Issue 9 winter 2015 by Seyi Clement

Africa’s Premier Law Journal

Issue 9

Winter 2015

The Debate Ban on same sex marriages

Michael Otu

Charismatic banker and a quintessential lawyer The role of the in-house legal team in the SEPLAT IPO AMCON - an institution caught in the quagmire of debt recovery in Nigeria Garnishee Proceedings; a procedure in need of reform A spotlight on private equity in Africa Anti-bribery laws - foreign guns pointing at Africans’ heads

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Law Digest Winter 2015

I NTE R N ATI O N A L L ITI GATI O N A N D AS S ET R E COVE RY F O R U M Lagos, November 2016

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EDITOR

Seyi Clement editor@nglawdigest.com

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EDITORIAL BOARD • Hon Justice S.M.A Belgore, CON, GCON, FNIALS, LLD(Hon) (Former Chief Justice of Nigeria). • Hon Justice G. Oguntade, CFR, JSC (Rtd) • Dr. Anthony C.K. kakooza Ph.D. Dean Faculty of Law, Uganda Christian University. • Kemi Pinheiro, SAN Senior Partner, Pinheiro & Company. • Professor Dakas CJ Dakas Ph.D, SAN, Ben Nwabueze Distinguished Professor of Law, Director of Research, NIALS. • Dr. Uche Ewelukwa Ofodile LL.M (London, Harvard) S.JD. (Harvard), Professor of Law, University of Arkansas School of Law. • Dr Adetokunbo Derek Obadina B.A. (Hons) (Sussex); LL.M (London) Ph.D (Wales), (Solicitor, England & Nigeria), Dean Faculty of Law, Lagos State University. • Dr. Edwin Egede LLB (Hons), BL, LLM, PhD, Senior Lecturer, Cardiff University. • Njaramba Gichuki, Senior Lecturer, University of Nairobi, member Editorial Board, East African Law Journal

LEGAL LIABILITIES All rights reserved. The contents of this publication may not be reproduced by any means, in whole or in part, without the prior written consent of the publisher. Any submissions or contribution from readers shall be subject to and governed by XL Nominees Limited’s Terms and Conditions, which are available upon request. The publishers regret that they cannot accept liability for errors or omissions contained in this publication, however caused. The opinions and views contained in this publication are not necessarily those of the publishers. Readers are advised to seek specialist advice before acting on information contained in this publication which is provided for general use and may not be appropriate for the reader’s particular circumstances.

40 BAN OF SAME SEX MARRIAGES – CASE FOR AND AGAINST This is the first of our debates on topical issues facing Africa. In this issue we examine two of the many opposing views on the issue. Whilst the discussants may not have covered all the points that could and should be raised in the debate, we hope that this discussion would encourage further discussions on the issue. That is issue has polarised and will continue to polarise the continent is no surprise. It would be foolhardy to think the issue has gone away just because of the ban. Whilst the Editor has contributed to this debate, the views expressed are his personal views and not that of the journal. The journal will reason a platform for all sides to argue their case. COVER STORY 34. An exclusive Interview: Michael Otu – Charismatic banker and a quintessential lawyer 4. From the Editor 5. News 8. Letters to the Editor 10. Case Review and Legal Development 17. Law Digest Africa Awards Gallery 55. International Litigation Conference Gallery LABOUR LAW 28. Ministerial consent for “release” of Nigerian oil workers – an act of meddlesome interference or protectionism?

REGULATION 31. Anti-bribery laws - foreign guns pointing at Africans’ heads LITIGATION 45. AMCON – an institution caught in the quagmire of debt recovery in Nigeria. 64. Garnishee Proceedings – a procedure in need of reform PRIVATE EQUITY 48. A spotlight on private equity in Africa CAPITAL MARKET 52. The role of the in-house legal team in the SEPLAT IPO

Law Digest Winter 2015

FROM THE EDITOR

Dear Colleagues,

MERRY CHRISTMAS AND A HAPPY NEW YEAR TO ALL It gives me great pleasure to present the last issue of the year. We have with your support accomplished much in our young existence. We have notched up a few firsts along the way. We are the first (and still the only) Africa-wide law journal and the first African law journal to be featured on CNN. Our latest project, Law Digest Africa Awards is recognised as the leading mark of quality of African lawyers. However, we recognise that we still have a long way to go in our quest to play an active part in developing Africa’s capacity and improving quality in the provision of legal services. We recognise that quality assurance is still a challenge in many African jurisdictions. We hope the Law Digest Africa Awards will go some way in encouraging firms to focus on quality. Nominations for the 2016 awards will open on 1st Feb 2016. For more information visit, www.legaldigestawards.com. It also gives us pleasure to welcome to our Editorial Board, three eminent jurists, Justice George Oguntade, CFR and a retired justice of the Supreme Court of Nigeria. Justice Oguntade is undoubtedly one of the best legal minds to have sat on the bench in the Nigerian apex court. We welcome from Kenya, Njaramba Gichuki, a partner at the firm of Wanyaga & Njaramba, a lecturer at the University of Nairobi and a member of the Editorial Board of the East African law Journal. We also welcome from Uganda, Dr. Anthony C.K. Kakooza, Dean Faculty of law, Uganda Christian University. In this issue we have reported on two disparate cases, both of which could have significant effect on our continent in terms of foreign investment and reparation of illicit asset flow. The case of Commissioner General –v- Zain International CA 001 of 2012, has caused some concerns amongst investors, who are troubled by the ruling which suggests that sale of shares in a Dutch company could give rise to tax liability in Uganda, because the Dutch company owns the shares in a Ugandan company. By implication, sale of Diageo or Heineken for example, could give raise to tax liability in various parts of Africa. This is a development that will be keenly watched by investors across the world. The second case is that of The Federal Republic of Brazil and another – v- Durant International Corporation and

Law Digest - Expanding Minds 4

another. Privy Council Appeal No 0069 of 2013. We make no apologies for reporting the case in full, as it is an elucidating discussion on one of the most complex areas of tracing of assets. Also in this issue, we launch our debate column where we hope to bring to you debates on topical legal issues. To kick off the debate is one of the most polarising issues of the day, the treatment of same-sex relationships. The handling of this issue by some African countries has brought international condemnation and plaudit in equal measures. The reaction within the continent itself would suggest that the majority supports the tough stands taken by countries such as Nigeria, Zimbabwe, and Zambia etc. In our next issue, we will consider the secessionist conflicts in Africa from Casamance (Senegal), to Cabinda (Angola), from Zanzibar (Tanzania), to Somaliland (Somalia) and from Western Sahara (the disputed territory bordering Morocco) to now, BIAFRA in Nigeria. It is said the secession conflicts in Africa now account for more than 80% of the deaths in Africa and it also a major cause of infrastructure degradation, uneven development and security concerns. Scotland has just by means of resolution, decided to remain within the United Kingdom. Should African nations provide similar legally binding mechanism for minority groups? - The topic is “Right to selfdetermination is the answer to Africa’s security problems”. Articles for and against may be sent editor@nglawdigest.com. Articles should not exceed 2500 words. To contribute articles or commentaries to the Law Digest, please write to me at editor@nglawdigest.com. Yours,

Seyi Clement Publisher/Editor

News

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Incidents of bribery increased across Africa I

ncidents of bribery have increased, but so has general awareness of anti-bribery compliance among organisations: these were some of the highlevel findings of a recent survey conducted by ENSafrica. Key findings include: • 24% of organisations have experienced an incident of bribery and/or corruption in the past 24 months (that’s an increase of 4% since 2013), with 5% experiencing five or more incidents within the last

24 months • just over 90% of organisations surveyed have a policy prohibiting bribes, 52% have an established anti-bribery compliance programme and 43% have conducted a detailed anti-bribery risk assessment of their bribery risks A total of 88 organisations across Africa, including in Mauritius, participated in the survey. The survey was designed to gauge perceptions regarding an organisation’s anti-corruption

compliance commitment to observing local and global requirements and to see how these compliance processes compare to generally accepted anti-corruption compliance best practice. Other key findings included: • 68% of those surveyed believe that third-party business partners pose the greatest source of bribery risk to their organisations • 17% of organisations feel they are highly exposed to bribery in Africa (a drop of 33% compared to 2013), with 71% believing they are moderately exposed to bribery and corruption in Africa • Angola, the Democratic Republic of Congo, Ghana, Kenya, Mozambique, Nigeria, South Africa and Uganda were highlighted as corruption hotspots • only 36% of organisations surveyed: • are confident that they have proportionate procedures to mitigate bribery risks; or • believe they are well prepared to respond to the threat of an anti-bribery regulatory investigation • 62% of organisations now conduct due diligence screening on third parties, an increase of 22% from 2013 • only 40% of organisations have a dedicated anti-bribery training programme for their employees and 15% provide anti-bribery training to their business partners . The Report authors, Steven Powell, Roy Gillespie, Andisiwe Jele and

Dave Loxton said, “our survey further found that organisations: • with an anti-bribery compliance programme, • with a dedicated anti-bribery policy, • with top-level commitment, • who have conducted an antibribery risk assessment, • who conduct anti-bribery due diligence on business partners, and • who provide their employees and third parties with antibribery training • reported fewer incidents of bribery as opposed to those who do not.” They advised that having an effective anti-corruption programme is more important for companies today than ever before. Many companies are now recognising the potential reputational harm, economic costs, fines, penalties and potential criminal prosecution that bribery and corruption pose to their business. For years the United States was the only country that rigorously pursued the payment of bribes outside of its territorial boundaries through the Foreign Corrupt Practices Act of 1977 (FCPA). More recently, the British Government has also become a serious anti-bribery compliance enforcement role player, through the UK Bribery Act of 2010. They also cautioned that organisations should understand that bribery remains a constant threat and they need to ensure that their anti-bribery controls and procedures are in good working order. Ongoing monitoring and tweaking of anti-bribery controls and procedures is essential and will help to remediate risks before they spread.

Foreigners to lose out in Namibian land reforms

São Tomé to compete with Nigeria for Gulf of Guinea trade

amibia’s urban and rural development minister, Sophia Shaningwa, has presented proposed amendments to the Local Authorities Bill, which will restrict foreign land acquisitions. Under legislative proposals, within so-called open zones locals are given preference in acquiring property, while foreigners are only able to purchase land for dwelling, with permission.

Within reserved zones, only locals will be permitted to purchase land, and only in areas commensurate to income categories. Foreigners will be limited to leasing commercial property. In both zones, before permission is sought to sell to another foreigner, any foreignowned property must be offered to the local authority first, then a local, and then the state.

he government of São Tomé and Principe has signed a memorandum of understanding (MoU) with China for the construction of an USD800 million deep-sea trans-shipment port. The port will be operated as a public-private partnership, with at least USD120 million of investment from China’s state-owned China Harbour Engineering Co. It is estimated that the port will begin

operations in 2019. Greater Chinese state involvement in this proposed new port reduces cancellation risk, and would turn São Tomé into a trans-shipment hub for goods travelling to the larger economies of nearby Angola and Nigeria, which both struggle with marine logistical capability, and currently route much of their deep-water port commerce through the Canary Islands.

News

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Reprieve for Glencore in Zambia E Urs Feller of Prager Dreifuss AG

Switzerland is committed to the reparation of illicit funds from Africa

rs Feller, a Swiss based lawyer and partner in the firm of Prager Dreifuss AG assured delegates at the just concluded Law Digest Conference on Cross-border Litigation and Asset Recovery, that Switzerland is committed to the reparation of illicit funds from Africa. Speaking to a packed audience which included many from the EFCC and the judiciary, he highlighted new initiatives by the Swiss authority to improve the process of seizure and reparation of illicit funds from Africa, including a new “PEP-Act” proposed as

basis for freezing orders against Politically Exposed Persons. Additional instruments such as the shifting of the burden of proof on the accused to prove source of fund is also available, where the account holder is proven to be member of a criminal gang. Speaking at the same event, Chief Godwin Obla, SAN a prosecutor for the EFCC caution against unrealistic expectations on the EFCC in light of the limited funding provisions available to the organisation.

mbattled Glencore may have escaped the prospect of licence revocation, despite President Edgar Lungu‘s suggestion on 2 November that the company should consider handing Mopani Copper Mines (MCM) back to the government to find other investors if it fails to maintain operations. The comments came amid meetings with mine owners and unions in Zambia’s Copperbelt province over proposed job cuts by a number of companies in the copper sector, which has faced commodity price falls as well as operational challenges such as power cuts. Glencore previously announced plans to halt operations at Mopani for 18 months in order to proceed with USD950 million of operational expansions and production upgrades. Around 3,800 jobs are reportedly at risk as well as contract worker roles

According to sources close to the Patriotic Front-led government, the government is likely to seek to facilitate a deal at Mopani similar to that reached with China Non-Ferrous Mining Corporation’s Luanshya Copper Mine (CLM), which has agreed to retain on its payroll 1,600 workers it had placed on forced leave. The government is also likely to call on mines to boost social investment in communities during periods of care and maintenance. Licence revocation threats against mines announcing downscaling plans are unlikely to be enforced, particularly as this would likely put recently proposed mining investment plans at risk. The prospect of such compromise was boosted when President Lungu struck a somewhat conciliatory tone with calls for further dialogue between unions and mines.

ENSafrica Launches ENSafrica | Ghana E

NSafrica has joined forces with prominent Ghanaian law firm Oxford & Beaumont Solicitors to form ENSafrica | Ghana, reinforcing its position as Africa’s largest law firm. The firm believes that the addition of ENSafrica | Ghana will bolster its already strong offering on the continent.

Since its establishment in 2006, Oxford & Beaumont Solicitors has grown to become one of the top corporate and commercial law firms in Ghana, with an outstanding reputation. It is acclaimed for its “in-country” critical mass coupled with the ability to provide clients with fullservice domestic capability.

Speaking to Law Digest, Mzi Mgudlwa, deputy chief executive at ENSafrica.said, “We are delighted to be expanding our presence into West Africa as it is a pivotal location for our clients, Oxford & Beaumont Solicitors is a prestigious player in this space and we are thrilled that they have chosen to come on board.”

Founding partner and chairman of Oxford & Beaumont Solicitors, Elikem Kuenyehia said, “We share with ENSafrica the strategic goal of providing our clients with a world-class service, and we have full confidence that this union will significantly help to grow our collective firms’ offering to clients doing business across Africa.”

ENSafrica | Ghana is based in Accra and provides a fullservice offering of corporate and commercial, litigation and dispute resolution, project finance, tax, governance and nominee services. When ENSafrica | Ghana launches on 1 December 2015, ENSafrica will have offices in Ghana, Mauritius, Namibia, Rwanda, South Africa, Tanzania and Uganda, which operate seamlessly as one firm. With over 600 practitioners, the firm is committed to ensuring clients receive consistent world-class service, fast turnaround times and a cost-effective offering, wherever they choose to do business across Africa.

ENSafrica management team

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Guests at the Law Digest Africa Awards Dinner

Law Digest Africa Award makes a big splash T

he Law Digest Africa Awards made its debut in Lagos at a star-studded event at the Oriental Hotel. The award designed to honour excellence in the practice of law across Africa was attended by over 150 senior lawyers, politicians and regulators, including Otunba Femi Deru – President ICAN, Dr. Akinkunmi – Commissioner for Finance Lagos State, former Attorney General of the Federation, Chief Bayo Ojo, SAN. Chief Bayo Ojo, SAN who is also one of the award judges, said “the Law Digest identifies law firms that have excelled in their various areas of specialty that is what this is all about. It’s innovative, it’s good; it recognises hard work and diligence in the legal industry. It will promote the growth of the legal profession in the sense that it’ll be an ideal to aspire to, other law firms will be inspired to be diligent and hope to win in the future. This will increase capacity and be something to look forward to.” One of the recipients of the award, Gbenga Oyebode (MFR), said it was the first time that an Africaoriented magazine has decided to celebrate African lawyers and this will spur him on. He said: “I feel particularly proud, I’ve been chosen for the law achievement award, it’s a lifetime achievement. What this proves for me is that

the last 35 years of practicing law have not been in vain and it also galvanises me to do more in future. Typically we have all these western publishers celebrating themselves and celebrating primarily Southern African law firms, so, it’s a great opportunity for us to have someone who takes a fresh look at firms that have done extremely well.” Gbenga Oyebode, whose firm, Aluko & Oyebode, confirmed its position as the leading law firm in Africa by winning the most contested, Law Firm of the Year award, said the award “is a very great thing.” He added: “It’s all about service, it’s all about developing our profession, it’s all about giving back and I suspect that that’s why I have been awarded the high honour today.” Seyi Clement, the publisher and editor of Law Digest, said the award is designed to recognise excellence in the practice of law across Africa. He added that both big and small lawyers have equal opportunity to be recognised. “We look at the quality of work they do, not really the size. What their colleagues, clients say about them.” He added that, “this is the third year the journal has been in existence and the vision is to

promote African legal practice through articles. The Law Digest is currently distributed in nine countries across the world: Nigeria, Ghana, South Africa, Kenya, Uganda, Tanzania, Australia, USA and UK. We’re going to launch a francophone version in 2016, so that both Anglo and Francophone duristrictions will be able to enjoy and contribute to the journal.” Mr. Clement advised that the process for selection of candidates for the award started in January 2015, with nominations made by 250 senior lawyers and Bar Associations across Africa, and the UK. The nominations were whittled down to a shortlist of 68 candidates by a penal of judges made up of 7 senior lawyers from Africa and the UK. Nominees were then invited to submit evidence in support of their nominations to the penal of judges. In addition, nominees were required to provide a list of clients. From each nominee’s list of clients, we interviewed a randomly selected client for feedback on the nominee. The awards are made base on the assessment of the judges and client feedbacks. Seyi Clement said, “This is the most thorough and transparent award process around” He further said that nominations for the 2016 will open in February 2016.

