This tradition has been recognised in this essay. The limitation of common law is that it avails only against the executive, but not against the legislature. To courts in the common law tradition, the authority of the legislature to interfere with private rights is unquestioned and unfettered by any speculative theorising.33 Under British colonial administration, the encroachment of the legislature on the rights of people never went beyond what the exigencies of administering the colonial territory demanded. Apart from laws of sedition for example, it can be contended that the state of civil liberties up to the time of internal self-government in Nigeria, were at par with other colonial dependencies and as availed in Britain itself.34 Yet as self-government was being gradually conceded to Nigerians, the question had to be faced of how to preserve this libertarian heritage against not only the executive, but also legislatures controlled by tribal majorities. Not only these, but the interest of all Nigerian tribes whether of the majority or minority stock! It was wishful to hope that such legislatures in a territory dominated by tribal or racial particularisms would have been as tolerant as the British have been for instance, towards the right to criticize the government, not to mention the legitimate aspirations of ethnic minorities. Self-restraint and respect for the rights of minorities are ingrained in the British legal tradition, but it had not been inculcated by the new indigenous legislatures of Nigeria at the twilight of colonial rule. For the actors of independent Nigeria to have developed to such an extent as to counteract the feelings of tribal, racial or religious politics and so make a reasonable presumption that the constitutional guarantee of principles of civil and political liberty are not called for or needed, was a bridge to far.

The setting of Nigeria as British Colonial rule was receding was radically different from the conditions that prevailed in Britain. There was the danger of blurring legal questions whether on the constitution or on fundamental human rights

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with matters which were political in the narrow sense.36 A typical example being the matter of and the circumstances surrounding the case of Adegbenro v Akintola 37 an outstanding political case, which arose after Nigeria’s independence, where the Privy Council decided the matter contrary to the claims of the “de facto” Premier of the Western Region of Nigeria. The decision was superseded in Nigeria by retroactive constitutional amendment.38 Therefore there was a desperate need to move towards some form of constitutional means of safeguarding the rights of ethnic minorities in Nigeria. Happily the (1960) Independence Constitution enacted for the territory laid the tentative foundations for meeting some aspirations of Nigeria’s teeming minorities that has subsequently been re-enacted and improved upon by subsequent constitutions.

Thus, the most significant safeguard for the protection of ethnic minorities at that time-the creation of new states within Federal Nigeria was provided for in the constitution,39 even the provisions on fundamental human rights which transcends individual freedoms and liberties in their application and reaches out to ethnic groups was given pride of place and continues to hold great importance in Nigeria’s Constitutional development.40

CFRN 1999 Cap V Part 1 sec.55 U. N. Reports of the Special Rapporteurs: The Situation of Human Rights in Nigeria G.A. A/51/538 item 110 (c) of 22/10/1996 p28 3 endnote 2 above 4 Cap 1, Part 1 sec.3 to the effect that the CFRN 1999 takes precedence over all other laws in Nigeria, such laws being void to the extent of their inconsistency. The Supremacy of the Constitution is also clearly expressed in section 1[1] of the same Chapter 5 Okonkwo, C.O., Sources of Nigerian Law in Introduction to Nigerian Law, Okonkwo, C.O. editor 1980 (London: Sweet and Maxwell) p.1 6 B. O Nwabueze, ‘Equality Before the Law’ in M.A Ajomo, [editior] Fundamentals of Nigerian Law 1989 (Nigerian Institute of Advanced Legal Sudies; University of Lagos (Nigerian Institute of Advanced Legal Sudies; University of Lagos pp 39 -62 at p 40. See further CFRN 1999 Chapters II and IV. 7 [1931] All ER Rep. 44 8 [1921] 2 AC 399 9 [1944] AC 170 10 A. Oyebode, Law and Nation-building in Nigeria. : Selected Essays (2005) (Ogba, IkejaLagos: Centre for Political and Administrative 1 2

Research) p 16 11 Graf, W.D., The Nigerian State. 1988, (London: James Currey) p7 as in P. Badru, Imperialism and Ethnic Politics in Nigeria.

1998 (Trenton New Jersey & Asmara, Eritrea: Africa World Press)p4 12 E. A. and S.S. Richardson, The Native and Customary Courts of Nigeria. 1966 (London: Sweet and Maxwell, Lagos : African Universities Press) p3 13 Order No6 of 1900; The Southern Nigeria, Order in Council 0f 1899 14 See A. O. Obilade, Nigerian Legal System 1979 (London: Sweet and Maxwell) p24-25 15 ibid at p24 and 28, 16 B. O. Nwabueze, Constitutional Law of the Nigerian Republic 1964 as in footnote 44 p52 17 Ibid 18 Government Notice No. 516, 1942 and section 5(2) of Nigeria (Protectorate and Cameroons ) Order in Council, 1946.

19 Ibid at p 154-155 20 Nigeria Constitution Order in Council 1951 s.91 and schedule III, the House of Chiefs had existed in Northern Nigeria since 1946 see Nwabueze footnote 11 p46 21 Ibid p5; see also Nigeria Order in Council (S.I. 1954, No.1147; S.I. 1955, No. 431) 22 A. Lewis,Politics in West Africa [1965] p50 in Nwabueze note 44 at 147 23 Nwabueze end note 44 at p110 24 O. I. Odumosu, Nigerian Constitution, 1973 (London: Sweet and Maxwell) p240 25 Cmnd 505, 1958 26 B.O. Nwabueze footnote 44 at p129 27 Cmnd 505; footnote 44 at p129 28 Ibid 29 M. I., Jegede, The Supreme Court’s Attitude towards some Aspects of Individual Freedom and the Right to Property in A. B. Kasunmu, The Supreme Court of Nigeria 1977( Heinemann Educational Books (Nig.) ltd: Ibadan) p110 30 O. Awolowo, “Awo”: An autobiography pp193199 31 S. A. de Smith, Fundamental Human Rights in the New Commonwealth, 1961 International and Comparative Law Quarterly Vol. 10 32 Nwabueze footnote 44 at p129 33 B. O. Nwabueze, A Constitutional History of Nigeria 1982 (London: C. Hurst & Co. Ltd) p118; Liyange v R [1967] AC 259 PC 34 B. O. Nwabueze foot note 95 at p119, see an example in this regard in post-colonial Nigerian case of DPP v Chike Obi 35 Nwabueze footnote 95 at 119 36 K. Robert Wray, ‘Human Rights in the Commonwealth’ International and Comparative Law Quarterly 1968, Vol. 17 908-925 at 910.

Apart from DPP v Chike Obi [1961] All Nigeria Law Report 186 which has already been cited which involved freedom of expression note too should be had of the case of The Queen v Amalgamated Press Nigeria Ltd & Another [1961] 1 All Nigeria Law Report 199; Adegbenro v Akintola {1963]AC 614 37 [1963] A.C. 614 38 S.A. De Smith, The Right Honourable Lord Woolf , J. Jowell and A.P. Le Sueur, Principles of Judicial Review, 1999 (London: Sweet &Maxwell) p178 footnote 32. Note also the case of Lakanmi and Ola v. Attorney General Western State of Nigeria ( Suit no. 58/69) [1970] NSCC 143 where a decision of the Supreme Court of Nigeria invalidating a military edict was set aside by the Federal Military Government of Nigeria’s Supremacy and Enforcement of Powers Decree 1970 (Decree number 28) 39 The Nigeria (Constitution ) Order in Council 1960 (The Dominion Constitution), Chap 1, Sections 2,4. See CFRN 1999 Part II, Section 8 40 Chapter 3 of Nigeria’s Dominion Constitution, 1960. See CFRN 1999, Chapter IV.

COMMERCIAL LITIGATION Segun Osuntokun - Berwin Leighton Paisner

Strategies for Challenging Preliminary Freezing and Disclosure Orders

P

Segun Osuntokun Partner, Berwin Leighton Paisner

“The purpose of a freezing order is to preserve assets against which judgment in the substantive claim can ultimately be enforced; it does not give the claimant any security in the assets or priority over other creditors of the defendant”

icture the following scenarios in which, in the words of the usual movie disclaimer, “any resemblance to real persons living or dead is purely coincidental!”

You receive an urgent call from a former bank executive who is enjoying life in one of his choice properties in London or, for gender balance, the wife of a deceased military dictator equally enjoying life in a mansion in Nigeria. They say to you: “I have just been personally served with a copy of an English court order which says that my worldwide assets have been frozen and which requires me to produce within 48 hours documents relating to my assets and other transactions. No one told me that they were taking me to court and this is a disaster. I want you immediately to get rid of this order which will make my life a misery.”

What do you do?

Before looking at the strategies for challenging such an order, it is worthwhile spending a few minutes reminding ourselves of the nature of worldwide freezing orders granted by the English court and the basis on which they are made.

The former Master of the Rolls, Lord Donaldson, knew what he was talking about when he described the freezing injunction (or Mareva injunction) as one of two “nuclear weapons” in English law (the other being an Anton Pillar order): Bank Mellat v Nikpour [1985] FSR 87. Given the predilection of the English court to exercise its jurisdiction extraterritorially and to make freezing orders on a worldwide basis, perhaps it could now be more aptly described as the “Intercontinental Ballistic Missile of English Law.” The purpose of a freezing order is to preserve assets against which judgment in the substantive claim can ultimately be enforced; it does not give

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the claimant any security in the assets or priority over other creditors of the defendant. The ancillary disclosure orders which the court makes are designed to give teeth to the freezing order by compelling the respondent to say where his assets are and allowing the claimant to monitor compliance with the order.

The court has the power to make wider ancillary orders, such as: • an order for delivery up of documents in his possession relating to assets above a certain specified value, as well as, all bank statements in his possession within a particular date range; • an order requiring the respondent to provide details of third parties holding documents relating to his assets; • an order requiring details of the respondent’s computers etc on which documents or information relating to assets is stored and any email accounts relating to his assets; and • a passport order with a prohibition against leaving the jurisdiction (for example, until 48 hours after compliance with his disclosure obligations), although this is rare.