Stephen Akinsanya, the Chairman of the BritishNigerian Lawyers’ Forum said, “the awards will raise the profile of African lawyers. The awards will also let people know that just as Africa is developing, there are law firms with African lawyers who are more than able to deal with the issues that crop up in the commercial world of developing the economy in Africa.” Bebe Clement, the Business Development Director for Law Digest said it’s a magazine behind African lawyers globally, “so that they can compete on the international stage and to raise the profile of African law firms.” She disclosed that the awards is going to be an annual event and it was prompted by the need to recognise and reward the hard work of those who are making waves in the legal profession in Africa. For Professor Konyin Ajayi, SAN, the awards came at the right time. Professor Ajayi SAN, a guest at the event, said: “I think it’s a great initiative by the Law Digest to begin to grant recognition to the role lawyers play in economic development, particularly now that the country is going through challenging times both in terms of security and the economy.”

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LETTERS TO THE Letters for this column should be sent online to editor@nglawdigest.com. To be considered for publication, letters must bear the name and address of the sender and, because of limited space, letters may be edited to meet space, clarity and style requirements.

Particularly refreshing publication...

A beautiful amalgam of law and journalism...

This is a welcome publication with incisive questions and informed answers to issues hitherto avoided or unattended to by many publications. The interactive forum created by you is particularly refreshing to lawyers still interested in best practices. I wish you a fulfilling mission to keep law dynamic in its practice and procedure.

I have had the pleasure of reading the Law Digest. The quality of the print work of the magazine is excellent compared to some magazines I have read. I like the fact that we now have a magazine that addresses topics of interest to lawyers both abroad and in Africa. As a lawyer based in the UK the magazine enlightens me on issues pertinent to the legal profession in Africa. I commend the editors of the magazine and urge colleagues here and abroad to make this magazine part of their essential reading.

Yomi Okunnu

Yomi Okunnu & Associates Nidocco House, 7 Onike Road, Yaba, Lagos

A promising initiative... The magazine is undoubtedly a promising initiative if it can be sustained, quality and brand protection maintained and essence not compromised. Surely there is a need and a place for a top quality Law magazine in Africa. Kehinde Aina

Aina Blankson 5/7 Ademola Street, SW Ikoyi Lagos, Nigeria

Intellectually stimulating...

The Law Digest is an idea whose time I was very impressed with the writings, design and overall contents of the Law Digest. I look forward to reading and contributing to future publications.

My initial intention on obtaining a copy of the journal was to read one or two articles in my areas of interests, but I ended up reading all for the following reasons: All the articles are written in plain, simple and easily understandable English, devoid of legal jargons. The articles are not only intellectually stimulating but also provide in - depth analysis of the various substantive law covered in them. Most of the writers adopted a comparative analysis approach which is a very invaluable method of exposing lawyers to the law or case law in other jurisdictions and how it impacts on us. One other notable feature is that all the writers are seasoned and experienced lawyers who all exhibited sound knowledge of law and issues in their respective article. If the quality of this issue is taken as an indication of what to expect in subsequent editions, then we are about to witness a major contribution to the development of law and legal education in Africa.

Debo O. Adesina, Esq.

Yinka Soyombo

Abimbola Badejo

Barrister 5 Pump Court Chambers, UK

Very impressed...

Akin Gump Strauss Hauer & Feld, Texas, USA

Yinka Soyombo & Co, Lagos

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Academic commitment to sources... I received the digest yesterday through my secretary and I write to express my deep gratitude for it. Through the rather punishing schedule of my recent weeks, the short, apposite and illuminating articles have managed to grab and retain my attention every chance I get for a breather from work. Perhaps as a bias from my peculiar transitions from and between litigation and academics, I have particularly enjoyed the academic commitment to sources at the same time as the articles reflect the pithy aptness of practitioners. Congratulations for a splendid presentation! Prof. RACE Achara

Millenial Chairman, Nigerian Bar Association, Enugu; Past Dean of Law, Enugu State University of Science and Technology

Highly relevant topics... The articles are well researched and the topics are highly relevant. We hope this will help to fill the vacuum

caused by dearth of contemporary legal works on topical issues. My greatest prayer is that this awesome publication will be sustained. Oke Omezi

Ogbemudje, Omezi & Co. Lagos

Inspirational Interview... As a UK qualified lawyer with a keen interest in the legal issues affecting businesses and individuals both here and in Africa, I have found the Law Digest a useful tool to gaining an insight into the many issues facing the legal professional in Africa and look forward to learning more so I can give my UK clients a steer in to the growing interest in our continent as a place to do business. I wish the editor and his team longevity and sustainability in the growth of what should be a phenomenally successful venture. Femi O. Ogunshakin

Loftus Stowe – Legal & Tax Advisers The Turbine Business Centre, Coach Close Worksop, Nottinghamshire S81 8AP

Keep up the good work... I read the magazine with keen interest. I was particularly pleased with the range of articles which I believe achieve your objective to assist in sharing of knowledge and best practice within the community of African lawyers at home and abroad. Please keep up the good work! Esther Ogun

Akin Palmer LLP, 3 Angel Gate, 326 City Road, London, EC1V 2PT

Inspiration... The magazine provides a forum to highlight topical legal issues of interest to lawyers in and outside Africa and that is where I see it providing a valuable resource. Well done in putting this together and I wish you success in the future. You deserve it! Elias Bwambale

Legal Aid Project Uganda Law Society, Uganda

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Case Review and Legal Development From the Research Desk

UGANDA

Taxation Liability to tax Disposal of shares Cross border asset disposal

Commissioner General –vInternational CA 001 of 2012

Zain

On appeal from High Court of Uganda at Kampala in Zain International BV –v- Commissioner General and URA HCT-00-CV-MC-0096-2011 Justices: Hon. Mr Remmy Kasaule, Hon. Mr Kenneth Kakuru, and Hon. Mr Geoffrey Kiryabwire Factual Background On the 30th March 2010, the Respondent sold shares in Zain Africa BV to Bharti Airtel International. Zain Africa BV was incorporated and resident in the Netherlands, as well has having equity interests in 26 other Dutch BV companies, including Celtel Uganda Holding BV which owned 99.99% of Celtel Uganda Ltd. The Appellant issued a tax assessment on the 10th March 2011 on the disposal on the grounds that the shares disposed of in Zain Africa BV were those held indirectly by Zain International BV in Celtel Uganda Ltd and therefore the transaction was liable for tax in Uganda. The Respondent objected to this assessment as they believed no shares or property in a Ugandan company was ever transferred. The Appellant in consideration of this objection (hereafter referred to as the “impugned decision”) stated that tax was due because the transaction had led to a “gain arising from the disposal of an interest in immovable property located in Uganda.” But, no fresh

assessment was made following the acceptance that the first assessment was erroneous. The Appellant sought enforcement of the tax assessment. The Respondent naturally objected to the impugned decision and filed an application for judicial review at the High Court seeking a declaration that the Appellant lacked jurisdiction to tax it on the disposal of the shares in Zain Africa BV and the impugned decision was illegal, improper and irrational and should be quashed. Further, the Respondent argued that the Appellant should be prohibited from enforcing the decision. The High Court granted these orders by way of judicial review on the grounds that the decision making process was procedurally improper and unfair. It is this decision, which brought the appeal. The Appellant argued inter alia that the objection by the Respondent was a section 99(1) Income Tax Act, Cap 340 (ITA) objection and as such the section 100 ITA procedure for appeal should be followed. Therefore the complaint to the High Court was an abuse of process and other legislative remedies should be exhausted before judicial review is sought. It argued that in the alternative, the High Court should have referred the challenge to the Income Tax Tribunal under section 19 of the Tax Appeals Tribunal Act 1998. The Respondent argued inter alia that judicial review was proper under the Judicature Act, Cap 13 and other legislature, as the Appellant was a statutory authority, whereby judicial review would be appropriate to control its actions. Relying on Council of Civil Service Unions -v- Minister for Civil Service [1985] A.C. 374, where the court held that administrative action was subject to control by judicial review under 3 heads, being, illegality, irrationality and procedural impropriety. They argued that the tax assessment was an illegality. They also argued that, as it was not subject to Ugandan tax law, the assessment

was contrary to the ITA, as well as the Uganda-Netherlands Double Taxation Agreement. They argued that the disposal of the assets had not given rise to income derived from sources in Uganda, as the shares disposed of were not Ugandan shares in a manner of speaking. It argued that consequently any assessment to tax was ultra vires the Appellant. Court of Appeal Decision In the opinion of the court, the issue of whether the Appellant had the power to assess the transaction to tax and whether the Respondent is required to pay tax is to be distinguished from the question of whether the Respondent was exempt from assessment. Under Article 152(1) of the Ugandan Constitution 1995 and the provisions of the ITA, the court was satisfied the Appellant had jurisdiction to tax. The real issue according to the court in this case was whether the income of the Respondent was subject to the section 21 ITA exemption. They found that the trial judge erred in holding there was no jurisdiction to tax, it was up to the Respondent to discharge the burden to prove they were not liable to pay tax, due to the exemption or for another valid reason. Further, the court held that neither the trial judge nor the court had enough evidence given the prerogative nature of the application to decide whether an exemption or other valid reason applied. Their Lordships further held that the act of carrying out the assessment to tax and requiring payment without considering the application of the section 21 ITA exemption manifest procedural impropriety which justified the granting of the order of certiorari as a remedy. The appeal was therefore dismissed. The Court found that the Appellant could go through the decision-making process again as the Appellant was still at liberty to make a fresh assessment.

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Asset Tracing Backward Tracing Lowest intermediate balance rule The Federal Republic of Brazil and another – v- Durant International Corporation and another. Privy Council Appeal No 0069 of 2013 Appeal from the Court of Appeal of Jersey before Lord Neuberger, Lord Mance, Lord Carnwath, Lord Toulson and Lord Hodge Factual Background The defendants (“Durant” and “Kildare”) are companies registered in the British Virgin Islands. Kildare is a wholly owned subsidiary of Durant and both companies are or were at the relevant time under the practical control of Mr Paulo Maluf and/or his son Mr Flavio Maluf. From 1993 to 1996 Mr Maluf senior was mayor of the municipality. Durant and Kildare appeal to the Board against a decision of the Court of Appeal of Jersey, which upheld a judgment of the Royal Court that the companies were liable to the municipality as constructive trustees of US$10,500,055.35 representing bribes received by Mr Maluf senior in connection with a major public road building contract. The findings of fact by the Royal Court are no longer challenged, but the appellants contend that the total amount which can be properly traced to them from the bribes is limited to US$7,708,699.10. The trial judge found that in early 1998, Mr Maluf senior, or others on his behalf, received 15 secret payments, and that funds equivalent to 13 of those payments were converted to US dollars and paid into an account under the control of Mr Maluf junior with the Safra International Bank of New York in the name of Chanani (“the Chanani account”). The 13 payments spanned a period from 9 January to 6 February 1998 and amounted in all to US$10,500,055.35. Over the period of ten days from 14 to 23 January 1998, there were six

payments from the Chanani account to an account held by Durant with Deutsche Bank in Jersey (“the Durant account”). These payments totalled US$13,120,000.00. Over the period from 22 January to 23 February 1998 there were four payments from the Durant account to an account held by Kildare also with Deutsche Bank in Jersey (“the Kildare account”). These payments totalled US$13,500,000.00. The municipality claimed to trace the US$10,500,055.35 to the Durant account and thence to the Kildare account. It asserted that the full amount of those bribes was paid from the Chanani account to the Durant account. It did not make any claim in respect of the excess of the amount paid from the Chanani account to the Durant account (or from the Durant account to the Kildare account) over the US$10,500,055.35. The appellants’ case that their liability as constructive trustees is in round figures for US$7.7m, and not for US$10.5m, has two limbs. One is that the last three payments into the Chanani account identified as proceeds of bribery were made on dates between 26 January and 6 February 1998, and so came after the final payment from the Chanani account to the Durant account. It submitted that those three payments into the Chanani account cannot be traced to the appellants because there is no sound doctrinal basis for “backwards tracing”. The other limb of the appellants’ argument is that the Chanani account was a mixed account; and that where a claimant’s money is mixed with other money, and drawings are made on the account which reduce the balance at any time to less than the amount which can be said to represent the claimant’s money, the amount which the claimant can thereafter recover is limited to the maximum that can be regarded as representing his money (“the lowest intermediate balance rule”). In this case it argued that on two occasions (20 and 23 January 1998) payments were made from the Chanani account to the Durant account of sums which exceeded the maximum that could be said to have come from the bribes and must therefore have come from other sources. The parties agreed at the trial, as a matter of arithmetic, that if either limb

of the argument was correct, the effect would be to limit the traceable amount to the same figure of US$7.7m. The Royal Court rejected the appellants’ arguments. The court concluded that the law prohibiting backward tracing was uncertain, that at a conceptual level the subject seemed incapable of wholly satisfactory solution and that at the level of policy, it was unlikely to be settled in English Law below the Supreme Court. Its own view was that Jersey law should not set its face against accepting that “backward tracing” may be legitimate. It said that, at least where the account remained in credit during the relevant period, so there was no question of possible insolvency and prejudice to unsecured creditors, and where there was no suggestion of an intervening bona fide purchaser for value, the question should be whether there was sufficient evidence to establish a clear link between credits and debits to an account. If such a link were established, the court did not consider that there was cause to diminish its effect by introducing the concept of “a lowest intermediate balance rule”. It considered that, as a matter of judicial policy, this approach would accord most closely with considerations of justice and practicality. It observed that otherwise any sophisticated fraudster would be able to defeat an otherwise effective tracing claim simply by manipulating the sequence in which credits and debits were made to his account. The judgment continued: “Take, for example, a situation in which a debit on one day and a credit a few days later are each accompanied by a bank notification advice unequivocally indicating that they relate to one and the same transaction. Is it to be said in such circumstances that the later credit cannot be traced into the earlier debit simply because of the order in which the two items appear on the bank statement or because at some point between the two the balance on the account fell, say, to zero before being replenished with new funds? As Professor Andrew Burrows observes in his treatise on The Law of Restitution, 3rd ed (2011), p 142: ‘Indeed it would seem that ‘backward tracing’ must be accepted if one is to explain tracing into and through ‘in credit’ bank accounts. This is because if one is tracing funds into

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something else; the £999 has ceased to exist. This explains “the lowest intermediate balance” principle. Similarly, a property interest cannot turn into (or provide a substitute for) something which the holder already has; the later acquisition cannot be the source of the earlier. This explains the “no backward tracing” principle. The two are in a sense opposite sides of the same coin.

a bank account, the account is often credited before the bank has received the relevant funds. In other words, the debt owed by the bank to the customer, which is treated as a substitute for the funds, exists in advance of the funds being received.’” On the question whether there was the necessary link, the court observed that it was the appellants’ own pleaded case that the relevant payments into the Durant account were linked with one another, allegedly as commission earned in a particular transaction, as well as with the payments into the Chanani account, and it concluded that the link between the payments could not be plainer. The Court of Appeal (James McNeill, QC, President, Jonathan Crow, QC and Sir David Calvert-Smith) upheld the reasoning and conclusions of the Royal Court. Decision Lord Toulson delivering unanimous decision of the court said that the doctrine of tracing involves rules by which to determine whether one form of property interest is properly to be regarded as substituted for another. It is therefore necessary to begin with the original property interest and study what has become of it. If it has ceased to exist, it cannot metamorphose into a later property interest. Ex nihilo nihil fit: nothing comes from nothing. If the money in a bank account has dwindled from £1,000 to £1, only the remaining £1 is capable of being substituted by

Conceptually the appellants’ argument is coherent and it is supported by a good deal of authority. In James Roscoe (Bolton) Ltd v Winder [1915] 1 Ch 62, a company sold its business under an agreement containing a promise by the purchaser to collect on behalf of the vendor the amount of the book debts owed to it at the date of the agreement. From the sums collected, the purchaser paid £455 into his general bank account, but he failed to account for the money to the vendor and made drawings from the account which reduced it at one stage to £25. He later made payments into the account from an unrelated source, and died with a balance in his account of £358, to which the vendor claimed to be beneficially entitled. Sargant J held that the maximum which the vendor was entitled to trace was £25, representing the lowest sum to which the balance on the account had fallen between the payment of the £455 into the account and the purchaser’s death, on the ground that at that date of the lowest balance the purchaser must have denuded the account of all the trust moneys except to the extent of £25. In In re Goldcorp Exchange Ltd [1995] 1 AC 74, a company mixed bullion belonging to some of its customers with other bullion. It then reduced its stock to less than the amount which belonged to those customers. It later bought more bullion, but there was no evidence to link the later purchases with the earlier depletion of the stock. On the company being placed in receivership, the customers claimed an equitable lien over the stock of bullion held by the company at the time of the receivers’ appointment. The judge found that the amount of bullion held by the receivers on behalf of those customers was an amount equal to the lowest balance of bullion held by the company at any time, applying James

Roscoe (Bolton) Ltd v Winder. The Board upheld his decision. Lord Mustill, at p 109, cited the judgment of the Court of Appeal in In re Diplock [1948] Ch 465, 521, where it was said: “The equitable remedies presuppose the continued existence of the money either as a separate fund or as part of a mixed fund or as latent in property acquired by means of such a fund. … It is, therefore, a necessary matter for consideration in each case where it is sought to trace money in equity, whether it has such a continued existence, actual or notional, as will enable equity to grant specific relief.” Lord Mustill observed that the law relating to equitable tracing was still in a state of development, but that it would be inequitable to impose an equitable lien in favour of the customers in that case, since there was no evidence that their bullion continued to exist as a fund latent in property held by the company. In Bishopsgate Investment Management Ltd (In Liquidation) v Homan [1995] Ch 211 large amounts of funds held by Bishopsgate on trust under various pension schemes were improperly paid into a bank account of Maxwell Communication Corporation plc (“Maxwell CC”). The account was either overdrawn at the time of the payments or subsequently became overdrawn. Maxwell CC was hopelessly insolvent and was subsequently placed in Chapter XI protection under the US Bankruptcy Code. The administrators wished to make an interim distribution to Maxwell CC’s creditors, but Bishopsgate’s liquidators claimed to be entitled to an equitable charge over the whole of the moneys in the account, which happened to be in credit at the time of the administrators’ appointment. At first instance Vinelott J held that Bishopsgate could not trace through an overdrawn bank account, whether it was overdrawn at the time when the relevant moneys were paid into it or became overdrawn by subsequent drawings, subject to a reservation if it were shown that there was a connection between a particular misappropriation and the acquisition by Maxwell CC of a particular asset. He considered that there could be backward tracing if, for example, an asset was acquired by Maxwell CC with

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The doctrine of tracing involves rules by which to determine whether one form of property interest is properly to be regarded as substituted for another. It is therefore necessary to begin with the original property interest and study what has become of it.

moneys borrowed from an overdrawn account and there was an inference that when the borrowing occurred it was the intention that it should be repaid by misappropriation of Bishopsgate’s moneys. His conclusion was that “proof that [money was] paid into an overdrawn account ... may not always be sufficient to bar a claim to an equitable charge”. Bishopsgate’s liquidators appealed, and Maxwell CC’s administrators served a respondent’s notice by way of crossappeal, asking the Court of Appeal to overrule the judge’s reservations. Dillon LJ considered it to be at least arguable that if the connection postulated by the judge were proved, there ought to be an equitable charge in favour of Bishopsgate over the particular asset, and he held that both the appeal and the crossappeal should be dismissed. By contrast, Leggatt LJ held that there could be no tracing remedy against an asset acquired before misappropriation of money took place, since the money could not be traced into something which had been acquired before the money was received and therefore without its aid; but he accepted that if an asset were used as security for an overdraft, which was then discharged by means of misappropriated money, the beneficiary might obtain priority by subrogation. He therefore considered that the judge came to the right conclusion, although he did not accept that it was possible to trace through an overdrawn account, or to trace misappropriated money into an asset

bought before the money was received by the purchaser. The third member of the court, Henry LJ, stated laconically that he agreed with both judgments. The Court of Appeal was again divided in Foskett v McKeown [1998] Ch 265. The claim was by purchasers who advanced money on trust under a property development scheme which was never carried out. The issue was whether they could trace their money into the proceeds of a life insurance policy. The matter came before the court on an application for summary judgment, before the facts had been fully investigated. In his judgment Sir Richard Scott V-C said at pp 283284: “I regard it as likely, that [the purchasers] will establish that it was [the deceased’s] intention throughout to use [the] purchasers’ money to pay the 1988 premium. If that is the case, it does not seem to me at all obvious that the circumstance that the payment into the account of the purchasers’ money was made very shortly after the payment of the premium, rather than before or at the same time as the payment, should be regarded as fatal to the purchasers’ equitable tracing claim. The availability of equitable remedies ought, in my view, to depend upon the substance of the transaction in question and not upon the strict order in which associated events happen. Moreover, there is at least some authority which the purchasers could pray in aid: see Agricultural Credit Corpn of Saskatchewan v Pettyjohn (1991) 79 DLR (4th) 22 and [Professor Lionel Smith] “Tracing into the Payment of a Debt” [1995] CLJ

290, 292-295.” The majority of the court took a different view. Hobhouse LJ and Morritt LJ both held that the doctrine of tracing does not extend to following value into a previously acquired asset. Morritt LJ said at p 296 that the claimants “must be able to identify the money of the purchasers at every stage of the process.” The appellants’ argument has academic support, most fully developed in Professor Matthew Conaglen’s article “Difficulties with tracing backwards” (2011) 127 LQR 432, written in riposte to the argument of Professor Smith (to which Sir Richard Scott V-C referred in Foskett v McKeown). Professor Conaglen begins with the proposition that “Tracing is the process of identifying a new asset as the substitute for the old” (per Lord Millett in Foskett v McKeown at [2001] 1 AC 102, 127). He observes that the acquisition of an asset and the extinguishment of a debt are different things. A debt is an asset in the hands of the creditor, and so can provide a basis for traditional tracing in relation to the creditor’s assets. But a debt has no asset value in the hands of the debtor; it is a liability which ceases to exist when it is paid. Having said that, Professor Conaglen accepts that there is nothing conceptually impossible about the courts tracing trust funds through the payment of a debt into assets that the trustee had acquired, before that payment was made, by incurring the

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The courts should be very cautious before expanding equitable proprietary remedies in a way which may have an adverse effect on other innocent parties. If a trustee on the verge of bankruptcy uses trust funds to pay off an unsecured creditor to whom he is personally indebted, in the absence of special circumstances it is hard to see why the beneficiaries’ claim should take precedence over those of the general body of unsecured creditors. debt. But he argues that the support in the case law for such an approach is weak and that there is stronger authority against it. Professor Conaglen recognises that it is ultimately a matter of legal policy whether the law ought to allow backward tracing. He concludes, at p 455: “When the already precarious position of unsecured creditors is weighed against the concomitantly far better protected position of trust beneficiaries, it is suggested that the law ought not to recognise the possibility of tracing backwards. The unsecured creditors should not have their position worsened further by effectively making them insurers for the beneficiaries against trustee defalcations. Trust beneficiaries whose money has been wrongly applied in satisfaction of a debt can stand in the position of the satisfied creditor (by subrogation), but it is a step too far, in policy terms, to allow them to stand in the position of the debtor and act as owners of property

that the trustee acquired before the debt was paid. Alternatively, if backward tracing is to be allowed, then the policy concerns that have been highlighted above suggest that the extent to which payment of the debt is considered attributable to acquisition of the asset should perhaps be limited in some way, such as by reference to whether the trustee intended at the time the asset was acquired to (mis)use trust funds to pay for it. … That would be consistent with equity’s traditional concern for substance – meaning intention – over form. However, the evidential difficulties inherent in a test that is focused on the defalcating trustee’s intentions provide yet further reasoning for concluding that the balance is appropriately struck by refusing to recognise backward tracing.” The respondents found their arguments on the passage already quoted from in Lord Millett’s speech in Foskett v McKeown. They emphasise that it is inaccurate to speak of tracing one asset into another. Rather, the court is concerned with tracing the value inherent in a trust asset. Whether it can properly be traced into another asset depends on whether there is a sufficient transactional link. In considering that question, the court should concentrate on the substance of the transaction and not the form. In general terms those propositions carry force, but they do not resolve the disputed issues. More particularly the respondents submit, as Professor Smith argues, that money used to pay a debt can in principle be traced into whatever was acquired in return for the debt. That is a very broad proposition and it would take the doctrine of tracing far beyond its limits in the case law to date. As a statement of general application, the Board would reject it. The courts should be very cautious before expanding equitable proprietary remedies in a way which may have an adverse effect on other innocent parties. If a trustee on the verge of bankruptcy uses trust funds to pay off an unsecured creditor to whom he is personally indebted, in the absence of special circumstances it is hard to see why

the beneficiaries’ claim should take precedence over those of the general body of unsecured creditors. However there may be cases where there is a close causal and transactional link between the incurring of a debt and the use of trust funds to discharge it. Agricultural Credit Corpn of Saskatchewan v Pettyjohn (1991) 79 DLR (4th) 22 (Sask CA) provides a good example. In 1981 and 1984 Mr and Mrs Pettyjohn applied to the credit corporation for loans to purchase cattle. They were informed that their applications were approved and that they could proceed to make the purchases. The Pettyjohns went ahead and bought cattle using a credit line with their bank as their immediate source of funding. About the same time, or shortly afterwards, the loan agreements with the credit corporation were executed, under which the credit corporation was given security over the cattle, and the moneys advanced by the credit corporation were used to pay back the bank. Sometime later the Pettyjohns sold the cattle (without the credit corporation’s agreement), bought replacement cattle and used the proceeds of sale to repay the loan for the purchase of the replacement cattle. They then became insolvent. The credit corporation claimed to have a purchase money security interest in the replacement cattle under the Personal Property Security Act 1993 (the “Act”). The claim gave rise to two issues: whether the lender had a right to security over cattle which were purchased after the loan application had been approved but before the loan moneys had been advanced: and, if so, whether the lender was entitled to trace the value of its original security into the replacement cattle. The Saskatchewan Court of Appeal decided the case in favour of the credit corporation. Its decision on the second point turned on the construction of the provisions of the Act, but its decision on the first point is of general interest. Under the Act, it was necessary for the credit corporation to establish that it gave value to the debtor for the purpose of enabling the debtor to

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acquire rights in personal property (as it undoubtedly did) and, more importantly, that the value was applied to acquire the rights. On that issue the court said at p 38: “The…requirement, that the value have been used to acquire such rights, presents greater difficulties. How can it be said that the moneys advanced were used to acquire rights when the purchase had already taken place and the rights already acquired? It is, however, commercially unreasonable to divide the transactions so minutely. The Pettyjohns used the value given to them to pay off interim financing, but the interim financing had not been obtained as a separate transaction, but always with the view that it would be repaid through the moneys advanced by ACCS. The Pettyjohns used the value given as part of a larger, commercially reasonable transaction to acquire rights in the 1981 and 1984 cattle. The fact that the use of the value given was, due to the nature of the transaction, after the acquisition of rights does not alter the conclusion that the value given was used to acquire those rights.” On those facts the court was right in the view of the Board not to divide minutely the connected steps by which, on any sensible commercial view, the purchase of the cattle was financed by the credit corporation, but to look at the transaction overall. The interposition of the bank was purely to provide bridging finance to cover the gap in time between the purchase and

the credit corporation’s funds coming through as previously arranged. The development of increasingly sophisticated and elaborate methods of money laundering, often involving a web of credits and debits between intermediaries, makes it particularly important that a court should not allow a camouflage of interconnected transactions to obscure its vision of their true overall purpose and effect. If the court is satisfied that the various steps are part of a coordinated scheme, it should not matter that, either as a deliberate part of the choreography or possibly because of the incidents of the banking system, a debit appears in the bank account of an intermediary before a reciprocal credit entry.

The Board therefore rejects the argument that there can never be backward tracing, or that the court can never trace the value of an asset whose proceeds are paid into an overdrawn account. But the claimant has to establish a coordination between the depletion of the trust fund and the acquisition of the asset which is the subject of the tracing claim, looking at the whole transaction, such as to warrant the court attributing the value of the interest acquired to the misuse of the trust fund. This is likely to depend on inference from the proved facts, particularly since in many cases the testimony of the trustee, if available, will be of little value.

The Board agrees with Sir Richard Scott V-C’s observation in Foskett -v- McKeown that the availability of equitable remedies ought to depend on the substance of the transaction in question and not upon the strict order in which associated events occur. Similarly, in a case such as Agricultural Credit Corpn of Saskatchewan- v- Petty john, the Board does not consider that it should matter whether the account used for the purpose of providing bridging finance was in credit or in overdraft at the time. An account may be used as a conduit for the transfer of funds, whether the account holder is operating the account in credit or within an overdraft facility.

The Board does not doubt the correctness of the decisions in James Roscoe (Bolton) Ltd v Winder and In re Goldcorp Exchange Ltd, but in neither case was there evidence of an overall transaction embracing the coordinated outward and inward movement of assets. In the present case the Royal Court and the Court of Appeal were justified in concluding that the necessary connection between the bribes and the receipts totalling US$10,500,055.35 was proved, having regard in particular to the admission in the pleadings as to the link between the sums received by the appellants and the Chanani account. The Board will therefore humbly advise Her Majesty that the appeal should be dismissed.

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LABOUR LAW Ijeoma Uju, Templars

Ministerial consent for “release” of Nigerian oil workers: An act of meddlesome interference or protectionism?

Ijeoma Uju Managing Counsel - Templars

The protectionist tendencies of the DPR surfaced on 5 March 2015 when it issued the “Guidelines and Procedures for the Release of Staff in the Nigerian Oil and Gas Industry” (the “2015 Guidelines”).

n an era where securing a job in the supposedly buoyant oil and gas industry is as tough as the biblical camel going through the eye of the needle, it is understandable why the Federal Government of Nigeria (the “FGN”) will be most protective of the few “fortunate” Nigerians who manage to secure such lucrative jobs. However, the reality is that only a few of such “fortunate” Nigerians are public servants who enjoy security of employment because their contracts of employment have statutory protection. The majority are in the private sector and their employments are governed by common law which typically vest the employer with power to hire and fire at will. It is this huge loophole that the FGN through the Department of Petroleum Resources (“DPR”) and other agencies, have been trying to close for decades through various directives, circulars, guidelines and similar instruments. However, the challenge for the Government has always been drawing the fine line between employee “protectionism” and what the Supreme Court of Nigeria has described as “meddlesome interference” in a simple master and servant relationship. The protectionist tendencies of the DPR surfaced on 5 March 2015 when it issued the “Guidelines and Procedures for the Release of Staff in the Nigerian Oil

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and Gas Industry” (the “2015 Guidelines”) with the main objective of establishing procedures for obtaining the prior consent of the Minister of Petroleum Resources (the “Minister”) for the “release” of Nigerian workers in the oil and gas industry. This well intentioned measure is not novel, as the DPR had issued similar directives in the past. Precisely, on 6 February 1997, the DPR on behalf of the Minister issued Circular No. PR5061/B/V.2/181, entitled “Release of Nigerian workers from Employment in the Petroleum Industry and Utilisation of Expatriate Quota” (the “1997 Circular”), to oil producing, oil marketing, and oil service companies in Nigeria, directing all such companies to, among other things, apply for the approval of the Minister before releasing any Nigerian staff from their employment. Perhaps the DPR felt the need to issue the 2015 Guidelines because the 1997 Circular was breached by those to whom it was addressed with impunity and without adverse consequences. Unlike the 1997 Circular which did not prescribe detailed processes to be followed for the release of Nigerian employees and which did not contain any penalties for non-compliance, the 2015 Guidelines has taken the far reaching approach of prescribing more detailed requirements and procedures for obtaining the consent of the Minister before “releasing” a worker and also sets out stiff penalties for non-compliance. The definition of the term “release” in the 2015 Guidelines and the implications of a “release” is curious. The 2015 Guidelines defines “release” to include but not limited to, “the removal of a worker from the employment…in a manner that permanently separates the worker from the company whether such

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Despite the common law position and the position of the Nigerian courts on the subject, the DPR and other agencies in the oil and gas industry such as the Nigerian Content Development Monitoring Board (“NCDMB”) continue to flagrantly disregard the law. removal is by dismissal; retirement - whether voluntary or forced; termination; redundancy; release on medical grounds; resignation; death or abandonment of duty post”. It is difficult to understand the reasoning behind requiring the consent of the Minister to “release” an employee who dies in service or voluntarily resigns, retires or abandons his duty post. However, the drafters of the 2015 Guidelines would appear to have considered the impracticability of this approach and decided to stipulate that it would be sufficient to merely notify (as opposed to obtaining the consent of) the Minister of the “release” where the employee retires voluntarily, resigns, dies or abandons his duty post. In the case of abandonment of duty, the employer can “release” the employee after two weeks of notifying the DPR. Penalties stipulated for failure to obtain the Minister’s consent prior to the release of a worker or to implement the decision of the DPR in this regard, include, fines ranging between ₦5,000,000.00 (Five Million Naira) to ₦10,000,000.00 (Ten Million Naira), recall of the released worker(s) and in some cases, suspension or cancellation of the lease, licence or permit belonging to the employer. The drafting of the 2015 Guidelines makes it difficult

to determine, whether the DPR will impose just one or more than one penalty in relation to a single infraction. Not surprisingly, the 2015 Guidelines has received widespread criticism since its release. The reason for the criticism is not farfetched. It relates to the apparent disregard for the sanctity of employment contracts. The sanctity of employment contracts is upheld all over the world and Nigeria cannot be an exception. An employment contract by its very nature is personal due to the master-servant relationship it creates, and is in principle subject to the general contractual rules of common law (except in relation to those contracts with statutory protection). The Supreme Court was clear in the renowned case of Chukwuma

employer. Indeed, the equitable remedy of specific performance, save in special circumstances (such as where the employment has statutory flavour), is alien to contracts of service. The courts have succinctly expressed this position on several occasions. In fact, the Court of Appeal (subsequently upheld by the Supreme Court) was

The DPR and the NCDMB appear not to realise that the matter of termination of an employee can only be subject to the contractual relationship, that is, the contract governing the employment.

“release” is destined to include retirement, redundancy, dismissal etc.

vs. Shell Petroleum Development Company (1993) 4 NWLR (PT 289) 512, when it decided that, “it is a well-established principle of the common law, and of Nigerian law, that ordinarily, a master is entitled to dismiss his servant from employment for good or bad reasons or for no reason at all”. Thus, the right to hire and fire is inherent in all contracts of employment, as a willing employee cannot be forced on an unwilling

very specific in the case of Shell Petroleum Development Company vs. Nwawka & The Director of Petroleum Resources (2003) 6 NWLR (Pt.815)184, when it held, “that a directive from a stranger or third party to a contract may not be construed to derogate from such contractual relationship and that the DPR cannot issue any directive that could have the effect of affecting that contractual relationship”.