In order for the English court to exercise its discretion to make a freezing order it must either have jurisdiction over the underlying cause of action or it must be satisfied that the order can be properly made as a protective measure in respect of a cause of action subsisting outside the jurisdiction and the respondent has a close connection to England and Wales.

Once jurisdiction has been established it is then necessary to satisfy the court that on the evidence, there are grounds for granting a freezing injunction.

First, the claimant must show that it has a good arguable case - It is not necessary to establish that the claim is “bound to succeed” or has more than a 50% chance of success. But a case that is no more than arguable is not sufficient. In Fourie v Le Roux [2007] UKHL 1, the House of Lords held that a freezing injunction should be dismissed where, at the time it was granted, the underlying claim had been “unformulated and inchoate.”

Secondly, the respondent has assets

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within or outside the jurisdiction - The respondent should have assets within the jurisdiction. However, if the assets within the jurisdiction are insufficient to meet the claim, the court may order an injunction over assets in specific countries, or a WFO. An applicant must demonstrate a real prospect that the assets are in the country where enforcement is sought.

Thirdly, there is a real risk of dissipation of those assets - There must be evidence of a real risk that any judgment may not be satisfied.

It is not necessary to show that the respondent intends to deal with his assets so as to defeat the enforcement of an eventual judgment. The court applies an objective test and considers the effect of the respondent’s actions, not his intent. The test is not one of probability of dissipation (see Briggs J in Caring Together v Bauso [2006] All ER (D) 167 (Jul). The court is not concerned with the use of assets to pay genuine indebtedness. Risk of dissipation is often difficult to prove. In practice, the courts may be prepared to grant a freezing order even if the evidence of risk of dissipation is “less than compelling” (see Macleish Littlestone Cowan v Hajibassi [2006] EWHC 1587 (Ch)). A risk of dissipation may be more readily inferred where the claim involves an allegation of criminal behaviour by the defendant (see Abbey National v Daily Meals [2006] All ER (D) 140 (Jun)). Any evidence of a risk of dissipation is weakened where there is delay on the part of the applicant.

In the case of freezing injunctions made in support of foreign proceedings, the factors which the court will take into account are: • Whether making the order would interfere with the management of the case in the primary court.

• Whether it is the policy in the primary jurisdiction to refuse to grant the relief sought.

• Whether there is a danger that the order would give rise to disharmony or confusion and/or the risk of conflicting, inconsistent or overlapping orders in other jurisdictions.

• Whether, at the time the order is sought, there is likely to be potential conflict as to jurisdiction.

• Whether the order could be enforced. The courts will not grant an order if there would

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be no real sanction against the respondent for non-compliance.

So, back to our imaginary wife of a deceased military dictator or former bank executive who has just been served with an English worldwide freezing order made without notice.

What options are open to you as their lawyer to relieve the pressure which the order places on them?

From my experience there are two broad strategies which can be adopted in the medium to long term – the first is what I would call a full frontal attack by which you seek to challenge the basis on which the order was obtained and the second is more akin to a guerilla campaign whereby you seek through a war of attrition to weaken the impact of the freezing order on your clients’ lives and businesses. However, whichever medium to long term strategy is adopted, your immediate strategy should always be to seek to comply with the terms of the freezing order.

This is because the consequences of not complying are pretty serious. The freezing order will have endorsed on it a penal notice which will state that if the respondent disobeys the order he may be imprisoned, fined or have his assets seized. That is not an empty threat – a gentleman named Mukhtar Ablyazov, a former trade minister in Kazakhstan and CEO of BTA Bank, was sentenced to prison for 22 months for failing to disclose his assets and documents pursuant to an English worldwide freezing order. He is currently cooling his heels in a French jail pending his extradition to Russia and Ukraine. I also recently successfully obtained a contempt order against a defendant for flouting the terms of a freezing order.

He was sentenced to a year in prison, suspended for two years.

Compliance in the short term will usually mean putting together a list of the client’s worldwide assets and drafting an affidavit verifying the list. Copies of any specific documents ordered to be disclosed should be provided within the specified deadline.

The deadlines imposed by WFOs are usually very tight. It is not uncommon for the respondent to ask for the disclosure of asset and documents within 48 hours of service, with a verifying affidavit within 7 days. If these deadlines prove to be impractical or simply impossible to meet, then the applicant should be asked for an

extension. If it is not granted then an urgent court application should be made. The claimant should serve the WFO on third parties, such as banks, who may hold assets belonging to your client and as such they will be on notice not to dissipate or permit any dissipation of assets. You should however also, on behalf of your client, take steps to ensure that everyone who needs to know does know about the WFO so that no assets are unwittingly dissipated in breach of the WFO.

The freezing order will have endorsed on it a penal notice, which will state that if the respondent disobeys the order he may be imprisoned, fined or have his assets seized You should also during this preliminary stage consider the practical implications which the WFO has on your client’s livelihood and what steps can be taken to ameliorate any difficulties. The WFO will provide that your client is allowed to spend a specified sum on living expenses and legal fees. Are the amounts specified sufficient? If not, in the first instance seek a variation by consent and if the claimant refuses, apply to court.

However, be ready to justify any increase with hard evidence.

The first opportunity to consider whether and how to challenge the WFO will come at the hearing on the return date, which is typically two to three weeks after service of the WFO. By this time, you will have been provided with the evidence relied upon by the claimant at the without notice hearing and a full note or transcript of the hearing, so you can evaluate whether there were proper grounds for making the WFO or if there are other ways in which you can lessen its impact.

If the WFO was obtained without notice, then your efforts should be focused on scrutinising whether the claimant and its advisers complied with their duty to make full and frank disclosure or fair presentation to the court on the application. In short, the

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applicant should have disclosed all matters that are material to the court in deciding whether to grant the order and, if so, on what terms. This includes disclosure of relevant legal principles even if they are not in the applicant’s favour. The relevant law is summarised in the judgment in Brink’s-Mat Ltd v Elcombe and others [1988] 3 All ER 188. The main principles are: • Materiality is to be decided by the court, not by the applicant or his legal advisers.

• The matters to be disclosed may be matters of fact or law, and may be adverse to the applicant. This would include any defence to the claim that may be available to the respondent.

The duty applies to facts known to the applicant and those facts that would have been known had proper enquiries been made.

Compliance in the short term will usually mean putting together a list of the client’s worldwide assets and drafting an affidavit verifying the list In Deutsche Bank Suisse SA v Khan and others [2013] EWCA Civ 1149, the Court of Appeal considered whether the duty of full and frank disclosure had been complied with in a without notice application. It re-affirmed the importance of complying with the duty to give full and frank disclosure of all material facts and law when making a without notice application, no matter how urgent the application or how informal the mode of communication with the court may be.

If the applicant failed to discharge the duty to give full and frank disclosure, then you may be able to apply successfully for the discharge of the WFO. This was the outcome in The Arena Corporation Ltd (in provisional liquidation) v Peter Schroeder [2003] EWHC 1089 and Millhouse Capital UK Ltd v Sibir Energy plc [2008] EWHC 2614 (Ch), where the judge set aside a WFO obtained on a without notice basis owing to the extensive and culpable failure to give full and frank disclosure

and so as to demonstrate to both the claimants and other without notice applicants the gravity of their duty of disclosure and the consequences of ignoring it. However, a note of caution: the court has a very broad discretion and even if it is found that material facts had not been disclosed, it may nevertheless allow the WFO to continue. The broad principles which the court will apply were set out in Crown Resources AG v Vinogradsky (unreported) where the judge said: “issues of non-disclosure or abuse of process in relation to the operation of a freezing order ought to be capable of being dealt with quite concisely… it is inappropriate to seek to set aside a freezing order for non-disclosure where proof of non-disclosure depends on proof of facts which are themselves in issue in the action, unless the facts are truly so plain that they can be readily and summarily established, otherwise the application to set aside the freezing order is liable to become a form of preliminary trial in which the judge is asked to make findings (albeit provisionally) on issues which should be more properly reserved for the trial itself.”1 The judge also stated that: • there are degrees of relevance of material facts and it is important to preserve a due sense of proportion;2 • the more complex the case, the more fertile is the ground for raising arguments about non-disclosure and the more important it is that the judge should not lose sight of the wood for the trees;3 and • in applying the broad test of materiality, sensible limits have to be drawn. Otherwise there would be no limit to the points of prejudice which could be advanced under the guise of discretion.4 If you think you have grounds for applying to set aside without notice WFO on grounds of material nondisclosure, when should you make an application?

The temptation may be to launch the application at the earliest opportunity. Whilst in certain circumstances that may be tactically the right move to make, you must beware that there is authority (Dormeuil Frères SA v Nicolian Ltd [1988] 1 WLR 1362) that “save in exceptional cases, it is not the correct

You can alleviate any immediate impact by obtaining variations to the WFO procedure to apply to discharge an ex parte injunction on the grounds of lack of full disclosure at the interlocutory stage of the proceedings” and (at 1370) “in the ordinary case it is wrong on the hearing of an inter parties motion to go into huge complexities involved in trying to disentangle at that stage whether there was full disclosure when the ex parte order was obtained. The matter should normally be dealt with at trial…”

In my experience, an application to discharge a WFO for material nondisclosure should only be made at an interlocutory stage if the application can be made succinctly and powerfully.

The danger is that the application turns risks turning into a trial of the underlying merits of the claim, or akin to a strike out application. In a recent case I was involved in, the defendant applied to set aside my clients WFO and in support served evidence from eight different witnesses. We saw it as an attempt to obtain summary judgment against our client and we countered with our own application for summary judgment. The defendant failed to persuade the court to dismiss our client’s case; instead on our client’s application for summary judgment, the court gave the defendant leave to defend on the condition that he pay a substantial sum of money into court. The defendant’s application in that instance backfired dramatically: Intercontinental Bank v Akingbola [2011] EWHC 605 (Comm).