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While the position of the law is quite clear, it would appear that the DPR has forgotten or rather has decided to be wilfully unmindful of the decision of the apex court in Chukwuma vs. Shell (supra) and Shell vs. Nwawka (Supra). Despite the common law position and the position of the Nigerian courts on the subject, the DPR and other agencies in the oil and gas industry such as the Nigerian Content Development Monitoring Board (“NCDMB”) continue to flagrantly disregard the law by justifying their interference in the employment contract of workers in the oil and gas industry on the basis of national interest, claiming that they only seek to protect the oftentimes vulnerable worker in Nigeria by exercising authority claimed to be derived from Section 10 of the Nigerian National Petroleum Corporation Act 1990, (“NNPC Act”) Sections 9(1) (b) and 12(1) of the Petroleum Act 1998 and Section 28 of the Nigerian Oil and Gas Industry Content Act 2010, which generally provides that Nigerians shall be given first consideration for employment and training in the oil and gas industry. In furtherance of the objectives of the Nigerian Oil and Gas Industry Content Development Act 2010, amongst which is to increase indigenous participation in terms of human resources, the NCDMB in its guidelines on the hiring of expatriates also requires that employers seek its prior approval before applying for expatriate quota positions from the

Ministry of Interior. It further requires that operators and service companies intending to embark on any form of staff rationalisation notifies the NCDMB of such scheme, providing details of the justification for the exercise and its impact on the Nigerian workforce of such companies. The NCDMB has indicated that its intention “is to protect the Nigerian work force by curbing the systemic substitution of experienced Nigerian workers with expatriates”. These intentions though laudable are very intrusive. It cannot be conceivably construed that the intendment of the Nigerian content policy meant for the protection of Nigerian employees will be such as to extend to a regulation of an employer’s right to terminate an employee, notwithstanding the reason for such termination. The DPR and the NCDMB appear not to realise that the matter of termination of an employee can only be subject to the contractual terms governing the employment. Thus, in termination cases, the circumstances in which the employment was terminated such as malice, bad faith or other unfavourable circumstance are irrelevant and of no consequence and cannot be taken into consideration, so long as the termination was done in accordance with the terms of the contract. Of greater concern, still, is the validity of the provisions of the 2015 Guidelines which derives its authority from Regulation 15A of the Petroleum (Drilling and Production) (Amendment) Regulations 1988 made pursuant to Sections 9(1) (b) and 12(1) of the Petroleum Act 1998, as well as Section 10 of the NNPC Act, which provides that any regulatory function conferred on the Minister pursuant to the Petroleum Act or any other enactment may be delegated to and discharged by the Director of the

DPR. Section 10(2) of the NNPC Act in particular empowers the Minister to delegate such powers as may be conferred on him under the Petroleum Act 1998 to the chief executive officer of the DPR. Nothing in these principal statutes empowers the Minister to intervene in employment relations in the oil and gas industry. The DPR therefore has no legal basis for issuing the 2015 Guidelines which provisions are clearly beyond the scope of its regulatory oversight. While the position of the law is quite clear, it would appear that the DPR has forgotten or rather has decided to be wilfully unmindful of the decision of the apex court in Chukwuma vs. Shell (supra) and Shell vs. Nwawka (Supra). Perhaps, what is needed is a fresh judicial pronouncement to juggle the memory of the DPR, hopefully, into withdrawing or at least amending the 2015 Guidelines to suit the realities of the employment relationship. Achieving this feat, would no doubt require a legal challenge to the DPR’s authority to issue the 2015 Guidelines or to interfere in master-servant relationships. The problem is that this may not happen in the near future, as more often than not, industry participants who are affected by DPR’s directives simply comply with the guidelines and directives of the DPR without challenge, obviously, for fear of running the risk of being perceived as defiant by their primary regulator. What makes such a challenge even more unlikely is the arm-twisting tactics that the DPR employs in getting industry participants to kow-tow to its rules (whether or not validly issued), by either withholding or cancelling the licenses and permits pivotal to their operations or at least threatening to do so. As it is, the waters are yet to be tested and the extent to which the DPR is ready to go in implementing the 2015 Guidelines is uncertain.

REGULATIONS Patrick Rappo & Helen Aldridge [Steptoe & Johnson]

Anti-bribery laws foreign guns pointing at Africans’ heads

Patrick Rappo – Partner

Helen Aldridge - Associate

This article highlights the key extraterritorial provisions of the main statutes likely to achieve this, the U.S. Foreign and Corrupt Practices Act 1977 (“FCPA”) and the UK Bribery Act 2010 (“UK BA”).

he arrest and extradition of FIFA officials to the U.S. and enquiries into the award of the hosting of past and future World Cups, has set alarm bells ringing across Africa. Long used to international leaders moralising about the continent, yet at the same time benefiting from the extraction/exploitation of its natural resources, Africans are now seeing those same leaders championing crusades against “the cancer of corruption”. Another idle threat or is the foreign gun pointing at African heads going to see citizens and corporations appear in overseas jails? This article highlights the key extraterritorial provisions of the main statutes likely to achieve this, the U.S. Foreign and Corrupt Practices Act 1977 (“FCPA”) and the UK Bribery Act 2010 (“UK BA”), along with an analysis of the UK BA following its 4th anniversary, and considers what multinational corporations need do when reviewing their international compliance efforts to avoid the barrel of the gun. The FCPA and the UK BA are the strictest and most well-known pieces of anti-corruption legislation in the world today. The former because of the zeal with which it is used by the U.S. Department of Justice (“DoJ”), and the latter because of the fanfare it received, as the new kid on the block, upon becoming law in 2011. Under both statutes, any individual or corporation committing acts of corruption within either the U.S. or the UK will come within their sights, irrespective of nationality or place of incorporation. While this is not uncommon, what is of particular note is that both pieces of legislation also have very wide extra-territorial reach, stretching well beyond the shores of the Hudson or the Thames. First, both pieces of legislation can apply to conduct taking place overseas, outside of U.S. or UK territory. Second, they can apply to non-U.S. or UK citizens. By way of example the FCPA covers

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“resident aliens” and businesses, as long as they have a principal place of business in the United States. U.S. businesses can also be held liable for the acts of their officers, directors, employees, agents (regardless of their nationality), and for the acts of their foreign subsidiaries. Likewise the UK BA applies to all those with a “close connection” to the UK, including British citizens, citizens of British overseas territories, those ordinarily resident in the UK and bodies incorporated under the law of any part of the UK. Senior officers of a corporate body can also be held liable if they “consent or connive” in the commission of bribery offences committed by the company. The FCPA will also apply to any issuer of securities on a U.S. Stock Exchange, or any officer, director, employee, or agent of such issuer - irrespective of whether the issuer is a U.S. or non-U.S. company – and operates to prohibit them from using the U.S. “mails or any means of instrumentality of interstate commerce” for corruption of public officials anywhere in the world. A similar prohibition applies to individuals, irrespective of their nationality – meaning that non-U.S. citizens and businesses alike can

The FCPA and the UK BA are the strictest and most well-known pieces of anticorruption legislation in the world today. be liable for conduct that occurs exclusively overseas, as long as some relatively minor incursion onto U.S. soil occurs, such as the sending or receipt of an email or the clearing of a U.S. dollar transaction. While the UK BA does not adopt the same language, there are similarities with the corporate offence of “failure to prevent bribery” by an “associated person”. This offence covers any bribe (both in the private or public sectors), occurring anywhere in the world (even if no activity takes place in the UK), by any associated person (e.g. an employee, subsidiary or agent) and to any organisation - as long as the organisation “carries on a business or part of a business” in the UK.

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In addition to liability under the FCPA or UK BA, non-nationals could also be liable to prosecution for conduct taking place entirely overseas, if acting in concert with another who is directly liable under the legislation – for example, conspiring with another or inciting another to commit a bribery offence. Thus enforcement agencies such as the U.S. DoJ and the UK Serious Fraud Office (“SFO”) now have an armoury of extra-territorial provisions to exert jurisdiction over corporates and individuals from across the globe, for activities that barely, if ever, made their way across the Atlantic, let alone set foot on U.S. / UK soil. It is depressingly common to see how frequently these tools have in fact been used by the U.S authorities; one only has to look at the top 10

In addition to liability under the FCPA or UK BA, non-nationals could also be liable to prosecution for conduct taking place entirely overseas, if acting in concert with another who is directly liable under the legislation. FCPA enforcement actions in terms of financial penalties, to see how many orders have been made against nonU.S. companies. Whilst the UK has not scaled similar heights (or depths), it is likely to follow suit. The UK Prime Minister, David Cameron, has repeatedly stated his opposition to corruption, and his commitment to tackling it and increasing transparency around government contracts and beneficial ownership. Prior to a recent G7 summit he tweeted: “Corruption is the cancer at the heart of so many of the problems we face around the world today. The migrants drowning in the Mediterranean are fleeing from corrupt African states. Our efforts to address global poverty are too often undermined by corrupt governments preventing people getting the revenues and benefits of growth that are rightfully theirs. Corruption undermines the wider global economy

too. The World Economic Forum estimates that corruption adds 10% to business costs globally, while the World Bank believes some $1trillion is paid in bribes every year. Cutting corruption by just 10% could benefit the global economy by $380billion every year” Combine this with an increased global focus on the prevention of international crimes, such as bribery, corruption and money laundering, and much greater international cooperation - there is a clear uptick in local enforcement as well as the use of extra-territorial provisions and extradition proceeding. 2015 has seen a lot of activity thus far, with President Muhammadu Buhari’s highprofile actions in Nigeria, and the anti-corruption drives and resultant investigations taking place in Ghana, Kenya, Malawi, South Africa, Tanzania and Zambia, which have already led to various individuals being charged.1 Thus, it is essential that multinational corporations, whether operating in the United States, the United Kingdom or elsewhere, look at their potential liabilities under both the FCPA and UK BA to which their operations may be exposed and take proactive remedial action to ensure compliance. It is only by doing so that the prospects of a declination (no further action) or a non-criminal outcome (such as a deferred prosecution agreement (“DPA”) settlement) are maximised. It is worth noting that while prosecutors in the U.S. have the power to decide whether or not to take enforcement action against companies, and will take careful stock of compliance policies and procedures, in the UK it is a statutory defence to the corporate offence of failure to prevent bribery to have “adequate procedures” in place to prevent corruption, even if they did not succeed in actually preventing it. Turning more specifically to the UK BA - which was modelled on OECD guidance and the FCPA, and intended to reduce corruption by striking fear into companies and individuals alike – it marked its fourth birthday on 1st July 2015, but how has it fared? Heralded as the strictest ABC (“antibribery & corruption”) legislation in the world, with very wide extraterritorial jurisdiction and low hurdles to establish corporate criminal liability – has it lived up to its billing and will it cause us to see Africans in UK courts? To the uninitiated, it may appear that the DoJ is the only Sheriff in

town, willing and able to use its guns, with the SFO having only brought one successful prosecution of two individuals under the UK BA (which only related to relatively small side charges in a much larger fraud case),2 and to date no DPAs have been entered into, even though they have been in force since 24 February 2014. Nonetheless there has been a change in style and emphasis in the UK – not only is David Cameron talking the talk about his ABC credentials, he is starting to walk the walk: publishing the first UK Anti-Corruption Plan,3 making the introduction of a failure to prevent fraud offence an election manifesto commitment, introducing legislation to ban bearer shares and creating a public register of beneficial owners of companies. He is also forcing his international colleagues to listen and the SFO and the judiciary in the UK are clearly paying attention. The SFO has continued to open a swathe of high profile UK BA investigations into individuals and companies, including those with a noticeable African presence, such as ENRC, Barclays Bank, the Sweett Group, GPT, Alstom and GlaxoSmithKline. Meanwhile the judiciary, in those cases under the UK BA and its precursor legislation, has shown just how seriously it will treat bribery, by imposing swingeing sentences. In December 2014, in the Sustainable AgroEnergy case, Mr West was sentenced to 6 years’ imprisonment for offering a bribe of £189,000 to Mr Stone, while the latter was sentenced to 4 years’ imprisonment for receiving the bribe. This case was the first under the new UK Sentencing Council Guidelines for Fraud, Money Laundering and Bribery,4 and indicates the tough approach that will be taken by the UK courts. Further, the convictions also show that the SFO is not just targeting bribes involving foreign public officials or large multi-nationals, but has its sights set on any organisation or individual that infringes the Act, including private-sector bribery allegations. In spite of the SFO failing to produce a foreign bribery-related conviction against a corporation under the UK BA, Stuart Alford QC (Head of Division at the SFO) noted that “...the record in respect of the Bribery Act is not nearly as troubling as some people make out. This is a

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In addition to liability under the FCPA or UK BA, non-nationals could also be liable to prosecution for conduct taking place entirely overseas, if acting in concert with another who is directly liable under the legislation. piece of legislation which is taken very seriously, and you will start to see an increase in the number of prosecutions: both from the SFO and other agencies”.5 With additional funding to tackle economic crime, a perennial problem for enforcers in the UK, all but guaranteed by the UK government in the form of “blockbuster funding” for the largest cases, Alford’s words and Cameron’s words should not be taken lightly. This is particularly the case as the UK Anti-Corruption Plan seeks to improve the reporting of bribery, for example to British Embassies, and by considering whether payments should be made to whistle-blowers who report issues, as well as better liaison between the Embassies, local governments, UK and other international enforcement agencies. An example of the foregoing is the Swift Technical Solutions case in the UK,6 which centred on allegations of corrupt payments to officials of two Nigerian Boards of Internal Revenue, one in Rivers State and the other in Lagos State. The company, Swift, cooperated with the SFO, providing documents and making staff available for interview, for which it was not charged with any offence, while further assistance was also provided by the Economic and Financial Crimes Commission of Nigeria. In spite of speculation that the SFO’s future is uncertain, and question marks around whether DPAs will prove as effective in the UK as in the U.S., their introduction has marked a significant development in the UK’s approach to facilitating the resolution of multi-jurisdictional cases, aligning it with the U.S.’s approach: namely, “co-operate and leniency results”, “don’t co-operate and disaster awaits”. This was emphasised by David Green,

director of the SFO, an anti-corruption Conference in London in June 2015, when he said that companies need to do three things to be able to demonstrate to the SFO, and also to a judge, that a DPA is in the public interest, namely they must “co-operate, co-operate and co-operate”. He also went on to suggest that companies should come in early to discuss and report issues to the SFO, so that companies and their advisers can find out from the SFO how it would like things to be done, without “churning up the crime scene”. He went on to spell out that the advantages of adopting such an approach are not only that it makes a UK DPA more likely, but also that it is more likely that the U.S. DoJ would not get involved. Whether companies are enticed by this remains to be seen. However if individuals or other competitors blow the whistle first, it may be too late. Concluding Thoughts Co-operation, intelligence gathering and sharing of information and evidence has increased dramatically between regulatory agencies and prosecutors throughout the world, particularly in high risk jurisdictions (many of which appear across Africa)7 or high risk business sectors prevalent across the African continent (such as oil, gas, mining, telecoms, pharmaceuticals and financial services). As such, businesses should note that their domestic enforcement agency will no longer be a passive player, and may in fact be closely monitoring certain high risk scenarios and also receiving or passing on information about misconduct to other international agencies – thus increasing regulatory and prosecution risks. This is more so due to the notable recent uptake in anti-corruption drives and investigations taking place across all four corners of Africa, as mentioned above. Additionally the FCPA and the UK BA have significant extra-territorial remit, in particular the corporate offence of failing to prevent bribery. Both U.S and UK prosecutors have an arsenal of weapons to use in the crusade against corruption, and are itching to pull the trigger. As such, companies need to ensure that the barrel has no reason to be pointing at

them – How? By carefully reviewing their bribery and corruption risks, especially third parties or agents or dealings with government officials, and by maintaining “adequate procedures” for anti-bribery and corruption compliance, which are routinely monitored and updated. On a similar note, under the UK Anti-Corruption Plan and the Conservative election manifesto, the UK Ministry of Justice has been tasked with considering the introduction of a new corporate criminal offence of “failure to prevent economic crime”, to parallel the failing to prevent bribery offence. Both of these offences will significantly impact any organisation that “carries on...part of its business” in the UK, making them strictly liable for economic crimes committed by their employees, subsidiaries and agents world wide. As such, companies need to ensure that if they have any exposure to the UK that their bribery and corruption, and financial crime, systems and controls are adequate, and at a standard that will thwart any prospective prosecution in the UK, thereby leaving the enforcement agencies firing blanks. 1 For example, July 2015 alone saw the sentencing of two former mining ministers in Tanzania; the start of a high-profile trial in South Africa against three former senior officials from the police crime intelligence unit; 2 For further information, see: http://www. sfo.gov.uk/press-room/latest-press-releases/ press-releases-2014/city-directors-sentencedto-28-years-in-total-for -23m-green-biofuelfraud.aspx. 3 Available at: https://www.gov.uk/ government/publications/uk-anti-corruptionplan. 4 Available at: https://www.sentencingcouncil. org.uk/wp-content/uploads/Fraud_bribery_ and_money_laundering_offences_-_Definitive_ guideline.pdf. 5 Stuart Alford QC, Enforcing the UK Bribery Act - The UK Serious Fraud Office’s Perspective, 17 November 2014, the Anti-Corruption Oil and Gas Conference 2014, available at: http:// www.sfo.gov.uk/about-us/our -views/other speeches/speeches-2014/stuart-alford-qcenforcing-the-uk-bribery-act---the-uk-seriousfraud-office’s-perspective.aspx. 6 http://sfo.gov.uk/press-room/latest-pressreleases/press-releases-2015/defendantsacquitted-in-nigerian-corruption-trial.aspx. 7 This is evident from Transparency International’s Corruption Perceptions data, available at: http://www.transparency.org/ cpi2014/results.

Lawyer in the News MICHAEL OTU

CHARISMATIC BANKER, QUINTESSENTIAL LAWYER

ichael Osilama Otu’s rise to becoming perhaps one of the youngest Company Secretary/ Legal Advisers in one of Nigeria’s most competitive industry in 2002 has been nothing short of meteoric, but not surprising. While at the University and the Nigerian Law School, he won several awards including – the Best Graduating Student in Banking, Insurance and Negotiable Instrument, Sir. Darnley Alexander’s Prize for Best Student in Legal Drafting and Conveyancing, Chief Ernest Shonekan’s Prize for Best Student in Legal Drafting and Conveyancing, Chief F.R.A. Williams Prize for Best Student in Legal Drafting and Conveyancing. He is a member of various professional bodies including the Nigeria Bar Association (N.B.A), Nigerian Society of International Law and the International Bar Association. He is an Honorary Senior member, Chartered Institute of Bankers of Nigeria (HCIB) and a Fellow of the Chartered Institute of Arbitrators of Nigeria. He is a Resource Person for the Financial Institutions Training Centre (FITC) as well as the Chartered Institute of Bankers of Nigeria (CIBN). He is one of the new breed of bankers who are championing the issue of corporate governance within corporate Nigeria. He is a forthright professional who sometimes takes no prisoners in his drive for productivity. His comments at a recent seminar on legal services cost, where he said that in-house counsel should understand the need to recognise that legal department as a cost centre is not immune from cost cutting imperatives, was a wakeup call for the banking sector. He is a family man and devout Catholic. He is currently the President of Weppa Wanno Pyramid Club of Nigeria, a sociocultural organisation in Edo State. Weppa Wanno Pyramid Club seeks to advance the cause of the masses through scholarships to indigent students, provision of free primary healthcare and associated community services. He is a member of Ikoyi Club 1938 and Island Club, Lagos and our Lawyer in the News.