By contrast, I acted for the respondents in a case where a swiftly made and targeted application to dismiss an injunction for material non-disclosure was successful. The applicant in that case was an aggrieved minority shareholder in a Nigerian telecoms company who wished to stop other shareholders from selling their shares to a company owned by a Sudanese businessman, allegedly in breach of a right of pre-emption in a shareholders’ agreement. The minority shareholder obtained an ex parte injunction from the English High Court preventing the majority shareholders from completing the sale, pending the commencement of arbitration

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proceedings.

One of the grounds on which he did so was that he had secured funding to exercise his alleged right of pre-emption. However, when the evidence on which the applicant relied was reviewed, it was particularly noticeable that he made statements as to the availability of funding without backing it up with concrete evidence. Accordingly, the majority shareholders in turn made their own ex parte application for disclosure, compelling the minority shareholder to produce documents allegedly backing up his claim that he had the necessary funding. This documentation showed that, contrary to the representations that had been made to the court on the ex parte application, the minority shareholder did not in fact have the requisite funding. In short he had deliberately misled the court.

Ten days later, the respondents applied to discharge the injunction on a number of grounds: first, that the respondents should have been given notice of the injunction and the applicants case on urgency did not make sense, secondly, that the applicant did not have a good arguable case for breach of contract and thirdly that he had failed to be full and frank about his ability to exercise his right of pre-emption. He had told the court that he was ready willing and able to exercise the right, but the truth was that he was not. The court discharged the injunction and awarded the respondents substantial indemnity costs: Econet Wireless Limited v Vee Networks Limited [2006] EWHC 1658 (Comm).

If there are no grounds to apply to dismiss the WFO or if you think there are but decide that the time to make

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an application is at trial, there are other ways in which you could protect your clients or lessen the impact of the WFO on your clients’ livelihood.

One way is to ensure that the applicant is good for the crossundertaking in damages which would have been provided as a price by the court granting the injunction.

To remind you, the principle is that because the interim injunction is granted before a determination of the substantive merits of the applicant’s case, the applicant will be required to undertake to compensate the respondent if it turns out either at trial or earlier that the injunction should not have been granted. If there is any doubt in your mind that the applicant will be able to afford to pay such compensation to your client, then you should immediately seek a fortification of the undertaking. Such fortification could take the form of a payment of money into court or the provision of a bank guarantee or bond that would pay out in the event that compensation was ordered.

In a recent case in which I acted against a former bank executive, the price my client paid for a WFO was a cross undertaking in damages fortified by a payment of £100,000 into an account held by my firm to the order of the court.

If the WFO is interfering with your client’s business or day to day life, then you should consider whether it is able to provide security for the claim.

If your client can provide security, then the WFO will cease to have effect.

Security can be provided in a number of ways, for example by a payment into court or the provision of a guarantee.

So, to conclude, a strategy to

challenge a preliminary freezing and disclosure order, needs, I believe, to be a well-considered and patient one. If served with a WFO granted by an English court, the initial focus must be on compliance with the strict letter of the order, given the grave consequences of non-compliance. You can alleviate any immediate impact by obtaining variations to the WFO. Once you are satisfied that you have complied and your client is not at risk of any contempt proceedings, then you can evaluate whether the WFO was properly granted. In particular, consider whether the applicant made full and frank disclosure and a fair presentation when applying for the WFO. If you believe that the applicant did not do so and you are able to marshal the non-disclosed facts and materials in a clear and succinct way, then by all means apply to discharge the injunction at an interlocutory stage. If however, you think that the application may turn into a minitrial on the merits, you may be best served by keeping your powder dry until the trial of the substantive suit.

In the meantime, you should seek to protect your clients’ interests by ensuring that the applicant is good for the cross undertaking in damages and applying for such fortification as the circumstances warrant. Finally, if your client can afford it, the impact of a WFO can be completely negated by the provision of adequate security.

Pages 4-5 of the transcript Page 6 of the transcript 3 Page 7 of the transcript 4 Page 22 of the transcript 1 2

INSOLVENCY Moyo Onigbanjo, SAN

An overview of the provision for the appointment and removal of Receivers in Nigeria Introduction

Moyo Onigbanjo, SAN

“The appointed receiver in this sense is deemed to be the agent of the appointer and not the courts.

Notwithstanding, receivers appointed in this manner can approach the court for direction with respect to issues ancillary to the performance of his duties”

The importance of receivership in corporate law practice cannot be underestimated.

The receiver in law and in practice manages the business of the company and disposes of its assets by virtue of the powers conferred on them by statutes. The prime onus of receivers in law is to pay the net proceeds to the secured creditors after a deduction of the receiver’s fees, expenses and costs, up to the total of their secured debt;1 and to realise value from the secured assets of the company. The receiver has a duty to act in good faith to the company, 2 its secured creditors etc. while taking reasonable steps in managing the company’s businesses as well as its assets.3 Once a receiver manager is appointed, in reality there are two main strategies, which can be deployed to realise his objectives.

These are namely to take over the assets and dispose of them with a view to using the proceeds realised therefrom to settle the debt. The other option which is however only really available where the receiver is also appointed as manager, is that of the management of the business as a going concern.4 In this instance proceeds/profits realised from the operations of the business would be used to offset the debt.

Regardless of the tactics employed, a receiver must take into account the holding costs, the high risks to the improved net realisation if the assets are to be placed on the market immediately.5 Therefore, in connection with the duty of care of a receiver(s), it has been opined that the receiver is required to carry out positive and reasonable steps to maintain the

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value of the assets. Even so, there is no requirement in taking steps or in incurring expenditures for the purpose of enhancing the net realisation of the debenture.6 In other words, the strategies to be used by the receiver is discretionary, in that, it depends to a great extent on the circumstances of the case. Its application must rest on the best suitable method favourable to the case at hand.7 Appointments Having drawn from the above, receivership arises in situations where an enterprise or an institution upon failure to meet its financial obligations and upon entry of bankruptcy rests its assets both tangible and intangible in the custody of a person or group of persons termed as “receiver(s)”for safe and proper keeping.8 The court in Prince Abdul Rasheed Adesupo Adetona & Ors Vs Zenith Int’l Bank Limited,9 described receivers to mean persons appointed by courts aimed at preserving property for the satisfaction of creditors’ claims, the failure of which will expose such claims/property to damage.10 The purpose of such appointment by the court is, thus, for a smooth running, management and operation of the company.

In the broad sense, appointments by the court and out-of-court appointments are the two recognised methods in law through which receivers are appointed.

Appointment out of court A debenture holder can appoint a receiver/manager where there is a power clause in the debenture trust deed to that effect.11 Such appointment usually is made out of court. This clause empowers the secured creditor to appoint receivers/ managers without having recourse to the courts.12 The appointed receiver in this sense is deemed to be the agent of the appointer and not the courts.

Notwithstanding, receivers appointed in this manner can approach the court for direction with respect to issues ancillary to the performance of his duties.13 Appointment by court It is important to note that a receiver/ manager is appointed not just to protect the interest of the debenture holder, but also for the estate of the debenture involved and the interest of those concerned.14 Thus, a debenture

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holder or a trustee via an application might apply to the court for the appointment of a receiver/manager in the absence of an express power of such appointment in the debenture trust deed.15 Such receiver appointed by the court is deemed an officer and or agent of the court and not an agent of either of the parties to the proceedings.16 The appropriate court in Nigeria to channel such an application is the Federal High Court in all cases where it appears just and convenient to do so.17 Notably, the Supreme Court in Uwakwe V Odogwu 18 noted the instances a receiver may be appointed as follows: “A receiver can only be properly appointed for the purpose of getting in and holding or securing funds or other property, which the court at the trial, or in the course of the action, will have the means of distributing amongst, or making over to, the persons or person entitled thereto. The object sought by such appointment is therefore the safeguarding of property for the benefit of those entitled to it. There are two main classes of cases in which the appointment is made: 1. to enable persons who possess rights over property to obtain the benefit of those rights and to preserve the property pending realisation, where ordinary legal remedies are defective; and 2. to preserve property from some danger which threatens it.”

Further, preserving a property pending litigation to decide the rights of parties or to prevent a scramble among those entitled can also be attributed as an instance for appointing a receiver, such as, appointment pending a grant of probate or grant of letters of Administration.19 Appointment of receivers under various legislations in Nigeria Under the CAMA The appointment of a receiver is principally provided for under the Companies and Allied Matters Act 1990 (CAMA). Though a receiver is not expressly defined by the Act, section 400(1)(a) is to the effect that: (a) Any reference…. to a receiver or manager of the property of a company, or to a receiver thereof, includes a reference to a receiver or manager, or as the case may be to a receiver of

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part only of that property and to a receiver only of the income arising from that property or from part thereof. 20 The need to resort to the appointment of a receiver may also arise where the company is adjudged to be insolvent and can no longer meet its obligations towards creditors in an action for winding up. 21 Section 209 Section 209(1) specifically provides for the appointment of a receiver as one of the remedies available to a debenture holder when such debenture is due. The section also provides a category of people who may appoint the receiver as regards the debenture to include: a. that trustee; b. the debenture holders of the same class containing power to appoint; c. debenture holders having more than one half of the total amount owing in respect of all the debentures of the same class; or d. the court on the application of the trustee. 22 It is necessary to note at this juncture that Sections 387 - 392 of the CAMA deal specifically with the appointment of receivers. As stated above, the term ‘receiver’ is not defined in the Act but rather the category of persons entitled to be so appointed is outlined; and subsections (2) and (3) outlines the offence for failure to adhere to the provisions of said section 387 (1). 23 However, Section 388 provides that where an application is made to the court to appoint a receiver on behalf of the debenture holder or other creditors of a company which is being wound up by the court, an official receiver may be appointed.

In furtherance of the above, Section 389 (1) states that...the court may, on the application of a person interested, appoint a receiver or a receiver and manager of the property or undertaking of a company if a. the principal money borrowed by the company or the interest is in arrears; or b. the security or property of the company is in jeopardy.”

Subsection (2) is to the effect that such receiver appointed by the court will be deemed an officer of the court not of the company, and, directions taken shall be in line with those set out by the court. 24

Conveyancing Act 1881 and the Property and Conveyancing Law 1959 Under sections 19 of Conveyancing Act 1881 and section 131 of the Property and Conveyancing Law 1959, the power to appoint a receiver becomes exercisable where:

It is important to note that a receiver/manager is appointed not just to protect the interest of the debenture holder, but also for the estate of the debenture involved and the interest of those concerned i. the mortgage money has become due for payment and the mortgagee has served a written notice on the mortgagor informing the latter that the principal has become due but the mortgagor defaults in repaying the whole or part of the money for a period of three months thereafter; or ii. some interest is in arrears and remains unpaid for two months thereafter; or iii. the mortgagor has committed a breach of some other covenant in the mortgage deed.

A legal mortgagee can appoint a receiver where the mortgagor defaults to pay. It follows therefore that apart from the legal mortgage, where the mortgage is an equitable mortgage created by deed, the power to appoint a receiver should be provided in the deed.

Lagos State Mortgage Property Law 2013

and

One of the powers of the mortgagee subject to the express provisions in a Mortgage Deed under the Lagos State Mortgage and Property Law, 2013 includes:i. The power to appoint a Court approved Receiver to recover any income from the Mortgagor and or the Mortgaged property.

Removal and termination A receiver and manager appointed out of court has a defined object:

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to secure the repayment of the sum due to the creditor who appointed him. Once that goal is reached he will be discharged from his duties.

A receivership may be determined by the parties themselves, by death, by the court or automatically. 25 In practice, the office of receiver(s) has been known to terminate in the following ways;

While the receiver under the conventional debenture is expressed to be in a fiduciary relationship with the company, that special and limited agency does not invest the company with any powers to dismiss the receiver By the parties The most obvious and frequent circumstance where a receivership ends is where the receiver’s job is completely executed and his appointor expressly discharges him.

Such termination is either entirely or in effect consensual and occurs after the receivership has run its course. But termination may also take place prematurely in the event of death, resignation or dismissal of the receiver. 27 Dismissal: While the receiver under the conventional debenture is expressed to be in a fiduciary relationship with the company, that special and limited agency does not invest the company with any powers to dismiss the receiver. The right is reserved for the debenture holder.

Resignation: In practice a receiver would of course be within his/her right to resign his appointment as a receiver.

By the court: The Court may in the exercise of its inherent jurisdiction remove a receiver in a proper case. Generally, an application to the court could be

brought by the person or persons who appointed the receiver. However, the Court will also intervene: a. Where the receiver/manager has not on a true analysis of the position been appointed by a majority in the value of debenture holders, if that is a condition of the appointment. 29 b. Where a disqualified person has been purportedly appointed as a receiver, the court will hold the purported appointment as a nullity and any act done by such disqualified person will amount to a nullity as it lacks the legal effect that would otherwise have been attributed to it. 30 Operation of law The title of a receiver/manager is no better than the title of the debenture holder who appointed him. Where therefore a prior encumbrancer comes forward and appoints his own receiver/manager, the appointee of the latter encumbrancer will be replaced. The replacement is automatic 31 and requires no order of court unless there is a dispute as to priorities.

Once the receiver has paid all preferential debts and the debenture holder and any other creditors who rank ahead of the debenture; and has recovered the remaining of his liabilities, remuneration and expenses, his work is done. He is functus officio.

Any further activities may expose him to a claim in trespass 32 and any attempt to proceed with sales of further property may be restrained by injunction.

The right of the company to deal with the assets of the company in receivership are revived at the termination of the receivership. 33 CAMA and removal of receivers It is important to note that CAMA failed to make provisions with respect to ‘removal’. The lacuna of the law in this respect calls for more attention. This is because the lack of set out procedures for termination of receiver appointment in the Act could lead to mismanagement of the assets of the company, especially in cases where the appointor and debenture holder refuse to terminate the receiver appointed out of court even though it is obvious that the assets are being mismanaged by the receiver.

The only resort of the directors/

shareholders of the company or property under receivership will be to rely on the court to seek for termination under the general law; and this could as well lead to hardship on the owners of the company with the tedious task of proving the same before the court.

Conclusion The significance of receivership and its place in corporate law practice cannot be over-emphasised. It is pertinent for both the appointer and appointee to determine the best strategy to adopt in achieving the objective behind the appointment of a receiver, should the receiver appointed act or regard himself as an undertaker or preserver. It is noteworthy also that Nigerian legislation fails to set out provisions to regulate the aspect of removal and termination of the receivers’ appointment. This leaves a lacuna that has even not been addressed in-depth by case law. For a law that makes provision for appointments 34 should equally make provision for removal. This makes out for good practice if such provisions are spelt out in the Act. 1 Mark Stamp, “Practical Company Law and Corporate Transactions” (Sweet and Maxwell, 2011) pg 566.

2 Ibid.

3 See Standard Chartered Bank Ltd v Walker (1982) 3 All E.R. 938 and, section 393 (1) Company and Allied Matters Act 1990 (“CAMA”).

4 Section 393 (1) CAMA. 5 Austen Imber, ‘APC Case Book: Case Work Illustrations for General Practice Candidates’ (Taylor and Francis, 2013) 108.

6 Imber (n6) 108.

7 Section 390(1) – (3) CAMA. 8 Ken Philip and Kaminski Kerin “Receivership: A Value-Adding Tool: Secured Lender” (2007) 63 (1), 30, 34, 36.

9 (2007) LPELR- 896(CA), the Court quoting Black’s Law Dictionary, 6th Edition.

10 Ibid; See also Section 393(1) of CAMA, which is to the effect that: “A person appointed a receiver of any property of a company shall subject to the rights or prior encumbrances, take possession of and protect the property, receive the rents and profits and discharge all outgoings in respect thereof and realise the security for the benefit of those on whose behalf he is appointed”.

11 Intercontractors Nigeria Limited Vs National Provident Fund Management Board (1988) 2NWLR (Pt. 76) P. 280.

12 The Act also provides a list of those who can appoint a receiver aside from the Court see Section 209(1) of the Act. 13 As provided for in Section 391 of CAMA. See also, Unibiz (Nig) Ltd Vs C.B.C.L. Ltd (2003) 6 NWLR 816 at 424 para B-D. 14 Intercontractors Nigeria Limited Vs National Provident Fund Management Board {supra} 15 Okoya & ors Vs. Santili & Ors (1990) 2 NWLR (Pt. 131)172; Prof. I.O.SMith ‘The

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Nigerian Law of Secured Credit at p. 332 16 Shining Star Nigeria Ltd Vs. A.K.S Steel Nigeria Ltd (2011) 4 NWLR at 596(SC); CAMA Section 898(2) 17 Section 567 of CAMA. 18 (1989) NWLR (Pt. 123) 526 19 Uwakwe V Odogwu (1989) NWLR (Pt. 123) 526.

20 Section 400 (1) (a) CAMA. 21 CAMA Section 437 ‘ It is hereby declared that where application is made to the Court to appoint a receiver on behalf of the debenture holders or other creditors of a company being wound up by the court, the official receiver may be so appointed.’

22 Section 209 (1) (a)-(d) CAMA. 23 See section 387 (1) (2) and (3) CAMA. 24 See section 389 (2) CAMA. 25 Y.Y.Dadem, ‘Property Law Practice in Nigeria’

HUMOUR

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(2nd Edition, Jos University Press 2009) 143.

The Law Relating to Receivers, Managers and Administrators, Third Edition by Hubert Picarda at page 291; In the United Kingdom for instance, the law is to the effect that: an administrative receiver of a company may at any time be removed from office by order of the court, but not otherwise. He must also vacate office if he ceases to be qualified to act as an insolvency practitioner in relation to the company.

27 The Law Relating to Receivers, Managers and Administrators, Third Edition by Hubert Picarda {Supra} 28 R V Board of Trade, ex p St Martin Preserving Co Ltd (1965) 1 QBD 603 29 Section 209 (1)(c) CAMA provides for a situation where the Receiver is appointed by debenture holders having more than one half 26

of the total amount owing in respect of all the debentures of the same class.

30 Section 387(1) CAMA provides for the category of people who cannot be appointed receivers.

31 Deducible from Re Metropolitan Amalgamated Estates as cited by the Law Relating to Receivers, Managers and Administrators, Third Edition by Hubert Picarda at page 293 32 Bank of New South Wales V Federal Taxation Commissioner (1979)145 CLR 438; Re Arnold Trading Co. Ltd [1983]NZLR445 at 451 CA; as sited by The Law Relating to Receivers, Managers and Administrators, Third Edition by Hubert Picarda at page 299 33 Intercontractors V N.P.F.M.B (1988) NWLR (Pt. 76) 280.

34 Interpretation Act, Section 11, Volume 8 LFN, 2004.

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SPECIAL FEATURE

Getting the Best from PPP Africa’s Current Dilemma

P

ublic Private Partnership (PPP) is a hot topic throughout Africa.

Private sector funding and expertise is widely regarded as the key to rapid and sustained improvements in infrastructure and public services.

However, while it is clear that PPP can deliver social value and promote economic growth, projects in Africa frequently face formidable challenges when it comes to ensuring that: • rights are not overridden without adequate compensation, and • benefits actually reach communities affected by development.

Malcolm Dowden, Consultant to Charles Russell Speechlys LLP and Director of Law Programmes at Law2020

“Private sector funding and expertise is widely regarded as the key to rapid and sustained improvements in infrastructure and public services”

Where community rights are overridden or simply not catered for, projects risk opposition and even violence, reminiscent of attacks on gas and oil pipelines in Nigeria. Those difficulties are not necessarily the result of corruption at government level. They stem in part from the complex and often undocumented forms of land ownership, communal and tribal rights over land.