R V

with

Michael Otu By Seyi Clement

Have you always wanted to be a lawyer? Yes. I have always nursed the ambition to be a lawyer. I was greatly influenced watching my Dad who was a local “Notary Public” in the 60’s – 70’s. He drafted documents for the local populace ranging from simple agreements to complex land agreements. He was a customary court member covering my local government. This brought me face to face with real court situations. This experience influenced to a large extent my decision to go into the legal profession. You have always championed the cause of good corporate governance, why do you think this area is so significant to the country’s economic wellbeing? Corporate governance is the foundation for the survival of any corporate organisation. A company

that is already doing well and which decides to further conduct its business in line with good corporate governance and best practices will probably do better. The same applies to public institutions, ministries, department and agencies. In addition, good governance will ultimately lead to a better society. Good corporate governance has proven very challenging for many companies in Nigeria, why is the lack of board members and management with integrity, skills and experience often cited as a problem? In my opinion, board members in many companies, especially in large parastatals possess quite impressive qualifications, have gone through various training programmes and have also spent considerable years in service to acquire acceptable levels of skill and experience before being appointed as board

members. Furthermore, the wealth of intellectual capacities available to advise the Board are usually reasonably sufficient to make sound decisions. Hence the issue is not one of lack of skills and experience, rather one of integrity. I believe that the reason why it could sometimes appear that some board members seem to lack skill and experience is because of decisions taken which are simply imprudent, but these decisions are neither a result of lack of skills nor experience, but misdirected interests due to lack of integrity. I am not suggesting that board members should be devoid of differing interest and perspectives, that can actually be a strength, but the Board that functions optimally is the one that aggregates these differing interest and perspective for the benefit of all stakeholders. The strength of the Board is actually its ability to harness these different 35

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reduced the incident of nonperforming loans (NPLs). In this regards, the bank has received accolades including winning Corporate Governance Awards. Notwithstanding the above, challenges do arise but we have developed an effective capacity to withstand such challenges. Do you think good corporate governance take enough significance in the strategic decision making of companies in Nigeria? If not, why do you think this is the case?

Mr & Mrs Michael Otu at the Law Digest Africa Awards dinner

interest and perspectives and takes well-founded decisions. What crucial steps are being taken by Zenith Bank to enforce good corporate governance and, at the moment, what are the key challenges faced by the Zenith Bank in this regard? A lot is being done by the bank in this direction. These include but are not limited to: 1. promotion of strong business ethics through policy statements, catch-phrases and other spacerepetitive modes that enhances the education of staff on corporate governance issues; 2. periodic and regular awareness training and workshops for directors, members of the executive management and staff on the corporate governance standards in a bid to encourage compliance with the code of

Corporate Governance; 3. creating roles that encourage the practice and internalisation of corporate governance standards in the bank’s culture; 4. the clear assignment of responsibilities and decision making functions like incorporating a hierarchy of required approvals for different operations of the bank from individuals to the board of directors, as the case may be; 5. establishment of mechanisms for the interaction and cooperation among the board of directors, senior management and auditors, strong internal control systems, including internal and external audit functions, risk management functions independent of business lines and other checks and balances; and 6. developing and rolling out of proper risk management policies which overtime have drastically

It is my considered opinion that corporate governance has not taken enough significance in strategic decision making of most companies in Nigeria. This is due largely to the fact that the players and the practitioners charged with the responsibility to drive corporate governance culture in their organisation do not have sufficient knowledge of the standards and therefore not able to introduce the required standards within their organisations. Another major cause is the drive for profit by most companies at the expense of appropriate risk management and governance measures. Good governance is routinely sacrifice at the altar of profit. Good corporate governance remains one of the key determinate of the success of the nation’s financial system as it would go a long way to determine their health status and integrity both locally and in the international market. A key task before the regulators is to continually formulate framework and consistently implement measures that would ensure a wider practice of good corporate governance in vital institutions. How much responsibility should management bear in relation to corporate governance failings at a micro and macro level? The tone for corporate governance is set at the top, i.e., board

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level. Management then takes responsibility for implementation by providing enablers for other staff and operators. Accordingly, there is a huge responsibility on management to ensure success – being the day to day operators. What do you see as your role and the role of the Board in maintaining good corporate governance within Zenith Bank? Basically, my role as the Company Secretary and the role of the Board of Directors of Zenith Bank are statutorily founded. As part of my duties as the Company Secretary of Zenith Bank, a public limited liability company, the law dictates that I ensure that I play a key role in the governance process such as ensuring that all statutory meetings required of the Company are conducted in line with applicable laws and regulations including extraordinary general meetings. I advise the Board on the compliance, composition of members, their roles and responsibilities, management of proceedings and processes relating to meetings in terms of logistics, notices, proxy issues, minutes, decision taking and implementation. My role also involves liaising with stakeholders on issues such as shares and share transfers, statutory declarations and submission of regulatory returns. I also manage disclosure issues on corporate governance to appropriate regulators like SEC and NSE. I see myself as an important figure within the governance architecture of the bank. Doubling as the head of the Legal Department of the organisation, I ensure that all legal issues are properly handled and my department exercises control functions, takes necessary steps and advises on operational issues requiring legal input. The fact that I have highlighted all these corporate governance requirements as my role in the company does not mean that they are exhaustive. With the evolving nature of my duties, I have continued to develop social and professional skills in order to attend

to the interests of stakeholders in the industry and harness modern technology to improve services. In fact, with the current drive of Zenith Bank toward achieving best practices, I have continued to monitor and ensure compliance with the recommendations by the International Organisation for Standardisation especially in the aspect of the Organisation’s information security and making sure that business continuity plans are in place. The role of the Board in corporate governance is basically that of directing the company towards achieving its corporate objectives. However, the demands of the 21st century have seen the roles of the Board shift from the traditional requirement of attending meetings and taking decisions in order to achieve set financial targets. The Board is now seised with the herculean task of ensuring that they aggregate the interests of all stakeholders in the decision making process of the Bank, whilst achieving the set corporate objectives. It is obvious that the Banking sector is virtually the most regulated in Nigeria and so, the Board has to develop a strong positive culture in corporate governance, which essentially would be a set of both written and informal values which would influence their decision making process to ensure they are in sync with best practices at all times. Board members may express divergent views and I believe that this is healthy for the system, however, they have to ensure these views are well considered in decision making. The Board has to, for proper clarification of Board issues and processes which are in doubt, seek counsel from the company secretary and importantly, the intellectual wealth in the organisation should be harnessed for matters bordering on other various issues when they arise. The Board has to, on a continuous basis be accountable and professional, adopting international best practices in order to instil confidence in the Bank in the local and international financial markets and system where it operates.

Do you see any conflict between the role of the board and yours? I strongly believe that there is a synergy between the role of the Board and that of the Company secretary. The Board plays a significant role in ensuring good corporate governance and the Companies and Allied Matters Act retains the need for a Company Secretary in both private and public companies. Hence the responsibilities of the modern day Company Secretary has evolved from that of a “Note taker” at board meetings or “Administrative Servant of the Board” to one which encompasses a much broader role of acting as “Board Adviser” and having responsibility for the organisation’s Corporate Governance. The Board relies on the Company Secretary to advise it not only on directors statutory duties under the law, disclosure obligations and listing rule requirements, but also in respect of Corporate Governance requirements and practices and effective Board processes. This specialised role of the modern Company Secretary has emerged to position me as one of the key governance professionals within the organisation. What are the key points in Zenith Bank’s strategy that has helped it maintain its strong position in the sector? Our emphasis as a bank and financial institution which has guaranteed our strength, growth and reputation over the years has been the emphasis on people, which comprises of all stakeholders in the industry; technology, in order to make banking simpler and easier while exceeding the expectations of our customers in line with the demands of the 21st century; top class service, not just to our customers and shareholders, but to the community and fulfilling our corporate social responsibilities. These I strongly believe, would ensure that our reputation continue to positively wax stronger and make us very relevant in the nation’s banking industry.

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It has been suggested by some that the regulatory regimes in the banking sector is unnecessarily complex and convoluted with many regulators jostling for position, what is your view on this? Regulation is good, but when it becomes excessive then it kills initiative. The current regime of regulations in the industry requires synergy rather than divergence as seen in the recent tussle between Nigeria Deposit Insurance Corporation (NDIC) and the Central Bank of Nigeria (CBN) on appropriate authority to regulate banks. They should work in harmony to complement each other to ensure a sound and safe banking environment. The banking sector in Nigeria has undergone extensive reform in the recent years - the government’s policy of consolidation reducing the number of banks from over 88 to about 12, how as this shaped the industry and what are the positives from the exercise? The government deemed the reform of the Banking Sector necessary in order to instil confidence in the sector, enhance financial and economic stability in the sector in order for banks to play their crucial role as development enablers. As at 2004, when Nigeria initially introduced major banking reforms, a lot of banks were inefficient, without financially sound capital bases, had huge debt profiles and generally lacked sound corporate governance. Furthermore, there was heavy reliance on foreign banks as many local banks could not meet the financial needs of government and customers with big ticket transactions. Essentially, the banking sector reform was identified by government as a crucial aspect of the economy, which required reforms, if Nigeria was to achieve set economic, social and political goals such as the Millennium Development Goals. In order to create a financially viable banking system, the reform process had to be undertaken by the government using the CBN as a launch pad. This saw the merger, acquisition and restructuring of

several banks, which of course created bigger banks in terms of nature and structure. Foreign portfolio investments and foreign direct investments increased, many banks which had uncollectable and non-performing loans had to establish structures in order to recover such funds and where such was unrecoverable, approach the Asset Management Corporation of Nigeria to absorb the bad debts as toxic assets (or eligible liabilities). The available banks had to adopt sound corporate governance principles in line with CBN recommendations. The strong capital base of Nigerian banks due to the reform process led to increased confidence of the international financial system in the Nigerian banking system, making it easier to source for and acquire funds in the international market. Foreign legislative development such as FATCA has undoubtedly caused a ripple in the international tax regime, given its extraterritorial reach/effect. What are the challenges posed by the piece of legislation for banks like Zenith Bank? FATCA requires all Banks, fund managers and investment funds and certain insurance companies in Nigeria not only to enter into an agreement or register with IRS but to identify all US account holders and investors, treat any non–cooperating investors as “recalcitrant” and deduct a 30% withholding tax on US source income from those who fall into the recalcitrant category. Apart from the legal aspect of waiting for the law to be domesticated by our own legislators, Zenith Bank is faced with engaging in the strategic and operational issues the law raises, starting from gaining a full understanding of FATCA and the effect the law will have on the current state of operations within the Bank. The Bank will have to analyse affected customers, as well as educate both internal stakeholders and customers about the law and the need for compliance and the effect of noncompliance. Though the compliance with the FATCA requirements may

be considered only persuasive due to the sovereignty of state principle, the need for institutions to have access to US markets and to be connected to the global market, makes compliance a necessity. Local Content laws has been described as manna from heaven for Nigerian banks, is that an apt description of the legislation? Nigeria’s local content regulations was clearly a response by the Federal government in 2010 to provide opportunity for, protect and promote local operators and professionals in the country with particular focus on the oil & gas sector. Section 3 of the Nigerian Oil & Gas Industry Content Development Act 2010 clearly provides that Nigerian independent operators shall be given first consideration in the award of oil blocks, oil field licenses, oil lifting licenses and in all projects in which an award of contract is to be made in the Nigerian oil & gas Industry. The Act seeks to encourage the development of businesses ranging from small and medium enterprises to large corporate outfits in this sector. This can be seen in the powers conferred on the Minister to set out targets to ensure full utilisation of indigenous companies operating in various aspects affecting of the oil & gas sector. This has led to an increase in the number of local professionals and entrepreneurs in the industry. The local content regulations have therefore impacted significantly on the energy sector. The banking and financial services sector have since the passage of the Act, seen companies with significant indigenous participation in terms of shareholding and investment, approach the banks in order to borrow through bilateral lending or by conducting syndications in order to fund operations in the upstream and downstream sectors of the oil & gas Industry. No doubt, funding these huge capital demanding projects have not been a walk in the park for banks in Nigeria, however the strong positioning of Nigerian banks have ensured that they are up to the task.

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Michael Otu led the Zenith Bank plc to the In-House Team of the Year award at the Law Digest Africa Award.

Do you believe that Nigerian banks are over-exposed to the oil sector, capital market and public sector and what can be done to increase diversification in banks’ portfolios? Nigeria’s economy is essentially oil-based. Industry regulators and operators alike, are concerned that a large chunk of about ₦5 trillion in loans granted to this sector in the last couple of years might be impaired and might likely throw these sectors into another round of crisis. The steep fall in the index crude price is not helping matters as cashflow projections of projects to which huge lending has been made by the banks now seem too optimistic. To avoid further slump and financial doom, it is advisable that the banks entrench sound risk management practices to forestall a recurrence of the crisis that rocked the country’s financial system a few years back. What are your career highs and lows so far? Being able to attain, purely on merit, within so short a time, the headship of the legal department and board secretariat of one of the biggest banks

in Sub-Saharan Africa. I have been able to give back by contributing to the knowledge base in the industry through facilitation in training and workshops for the industry. In addition to the above, leading the department to the Law Digest Africa Awards as the best in-house team in the banking and financial services sector in Africa in 2015. This is prestigious award which serves as a confirmation that we must be doing something right. Shortlist for this award include some of the established banks and insurance companies across Africa. For the low, I wish I could do more than I have done so far. You are involved in various philanthropic activities, which of those philanthropic activities are you most passionate about? I am involved in church activities as a practicing Catholic through which I have reached out to and touched many lives both within my local environment and other parishes within my home town and adjoining villages. Also, in terms of community service, I am currently the President of Weppa Wanno Pyramid Club of

Nigeria, a socio-cultural organisation in Edo State. We have used the platform to advance the cause of the masses through scholarships to indigent students, medical and associated community services. I am very passionate about the two. How would you describe Michael Otu? Michael Osilama Otu, is a lawyer, a banker, Christian and family man. A kind and compassionate individual who believes that the greatest gift you can give to humanity is love. What do you do to relax and unwind? I read books on power and authority. I love reading books like The God Father, 48 Laws of Power, The Art of War, The Art of Seduction, The Mafia Manager and the likes. They give me real lessons about life and the struggle for power and influence. What’s next for Michael Otu? For me, I trust in God Almighty for direction for my failure.

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Ban on Same Sex Marriages A case for, by K Anya, PhD1 and C E Anya (Mrs)2 Introduction The Nigerian state is first and foremost a multicultural entity. There are over 250 ethnic groups inhabiting the landmass known as Nigeria. Significantly, such a large collection of ethnic groups usually possesses the potency to manifest wide ethical and moral values, which may undoubtedly operate in opposition to one another. In its daily living, the communities will usually succeed in evolving and hazarding established machinery for the making of its rules and regulations, ultimately directed to the harnessing of its private and public transactions. This established process to formulate rules may not succeed in recognising the vast chains of contending and competing ethical and moral values associated with the people and might even promote one set of values over another. Consequently, in most societies, there is bound to be a divide between the text-book laws and wide but conflicting and competing moral and ethical rules affecting the vast majority of the populace. There is a constant pressure on law makers to classify for punishment, acts which some in the society deem unethical or an offensive 40

lifestyle pattern. It is in response to the above, that the paper seeks to weigh the balance between the politics of ‘state controlled and desired ethics’ on the one hand, and moral and immoral practices of the populace on the other hand, in light of the ban on same-sex marriages by offering a fresh look at the politics and/ or role of the state in a multi-cultural society, in correcting through legislation perceived immoralities in a secular state like Nigeria.

Ban on Same-Sex Marriages

Concept of Morality The concept of morality is notionally sectional and internationally relative, but not universal. Morality as a matter of fact is relative, peculiar and cultureinfluenced.3 Consequently, the content of morality in one society may differ in another greatly. There is no consensus as to a particular moral rule. Morality is value-free. In the same vein, values are open-ended. It defies a standard content. The Zambian case of State v. Wolfgang Seifarth 4 is illustrative. The accused, a German tourist in Zambia was convicted under a Zambian Penal Code Cap 87, (the “Code”) section 155 and 156 which outlaws ‘unnatural’ sex acts and provides

for a maximum jail term of 14 years. The accused in his defence argued that the perpetrated sexual conduct alleged against him and purportedly contrary to the Code is an acceptable sexual practice in Germany and as such not immoral. In its judgment, the Court stated that ‘customs of other countries which are an abomination here in Zambia, must not be allowed to be practiced by tourists or anybody.’5 By contrast, in Mohammed v. Knot,6 a 26 year old Nigerian Muslim married a 13-year-old girl. Both of them were living in England, although domiciled in Nigeria, where the marriage was celebrated. The Complainant proffered

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realising the way and life of the couple in that country (Nigeria) would not say the marriage is repugnant to morality. This notion of morality being notionally sectional is even much more confusing in multi-cultural countries. Faced with this situation, the question that many jurists are asking is, “what is the business of the law meddling in the issue of morality?” It is pertinent at this juncture to review the salient points of the controversial Act. The Legislative Effort to Prohibit Gay and Lesbian Relationships as well as Same Sex Marriages under Same Sex Marriages (Prohibition) Act 2013

information to a juvenile court, ‘that the girl was in need of care, protection or control and was exposed to moral danger within section 2 of Children and Young Persons Act, 1963.’ The court in its decision stated that irrespective of marriage, the girl was too exposed and that the marriage was repugnant to any decent minded Englishman or woman. The girl was thereafter committed to local authority care. On appeal by the husband, the Court of Appeal held amongst others that the girl was not so exposed to moral dangers merely because she carried out her wifely duties and that decent minded Englishman or woman,

The Same Sex Marriages (Prohibition) Act 2013 (the “Act”) focuses on prohibiting homosexual and lesbian relationships and same sex marriages.7 The punishment reserved for the above conducts is fourteen years imprisonment with no option of fine for anyone involved8. Under the provisions of the Act, a marriage is defined as, ‘a legally binding union between a man and a woman, be it performed under the authority of the state, Islamic law or customary law.’ 9 The Act considered the issue of validity and recognition of marriage and provides as follows: ‘Only marriage contracted between a man and a woman shall be recognised as valid in Nigeria.’ The import of this is that even if the marriage is valid outside Nigeria, it will still remain invalid and unrecognised in Nigeria for all purposes under Nigerian law. Flowing from the above provision is the fact that rights ordinarily inuring to the parties involved in same sex marriage cannot be maintained or enforced in

The concept of morality is notionally sectional and internationally relative, but not universal. Morality as a matter of fact is relative, peculiar and cultureinfluenced any Court of law in Nigeria.10 Following the passage of the Act, in Bauchi State for instance, a suspected group of 18 young men allegedly homosexuals were arrested by the combined effort of the Police and the Hisbah group of the Bauchi Sharia Commission in a certain Denco Hotel within the Bauchi metropolis. The culprits were adorned in female dresses and wore makeup, in preparation, allegedly for the celebration of marriage, as at the time of their arrest. Challenges of Criminalising Immorality in a Secular and Multicultural Society For purposes of clarity, we have adopted the position that to criminalise an act includes the creation of provisions in legislations to forestall, check and/ or impose criminal liability for the violation of a particular prescribed conduct. It should be noted that the concept of ‘morality’ is an ambiguous term, if regard is had to its inability to assume either a peculiar or universal character.