There are also key issues to be addressed during a project’s procurement stages.

Transparency, fairness and clarity are key to securing the confidence of investors and lenders. That requires a combination of clear policy, effective legislation

and significant procurement expertise within the contracting authority, whether national, regional or municipal government.

It is also worth considering what Africa can learn from experience elsewhere. For example, the UK’s 25 year experience of PPP has not been trouble-free. The UK Treasury’s recent review of the Private Finance Initiative (PFI) and its revised approach (PF2) reflects some very hard-learned lessons. For example: • the PFI procurement process has often been slow and expensive for both the public and the private sector. This has lead to increasing costs and has reduced value for money for the taxpayer; • PFI contracts have been insufficiently flexible during the operational period, so making alterations to reflect the public sector’s service requirements has been difficult; • there has been insufficient transparency on future liabilities created by PFI projects to the taxpayer and on the returns made by investors; • inappropriate risks have been transferred to the private sector resulting in a higher risk premium being charged to the public sector; and • equity investors in PFI projects are perceived to have made windfall gains, and this has led to concerns about the value for money of projects.

HM Treasury also concluded that, too often, PFI has been used on projects where its application has been unsuitable and has, therefore, failed to deliver value for money.

Project selection and demand risk To have a realistic chance of coming to fruition a PPP project must be “fundable” – that is, it must be recognised as a sound investment by commercial lenders. While key factors include political stability, government commitment and procedural fairness and transparency, a project will be accepted as fundable only if it is based upon credible revenue forecasts and much of this depends on the PPP’s structure. If returns are to be achieved

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through “availability payments” made directly by the relevant government or contracting authority, then that authority’s credit-worthiness and record of payment in previous projects tops the list of potential concerns. By contrast, where the PPP is structured as a concession agreement, returns will be determined by the extent and reliability of user charges – for example, road tolls or rail fares.

Concession agreements, where returns are derived from user charges, are particularly susceptible to “demand risk”. Consequently, toll roads and bridges or energy schemes are much more likely to be viable in densely populated urban areas than in rural districts.

Similarly, urban transit schemes with a strong commuter base are much more likely to be fundable than long-distance passenger rail.

Long distance rail schemes may depend on the availability of long-term freight contracts based on minimum traffic commitments.

One result is that a project’s viability is often determined by financial projections than by reference to social need. PPP may be an effective route to infrastructure provision, but it may tend to increase rather than to close gaps in provision between cities and rural districts. Perhaps ironically, PPP may reinforce incentives to move into cities in search of employment, housing and opportunity and, as a result, increase pressure on urban infrastructure.

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and lenders. While each customary or communal rights regime is distinctive to its community, there are common themes across Africa. Norms include: • community-based jurisdiction over landholding and land use, often extending over large areas of land; • collective ownership or possession and control over naturally communal resources such as forests, rangelands or marshlands; and • The tendency for the size of customary territories to be periodically adjusted so that they remain at the scale at which community-based control can be effective.

In many jurisdictions communal rights enjoy constitutional protection.

For example, the Kenya’s 2013 Constitution, signed into law following the 2010 referendum, categorised land as public, communal or private.

Article 63 deals with communal land, and provides that: 1. Community land shall vest in and be held by communities identified on the basis of ethnicity, culture or similar community of interest.

2. Community land consists of— (a) land lawfully registered in the name of group representatives under the provisions of any law;

(b) land lawfully transferred to

grazing areas or shrines; (ii) ancestral lands and lands traditionally occupied by hunter-gatherer communities; or (iii) lawfully held as trust land by the county governments, but not including any public land held in trust by the county government under Article 62 (2).

Where community rights are overridden or simply not catered for, projects risk opposition and even violence, reminiscent of attacks on gas and oil pipelines in Nigeria Any unregistered community land must be held in trust by county governments on behalf of the communities for which it is held.

Crucially, the Constitution provides that community land must not be disposed of or otherwise used except in terms of legislation specifying the nature and extent of the rights of members of each community individually and collectively. Article 63(5) required Kenya’s Parliament to enact legislation to give effect to this Article.

PPP has been employed in developing urban transport such as the Gautrain in South Africa, the Monorail in Rivers State, Nigeria and the interstate in South Africa

Land access and communal rights Land access is a key concern for any large scale infrastructure project and is a particular concern where the project depends on private rather than government finance. In many parts of Africa, communal rights create an unfamiliar landscape for investors

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a specific community by any process of law; (c) any other land declared to be community land by an Act of Parliament; and

(d) land that is—

(i) lawfully held, managed or used by specific communities as community forests,

The land debate loomed large in Kenya’s constitutional referendum debate, and express protection for communal land was presented as a key stabilising measure, helping to reduce the risk of any recurrence of the violence that erupted following the 2007 elections.

However, because they are generally

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not documented, identifying and dealing with communal rights represents a major challenge for project promoters, as it becomes very tempting to try to plan routes around rather than through areas where they are likely to be encountered. However, engaging with communal land rights and ensuring that practical and economic benefits reach communities can be a highly effective way to secure support and enthusiasm for projects.

The objective is to secure the most sensible engineering solution rather than having to distort route planning or construction to avoid the land issue.

Released in 2013, “Securing Africa’s Land for Shared Prosperity”, is a copublication by the World Bank and the Africa Development Forum. Its core argument is that the inadequate systems used to determine and administer land rights severely

HM Treasury also concluded that, too often, PFI has been used on projects where its application has been unsuitable and has, therefore, failed to deliver value for money affects productivity and locks African countries into poverty. Although there has been progress, such as the establishment of Kenya’s National Land Commission in 2012, most African countries still use land administration systems that they inherited at independence, along with antiquated survey and mapping techniques. One consequence highlighted by Securing Africa’s Land for Shared Prosperity is that only 10 percent of Africa’s rural land is registered.

The remaining 90 percent is undocumented and informally administered which makes it susceptible to land grabbing, expropriation without fair compensation and corruption.

The report offers a series of 10 steps for improving land governance that it claims can help to revolutionise agricultural production, achieve rapid economic growth and create more opportunities for Africans, including women who make up 70 percent of

Africa’s farmers, yet are often locked out of land ownership due to customary laws.

The report lays out land reform pilots in Malawi, Benin, Burkina Faso, Ghana, Mozambique, Tanzania, Uganda and other countries and shows how many countries in Sub-Saharan Africa have recognised customary land rights and gender equality, the two key issues that provide a basis for sound land administration.

The 10 steps are based partly on lessons learned from agricultural land reform movements in Brazil and China and land rights reforms in slums in Argentina and Indonesia. They are tailored to reflect experiences with land reform pilot projects underway in African countries. These steps include: • •

•

securing tenure rights for community lands and individual plots; increasing efficiency and transparency in land administration services by empowering local communities and traditional authorities; and developing capacity in land administration by encouraging policy reforms and providing training.

Registration of communal rights provides a documented basis for contract and negotiations between infrastructure projects and the affected communities. It also provides a recognisable legal basis for payment of compensation in a form that reaches communities rather than going into general government coffers, with the attendant risks of corruption, and for legally binding obligations that protect productive land use.

However, there is a risk that community rights might be regarded as a precursor to individual ownership and control of land. Once areas have been registered, even if registered as land subject to community rights, the administrative process of subdividing that land into individually-owned parcels becomes considerably less difficult. For example, Article 237 of Uganda’s 1995 Constitution provides that all Uganda citizens owning land under customary tenure may acquire certificates of ownership in a manner prescribed by Parliament and that land under customary tenure may be converted to freehold landownership by registration. Arguably, formalisation

and documentation of land rights potentially creates circumstances in which those rights can be supplanted by individual title. In response to that threat, some countries have made it possible for customary rights to be registered without being extinguished

To have a realistic chance of coming to fruition a PPP project must be “fundable” – that is, it must be recognised as a sound investment by commercial lenders and replaced by individual tenure.

Consequently, in countries such as Mozambique, Uganda and Tanzania, it is possible for the same area of land to be subject to different registrations.

That possibility must be borne in mind when seeking to acquire land and rights for rail projects on a basis that minimises the risk of future challenge and unrest. Of course, from the perspective of African law firms, the overlaps and distinctions between communal and individual land rights means that local law input to due diligence is indispensable.

Legislation Investors and lenders will also scrutinise the effectiveness of PPP laws.

Transport, energy, communications and social infrastructure require huge investment and that is the context within which PPP legislation is being introduced and implemented throughout East Africa.

Uganda’s PPP strategy was published in 2010. Its proposed PPP Act was sent to the President for signature in July 2014, but remained in limbo due to industry concerns about key provisions – not least clause 18 which was recommitted for further consideration following suggestions that PPP agreements might require full Parliamentary approval, possibly on a line-by-line basis.

Any such requirement would risk fatal delays to any project. Consequently, the Bill was sent back to Parliament for further consideration – most recently on 3rd December 2014 by the Parliamentary Finance Committee.

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Projects are not wholly stalled until the legislation is in force. Uganda’s PPP unit has proceeded with several projects on a purely contractual basis and has a pipeline of further projects awaiting attention. However, given that a key purpose of the PPP legislation

Registration of communal rights provides a documented basis for contact and negotiations between infrastructure projects and the affected communities is to ensure transparency, fairness and efficiency in the procurement process (all key factors when seeking significant foreign investment) there is a strong perception that legislative delay risks deterring investment and limiting the pace of development.

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market testing. Therefore, it becomes extremely difficult to prove value for money.

Consequently, unsolicited projects may be brought into a far more formal procurement regime. That may take the form of a “Swiss challenge”, in which the proponent is required to take part in an open competition for the contract. That, in turn, raises questions about (i) the extent to which any intellectual property brought to the project by the proponent might be compulsorily acquired or licensed to a successful bidder and (ii) whether the proponent ought to be compensated for any design or feasibility work.