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…the paper seeks to weigh the balance between the politics of ‘state controlled and desired ethics’ on the one hand, and moral and immoral practices of the populace on the other hand, in light of the ban on same-sex marriages by offering a fresh look at the politics and/ or role of the state in a multi-cultural society, in correcting through legislation perceived immoralities in a secular state like Nigeria In this instance, morality is said to be notionally sectional11 and universally relative or peculiar. Whilst it can be argued that the present ban on samesex marriages in Nigeria is consistent with the dictates of moral values and religious beliefs of the majority of its citizens, it is also arguable that the ban is offensive to the constitutional understanding that Nigeria be and remain a secular state. Against this backdrop, there is bound to be a difference amongst the citizenry on the degree or element of morals in the society. This latitude of difference accounts for the non-universal character of morality, coupled with the fact that morality is purely a notionally sectional affair.12 Nevertheless, the ban on same sex marriages in Nigeria must be viewed in light of factors such as moralities, religions and political-legal considerations, usually contending and competing in a secular and multicultural society. It is obvious from the foregoing, that the inevitable supervisory roles of morality and religion in the shaping of conducts in a society merit closer examination. We submit that the role of morality and religion in any society must be consistent with the balancing factors geared towards societal bond. It should be the duty of every generation to identify and promote societal bonds in order to ensure the survival of the society. The role of law must therefore be to promote such societal bond and in that quest, the role of moral values and religious beliefs cannot

be underestimated. Elias did rightly assign some functions to law in a developing state. Such tasks which law must strive to achieve in a society include: 1. To promote economic growth and social well-being. 2. To elevate man’s moral nature. 3. To unify the several ethnic communities into a Nigeria society. 4. To evolve a common law for the country out of the existing bodies of law.13 The regime of sociological jurisprudence has always focused on the examination of social institutions with an aim to appreciating the operating basic norms from which legislations could be made. Therefore sociologists, lawyers and politicians alike should be seen considering the larger interest of the society in the course of law making. Emerging legislations ought to be teleological in nature. It must have a purpose-the promotion of societal bond through inter alia the elimination of immorality which viciously contends and competes for recognition as law. The lawyer as a social engineer utilises the law as a tool to fight immorality or social disorder. Therefore the legislative measure of prohibiting same sex-marriages is a desideratum for the survival of Nigeria, notwithstanding the deprivation through legal instrument of rights of its homosexual citizens. The discernible challenge of criminalising same sex-marriage ought to be sacrificed at the altar of societal cohesion. Conclusion It is against this backdrop, that the author commends the initiative and forensic effort of the legislators in criminalising same sex marriage-an immorality, rightly, perceived by a greater majority of the populace, potent enough to tear societal fabric. There is an inevitable interrelation between law and ethics, although there must be rigid separation of law and ethics for the purpose of legal analysis.14 The law of every modern state shows at a thousand points the influence of both the accepted social morality and wider moral ideals. These influences enter into law either abruptly and avowedly through legislation, or silently and piecemeal through the judicial process.15 Therefore, the government effort through the instrumentality of legislation to criminalise parties to same sex marriages is premised on the fact that the perceived conducts are simply antisocial. This legislation is not

the first of its kind.16 The Jurist Elias canvassed for more of such antisocial legislations in this way: “there should be more of this kind of social legislation in the day’s that lie ahead, since the elevation of the moral nature of man in our society, Nigeria, should be the constant concern of the government of the day. The acquisitive society we are creating is in real need of reforming legislative curbs from time to time.”17

1 Department of Jurisprudence & International Law, Igbinedion University College of Law Okada Nigeria. Associate-member, American Society of International Law (ASIL). 2 Legal Practitioner and Doctoral Student 3 A K Anya, “Moral Rules, Effective Laws and the Nigerian Society” (2009) Igbinedion University College of Law Journal 68-83 at 69, where the author stated that ‘Holland d-European country, approved marijuana as a prescription drug sometime in September 2003. By this singular act, she has become the first country to make cannabis available as a prescription drug in pharmacies: in order to treat cancer, HIV and multiple sclerosis patients. In fact, there have been calls for legalizing cannabis in countries like Britain, Canada, Australia and USA as well as pragmatic efforts to relax restrictions on its supply as a medicine. 4 Unreported. 5 His Worship Alloysius Mapate. 6 (1969) 1 Q.B. 1 7 Section 1, 2(2) and 3 8 Section 5(1) 9 Section 7 10 Section 1(2) 11 Morality is relative, peculiar and culture influenced. For instance, Holland-European country, approved marijuana as a prescription drug sometime in September 2003. By this singular act, she has become the first country to make cannabis available as a prescription drug in pharmacies: in order to treat cancer, HIV and multiple sclerosis patients. In fact, there have been calls for legalising cannabis in countries like Britain, Canada, Australia and USA as well as pragmatic efforts to relax restrictions on its supply as a medicine. Furthermore, in Holland, government regulates prostitution and the sale of cannabis in coffee shops. Holland is also the first country to legalise euthanasia. Compare with Britain, where the House of Lords have held that there is a limit to right to life: The Dianne Pretty case and Nigeria, where there is still sanctity of human life as enshrined in section 33, Constitution of the Federal Republic of Nigeria. 12 See Wolfgang Seifarth case, supra.. 13 T. O. Elias, “Tasks for Law in Nigeria.in Law in a Developing Society. Pp. 133, 135, 136, 137. 14 This is the position of analytical positivists like John Austin. See generally Lectures on Jurisprudence, Ed H.L.A.Hart. 15 Hart, The Concept of Law P. 199 quoted in Elias at Pp. 135, 136. 16 See The Children and Young Persons Act, Cap. 32, 1958 edition of the Laws of Borstal Institutions and Remand Centres (Amendment) Act, 1961; The Dangerous Drugs Act, Cap.48 Laws of the Federation and Lagos, 1958. 17 Elias, supra at 126.

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A case against, by Seyi Clement – Editor Law Digest1 The question before the US Supreme Court in Obergefell v. Hodges No. 14–556, was very simple: Are laws restricting marriage to a man and a woman unconstitutional under the 14th Amendment? That the court answered this in the affirmative is no surprise to watchers of developments in this area of Constitutional Law. The Supreme Court had set down a marker on 26th June 2013, in United States v. Windsor, No. 12307 by a vote of five to four, by invalidating section 3 of Defence of Marriage Act (“DOMA”), which defined marriage as the union of a man and a woman for federal law purposes, such as allocating Social Security survivors’ benefits or determining the immigration status of the spouse of a U.S. citizen. For the purpose of this paper, we shall not seek to argue the case against the ban on same sex marriages on the grounds of breaches of Convention rights which Nigeria signed up to. This much has been conceded by the proponents of the ban. Instead some proponents of the ban have sought to justify the ban on the higher ground of collective good. This argument is not new and has been expressed by some jurists as a variant of the doctrine of double effect. The doctrine (or principle) of double effect is often invoked to explain the permissibility of an action that causes a serious harm, such as the death of a human being, as a side effect of promoting some good end. According to the principle, sometimes it is permissible to cause a harm as a side effect (or “double effect”) of bringing about a good result even though it would not be permissible to cause such a harm as a means to bringing about the same good end. Thomas Aquinas is credited with introducing the principle in his discussion on the permissibility of killing in self-defence in the Summa Theologica (II-II, Qu. 64, Art.7). Killing one’s assailant is justified, he argues, provided one does not intend to kill him. Aquinas observes that “Nothing hinders one act from having two effects, only one of which is intended, while the other is beside the intention. … Accordingly, the act of self-defence may have two effects: one, the saving of one’s life; the other, the slaying of the aggressor.” According to Aquinas, a justification for the act of killing in selfdefence rests on characterising the defensive action as a means to a goal that is justified: “Therefore, this act, since one’s intention is to save one’s own life, is not unlawful, seeing that it is natural to everything to keep itself in being as far as possible.” The doctrine rests firmly on the distinction between grave harms that are regretfully intended as part of the means for doing greater good and grave harms

that are regretfully foreseen as side effects of the means. The difficulty in making this distinction is one of the major shortcomings of the doctrine, an issue that we will address further down in this paper. The New Catholic Encyclopaedia provides four conditions for the application of the principle of double effect: 1. 2.

“The act itself must be morally good or at least indifferent. The agent may not positively will the bad effect but may permit it. If he could attain the good effect without the bad effect he should do so. The bad effect is sometimes said to be indirectly voluntary. The good effect must flow from the action at least as immediately (in the order of causality, though not necessarily in the order of time) as the bad effect. In other words the good effect must be produced directly by the action, not by the bad effect. Otherwise the agent would be using a bad means to a good end, which is never allowed. The good effect must be sufficiently desirable to compensate for the allowing of the bad effect.”

The proponents of the ban argue that same sex marriages and/or relationship is immoral and a serious threat to societal cohesion and survival; hence breaching the rights of a minority sexually deviant citizens to achieve the greater good is merely an unintended effect. This argument has been well choreographed by both jurists and theologians on that side of the fence. In defending Nigeria’s human rights record at the 17th session of the Universal Peer Review, (UPR), Mechanism of the UN Human Rights Council in Geneva, Switzerland, the former Attorney General and Minister of Justice, Mr Mohammed Adoke, SAN, said “Nigeria does not accept recommendation of some countries on same sex marriage, because it is against its national values”. His views were echoed by Theologians such as Archbishop of Jos, Ignatius Kaigama. In his address to delegates at the 13th Annual Catholic Assembly in Jos, he was reported to have described the pressure being put on Nigeria to reconsider the ban as, “conspiracy of the developed world to make our country and continent the dumping ground for the promotion of immoral practices.” Limitation of the doctrine of double effect We submit that the proponents of the ban on the basis of the doctrine of double effect have

misinterpreted the doctrine and by so doing have done a huge disservice to the doctrine. Inherent in the doctrine is the doctrine of proportionality. This can be deduced from the discussions by Aquinas referred to above, where he said, “the permissibility of self-defence is not unconditional: “though proceeding from a good intention, an act may be rendered unlawful if it be out of proportion to the end. Wherefore, if a man in self-defence uses more than necessary violence, it will be unlawful, whereas, if he repel force with moderation, his defence will be lawful.” Could it be said that the ban with attendant criminal liability for participation, witnessing, associations with, etc., is a proportionate means of achieving a legitimate aim? Aside from the misinterpretation of the doctrine, the doctrine has failed to provide answers to a preponderance of questions such as, who determines what the greater good is and/or who’s greater good? Nothing demonstrates the fallibility of the doctrine more than more than the arguments deplored by protagonists of the fight for the abolition of slavery. Double Effect Argument and Pro-slavery Lobby The doctrine was employed by the proslavery lobby, the most famous being James Henry Hammond in his Mudsill Speech (1858). The basis of his theory was that slavery was for the greater good. He argued that there must be, and has always been, a lower class (the “mudsill”) for the upper classes to rest upon. Their labour enabled the higher classes to move civilization forward, which is essential for societal growth – a good thing. In his view, any efforts toward class or racial equality ran counter to this theory and therefore ran counter to civilization itself. Southern pro-slavery theorists asserted that slavery prevented any such attempted movement toward equality by elevating all free people to the status of “citizen” and removing the mudsill from the political process entirely. That is, those who would most threaten the democratic society’s economic stability and political harmony were not allowed to undermine it because they were not allowed to participate in it. The Pro-slavery lobby argued that the bane of many past societies was the existence of a class of landless poor. They argued that this class of landless poor was inherently transient and easily manipulated, and as such often destabilised society as a whole. Thus, the greatest threat to democracy was seen as coming from class warfare that destabilised a nation’s economy, society and government, and threatened the peaceful and harmonious implementation of laws. They argued that abolition of slavery would occasion such class warfare. In 1837, John C. Calhoun gave a speech in the US Senate

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advocating the “positive good” theory of slavery, declaring that slavery was instead of an evil, a good—a positive good. Positive good theorists believed that slavery, with its strict and unchanging social hierarchy, made for a more stable society. A close examination of these arguments clearly demonstrate that to the pro-slavery theorists, the greater good is not found in the voice of the majority, but in the wishes of the landowners – the minority. In the case of Aquinas, the greater good was what the Church considers the greater good. Another criticism of the doctrine is the difficulty in making the distinction between, the permissibility of causing a harm as a merely foreseen side effect of pursuing a good end and the impermissibility of aiming to cause harm to achieve a good end. How do we distinguish between harm which is merely a foreseen side effect and one which was intended? It has been submitted by some theorists that this distinction is influenced to a large degree by normative judgment. It is our submission that normative judgment is itself influenced to a large degree by moral values and religious beliefs. If we accept that morality is relative, peculiar and incapable of a universal form, one begins to

question how a concept, so much in a state of flux, should influence, so profoundly, our assessment of what is permissible harm. The abolition debate again is illustrative of this dilemma. Both sides of the argument invoked moral judgments in support of their arguments. The fluidity of morality drove Friedrich Nietzsche to comment, “you have your way, I have my way. As for the right way, the correct way and the only way, it does not exist”. Conclusion We struggle to accept the argument in support of the ban on same sex marriages on the principle of the doctrine of double effect. The ban fails even the most basic requirements of the principle. It cannot be said by even the staunchest of proponents of the ban, that societal cohesion or survival flow directly from the ban. Even if we accepts that the law in this context is used as a form of legal positivism, then the need for proportionality becomes most essential. The trumpeted aim of the ban could still be achieved by a simple non-recognition clause, such as that in section 3 of the Act, or section 3 of DOMA.

Partner – Augustine Clement Solicitors pg. 1021 3 Ibid 4 John C. Calhoun, “Speech on the Reception of Abolition Petitions, Delivered in the Senate, February 6th, 1837,” in Richard R. Cralle, ed., Speeches of John C. Calhoun, Delivered in the House of Representatives and in the Senate of the United States (New D. Appleton, 1853), 625-33. 5 Joshua Knobe (2003, 2006) demonstrated that the ways in which we distinguish between results that are intended or brought about intentionally and those that are mere side effects may be influenced by normative judgments, i.e. the The Knobe Effect 6 Joshua Knobe (2003, 2006) demonstrated that the ways in which we distinguish between results that are intended or brought about intentionally and those that are mere side effects may be influenced by normative judgments, i.e. the The Knobe Effect 1 2

LITIGATION Babatunde Ogungbamila & Aderinsola Fagbure [Olisa Agbakoba Legal]

AMCON - an institution caught in the quagmire of debt recovery in Nigeria

Babatunde Ogungbamila Partner Litigation

Aderinsola Fagbure Associate

The establishment of AMCON in 2010 engendered much hope. However the court driven recovery process has been much more challenging than anticipated

Introduction The 2007 global financial crises which resulted in the collapse of some international banking institutions had a ripple effect in Nigeria. The turmoil came on the heels of the 2005 Charles Soludo led reforms which were accompanied by the announcement of the ₦25billion minimum capitalization requirement. The attempt to shore up investors’ funds and comply with the mandate in a weak regulatory framework was characterised by significant abuses. This situation was worsened by the heavy exposure of local banks to borrowers in the collapsed capital market, the oil and gas industry as well as the real estate sector. The Asset Management Corporation of Nigeria (AMCON) was established pursuant to the Asset Management Corporation of Nigeria Act 2010, (AMCON Act) to prevent the collapse of the Nigerian banking sector through the acquisition of Non-Performing Loans (“NPLs”) from the banks and the recapitalisation of threatened financial institutions. The asset management initiative was championed by the Central Bank of Nigeria (“CBN”) as a much needed panacea for solving the problem of toxic loans which resulted from defective credit management processes. The Corporation is largely fashioned after the Troubled Assets Relief Program (TARP) which was established to restore banking stability through the purchase of troubled assets by the United States Secretary of Treasury. However, the AMCON model is not entirely new to this clime, as it is akin to the Failed Banks Tribunal, set up in the early 90s to recover non performing loans. The distinguishing

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factor lies in the approach. The Failed Banks Tribunal had a mandate to criminalise debts servicing failure, while the asset management technique prioritises debt recovery, hence the emphasis on Sections 48 and 49 of the AMCON Act. The establishment of AMCON in 2010 engendered much hope. However the court driven recovery process has been much more challenging than anticipated. This is largely because at the time of purchase of the toxic loans, there was little or no consideration for the viability of the assets. At the moment, AMCON is entangled in the slow judicial process and its technicalities, as evidenced by the fact that some cases have been in court for more than 4 years, with judgment nowhere in sight. Presently, the institution is at the mercy of an over-burdened court system. One wonders if 5 years down the line, the expectations of stakeholders have been attained. This article takes a second look at debt recovery by AMCON through the courts and its attendant challenges.

AMCON is entangled in the slow judicial process and its technicalities as evidenced by the fact that some cases have been in court for more than 4 years, with judgment nowhere in sight Understanding the role of AMCON AMCON was set up with a mandate to acquire eligible bank assets (EBAs) from eligible financial institutions (EFIs) and efficiently manage and dispose of these assets, with a view to obtaining the best returns on the loans acquired. The acquisition process was financed from a number of sources including the Corporation’s share capital of ₦10 Billion, ₦500 Million worth of debentures fully subscribed by CBN, in addition to three year zero coupon federal government guaranteed bonds. The

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first phase of acquiring these NPLs has been successful. The economy was effectively stabilized with the purchase of EBAs and the distressed banks restored to liquidity. Statistics reveal that 13,000 eligible bank assets were purchased, valued at about ₦3 Trillion. The second stage which involves debt restructuring cum recovery has been burdensome. Experience shows that court driven recovery has failed to yield the much desired results. Even more disturbing is the fact that the activities of the Corporation have been fraught with controversy with debtors describing the recovery process as amounting to hounding and attempts to strip them of their legitimate assets unfaily. These comments notwithstanding, the establishment of AMCON has undoubtedly stabilized the banking system. There is however a need to reevaluate the debt recovery processes currently employed with a view to improving the institution’s operations.

..the institution is saddled with the responsibility of resolving debt and can be said to be entangled in the normal banking business of negotiating with recalcitrant debtors, an assignment which appears much more complicated than was originally envisaged Functions of AMCON The powers of AMCON are wide with respect to debt resolution. It can initiate or participate in any enforcement, restructuring, re-organisation, programme of arrangement or other compromise, enforce any security, guarantee or indemnity, and give security for any debt, obligation or liability of any company in which it has holding interest. In essence,

AMCON is expected to play the role of a “Messiah” by buying over the debts of the EBAs. However, the exercise of this role has been fraught with challenges including securitisation lapses resulting from the high cost of perfection, poor documentation and defective procedures for granting loans. These problems which originated from the financial institutions concerned were invariably passed on to AMCON. Failure on the part of the Corporation to conduct thorough due-diligence before arquiring the NPLs further increased its already heavy burden. Effective due-diligence ought to have been a condition precedent to the acquisition of the NPLs. Most of the assets were not properly evaluated thus resulting in serious recovery concerns. Recovery tools and associated challenges Having said this, the institution is saddled with the responsibility of resolving debt and can be said to be entangled in the normal banking business of negotiating with recalcitrant debtors, an assignment which appears much more complicated than was originally envisaged. Ordinarily, AMCON’s recovery mandate should be an easy one. The presumption was that AMCON would acquire undisputed debts. AMCON with its powers under the AMCON Act would then proceeds against the debtor. Therefore, the Corporation is insulated from the burden of proving the debt. In fact, it has been argued that all that AMCON has to prove is that it purchased a debt. The court is to give judgment upon proof of purchase. In essence, all other issues of negligent handling of accounts and interest over-charge by the EFI were supposed to be of no relevance in an AMCON claim. However, in reality, AMCON is now faced with proving the indebtedness of recalcitrant debtors. Germaine to this debt resolution process is the question of determining who a debtor is. By the provisions of the AMCON Act, a debtor or debtor company means any borrower,

beneficiary of an eligible bank asset and includes a guarantor of a debtor, guarantor or director of a debtor company. A look at the debt portfolio posted by Nigerian banks and the negotiations reveal the complexities in proving debt. Many of these debt figures are disputed with parties having to seek the leave of the court to engage independent referees to examine the books and ascertain the real position of indebtedness. It is not uncommon to find instances where the debtor shifts from the named bank customer to the financial institution itself. Inaccurate calculation of principal and interest figures is a re-current problem. In establishing the existence of a debt, a financial institution must have made a loan to its customer, the account-holder must have been credited, the facility must have been drawn down, the customer must have defaulted in payment and demand must have been made. Lawyers, as recovery experts find it difficult to prove these facts because of: •

• • •

•

Inaccurate documentation or a complete non-availability of relevant documents; Challenges with post-merger integration; Non-availability of banking transaction history; Unscrupulous practices of bankers and account officers particularly non-transparent loan advancement policies; Unenforceability of collateral e.g., the non-payment of stamp duty; and Failure to effectively assess the quality of security pledged. This is a problem because the quality of an asset is determined not only by its physical state and its book value but also how free it is from encumbrances.

Within the existing legal framework, a number of debt recovery tools are at the disposal of AMCON and its consultants. However, the most applied recovery strategy against recalcitrant debtors has been the exercise of AMCON’s powers under

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On the whole, AMCON powers have not proved to be as effective as envisaged. sections 48, 49 and 50 of the AMCON Act. However, the effect has waned over time because of the debtors’ right to fair hearing as guaranteed by the Constitution. This has resulted in protracted litigation in most cases with minimal chances of recovery. Further, it is important to mention that the effectiveness of winding up and bankruptcy actions as tools for recovery are considerably limited. This is because of the reluctance of courts to wind up a company for its debt exposure, especially where the business is still solvent. Similarly, the provisions of the Bankruptcy Act 1990, though not the subject of this discourse seems to limit its adoption as a tool for recovery. The provisions of the Act appear to suggest that a debtor must be an adjudged debtor before bankruptcy proceedings can be commenced is still subject to judicial interpretation. On the whole, AMCON powers have not proved to be as effective as envisaged. The limitations include, the nature of the contended assets, mostly encumbered and the fact that freezing orders under the AMCON Act envisage that assets are clean, nothing to commend resort to Court, the debtor has the advantage considering fair hearing safeguards. Also, the provisions of the Practice Directions on day to day hearing are quite impracticable due to the Court’s enormous case load. Disentangling AMCON The writers are of the view that there is need for a shift from court-driven recovery methods to Alternative

Dispute Resolution (ADR) options, or even administrative techniques in this case. A hybrid approach which applies both litigation and mediation should equally be considered in ensuring a debtor repays his toxic loan. ADR may take the form of negotiation, mediation or arbitration while administrative tools include adverse publications through the media and the use of law enforcement agencies. The recent “name and shame” exercise carried out by Nigerian banks, as directed by the CBN is a practical demonstration of the use of publicity to bring debtors to the negotiation table. In employing this method, however, the importance of efficient record keeping by banks to determine the true list of debtors and debt portfolios cannot be overemphasized. This will help minimise the risk of libel claims. It is often argued that an amendment to the existing laws will make debt recovery a less risky venture by creating better measures to ensure that debtors meet their obligations. In this light, the AMCON Act should be reviewed to allow for the inclusion of efficient alternative dispute resolution mechanisms. We suggest that the early neutral evaluation technique be looked into. Vigorous sifting of lost causes, the need to know when to exercise the claw back option, as well as the development of in house capacity are advocated. Negotiation and settlement in house must be the first option. The importance of including alternative dispute resolution (ADR) provisions to allow parties to have access to private tribunals that can decide debt recovery related issues within a few days, cannot be over-stressed. AMCON needs to be disentangled from the web in which it currently finds itself. The establishment of special courts where the law of evidence is greatly de-

emphasised should be considered. This special court proposal will be beneficial because AMCON cases will no longer be subject to the complexities of the rules. Further, the Corporation should consider instituting an arbitral panel for engagement and negotiation with recalcitrant debtors. Experience has shown that traditional litigation as currently practiced has failed to yield the much desired result and does not align with current economic realities. There is a need to extensively explore ADR strategies and design full ADR Practice Protocols drawn from the LMDC Models, as well as strengthen the Practice Directions clause 2.2 on compulsory ADR. Importantly, the courts should be seen as the last resort in the debt resolution process. Conclusion It is a universal truth that the stability of a nation’s banking system is an important criterion for determining economic development. Unfortunately, seasoned financial analysts have mentioned that Nigerian banks may be on the verge of another credit crisis. The nation can ill-afford such a scenario, particularly when one considers its dwindling funds. The current reality as explained by recent publications is that the loan portfolio of banks has been further burdened by the huge exposure to oil and gas assets and the privatisation exercise in the energy cum power sector. We are of the strong opinion that AMCON needs to re-assess its thinking urgently. A new approach must be put in place to ensure that equity and justice are arrived at while optimising scarce resources.

1 2

As amended in 2015 Section 61 of the AMCON Act

PRIVATE EQUITY Yvonne Haizel, Mitsui & Co. Europe Plc.

The African Bull market has been dominated by South Africa

A spotlight on private equity in Africa I Yvonne Haizel

Africa Investment Strategist at Mitsui & Co. Europe Plc

n 2014, Africa saw the highest Private Equity (PE) deal flow to reach the continent since 2008. This was despite headwinds such as the Ebola virus in West Africa, and the protracted decline in oil prices which impacted major commodity exporters. Moreover, according to the African Private Equity and Venture Capital Association, there were 983 African PE transactions from 2007 to 2014 with an estimated transaction value of $34.5bn. Initial reports indicate that 2015 is looking like another record year for

Law Digest Winter 2015

PE activity on the continent, with private equity firm Helios Investment Partners closing its third Africa fund after raising $1.1 billion in January and Abraaj having raised $990m for its Africa Fund III in April 2015. So what has driven the surge in African PE activity over the last decade? Until the early 2000’s, development finance institutions dominated the African PE market. However, with Africa now grabbing the attention of international governments and investors worldwide, this has translated in the region receiving a greater share of global PE deal flow. The continents improving governance, rapid increase in consumer expenditure along with improving macroeconomic prospects are amongst the key factors contributing to this positive trend. With that said, it is worth noting that while African PE is on the rise, in comparison to other emerging and frontier markets, the continent still only receives a very small proportion of global PE deal flow. African PE activity by region and sector Over the last decade, the most active sector for African PE transactions included the consumer staples, consumer discretionary, industrial and financial sectors. This has been driven by the explosive growth in the young population, which is expected to continue until 2050. As such, international luxury good producers and wealth management firms have also rushed to Africa to participate in the continent’s rapid growth story and to capitalise on the subsequent growth in high net worth individuals.

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SPECIAL FEATURE African PE transactions by sector (2008 – 2014)

Source: African Private Equity and Venture Capital Association

Financials (16%) Consumer Discretionary (14%) Industrial (14%) Consumer Staples (14%) Materials (9%) Real Estate (8%) Healthcare (7%) Information Technology (5%) Telecommunication Services (5%) Utilities (5%) Energy (3%)

According to the Deloitte’s Africa private equity confidence survey, South Africa remains the most attractive region for PE managers operating in Africa, with the country attracting over half of the continent’s transaction activity. This is of little surprise considering international investors’ familiarity with the country in comparison to other African regions. The Western Africa region is second to South Africa in terms of the deal flow, with a growing interest in activity in East Africa.

Harnessing created by financing

the the

opportunity shortfall in

Financing remains one of the key challenges for small to medium sized enterprises in Africa. At the same time, the demand for funding such companies’ expansion is projected to continue growing. According to research conducted by the Commonwealth Secretariat and the Making Finance Work for Africa Partnership, pension funds in Africa are growing at a rapid rate, with the industry expected to expand as much as 400% in countries such as Ghana. This explosive growth across the continent has significant potential to close the funding gap in collaboration with private equity managers, allowing the asset class to thrive in the region. With the long-term nature of pension fund investing, private equity is a well-suited asset since the typical investment horizons for pension funds is usually beyond ten years. Pension fund investing in PE is a framework that has been tried and tested in the US since the 1970’s and has subsequently proved to be very successful. Today, from the US to the UK, governments in the Western world actively encourage pension fund’s participation in PE investing. However, despite the progress in recent years, in order for African pension funds to be considered key players in the PE industry, more needs to be done to improve the awareness of the asset class, in addition to the willingness of pension fund trustees to consider PE as a core asset class within portfolios. Another potential solution to the shortfall in financing in the region is the public-private partnership framework. African governments are expected to have the ability to fund only around half of the required infrastructure investment projects required over the next few decades, as such, the role of publicprivate partnership framework is

becoming increasingly important. China has already been successful in harnessing the public-private partnership model to secure project funding. At the same time, China has been a key player in pursuing partnership opportunities in Africa to date, with many countries such as India and the US now playing catchup. PE funds could increasingly be seen as potential private sector partners for government led projects. The challenges facing the industry While the opportunity to invest in a private equity fund may appear to be compelling, it is also important to consider the risk and potential challenges: 1. Regulatory reform Regulatory and compliance changes are some of the major challenges faced by PE investors operating in any country. With African governments reforming policies at a remarkable rate as the continent continues to attract international investors, in the near-term the regulatory changes are expected to come into effect at a rapid rate; maybe too fast a rate for private equity managers to fully grasp and incorporate in PE activity. 2. Knowledge about the asset class The PE industry in Africa remains in its infancy and while the opportunity delivers positive long term prospects, there is still a general lack of awareness of it. In order for a private equity ecosystem to flourish, it requires the financing demand to meet the opportunity set. Since many Africans are not aware of the role private equity can play in raising finance and contributing to the wider economy, many continue to miss the opportunity. 3. Exit opportunities The general lack of awareness of African PE as a means of financing is reflective of the

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continents underdeveloped capital market. This has resulted in exit opportunities for PE investments relatively limited, for example according to Allen & Overy, IPO’s only account for less than 5% of exits in Africa. However over the medium-term, as the African capital markets continue to expand in response to growing international interest, this trend is set to change. For example, earlier this year, the London Stock Exchange, which has been pursuing African listing opportunities, announced that it was highly likely that a number of Nigerian issues will hit the LSE over the next year. 4. Ineffective governance Research suggests that effective corporate governance more often than not equates to strong performance. Improving corporate governance is often used to improve the returns for PE managers and without it, companies can be doomed to failure. Additionally, another challenge facing Africa is lack human capital with the right expertise to work on the ground with the companies. 5. Sourcing opportunities The surge in interest in the Abraaj and Helios Investment Partners

Africa funds earlier this year demonstrates that international investors are increasingly looking at Africa as a land of opportunity. However, there is often a significant lag between the time when the capital is raised and when the actual investments take place. This highlights that despite the significant shortfall in funding for companies, the opportunities available may not be suitable or when they are, often requires a prolonged period of due diligence relative to other regions. Private equity can provide benefits far beyond that offered by other asset classes such as tangible economic development. Despite the challenges that comes with PE in Africa, the opportunity set is rapidly increasing as the ‘Africa rising’ narrative continues to materialise. As the financial markets in Africa evolve we are likely to see exit opportunities increase. It is important to note that although there is a wide array of challenges, this is to some extent compensated by the fact that the companies are often starting from a low base and as such the growth potential can be impressive. Key transactions in 2014 Two interesting transactions

2014 involved Helios Towers Africa and Diamond Bank. Helios Towers Africa, the telecommunication provider received $630m in a consortium led by Helios Investment Partners. As the largest African private equity transactions to take place in 2014, the investment was a second round of financing for the company, which is expected to experience significant growth across the continent over the next decade. An investment in Diamond Bank, the Nigerian based financial service firm, was also amongst the largest African private equity transactions in 2014; this was led by US private equity firm, Carlyle Group. Importance of a legal review framework for PE investments With the rise in private equity as an asset class in Africa, there is growing demand for legal professionals to contribute at various stages of private equity transactions. This includes fund formation, acquisitions, equity investment documentation, acquisition finance and exit opportunities.

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CAPITIAL MARKET Isaiah Odeleye - Seplat

The role of the inhouse legal team in the SEPLAT IPO Isaiah Odeleye In-House Counsel The purpose of this Article is not to produce an academic treatise on an IPO, but to share with readers, the role played by the SEPLAT Petroleum Development Company Plc (SEPLAT) in house legal team during the IPO of the company.1 Introduction

In 2011, the Board of SEPLAT took the transformational decision to pursue a simultaneous listing of the company’s shares on both the Nigerian Stock Exchange and the London Stock Exchange

In 2011, the Board of SEPLAT took the transformational decision to pursue a simultaneous listing of the Company’s shares on both the Nigerian Stock Exchange and the London Stock Exchange. This was a huge challenge for a young Nigerian company, which was then just over two years old. It was clear from the outset that the transaction would provide many different challenges as no Nigerian company had ever before achieved such dual listing. As a result, there were no established processes or

Law Digest Winter 2015

procedures to consider. The legal issues and challenges associated with this were significant in terms of the work load, the skills required and the number of advisers to be coordinated. The team of advisers required for an IPO include external lawyers, accountants, bankers, brokers, reserves specialists, analysts, environmental experts, media advisers and others. The in-house team was tasked with the co-ordination of the input of the external advisers, in addition to advising the Board. The factors that informed the founders’ decision to list the company’s shares on the Nigerian and London Stock Exchanges included: the desire of the company to have better access to capital in support of her growth aspirations, the need to have an internationally acceptable and objective market value for the shares of the company, the desire for an increased profile within Nigeria and internationally, the creation of markets for the shares of the company, and the desire to let others have access to the demonstrated wealth creation abilities of the company. London was chosen in addition to Lagos because, the London Stock Exchange is the biggest in Europe and London is a prestigious international commercial centre for the world. However, listing of a Company on any stock exchange also has its disadvantages which include: increased governance requirements, dilution of shareholdings, high costs and detailed disclosure requirements among others. Balancing these factors, SEPLAT concluded that the benefits of listing far outweighs the disadvantages. Confidentiality Agreements Confidentiality is extremely important for any IPO and one of the earliest actions of the in house legal team was to ensure that, all employees of the company who were involved in the IPO process entered into Confidentiality Agreements with the company, especially where one is

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SPECIAL FEATURE The challenge in negotiating fees for a transaction like an IPO is that it is impossible to know with precision when the company and the business environment would be ready for the launch of the IPO

company, its external international legal advisors Winston & Strawn LLP, the company’s two Nigerian external counsels, Punuka & Co. and Alliance Law Firm, the banks, their legal advisors, the accountants, the reserves specialists, and the Regulators and Exchanges in both London and Lagos was broad and deep. The key duties of the in house legal team in respect of due diligence were: the collation and provision of all documents and information required for DD and the provision

specific time. The company on its part recognises these conflicting pressures, a compromise was reached to the effect that, there would be a period of grace after the agreed period during which the fee payable would be frozen. For an IPO, success fees on percentage basis for certain service providers may be considered. For cost reduction purposes and for those services for which hourly rates are more appropriate, payment terms and estimated caps should be pre agreed to the extent these can be realistically

Where hourly rates are agreement, there must also be control over the number of staff that a service provider can deploy to render services and be paid for, whilst being careful not to compromise the quality of the service provider’s work product