Alternatively, in some variants of the Swiss challenge approach, the proponent may have an opportunity to match the successful bid, though that works in practice only in relation to the financial terms of a bid. It is less credible where quality criteria divide the bids.

Another possibility is that the original proponent develops the project and conducts the bidding process on behalf of the government. The original proponent cannot bid for the project, but receives a development fee from the

of the UK’s PFI projects, those acting for the public sector regarded their objective as being to pass as much risk as possible to the private sector. The problem was that the more potentially costly the risk, the more upwards pressure would be exerted on the contract price. As a result, many high-profile projects became far more expensive than a government funded project might have been.

That problem is compounded where private sector parties seek to lay off some of their risk through insurance.

Insurers will rarely say that a risk is uninsurable, however, the higher or more difficult to quantify the risk, the higher the premium.

A key finding of the UK Treasury’s review of PFI was that costs might best be controlled if the public sector retains risks that would otherwise drive up the costs of a project. Examples include: • political risk: in particular, the risk that a change of law or taxation might adversely affect the project or its ongoing returns, and • environmental risk: in particular, where liability for

PPP in the development of social projects such as schools, hospitals and social housing lacking in Africa

Unsolicited projects It is not always the case that governments or other contracting authorities identify a need and engage in a procurement process to fill that need. Often, governments are presented with unsolicited projects, already backed by available finance on condition that the proponent secures the contract.

A key challenge for governments is how best to respond to such proposals.

One option is to require the proponent to demonstrate the project’s feasibility.

If proven, then the contract may be let to the proponent. However, while that approach may have the merit of speed it lacks transparency and full

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winning bidder. While this provides both a role and a return for the proponent, its effect may be to exclude the most qualified and experienced bidder.

Consequently, bodies such as the Public Private Infrastructure Advisory Facility (PPIAF) tends to recommend a simple Swiss challenge approach, as adopted outside Africa in jurisdictions such as India, the Philippines and Taiwan.

Risk allocation Ultimately, PPP is about contract law and a key element of any contract is risk allocation. Risk allocation goes directly to price. This was a hardlearned lesson in the UK. In many

clean-up or remediation is based on legislative provisions that give a determining role to the public sector.

By reserving or self-insuring those risks, contracting authorities may achieve a far more cost-effective project than would be the case if a more rigid approach were taken to risk allocation.

Of course, risk allocation and the consequences of breach find expression in the drafting of the contractual documents governing a PPP project.

That often extends to the use and arguably abuse of force majeure provisions. Given the different ways in which jurisdictions address issues such as frustration or impossibility

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of performance, parties often create a specific contractual regime to cater for events that may prevent or delay performance.

The risk of force majeure is generally allocated to the government or contracting authority. This reflects the theory that governments or contracting authorities are best placed to manage, mitigate or self-insure in relation to major risks that are beyond the parties’ control. However, in the UK, PFI contracts frequently required the project company to bear all, or a portion, of force majeure events.

UK PFI guidance, in place before HM Treasury’s major review, distinguished between: • compensation Events: where the authority took responsibility and the project company is compensated; • relief events: where the project company was relieved from termination for failure to perform, but not from the financial effects of delays; and

•

force majeure events: where the affected party was relieved from liability for breach, but where the parties shared the financial effects of delays.

One key consequence was that project companies were compelled to lay off risk through insurance. Given the scale of projects and the difficulties of quantifying financial consequences in advance, insurance costs escalated inexorably driving up the overall project cost and contributing to delays in procurement and negotiation.

In UK PFI contracts “pure” force majeure events were limited to an odd assortment of events, with the drafting focus being on events that were clearly beyond government control, such as: • war, civil war, armed conflict or terrorism; • nuclear, chemical or biological contamination, unless the source or the cause of the contamination is the result of the actions of or breach by the Contractor or its

•

sub-contractors; or pressure waves caused by devices travelling at supersonic speeds, which directly causes either party (the “Affected Party”) to be unable to comply with all or a material part of its obligations under the contract.

Force majeure and risk allocation clauses are not mere “boilerplate”, and should not be regarded as standard and immutable. There is both scope and need for discussion to ensure that risks are allocated, or breach excused, in circumstances appropriate to the host jurisdiction of a major project. For example, the recent (and ongoing) Ebola crisis in West Africa, and previous outbreaks in East Africa, might merit specific provision. A project is more likely to be attractive to contractors and, crucially, fundable by lending institutions, if demonstrably and intelligently tailored to local conditions and risks.

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Moyo Onigbanjo SAN

Justice Oguntade, SCJ (Rtd) CFR

LR. A delegate with Adekunle Oyesanya SAN

Cross section of delegates

LR. Justice Oguntade, SCJ (Rtd) CFR, Moyo Onigbanjo, SAN and Babatunde Ajibade, SAN 46

Segun Osuntokun of Berwin Leighton Paisner LLP

Cross section of delegates

Yele Delano, SAN

Prof Konyin Ajayi, SAN

LR, Moyo Onigbanjo, SAN and Segun Osuntokun of Berwin Leighton Paisner LLP. 47

Aaron Adaga of AMCON, Q&A

Delegates at the registration 48

Bebe Clement, Business Development Director, Law Digest

Networking by delegates

Wole Ajimisinmi – Company Secretary Wema Bank plc

Gregory Enahoro of Knightbridge and Seyi Clement of Law Digest

Onome Tiku of Punuka Chambers

Seyi Clement of Law Digest 49

ARBITRATION Mrs. Omone Tiku, Partner, PUNUKA Attorneys & Solicitors

Strategies for Challenging the Appointment and Removal of an Arbitrator INTRODUCTION

Mrs. Omone Tiku, Partner, PUNUKA Attorneys & Solicitors

“An award made by an incorrectly appointed arbitral tribunal or arbitrator, may lead to an arbitral award being set aside as invalid and defective”

The appointment of an arbitrator is very important as failure to make a valid appointment has far-reaching consequences. An award made by an incorrectly appointed arbitral tribunal or arbitrator, may lead to an arbitral award being set aside as invalid and defective. Under Nigerian law, as with English arbitration practice, the appointment of an arbitrator is normally consensual.

Arbitrators are appointed either by agreement (as provided for under the arbitral clause) or by Order of Court.1 In ad hoc arbitration, appointment is usually by the parties directly (or where parties fail to reach agreement by the court) but in institutional arbitration the arbitrator is appointed by the arbitral institution chosen by the parties.

The Arbitration and Conciliation Act (the “ACA”)2 provides comprehensive provisions for the appointment of arbitrators, as well as what happens in events where the parties have not agreed on persons to be appointed as arbitrator. These default provisions cover the appointment of sole arbitrator, tribunal of three arbitrators, as well as the appointment of chairman, with time limits in order to avoid delay. If all these provisions fail, the parties can apply to court for assistance or to the designated appointing authority. Thus appointment may occur in various forms: (a) Joint appointment (for sole arbitrator); (b) Party appointment (for coarbitrators in a three or five man tribunal);

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(c) Co-arbitrators appointment (for presiding arbitrator); (d) Court appointment; or (e) Appointing institution (for institutional or ad hoc arbitration).

Section 6 of the ACA provides for 3 arbitrators as the default number of arbitrators where the parties have not stipulated the number in their arbitration agreement.

Appointment Procedure Under section 7(2) ACA the parties may specify in the arbitration agreement the procedure to be followed in appointing an arbitrator. Where no procedure is so specified (a) in the case of an arbitration with three arbitrators, each party shall appoint one arbitrator and the two thus appointed shall appoint the third. However if a party fails to appoint the arbitrator within thirty days of receipt of a request to do so by the other party or if the two arbitrators fail to agree on a third arbitrator within thirty days of their appointment the appointment shall be made by the Court on application of any party to the arbitration agreement; (b) in the case of an arbitration with one arbitrator, where parties fail to agree on the arbitrator, the appointment shall be made by Court on application of any party to the arbitration agreement made within thirty days of such disagreement.

However, there seems to be a challenge with section 7(2) (a) of the ACA. Section 7(2) provides that in the case of three arbitrators, each party shall appoint one arbitrator and the two so appointed shall appoint the third but if a party fails to appoint the arbitrator within thirty days of request to do so by the other party, the appointment shall be made by the court. The question is, does the court appoint only one arbitrator on behalf of the party who failed to appoint or does the court appoint the three arbitrators?

It is submitted that the court should only appoint the arbitrator on behalf of the party who has exercised his right of choice and thereby waived that right; for if the court were to appoint the three arbitrators, then the right of choice of the party who appointed will also have been lost and this could not be the intention of the draftsman.

Note that by the provisions of the ACA, the decision of the Court where it proceeds to appoint an arbitrator at

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the instance of a party or where there is an impasse cannot be subject to an appeal.3 The procedure for appointment under the UNCITRAL Model Law is similar to ACA. However the Lagos Arbitration Law 2009 (the “Lagos Law”) is slightly different as section 8(1) provides that if no procedure is specified in the arbitration clause, appointment is made by the designated appointing authority.

Section 8(3) of the Lagos Law is also different as it provides the procedure for multi-party arbitration to the effect that in the case of 3 arbitrators, disputing parties represent two separate sides as Claimant and Respondent failing which, the appointment of the arbitral tribunal shall be made by the appointing authority without regard to any party’s nomination. Under section 8(4) where no procedure and no designated appointing authority is provided the appointment of a sole arbitrator is by the Lagos Court of Arbitration (LCA). In the case of 3 arbitrators, if one party fails to appoint, the party who has appointed may appoint his arbitrator as sole arbitrator but if both parties fail to appoint, appointment is by LCA. Under the ICC Rules 2012, appointment is by the International Court of Arbitration (ICA).4 The default number of arbitrators is one, unless otherwise required. In the case of a sole arbitrator, parties jointly nominate the sole arbitrator for confirmation by the ICA. If they fail to nominate, the ICA appoints. In the case of 3 arbitrators each party nominates one while the ICA appoints the third (presiding arbitrator).

Art. 12(6) contains a similar procedure for multi party appointment as the Lagos Law, whereby all claimants appoint one, respondents appoint one and the ICA appoints the third arbitrator. The question however arises: what if parties all represent different interests? In the Dutco Case 5 three companies Siemens, BKMI and Dutco entered into a contract for construction of a plant with an ICC arbitration clause with provision for three arbitrators. Dutco commenced arbitration against the other two companies and appointed its own arbitrator. The respondents contended that separate or parallel arbitrations should have been commenced to give each of them opportunity to appoint their own arbitrators and so refused to appoint a common arbitrator because they felt they had divergent interests.

However, under protest they appointed a joint arbitrator and challenged the

tribunal so appointed by the ICC. Following the overruling of their objection, they applied to the Paris Court of Appeal to set aside the award on the ground of irregular constitution of the tribunal. On appeal to the French Supreme Court it was held that the parties had a right to the equality in constitution of the tribunal and as such the tribunal was irregularly constituted under French Code of Civil proceedings and the Civil Code. This case changed the approach of arbitral institutions to multiparty arbitration.6 Challenge & Removal of Arbitrators Statistics show that challenges to arbitrators’ appointment is on the increase.

The usual grounds for challenge include: • Conflict of interest/ justifiable doubts as to impartiality or independence of the arbitrator; • Lack of requisite qualification; • Lack of physical or mental capacity to conduct the proceedings; and/or • Undue delay in the conduct of proceedings or rendering award.

See section 8(3) of ACA and section 10(3) of the Lagos Law. Justifiable doubts as to impartiality or independence8 could manifest in several ways such as: • The Arbitrator having prior knowledge of the facts and involvement in the case;9 • The Arbitrator’s spouse or other close relative is acting for one of the parties or is a partner in the law firm that represents that party; • The Arbitrator was, in his capacity as legal advisor frequently engaged on behalf of one of the parties; • The Arbitrator enjoys repeat appointments from a party or law firm representing that party; • The Arbitrator has expressed previous opinion on the case; and/or • The Arbitrator displayed conduct betraying independence during the proceedings.

As a precautionary measure against challenge, a duty of disclosure is imposed on arbitrators. For the ICC a subjective test exists to ensure that the prospective arbitrator makes the

fullest disclosure, but the decision on whether an arbitrator should be treated as independent follows an objective test. Under Article 7(2) ICC Rules, a prospective arbitrator must sign a statement of independence prior to confirmation of appointment.

A similar provision is contained in Article 9 of the UNCITRAL Rules.

However, in International Centre for

Note that by the provisions of the ACA, the decision of the Court where it proceeds to appoint an arbitrator at the instance of a party or where there is an impasse cannot be subject to an appeal Dispute Resolution (ICDR) arbitrations, the test for challenging arbitrators is whether there are “justifiable doubts as to the arbitrator’s impartiality or independence” in the mind of a reasonable man.10 The duty to disclose inures throughout the arbitral proceedings (section 8(2) ACA) and upon disclosure, parties can choose to waive their right of challenge.

However what degree of disclosure is required? What relationships do not amount to a lack of independence?

Must all relations and connections with the subject matter and the parties be disclosed?11 A Challenge as to qualification could manifest where: • The Arbitrator does not fulfill agreed qualifications as stipulated in the arbitration clause; • The Arbitrator is not appointed by designated appointing authority or member of designated institution; and/or • The Arbitrator is not of agreed nationality.13 Where the arbitration agreement expressly stipulates that the arbitrators must possess certain qualifications, the appointment could be challenged on that ground if an arbitrator is found not to possess the requisite characteristics or qualifications. The arbitrator will also lack the power to make the award

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binding on the parties. Failure to comply with a requirement in the arbitration clause might enable the other party to challenge the arbitrator’s jurisdiction on the grounds that the tribunal is not properly constituted. In the English case of Sumukan Ltd v Commonwealth Secretariat,14 the arbitration agreement required consultation with Commonwealth governments before any arbitrator was appointed. Failure to comply with this requirement meant that the appointment was invalid. In some cases, the arbitration agreement may prescribe as qualification, membership of some organisations and institutions such as the London Court of International Arbitration (LCIA), the Chartered Institute of Arbitrators, etc.

The Convention on the Settlement of Investment Disputes between States and Nationals of other States (“the ICSID Convention”) provides in

Law Digest Winter 2014/15

Challenge on performance15

Grounds

of

non-

Another ground on which challenges have been made is the size of the arbitrator’s caseload or the number of other commitments preventing such an arbitrator from devoting the required amount of time to the arbitration.

An arbitrator’s unresponsiveness or dormancy and general failure to perform his or her duties properly and in a timely manner could constitute grounds for a challenge.16 This ground of challenge is founded on the arbitrator’s inability to act or where the performance of the duty to arbitrate has become impossible.17 In, Noble Resources Pte. Ltd. v.

China Sea Grains and Oils Industry Co. Ltd,18 the court terminated the mandate of an arbitrator who had been arrested and was detained in a

without undue delay, courts should take into consideration the following factors: what action was expected or required of the arbitrator in light of the arbitration agreement and the specific procedural situation; if the arbitrator has not done anything in this regard, whether the delay has been so inordinate as to be unacceptable in light of the circumstances, including technical difficulties and the complexity of the case; if the arbitrator has acted in a certain way, whether his conduct clearly falls below the standard of what could reasonably be expected.20 Also cases where the arbitrator is physically or mentally incapable of conducting the proceedings or there are justifiable doubts as to the arbitrator’s capacity to conduct the proceedings, thereby amounting to non- performance of duty or delay in performance of duty fall under this category.

Where no procedure is so specified (a) in the case of an arbitration with three arbitrators, each party shall appoint one arbitrator and the two thus appointed shall appoint the third Article 14, the characteristics and qualifications of persons whom state parties can appoint to the ICSID panels of arbitrators thus: “(1) Persons designated to serve on the Panels shall be persons of high moral character and recognised competence in the fields of law, commerce, industry or finance, who may be relied upon to exercise independent judgment.

Competence in the field of law shall be of particular importance in the case of persons on the Panel of Arbitrators.”

Lack of the above qualifications may be grounds for a challenge under Article 57 of the ICSID Convention.

On the other hand, if the parties have not specifically called for certain characteristics or qualifications, arbitrators’ nominations will stand even if the persons so nominated do not possess skills or qualifications that might objectively be considered essential to the task. Note that neither the ACA nor the Lagos Law stipulate qualifications for arbitrators.

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3 man panel Gazprom arbitration in session

foreign jurisdiction. Also, in a German case where a judge had been wrongly granted a special administrative permission to serve as arbitrator, as required under the administrative regulations applicable to judges in the jurisdiction in question, the court found that that would not make the judge de jure unable to perform his functions as arbitrator, but made the granting of his special administrative permission challengeable. As the challenge was time barred, the court treated the appointment of the judge as granted with the special permission.19 In determining whether an arbitrator had complied with the obligation to act

The Challenge Procedure The procedure for challenge of arbitrators is determined by agreement, by governing law or by institutional rules. Under the ACA, if no procedure is stated in the agreement the challenging party shall within fifteen days of becoming aware of such ground of challenge, send to the arbitral tribunal or arbitrator a written statement stating the grounds of challenge and unless the arbitrator who has been challenged withdraws from the case or the other party agrees to the challenge, the arbitrator shall proceed to decide on the challenge.21 Note that there will be

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no need for the tribunal to rule on the challenge if both parties agree to the challenge or the arbitrator withdraws from office.

Replacement is by the same procedure for appointment of arbitrators under the ACA. However, if the challenge is disputed and the challenging party remains unsatisfied with the tribunal’s ruling, can the dissatisfied party apply to Court to dismiss the tribunal’s ruling? The ACA is silent on whether the court can intervene after a tribunal has ruled on a challenge of appointment.

Section 12(4) of the ACA provides that a tribunal’s ruling on a plea of lack of jurisdiction shall be final and binding.

It should be noted that a challenge to an arbitrator’s appointment is different from a plea challenging the jurisdiction of the arbitrator. A challenge to appointment is directed at the person of the arbitrator i.e. his capacity or suitability to act, whereas a challenge to jurisdiction is directed at the scope of the arbitrator’s powers, i.e. whether the arbitrator has the power to determine the issues before him. This distinction is important as it affects the outcome of the challenge which becomes relevant in determining the strategy for challenge or removal of an arbitrator. This issue will be discussed subsequently under strategies for challenge or removal.

The ultimate decision on a challenge under the ACA lies with the court.

Article 12 (1)(c) of the Arbitration Rules made pursuant to the ACA states that “If the other party does not agree to the challenge and the challenged arbitrator does not withdraw, the decision on the challenge will be made… (c) in all other cases by the court.” Under the ICC Rules the challenge is submitted to the ICC Secretariat within 30 days of receipt of the notice of appointment and the ICA decides on the admissibility and merits of the challenge. The London Court of International Arbitration (LCIA) decides on a challenge under the LCIA Rules. It is important to note that the procedure to challenge under institutional arbitration is administrative and not adversarial.

Under the UNCITRAL system, a challenge must first be brought before the arbitral tribunal and if the challenging party is not happy with the tribunal’s decision it may request a decision from the courts at the place of arbitration.22 In the case of a threemember tribunal all three arbitrators will take part in the decision. The question has been raised as to whether this system is compatible with the

notion that justice must be seen to be done and that a judge should not sit in his or her own cause.23 The ICSID Rules tackle this question in another way such that if the challenge relates to a sole arbitrator or to the majority of an arbitral tribunal, it will be decided by the Chairman of the ICSID Administrative Council, who is the President of the World Bank. However, if the challenge is directed at one (or at a minority) of arbitrators, it will be decided by the majority.24 Thus, the ICSID seems to deal with the situation, by leaving the decision on the challenge with the arbitral tribunal for as long as is consistent with the notion of justice being seen to be done. Whenever the likelihood of a breach exists, an outside authority steps in to make the decision.