Dr. Mirian Kachikwu – General Counsel of Seplat with the award for the IPO at the Law Digest Africa Awards

not contained in their employment contracts. Similarly, the in house legal team ensured that all external advisers and service providers entered into similar agreements. Additional practical steps to secure confidential information within the provisions of the applicable laws were also taken by the in house legal team. Such steps included appropriate controls on the release of company information, keeping some information restricted to a core team on a “need to know” basis prior to IPO and ensuring single point accountability for certain information within the Legal Team. Due Diligence The IPO due diligence (DD) undertaken on SEPLAT by the

of clarifications on any of the documents or issues when required. Engagement of External Advisers The in-house team was also responsible for the engagement of external advisers and service providers. While the negotiation of the terms and conditions of each agreement was relatively easy, the same was not our experience during the negotiation of the fee payable under a few of such agreements. The challenge in negotiating fees for a transaction like an IPO is that it is impossible to know with precision when the company and the business environment would be ready for the launch of the IPO, however, external advisers and service providers will strive to have their fees paid by a

estimated. In jurisdictions where the ability or right of a service provider to charge success or contingency fee is subject to compliance with specified conditions under regulations, care must be taken to ensure that such conditions are strictly complied with, to ensure that the contingency fee agreement is enforceable. Engagement agreements should be signed with each service provider before the commencement of provision of services as part of good management of the IPO process and cost reduction strategy. Where hourly rates are agreed, there must also be control over the number of staff that a service provider can deploy to render service and be paid for, whilst being careful not to compromise the quality of work. Legal Opinions and the Key Roles of In the House Counsel Legal opinions are a core part of IPO documentation. Usually investors

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attribute more weight to the opinions of external solicitors who are adjudged to be independent compared with inhouse solicitors. The role of the inhouse team is to support the external counsels in the preparation of their opinions by educating them about industry practices where applicable and providing them all necessary information to discharge their duty. Ideally the Head Legal or General Counsel should, coordinate the overall IPO process under the CEO or other designated officer of the company for that purpose, lead prospectus drafting sessions, advise the board at various stages of the IPO process, ensure compliance with the various notices or required approvals, manage issues around potential liabilities, identify all regulatory requirements and ensure compliance with each of them, ensure the preparation and filing of all required documents with regulatory authorities, organise the verification of all facts in the prospectus and other applicable documents, proof read the draft prospectus, advise the board and committees on corporate governance issues, advise the board on the implications of becoming a public company, ensure the approval of the Board in respect of the corporate governance and other documents that must be approved by the Board etc. Nigerian and UK Governance Issues

Corporate

The UK and Nigeria both have their own comprehensive Codes of Corporate Governance that SEPLAT had to comply with. Following conversion to a Plc, it became necessary to review and update the company’s Corporate Governance policies for a wider, public investor base and to make sure that the policies meet the requirements of the UK and the Nigerian Code of Corporate Governance for public companies. As part of the process, we worked with our external counsel in the UK (Winston &Strawn) and Nigeria (Punuka & Co and Alliance Law Firm) to analyse the corporate governance requirements and model codes in the relevant regulatory regimes and to prepare corporate governance policies

including Board Charter and terms of reference of board committee, such as the Audit Committee, Risk Management Committee, Nomination Committee, Remuneration Committee and Corporate Social Responsibility Committee. The inhouse team, together with the external counsels also had to ensure that these terms of reference comply with the roles assigned to such committees as required by statute and regulations and/or considered to be best practice. The Prospectus and Liability The prospectus issued by the Issuer is the core document of a public offering, which describes the business and assets of the company and enables an investor to make an informed decision about the investment opportunity and potential risks to be considered in making an investment. It was the duty of the inhouse team, ably supported by the external advisers to ensure that SEPLAT meticulously and fully complied with all the applicable regulatory requirements and best practices in the two jurisdictions in respect of the information in her IPO prospectus and other IPO documents. The Key Challenges The key challenges of an IPO depends on a number of factors including: the business environment(s) where the company operates and is to be listed, the size of the IPO, whether it is dual listing or not, the nature of the company’s business, the applicable regulatory regime, the experience of the company in public offering of shares, the size of the IPO team etc. In general, the following were the key challenges faced during the IPO: consideration of the structure of the group, dove-tailing the requirements of the corporate governance codes in the UK and Nigeria (which was resolved in favour of best practice and compliance with the more stringent requirements in the two jurisdictions), choice of market and timing of the launch of the IPO, the readiness of the company and readiness of the market for the IPO, board and management composition, drafting of the prospectus and ancillary documents, choice of experts and

advisers, timely regulatory compliance, disclosures, managing the various IPO work streams, cost management, dual listing, establishment of policies and procedures to manage the post IPO life of the company and its long term success. All these challenges, one way or the other impacted on the role of the in house legal team. The company was able to overcome these challenges through competent, dynamic, innovative, effective and results oriented board and management and its excellent choice of external advisers. Conclusion The SEPLAT’s IPO was successfully completed in April 2014, raising the full US$ 500m sought. The IPO was a ground breaking achievement which has been described as a “pioneer transaction”, which represents a genuine first for the two said capital markets. In addition, it is likely to pave the way for similar transactions in the future for companies across Africa seeking to access international investors through public placement. A UK regulator commented that, it expects the deal structure and processes of SEPLAT to serve as a template for transactions that will follow it – both from Nigeria and from other African countries. Finally, deciding whether to undertake an IPO is a transformational decision for a company, which involves significant management time and costs. The costs and benefits of taking such a decision must be weighed properly in all material respects before starting the process. For SEPLAT, it was the right decision and has given the company better access to the capital markets in Nigeria and internationally among other benefits. However, every company contemplating an IPO should consider the pros and cons specific to them and their business up front and must then diligently plan to go and grow through it successfully.

1 The opinions and conclusions expressed or reached by me in this Article are my personal opinions and conclusions and should not be taken to represent the opinions or conclusions of SEPLAT.

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Law Digest Winter 2015

I NTERNATI O NAL LITI GATI O N

A N D A S S E T R E COV E RY F O R U M 5TH NOVEMBER 2015 AT THE NIIA, KOFO ABAYOMI STREET, LAGOS, NIGERIA

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Law Digest Winter 2015

Urs Feller of Prager Dreifuss AG

Roderick Cordara, QC of Essex Court Chambers

L-R, Dr Olisa Agbakoba, SAN and Kemi Pinheiro, SAN

Justice Oguntade, CFR, JSC, (Rtd)

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Chief Godwin Obla, SAN

Funke Adekoya, SAN

L-R, Supo Ati-John, Femi Ayandokun, Seyi Clement, Kebi Adejare

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Cross section of delegates

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Delegates with Bebe Clement - Business Development Director - Law Digest (middle)

Chief Bayo Ojo, SAN, CON

Prof. Konyin Ajayi, SAN

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Kamal Shah of Stephenson Harwood LLP

Dr. Simeon Obidairo of Aluko & Oyebode with other delegates.

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A Delegate at the Forum

Prof. Ben Nwabueze, SAN, CON

L-R. Dr. B. Ukoegbu (representing ICAN), Bebe Clement, Prof. Ajayi, SAN and Seyi Clement

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L-R. Dr B. Ukaegbu and a delegate

L-R. David Grief and Edmund King

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A delegate at the forum

Conrad Joseph, SAN

L-R. Roderick Cordara QC and Nnamdi Ukamba Ugochukwu

LITIGATION Bello Salihu - [Ajumogobia & Okeke]

Law Digest Winter 2015

and/or monetary damages. Sometimes, a combination of all the above may be contained in a single judgment/order of the court. The focus of this present analysis is on the judgment or decision of the court awarding monetary damages otherwise known as money judgment. Garnishee Proceedings One of the veritable tools available to a judgment creditor in enforcing money judgment is garnishee proceedings. Save for conflicting views of the courts regarding the role of the judgment debtor, and the unfortunate attitude of some garnishees, is a rather straightforward procedure. Essentially, garnishee proceedings is the procedure by which the court on the application of a judgment creditor makes an order attaching monies and properties belonging to debtor towards satisfying debts owed by the debtor in favour of a judgment creditor. This is available where debtor’s assets are in the hands (or custody) of a third party (“the garnishee”) free from any encumbrances. The garnishee order is made by directing the garnishee to hand over monies in its custody towards the satisfaction of money judgment made in favour of the judgment creditor. Garnishee proceedings are in two parts. The first part involves seeking an order nisi attaching the debt. This aspect of the proceedings is usually carried out via ex parte application, and upon the making of order nisi, the court binds the debt in the hands (custody) of the garnishee. The other aspect of the proceedings is thereafter scheduled for a day not less than 14 days from the day the garnishee order is served on the judgment debtor and the garnishee. The garnishee is therefore obliged not to dissipate or allow the dissipation of the debt from the day he is served or becomes aware of the order nisi. The garnishee upon being served with the order nisi is expected to pay the debt/ money attached by the order nisi into court. However, where the garnishee disputes its liability, he is obliged to reduce the dispute into an affidavit stating why the order nisi should not be made absolute.

Garnishee Proceedingsa procedure in need of reform Bello Salihu – Senior Associate, Ajumogobia & Okeke

Parties to garnishee proceedings Introduction This article examines the procedural process for enforcing money judgment in Nigeria under the Sheriffs and Civil Process Act Cap S6 Laws of the Federation of Nigeria 2004 (“SCPA”). Nature of Judicial Monetary Damages

Orders

and

The SCPA provides for different types of reliefs; declaratory orders, injunctions,

The requirement to serve a copy of the garnishee order nisi on the judgment debtor (section 83 (2) of SCPA) appears to have been the source of conflicting views by the courts. The Court of Appeal in PPMC V Delphi (2005) 8 NWLR (Pt. 928) 458: held that although garnishee proceedings is incidental to the judgment pronouncing the debt owing, the judgment debtor is not a necessary party to the proceedings. In the opinion of the court, it is a separate and distinct proceedings between the judgment

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creditor and the garnishee. See Zenith Bank –v- Igbokwe (2013) (LPELR – 21975 (CA). A similar view was held by the same court in Denton West -v- Muoma (2008)6 NWLR (Pt. 1083) 418 at 447. In UBA V. Ekanew (2010) 6 NWLR (PT. 1190), the court in emphasizing the insignificance of judgment debtor in garnishee proceedings described a judgment debtor as a “nominal party” who cannot react even if the law was not properly followed- it can only be seen and not heard and any action taken by it (judgment debtor) is considered in the eyes of the law as interloping, meddling or an obstruction. Interestingly however, the same Court of Appeal in Fidelity Bank Plc –v- Okuowulu [2013] 6 NWLR (Pt. 1349) 197 held that having been required to serve a copy of the order nisi on the judgment debtor before the commencement of the second part of the garnishee proceedings, the proceedings thereafter becomes tripartite in nature thereby suggesting that both the judgment creditor and the garnishee as well as the judgment debtor constitute parties to the proceedings. See also C.B.N V. Auto Import Export (2013) 2 NWLR Pt 1337 P. 80 and N.A.O.C. v. Ogini (2011) 2 NWLR (Pt. 1230) 131 both decisions of the Court of Appeal This latter view in the opinion of the author tends to afford the judgment debtor another bite of the cherry, if we remember that the judgement debtor who was a defendant at the trial leading to the judgment has made all the representation available, (albeit unsuccessfully) in the defence of the matter. The judgment sought to be enforced against him is the outcome of the evaluation of the evidence presented by both parties (judgment creditor and judgment debtor) which in the opinion of the court, the defence of the judgment debtor was not sufficient to deny the claimant (judgment creditor) the reliefs sought. Role of the garnishee Generally however, monies in bank accounts are liable to be attached in garnishee proceedings. Consequently, a judgment creditor may proceed against a bank in garnishee proceedings. Yet, the law also recognises situations where monies in the custody of a garnishee may not necessarily stand to the credit of the judgment debtor. This entitles the garnishee to deny liability. The denial of liability may be predicated on the following grounds; 1. The garnishee has a lien/interest in the money sought to be attached; or 2. The garnishee is genuinely aware of other interests in the debt sought to be attached.

The SCPA prescribes the procedure to be adopted by the courts in the event of such denial of liability. The guide is that the court should not make the order nisi absolute. Instead, the court is enjoined to order that any issue or question necessary for determining the garnishee’s liability be tried or determined in any manner in which any issue or question in any proceedings may be tried or determined. In the alternative, the court may refer the matter to a referee. The decision of the court to make the order nisi absolute would therefore be dependent on the outcome of the trial or determination of the question of the garnishee’s liability or the findings or opinion of the Referee. It is now not uncommon for garnishees to dispute liability (or the debt) of the sums attached by a garnishee order nisi. Although it is only normal to expect garnishees to conduct themselves as responsible corporate citizens in garnishee proceedings, contrary to expectations however, recent experience has shown that garnishees (most cases banks) cannot always be relied upon to be diligent in their search of their records for the purpose of confirming whether or not monies standing to the credit or for the benefit of the judgment debtor is in their custody or to be honest in their declarations. The denial of liability by a garnishee in a recent attempt by a judgment creditor to satisfy its judgment by way of garnishee proceedings provoked the admonition of the High Court of FCT coram Peter O. Affenin J. in his ruling delivered on 9th October 2014 in Suit No. FCT/HC/CV/294/2014 - C.U Tamara Nigeria Limited v. Nigeria Police Force & Anor and First Bank of Nigeria Plc In Tamara vs NPF, monetary judgement had been previously entered in favour of the Claimant against the Nigeria Police Force and the Inspector General of Police (“NPF”) in the sum of ₦66,494,162.12. The judgment debtor failed to satisfy the judgment and the judgment creditor commenced garnishee proceedings. On 6th March 2014, the court, on the application of the judgment creditor made an order nisi attaching monies allegedly standing to the credit of the NPF in a specified account domiciled in one of Nigeria’s commercial banks. The bank by an affidavit under oath, disputed liability by denying the existence of the specified account belonging to NPF. Subsequently, the court on 10th June 2014 pursuant to section 87 of the SCPA and on the application of the judgment creditor appointed the Director of Banking Supervision, Central Bank of Nigeria as Referee for the purposes of determining the bank’s liability. The issues to be determined by the referee included whether the specified account existed, whether the

The requirement to serve a copy of the garnishee order nisi on the judgment debtor (section 83 (2) of SCPA) appears to have been the source of what now appears to be conflicting views by the courts account had previously existed with the bank as alleged by the judgment creditor, and whether the judgment debtors maintained any other account(s) with the bank. The Referee, after his investigation, submitted a report of his findings to the court. In the report, the Referee confirmed amongst other things that the account specified by the judgment creditor existed in the bank even though same was closed shortly before the garnishee order nisi was made. As of the date of closure of the account, the account had a balance in excess of the judgement sum, and that this sum was transferred to another account within the bank. The report showed that there was no transfer instruction to this effect and that the bank did not also explain the reason for the transfer. The Referee also confirmed the existence of over 100 active accounts belonging to the NPF along with three other active accounts in the name of the Inspector General of Police (“IGP”). According to the report, as of 8th July 2014, the NPF accounts had a total net balance in a sum four times more than the judgment sum. On the basis of the report, the court found, amongst others, that the specified account not only existed in the bank as of the date of the affidavit denying liability, but that the account had sufficient funds to satisfy the judgment sum. The court also held that going by the findings of the Referee, the NPF had 101 active accounts and 3 other active accounts in the name of the IGP with the bank, and that it could not be true as stated in the bank’s affidavit that all IGP accounts domiciled in the bank had been closed. In its remark, the learned judge castigated the bank for the deliberate non-disclosure of the facts now revealed by the referee’s report. In the words of the learned judge: “It is unfortunate in the extreme that rather than making a full and frank disclosure demonstration (sic) of the utmost good faith expected of a responsible corporate entity, the Garnishee herein deemed it necessary to join forces with the judgment debtors (who, again unfortunately, are the foremost law enforcement agency in Nigeria) to so

Law Digest Winter 2015

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wantonly and deliberately misrepresent the existence of other accounts held by the judgment debtors at its Coomasie House Branch, which is a fact eminently within its knowledge, in the Counter Affidavit of the Garnishee dated 24/3/14 with a view to misleading the court”. The court concluded that the bank did not succeed in its “gallant” efforts to show cause why the order nisi should not be made absolute and accordingly, the order nisi attaching the judgment sum was made absolute. Although more of a charitable admonition, the pronouncement and findings of the court in the matter under review is testimony to the unfortunate attitude now being exhibited some corporate organisations particularly in relation to garnishee proceedings. Conclusion The futility of the disposition of some of the financial institutions in garnishee proceedings lies in the fact that they do not have any (at least not apparent) interest in the debt/money sought to be attached. In most cases, they are custodians for a fee. Ironically however, the banks tend to see more advantages in protecting their

customers rather than complying with court orders. This self-serving form of “protection” if it is with intent to mislead the court in any judicial proceeding is an unfortunate development. The victory of a judgment creditor remains interim and therefore dim where there are deliberate efforts directed at antagonising the mechanism for satisfying a judgment debt. The instant call therefore is for stakeholders to adopt such measures as may be necessary and effective to discourage this unhealthy practice. The sanction regime of the courts should be deployed proactively. In addition to this, the uncertainty created by the conflicting interpretation of section 83 (2) of SCPA by the courts in relation to the participation of judgment debtor in garnishee proceedings remains a challenge for this method of judgment enforcement. Steps required to resolve this inconsistency should be considered in order to afford practitioners and litigants some degree of predictability in garnishee proceedings. There is therefore a need for a pronouncement on the issue by the Supreme Court in view of the various divisions of the Court of Appeal on this issue

Legislative intervention in the form of an amendment to the SCPA should also be considered. Such amendment should be aimed at curing the mischief created by the present state of the law while taking into account international best practices in that specie of judgment enforcement procedure. The SCPA is a 1945 legislation - the inability of some of its provisions to meet present day realities is quite understandable. A good starting point might be what currently obtains in the United Kingdom where the English Civil Procedure Rules expressly makes a judgment debtor a party to garnishee proceedings. It specifically allows the judgment debtor (inter alia) to object to the court making an interim third party debt order (garnishee order nisi) final (absolute). In such circumstance, the judgment debtor is entitled to file and serve written evidence stating the grounds for his objection. While the English position appears attractive, the advice is not that it be incorporated wholesale. An assessment of existing legal framework taking into account our constitutional arrangement should precede any proposed legislative intervention.

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