It should be noted that the UNCITRAL Rules were developed for ad hoc arbitration and so there is no provision for an internal authority to deal with a challenge procedure. To shield arbitration from the intervention of national courts, the UNCITRAL Rules created a mechanism for designating an appointing authority. The Secretary General of the Permanent Court of Arbitration in The Hague is mandated to be the default designator of an appointing authority.25 While the system seems convoluted, it does avoid giving one institution the status of default UNCITRAL appointing authority. Thus, the “appointing authority” designated by the Secretary General will be in charge of any challenge against an arbitrator, even if the panel was not constituted with the help of an appointing authority.

Removal of Arbitrator Upon the challenge of an arbitrator’s appointment by a party, the arbitral proceedings could either be suspended or the arbitrator could be replaced if the ground and facts of the challenge are found to be reasonable and valid. A successful challenge to an arbitrator’s appointment means that the arbitrator ceases to serve as arbitrator with respect to the particular arbitration.

Some arbitrators withdraw from office once a challenge is filed.

The ACA does not provide for a removal process, but it provides in section 11 that the arbitrator shall be replaced in the same manner of appointment.

Under the Lagos Law, removal is by the court or designated arbitral institution or any other person vested with power of removal. If there is an arbitral or other institution or person vested with

the power to remove an arbitrator, the Court shall not exercise its power to remove the arbitrator unless satisfied that the applicant has first exhausted

The question then is, at what point should an appointment be challenged? Should you challenge it straight on or wait till after delivery of the award?

Or should the approach be a simple protest during proceedings and subsequent challenge of the award as in the Dutco case? all available recourse to that institution or party.27 A challenge could be made at any stage of arbitration. The stage and nature of the challenge will impart on the effect of the challenge on the arbitration. A successful challenge to an arbitrator’s appointment made during arbitration results in removal and replacement of the arbitrator, while a successful challenge to jurisdiction may result in termination of the arbitration proceedings or striking down of the specific issue on which the arbitrator lacks jurisdiction. On the other hand, a successful challenge to appointment after an award has been made will result in setting aside the award which is the same result as a successful challenge to jurisdiction after award. Note that a challenge to appointment which is not properly handled in the course of arbitration invariably goes to the root of jurisdiction and validity of the award, as one of the grounds for setting aside an award is that the composition of the arbitral tribunal was not in accordance with the arbitration agreement or the arbitration law.

Strategies for challenging appointment of an arbitrator

the

We have seen above that the appointment or removal of an arbitrator is governed by law and agreement. However, law

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and agreement only provide procedure; they do not provide strategies. So what then are the strategies for removal or challenging the appointment of an arbitrator?

The distinction and outcome of a challenge to appointment and jurisdiction of an arbitrator highlighted earlier is relevant in determining the strategy for challenge and removal.

On one hand, a successful challenge to appointment leads to removal and replacement of the arbitrator, while a successful challenge to jurisdiction leads to termination of the arbitration proceedings or striking down of specific issues where the challenge occurs in the course of the proceedings. On the other hand, a successful challenge to the appointment of an arbitrator after delivery of the award has the same effect as a successful challenge to jurisdiction after award. The effect is that the award would be set aside, provided the party challenging the arbitrator’s appointment or jurisdiction raised the plea in a timely manner during the arbitration proceedings, usually not later than the time of submission of the points of defence.28 Where a plea of lack of jurisdiction is raised in the course of the arbitration proceedings, the arbitrator reserves the right to either rule on the issue of jurisdiction first or incorporate his ruling in the arbitral award. The advantage of ruling on jurisdiction first is to avoid conducting proceedings in futility as anything done without jurisdiction is a nullity. It would be a complete waste of time for the arbitrator to conduct the entire arbitration proceedings and then turn around to rule in its final award that it lacks jurisdiction. Usually if an arbitral tribunal reserves a ruling on jurisdiction till final award he will likely rule that he has jurisdiction unless the issue on which he lacks jurisdiction can be separated from the other issues.

The question then is, at what point should an appointment be challenged?

Should you challenge it straight on or wait till after delivery of the award? Or should the approach be a simple protest during proceedings and subsequent challenge of the award as in the Dutco case?29 Determining the strategy would depend on the circumstances of each case and what each party wants to achieve. It would also depend on the kind of arbitration, i.e. whether it is institutional or ad hoc arbitration.30 For instance most arbitral institutions provide that a challenge to appointment must be made within specific time limits

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in the course of the arbitration so the options appear limited in institutional arbitration. The general factors to consider in determining when and how to challenge an arbitrator’s appointment would include such questions as, what is the client’s ultimate interest? What is the client’s objective? What impact will the challenge have on the arbitration process? Would a challenge at this stage stall the arbitration process against the client’s interest? Is the ground for challenge substantial and a real threat, which could lead to a miscarriage of justice? What would be the implication of non objection in the course of arbitration? Would it amount to a waiver of the right to object? How long will it take to get a final decision on the challenge? Does the ground for challenge go to the root of jurisdiction and will it render the award invalid or unenforceable?

In all, the choice as to what strategy to employ requires an appraisal of the facts and circumstances of each case and the adaptation of the strategy that would bring about the best result for ones client. However, where the parties have been aware of the facts giving rise to the challenge from the early stages of the proceedings, and especially if they were disclosed prior to the arbitrator’s appointment, a late challenge may well be perceived as frivolous or a deliberate attempt to cause disruption.31 It is suggested that where a party discovers facts which sufficiently form the basis for a challenge, a challenge should be made expeditiously or early enough so as not to render the entire arbitration proceedings a futility.

1 This usually comes into effect where parties are unable to appoint an arbitrator. See; Section 7 (2) (a) (ii) of the Arbitration and Conciliation Act 1990.

2 Section 7, ACA CAP A 18, Laws of The Federation of Nigeria 2004; See also Section 8, of the Lagos State Arbitration Law, 2009.

3 Section 7(4) ACA; This provision has courted quite a few reactions as it is believed to take away a party’s constitutional right of appeal as well as eroding the Appeal Court’s jurisdiction to hear appeals from the High Court.

4 Article 12 ICC Rules 2012.

5 1992 XV Yearbook Com. Arb. 6 For instance under Art 12(8) of the ICC Rules in the case of disagreement by multi parties, ICA appoints the 3 arbitrators and decides who to preside. See also s. 13(2) German Institution of Arbitration (DIS). The UNCITRAL Rules 2010 provides for multi party appointment but did not deal with the Dutco problem.

7 ICC Statistics recorded 38 to 57 challenges between 2006 and 2011 while the Stockholm Chamber of Commerce recorded 435 challenges

between 1989 to 2013.

8 Section 8 (3) (a) ACA and Section 10 (3) (a) Lagos Law. 9 Prior knowledge alone is not sufficient for successful challenge without proof of likelihood of pre judgment and miscarriage of justice. For example where the arbitrator having acted as mediator before has become aware of confidential facts.

10 See article 8 ICDR Rules; see also Articles 5.2, 5.3 and 10.3 LCIA Rules.

11 The IBA Guidelines on Conflicts of Interest in International Arbitration contains provisions on the extent of disclosure required.

12 Section 8 (3) (b) ACA and Section 10(3)(b) Lagos Law. 13 Note that nationality is not ordinarily a ground for challenge but it entitles the other party to challenge the arbitrator’s jurisdiction on the ground that the tribunal is not properly constituted.

14 [2007] ECWA Civ 1148.

15 Section 10 (3) (c) and (d) Lagos Law. 16 Fry, J. et al, The Secretariat’s Guide to ICC Arbitration, A Pre commentary on the 2012 ICC Rules of Arbitration from the Secretariat of the International Court of Arbitration, pg 173.

17 Article 14 of the UNCITRAL Model Law. 18 High Court—Court of First Instance, Hong Kong Special Administrative Region of China, 29 March 2006, [2006] HKCFI 334, available on http://www.hklii.hk/eng/hk/cases/ hkcfi/2006/334.html as cited in UNCITRAL 2012 Digest of Case Law on the Model Law on International Commercial Arbitration, United Nations New York, 2012, pg 71 19 Oberlandesgericht Hamm, Germany, 17 SchH 07/03, 18 September 2003, available on the Internet at http://www.dis-arb.de/de/47/ datenbanken/rspr/olg-hamm-az-17-schh-0703-datum-2003-09-18-id237.

20 UNCITRAL 2012 Digest of Case Law on the Model Law on International Commercial Arbitration, United Nations New York, 2012, pg 73.

21 See section 9(2), (3) ACA; section 12 ACA; section 19(1) Lagos Law. This is the principle of Kompetenz Kompetenz.

22 Article 13(2) UNCITRAL Model Law 2010.

23 Koch, C. ‘Standards and Procedures for Disqualifying Arbitrators’, Journal of International Arbitration, Vol 20. No. 4(2003) pp 325-353.

24 Article 58 ICSID Rules 2006.

25 Art. 6.2 UNCITRAL Rules.

26 Section 12(1) Lagos Arbitration law.

27 Section 12 (2), LSAL, 2009.

28 Sec 12 (3) of the ACA. In the US, a challenge to the appointment of an arbitrator can only be brought after delivery of arbitral award.

29 Ibid 5 30 Under Article 14(2) of the ICC Rules, For a challenge to be admissible, it must be submitted by a party either within 30 days from receipt by that party of the notification of the appointment or confirmation of the arbitrator, or within 30 days from the date when the party making the challenge was informed of the facts and circumstances on which the challenge is based if such date is subsequent to the receipt of such notification. <See http://www.iccwbo.org/products-andservices/arbitration-and-adr/arbitration/iccrules-of-arbitration/#article_14> (accessed on 25/10/2014).

31 R. King & B. Giaretta, Independence, Impartiality and Challenging the Appointment of an Arbitrator Ronnie King, ICLG to International Arbitration 2005, pg 29.

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